1 Trends in Science, Technology and Industry: An OECD Perspective Jerry Sheehan OECD Science & Technology Policy Division Knowledge Economy Forum III Budapest, 24 March 2004

2 Overview The knowledge-intensity of OECD economies continues to grow as countries develop and use knowledge more widely. Considerable variation among countries remains. Eastern European economies tend to lag other OECD countries, but are making good progress. Considerable variation exists among them. OECD countries are investing more in R&D, due in large part to increases in business R&D. Government support for business R&D is becoming more indirect and aims at a broader range of firms, in particular SMEs. Continued economic integration has fuelled globalisation of R&D, creating new opportunities for emerging & transition economies. Enhancing the social and economic impact of public research requires adequate funding and improved forms of governance. Producing sufficient numbers of scientists and engineers is a challenge faced by most OECD countries.

3 Investments in knowledge are growing across OECD...

4... as are knowledge-intensive industrial outputs Share of high- and medium-high technology manufacturing in total gross value added (2002) Share of knowledge-intensive “market” services in total gross value added (2000)

5 R&D investments are growing in most OECD countries, reflecting importance of innovation GERD as % of GDP Source: OECD MSTI Database, November 2003

6 Business is investing more in R&D Business R&D as a % of GDP Note: Data for 2002 or nearest year available. Source: OECD, MSTI database, November 2003.

7 Government financing of business R&D declining, but indirect mechanisms gaining Government-financed BERD % of GDP, 2002 Generosity of tax regimes for R&D (B-index)

8 Small firms play in important role & attract much government support

9 R&D becoming more globalised: opportunity for emerging economies? Foreign affiliates as share of industrial activityR&D intensity of domestic verus foreign firms Source: OECD Activities of Foreign Affiliates database, January 2004

10 Factors influencing the location of R&D Product markets -- Proximity to large, relatively homogeneous market with lead customers. Labour markets — labour costs are an important consideration for some R&D, but skills and regulation play key roles, too. Scientific and technological expertise — Proximity to major universities and research labs. Tap into locally generated ideas, suppliers and people. Innovative environment — ease of commercialising research results/inventions. Quality of life — as relates to foreign assignments for expatriated workers.

11 Funding for public research lags in Eastern European countries R&D in the higher education and government sectors as a % of GDP, 2000 Source: OECD, MSTI Database, November 2003.

12 Enhancing contributions of public research Old model: Funding basic research Government funding of basic research, often though institutional funding (i.e., block grants). Universities have autonomy in setting research objectives New model: Governing the science system Link government funding to social and economic objectives –Priority-setting –New funding Universities accountable for research spending and results –Competitive awards –Evaluation (ex-ante, ex-post). Encourage multi-disciplinary research and links to industry –Centres of excellence –Public/private partnerships

13 Strengthening industry-science linkages Formal Joint labs Spin-offs Licensing Research contracts Informal Mobility of researchers Co-publications Conferences, etc. Informal contacts Flow of graduates to industry Forms of Collaboration Routes to Commercialisation Entrepreneurial route: spin-offs/spin-outs Patenting route: licensing of technology Cooperative route: joint and collaborative research

14 Strengthening human resources for S&T Researchers per thousand labour force, 2002 Attract and retain foreign students and workers –Re-patriation –Immigration rules/policies –Quality and selectivity of universities –Excellent research centres –Innovative environment to attract entrepreneurs Cultivate domestic supply of scientists and engineers –Attract more students into science and engineering –Increase attractiveness of research careers

15 For more information... STI Outlook 2002 STI Outlook 2001 Drivers of Growth STI Scoreboard 2003