School for Business, Economics and Informatics Innovation Investment and Economic Recovery A Green Paper for Successful Economic Policies A Centre for Innovation Management Research Workshop Birkbeck, University of London 23 February 2017 Daniele Archibugi, Andrea Filippetti, Marion Frenz
Aim of the green paper Serves as a vehicle to invite opinions, discuss evidence and data, help identify policy instruments and inform policy development. We start by inviting comments on three main themes (but comments should not be limited or constraint by those themes) 24/02/2017 2
Outline 1. The picture in the UK and Europe a. GDP b. Investment in fixed capital c. Investment in R&D 2. Green paper questions a. Is the engine of creative destruction kaput? b. Are the current economic policies the right ones? c. Investment in infrastructure projects vs investment in research and innovation 24/02/2017 3
1. WHAT IS THE PICTURE? 24/02/2017 4
1.a) GDP annual growth rates 13 11 9 7 UK USA 5 China 3 India 1 EA15 -1 -3 -5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: OECD 24/02/2017 5
1.a) GDP annual growth rates 3.5 3 2.5 UK 2 USA EA15 1.5 1 0.5 2015 2016 2017 2018 Source: OECD 24/02/2017 6
1.b) Investment (GFCF) growth rates 8 3 -2 UK USA -7 EA -12 -17 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: OECD 24/02/2017 7
1.b) Investment as % of GDP Business sector Public sector 14 4 13 3.5 12 3 11 2.5 EU19 EU19 UK UK 10 2 9 1.5 8 1 2002 2004 2006 2008 2010 2012 2014 2002 2004 2006 2008 2010 2012 2014 Source: Eurostat 24/02/2017 8
1.c) R&D investment as % of GDP 5.00 4.50 4.00 3.50 Japan 3.00 Korea 2.50 European Union (15) 2.00 China United States 1.50 United Kingdom 1.00 0.50 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: OECD 24/02/2017 9
1. Summing up • The decline in economic growth is more severe in the UK and Europe in comparison to emerging countries and the United States. • At the same time the investment needed for growth is lacking as neither the private nor public sector is providing it. • The fact that government expenditure on R&D is pro- cyclically has not helped a return to growth 24/02/2017 10
2. GREEN PAPER QUESTIONS – THREE THEMES 24/02/2017 11
2.a What is going on? The pessimist A drought in new technological opportunities The optimist Issue with the exploitation of the current technological opportunities The business analyst Top technologies in the ICT cluster 24/02/2017 12
2.a What is going on? 1. Did the crisis come about because the potential of the current techno-economic paradigm is exhausted? 2. Which technologies will lead on the path of economic recovery? 3. Which innovations will drive the new economic recovery? 4. To what extent will they be based on social, organizational or technological components? 5. How can we overcome differences in public policy priorities in science and technology and business strategies? 6. Do we have appropriate indicators to measure the economic potential and impact of new technological opportunities in a changing context? 24/02/2017 13
2.b Is what is being done enough? European Commission’s Investment Plan for Europe: The Juncker Plan The UK’s Green Paper: Building our Industrial Strategy 24/02/2017 14
2.b Is what is being done enough? 1. Is the Juncker Plan an effective tool and does it counteract low investment in the private sector? 2. Is the UK’s Green Paper proposing the right Industrial Strategy for the UK? 3. Do the UK and Europe need to commit larger resources, and, where should those go? 4. Do the UK and Europe need a new golden rule for investments? 24/02/2017 15
2.c Where should we invest? Infrastructure investment Investment in research and innovation Effect in the short- and long-run Effect mainly in the long-run Effects are measurable Difficult to measure and estimates vary Selection of projects reasonably Selection at the technological frontier straightforward based on established criteria Uncertainty and failure are less of a Uncertainty and possibility of failure problem high Moderate Increase in human capital high Low Increase in the knowledge base high with spillover effects 24/02/2017 16
2.c Where should we invest? 1. What type of publicly funded investment is more appropriate in the current economic landscape? 2. Do we need a European public infrastructure push or a public research push for recovery? 3. Which innovation policies can make the biggest contribution to economic recovery? 4. What specific innovation initiatives oriented towards business are most useful: e.g. Small Business Research Initiatives, R&D Tax Credits, Knowledge Partnerships and Networks? 24/02/2017 17
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