Intangible Investment and the Swedish Manufacturing and Service Sector Paradox

Since the mid 1990s labor productivity growth in Sweden has been high compared to Japan, the US and the western EU-countries. While productivity growth has been rapid in manufacturing, it has been much slower in the service sector. Paradoxically, all employment growth since the mid 1990s has been created in business services. The two traditional explanations of this pattern are Baumol’s disease and outsourcing. This paper puts forward an additional explanation, based on the observation that manufacturing industries have invested heavily in intangible assets such as R&D and vocational training. In 2005–2006, intangible investment was 25 percent of value added in manufacturing, while the corresponding figure for the service sector was 11 percent. Moreover, calculations based on the growth accounting framework at the industry level in 2000–2006 show that intangible investment accounted for almost 30 percent of labor productivity growth in manufacturing. Thus, investments in intangibles that mostly are knowledge intensive services have contributed considerable to productivity growth in Swedish manufacturing since 1995.Intangibles; Manufacturing; Productivity growth; Service sector; Sector analysis

Do hedonic price indexes change history? The case of electrification

Rapid price decreases for ICT-products in the 1990s have been largely attributed to the introduction of hedonic price indexes. Would hedonic price indexing also have large effects on measured price and productivity during earlier technological breakthroughs? This paper investigates the impact of hedonic and matched model methods on historical data for electric motors in Sweden 1900–35. The results show that during the productivity boom of the 1920s, current prices for electric motors decreased by 13.2 and 12.2 percent per year depending on whether hedonic or matched model price indexes were used. This indicates high productivity growth in the industry producing electric motors in 1920–29. In contrast to Sweden, the US annual total factor productivity growth was only, according to current best estimates, 3.5 percent in Electric machinery compared to 5.3 percent in manufacturing in 1920–29. However, hedonic price indexes were not used to calculate US productivity. Finally, it is shown that the price decreases for electric motors in the 1920s were not on par with the price decreases for ICT-equipment in the 1990s, even if hedonic indexing is used in both cases.Hedonic price index; Electric motor; Productivity growth; Electrification; ICT revolution; Productivity growth; General Purpose Technologies; Innovation

How Much does Sweden Invest in Intangible Assets?

In this paper I attempt to replicate for Sweden the Corrado, Hulten and Sichel (2006) and Marrano and Haskel (2006) working papers on spending on intangible assets in the US and the UK. Based on their measurement methods the total spending on intangibles in Sweden in 2004 was 277 billion SEK or 10.6 percent of total GDP. Based on total spending it can be estimated that total investment in intangibles was 227 billion or approximately two-thirds of the total investment in fixed capital in 2004. Thus, investment in intangibles was considerable in 2004. The corresponding figures for the UK and the US were 10.9 and 13.1 percent, respectively. Even though the measurement methods of intangibles must be further developed, it could be argued that intangibles in the future should be included in the Swedish national accounts.Intangibles; Investment; Economic growth

Public Procurement for Innovation (PPI) – a Pilot Study

Public organizations may place an order for something (normally a product or a system) that does not exist. This “something” has to be developed by the supplier before it can be delivered. In other words, R&D and/or innovation are needed before delivery can take place. Until about 10 years ago this phenomenon was called “public technology procurement” Edquist et al 2000). This vocabulary of the 1990s and earlier has changed; the concept of “technology” has been replaced by the concept of “innovation”, reflecting a widening of the content of the notion. The phenomenon is a matter of using public demand (or similar) to trigger innovation. We will use the term “public procurement for innovation (PPI)” to denote this phenomenon. Further definitions are presented in section 2.4.Innovation Systems; innovation policy

Does Hedonic Price Indexing Change Our Interpretation of Economic History? Evidence from Swedish Electrification

Rapid price decreases for ICT-products in the 1990s have been largely attributed to the introduction of hedonic price indexes. Would hedonic price indexing also have large effects on measured price and productivity during other technological breakthroughs? This paper investigates the impact of hedonic and matched model methods on historical data for electric motors in Sweden 1900–35. The results show that during the productivity boom of the 1920s, the constant prices for electric motors decreased by 9.7 and 8.1 percent per year depending on whether hedonic or matched model price indexes were used. This indicates high productivity growth in the industry producing electric motors 1920–29. In contrast to Sweden, the US annual total factor productivity was only, according to current best estimates, 3.5 percent in Electric machinery compared to 5.3 percent in manufacturing 1920–29. However, hedonic price indexes were not used to calculate US productivity. Moreover, in comparison to the matched model, the hedonic price index on average overestimates price decreases when prices are decreasing and overestimates price increases when prices are increasing. However, the total effect of the two different price indexes remains approximately the same in 1900–35. Finally, it is shown that the price decreases for electric motors in the 1920s are not in par with the price decreases for ICT-equipment in the 1990s, even if hedonic indexing is used.Hedonic Price Index; Electric Motor; Productivity Growth; Electrification; ICT Revolution; Productivity Growth; General Purpose Technologies

Concluding Chapter: Globalisation and Innovation Policy

The concluding chapter of the “Small Country Innovation Systems” book develops a comparative analysis that deals with only a very few of the many issues addressed empirically by the ten country case studies. The concluding chapter focuses to some extent on issues related to globalization, but devotes most of its attention to innovation policy. The chapter is intended as a contribution to the comparative analysis of NSIs, conceived in the spirit of ‘appreciative theorizing’.Globalization; Innovation Policy; comparative analysis

Technological Breakthroughs and Productivity Growth

This study consists of an examination of productivity growth following three major technological breakthroughs: the steam power revolution, electrification and the ICT revolution. The distinction between sectors producing and sectors using the new technology is emphasized. A major finding for all breakthroughs is that there is a long lag from the time of the original invention until a substantial increase in the rate of productivity growth can be observed. There is also strong evidence of rapid price decreases for steam engines, electricity, electric motors and ICT products. However, there is no persuasive direct evidence that the steam engine producing industry and electric machinery had particularly high productivity growth rates. For the ICT revolution the highest productivity growth rates are found in the ICT-producing industries. We suggest that one explanation could be that hedonic price indexes are not used for the steam engine and the electric motor. Still, it is likely that the rate of technological development has been much more rapid during the ICT revolution compared to any of the previous breakthroughs.electrification; general purpose technologies; ICT revolution; productivity growth; steam power; Technological breakthroughs

From theory to practice: the use of systems of innovation approach in innovation policy

The main objective of this chapter is to discuss the implications of the adoption of the Systems of Innovation (SI) Approach in innovation policymaking. One of the main criticisms of the SI approach is the difficulty in translating it into real policymaking. This paper proposes a way of dealing with this complex problem. By breaking down the operation of the SI into ‘activities,’ the role of the government and the interplay between private and public actors can be discussed, and specific recommendations on how and when public actors should intervene can be made. The authors propose ten activities that capture the operation of an innovation system. The role of the public sector in each activity is then discussed, and a new research agenda is proposed.innovation systems; innovation policy

Outputs of innovation systems: a European perspective

This paper focuses upon the performance of innovation systems from an output perspective. On it, we try to characterize some European countries according to seven innovation output indicators in the manufacturing and service sectors. The data are gathered from the Community Innovation Surveys between 1996 and 2006. Innovation performance measurement is considered as increasingly interesting by several scholars during last years. It is also important as basis for the design and implementation of innovation policies as the comparison among countries allows policy failures to be detected. The approach followed in this paper could also provide insights when applied to developing countries, which are already concerned with the collection of science and technology indicatorsinnovation systems; output indicators; community innovation survey; manufacturing sector; service sector