Innovation Expenditures in European Industry

Keith Smith, Georgio Sirilli, Tore Sandven and Rinaldo Evangelista

No 199705, STEP Report series from The STEP Group, Studies in technology, innovation and economic policy

Abstract: This report uses data from the Community Innovation Survey to explore expenditures on innovation by European firms. It analyses the level and structure of three types of innovation investment across European industry: R&D, non-R&D expenditures (such as design activities), and capital investments linked to the innovation of new products. Although we have long had good data on R&D, we have lacked data on the other main categories of innovation expenditure. This is a serious problem, since one of the most important themes of modern innovation analysis has been the importance of non-R&D inputs to innovation. A related issue is expenditure on the acquisition of capital and intermediate goods, embodying new technologies. This type of investment, which is linked to both product and process change, has long been recognised as a key ‘carrier’ of technological advance. After discussing the data itself, we provide in Chapter One a general overview of the structure and characteristics of innovation expenditures across European industry. We then turn, in Chapter Two and Three to a more technical analysis of the data. The analysis seeks to explore two main issues: Can we identify industry-specific features of the level of innovation expenditures in European? That is to say, when we look at an industry, is the extent or intensity of innovation expenditure consistent across countries in Europe, or do these levels vary across countries? How does the composition of innovation inputs vary across industries, and is such variation consistent across countries in Europe? One of the basic problems for European innovation policy is to distinguish between the appropriate levels for policy action. What, for example, should be the tasks or areas of responsibility of the European Commission vis-a-vis the Member States? Such questions depend on the characteristics of innovation processes in Europe. Do industries in Europe have significant features in common? Is the structure of innovation inputs similar in the same industry across Europe? Or are there country-specific features (perhaps reflecting different national innovation systems)? If there is a common European level, then we may be able to identify - at least in a broad way – commonalities of innovation input where problems may arise which are appropriate arenas for European action. On the other hand, if innovation at industry level is characterised by strong country-specific features, then policies directed to specific industries or activities might best be undertaken at Member State level. This data strongly shows the importance of industry-level effects, rather than country-level effects: European industries appear to have strong commonalities in terms of innovation expenditures.

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