Madrid - 3 July 2008,Europes R&D: missing the wrong target Bruegel POLICY BRIEF 2008/3, March Bruno VAN POTTELSBERGHE (ULB, Solvay Business School, Bruegel) Working Paper with Azle Mathieu Working Paper with Didier Franois Other references,The R&D intensity target,Since 2002The Lisbon Agenda 3% of GDP should be devoted to R&D One third being funded by government 1 Observation 2 bmol 2 hypotheses,Europes R&D: Missing the wrong target,Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,Total R&D intensity over 25 years,EUs R&D intensity has been flat lining under 2% for 25 years,Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,There are strong variations across States, but the distribution is always higher in the US, with 7 States above 4%,Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,The R&D intensity target,Since 2002The Lisbon Agenda 3% of GDP should be devoted to R&D One third being funded by government 1 Observation 2 bmol 2 hypotheses,Government-funded R&D actually dropped over the past ten years, None of the EU member states has fulfilled its self-set commitment, as no country actually devotes one percent of its GDP to funding public or business (through subsidies and procurement) performed research activities. The only countries that are close to the 1% target are Sweden, Austria and Finland. A large number of countries have actually reduced their government funding of R&D as a percentage of GDP. A drop also occurred in the US and Japan over the same period, but it was largely compensated for by a more than proportional increase in business-funded R&D, which was not the case for EU27.,Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,And national reform programs are frequently overambitious, especially in countries with low R&D intensity,Source: van Pottelsberghe, Bruegel Policy Brief 2008/03,Technological specialization must be accounted for when analysing countries R&D intensity. Cf. Mathieu and van Pottelsberghe, 2008,Source: Mathieu & BVP, 2008,RIi,jt = jJ + tT (1) RIi,jt = jJ + iI + tT (2) 18 countries (j) with 21 industries (i) over five years (t),Country effect without and with industry dummies . Cf. Mathieu and van Pottelsberghe, 2008, 22 industries, 2000-2004, all estimates include time dummies,Adj. R-2 Without ID: 32% With ID: 69%,Source: Mathieu and van Pottelsberghe, 2008, new results,Regression on 18 countries, 5 years (2000-2004), 21 industries Intercept Timme dummies (ref: 2000) Country dummies (ref: GE) Sectoral dummies (ref: Mach. and equip.) None of the time dummies are significant,Source: Mathieu and van Pottelsberghe, 2008, new results,R&D intensity, 2000-2004,Higher than Germany,Like Germany,Below Germany,EU wrt USA and Japan (1998-2002, 3 regions, 21 industries),Source: Mathieu and van Pottelsberghe, 2008, R&D intensity, 1998-2002,Comparative advantage of countries in emerging technology fields (share of patents in the field in the country divided by the share of the field in total OECD patents). EPO patent applications; Priority Year 2003,Source: D. Guellec and D. Pilat, Productivity Growth and innovation in OECD, forthcoming, 08,The R&D intensity target,Since 2002The Lisbon Agenda 3% of GDP should be devoted to R&D One third being funded by government 1 Observation 2 bmol 2 hypotheses,Why do some countries have a higher R&D intensity?,Expected return Market size: need more integration (USA)? No market for technology Fragmented systems in Europe: costs and complexity,Patenting Processes The case of the European Patent Office,The EPS - Cost consequences,Source: Franois and van Pottelsberghe, 2006, forthcoming,Source: van Pottelsberghe and Franois, 2006,The lack of an integrated market for technology induces very high costs of patenting and a complex managerial burden on European innovators,London Agreement (1st May 2008),* Patent granted by EPO has claims translated into 3 official languages of the EPO: English, French and German; * State having no official language in common with one of the official language at the EPO, may require that translation of description to be supplied in the official language of the EPO prescribed by that state;,The impact of London Agreement on the cost of patenting in Europe, May 2008 (*),EPO-3: DE, FR, UK - with more than 70% of the EP patents validated in 2003; EPO-6: DE, FR, UK, CH, IT, NL - more than 30%; EPO-13: DE, FR, UK, CH, IT, NL, AT, BE, ES, DK, FI, IE, SE - more than 12%; EPO-34: all the EPC contracting states as of May 2008; Source: van Pottelsberghe and Mejer, 2008, forthcoming,Relative cost saving,Cost structure of direct patent fillings and 10 year of maintenance, May 2008 (in US PPP),Source: van Pottelsberghe and Mejer, 2008, forthcoming,Procedural and translation costs relative to the US (per claim*),Note: *Numbers in brackets indicate procedural and transaction cost per claim relative to the US. Source: van Pottelsberghe and