Recent Advances in the Measurement of Intangible Assets Presentation to NTTS 2015 Mary O’Mahony, (KCL) Co-authors: Carol Corrado (The Conference Board ), Jonathan Haskel (Imperial College London) and Cecilia Joan Lasinio (LUISS and Istat)
Intangible investments important driver of economic growth • Significant investment effort by firms – and the public sector • Capital input understated in the past as it relied mostly on tangible assets • Probably explains the ‘productivity puzzle’ • and the decline in labour share
European Commission funded research FP7 funded projects: Business sector COINVEST: www.coinvest.org.uk INNODRIVE: www.innodrive.org INDICSER: www.indicser.com Regional IAREG: www.iareg.org Public sector SPINTAN: www.spintan.net Research efforts led to the creation of a harmonised database for the Business sector, INTAN-Invest www.intan-invest.net. Currently being extended to include the public sector
What are intangible assets? Three main types of intangible assets identified by the research Computerised information Software and databases Innovative property Scientific R&D, Mineral exploration, new architectural and engineering design, New product development in the financial industry Economic Competencies Market research, Advertising, Firm specific human capital (training), Organisational capital
What are intangible assets? Many intangible assets involve both purchased and own account elements requires estimation Broader definition than currently in the National Accounts especially as regards economic competencies
Importance of intangible assets: large variation across European countries Business Intangible Investment as a percent of GDP (average 1998-2005). 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00%
Importance of intangible assets: Despite significant investment EU lags the US Business Intangible Investment as a percent of GDP (average 1998-2005). 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00%
Importance of intangible assets • Investment in intangible capital by businesses is sizeable and is able to explain a significant share of labour productivity growth • Some EU countries are already at the threshold of investing similar amounts of intangible capital as tangible capital investments • After expanding the definition of capital to include intangibles, capital rather than total factor productivity becomes the dominant source of growth in the business sector • Research also indicates that intangible assets are important in facilitating innovation and the adoption of new technologies
Other implications • The inclusion of intangible assets in national accounts has a significant impact on the levels of GDP. – with countries such as Italy and Spain investing significantly less than other EU countries, the already large macroeconomic disparities within the euro area will become even more distinct.
Including intangibles in the national accounts • Much work already taking place to bring intangibles into the national accounts • Research community has fed into this process through developing methodological frameworks, demonstrating the feasibility of incorporating intangibles and acting as consultants to NSIs • Further progress would benefit from close links between research and statistical communities • Especially in updating/extending datasets initiated by the research community as part of research projects • Essential to have timely good quality data to feed into research that informs policy
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