A comparative analysis of the science and innovation profiles of OECD and selected countries. Nils de Jager Canberra.

Transcription

1 A comparative analysis of the science and innovation profiles of OECD and selected countries Nils de Jager Canberra This paper was written by the author while engaged as a consultant at the OECD. It was part of an OECD report, Science, Technology, and Industry Outlook (STI) 2010, prepared under the auspices of the OECD Committee for Scientific and Technological Policy (CSTP). This paper constituted Chapter 3 of the main report. Ester Basri served as the overall co-ordinator of the STI report and Claire Miguet provided statistical support. All errors and omissions in this paper remain the responsibility of the author.

2 TABLE OF CONTENTS INTRODUCTION... 4 KEY RESULTS... 5 DESCRIPTION OF INDICATORS AND METHODOLOGY... 7 AUSTRALIA... 9 AUSTRIA BELGIUM BRAZIL CANADA CHILE CHINA CZECH REPUBLIC DENMARK ESTONIA FINLAND FRANCE GERMANY GREECE HUNGARY ICELAND INDIA INDONESIA IRELAND ISRAEL ITALY ITALY JAPAN KOREA LUXEMBOURG... 55

3 MEXICO THE NETHERLANDS NEW ZEALAND NORWAY POLAND PORTUGAL RUSSIAN FEDERATION SLOVAK REPUBLIC SLOVENIA SOUTH AFRICA SPAIN SWEDEN SWITZERLAND TURKEY UNITED KINGDOM...85 UNITED STATES ANNEXES NOTE ON NEW MEMBER COUNTRIES BIBLIOGRAPHY

4 INTRODUCTION This paper focuses on the individual profiles of the science and innovation performance of countries and relates these to their national context and policy challenges. Overviews of OECD accession countries (Estonia and the Russian Federation) and other BRIICS countries (Brazil, China, India, Indonesia and South Africa) were also included in the analysis. The analysis was conducted for the period up to 2008, although in many cases the latest available data were used (see Table 1.A1.1 in the Annex). A set of indicators are used to construct radar graphs, comparing each country s innovation performance with the OECD average. The standard suite of indicators includes: Innovation inputs: Gross expenditure on R&D (GERD) as a percentage of GDP Business enterprise expenditure on R&D (BERD) as a percentage of GDP Venture capital as a percentage of GDP. Innovation utputs/outcomes: Triadic patents per million of the population Scientific articles per million of the population Percentage of firms with new-to-market product innovations Percentage of firms undertaking non-technological innovation. Linkages and networks: Percentage of innovative firms collaborating Patents with foreign co-inventors Percentage of GERD financed by abroad. Human resources in science and technology (HRST) Researchers per thousand of total Science and engineering degrees as a percentage of all new degrees HRST occupations as a percentage of total. Each radar graph highlights the relative strengths and weaknesses compared to the performance of other countries. The indicators used in the radar graphs were selected on the basis of current science and innovation policy issues in OECD and selected countries. They typically focus on research and innovation inputs, scientific and innovation outputs or outcomes, linkages and networks including international linkages and investment in human resources. For most countries, the standard suite of indicators is used. When data are not available, alternative indicators are applied. Table 1.A1.1 in the Annex provides a full list and description of the indicators, methodological notes and data sources. For each indicator in the radar graph, the OECD country with the maximum value is set at 100 (with a position on the outer ring of the radar), taking into account all OECD countries with available data. The average is calculated by taking into account all OECD countries with available data (non-oecd countries are excluded from the average).

5 KEY RESULTS The economic events of the past few years have presented big challenges for science and innovation. Firms have faced weaker demand conditions and problems with credit availability that hampered efforts to maintain innovation activity. The sharp falls in trade, foreign direct investment flows and access to international financing adversely affected global supply chains that typically provide companies with technical expertise, market intelligence, business contacts and international partners. In addition, the withdrawal of temporary fiscal stimulus in a number of countries may also dampen demand for goods and services of innovative firms in the short term. Some countries have also announced cuts in their annual budget provisions for research and development (R&D) and tertiary education, thus reducing the resources available for public research and private R&D activities in the short term, and potentially affecting the human resources available for these activities over the longer term. While the current environment presents risks and uncertainty for R&D and innovation, science, technology and innovation can make key contributions to a successful recovery from the recession and boost the longer-term growth prospects of OECD and non-oecd economies. The economies of countries with strong innovation profiles have performed well and have emerged from the global recession with solid economic growth performances. Real growth in R&D spending in the OECD slowed from 2007 to 2008, with annual growth falling from over 4% in recent years to 3.1%. The number of triadic patents for the OECD has grown steadily since the mid-1990s, at an average annual rate of 2.4% from 1995 to However, growth has been weaker in recent years, and there was a fall in OECD triadic patent applications in Similarly, data on trademarks, which measures product or marketing advances, showed a 20% fall in Apart from the United States, all OECD countries have increased their output of scientific articles between 1998 and Taking a global view, scientific activities are intensifying and have occurred across more regions. Non-OECD economies, in particular, are continuing to expand their expenditures on R&D and are increasing their share of global research. For instance, China s real gross domestic expenditure on R&D in 2008 was equivalent to 13.1% of the OECD total up from around 5% in The Russian Federation s spending of USD 17 billion (constant 2000 dollars, PPP) in 2008 was equal to 2.2% of the OECD total, close to the shares of Canada and Italy. Non-member BRIICS economies (Brazil, Russia, India, Indonesia, China and South Africa) are making important investments in environmental technologies a dynamic area with growth potential and clear practical relevance in the context of global challenges related to climate change, water and food. In 2007, the BRIICS recorded a higher than average share of renewable energy patent applications in their submissions to the Patent Co-operation Treaty. The rise of non-member economies in research, science and technology present both opportunities and challenges for OECD countries. Non-members offer large consumer markets, new sources of skilled people and ideas and new collaboration networks. At the same time, the resulting re-organisation of production and research activity pushes OECD countries to adopt policy frameworks that support reallocation of resources to new activities and help businesses to adjust. Just as the improved performance of individual OECD countries can be viewed as a source of combined strength and an opportunity to expand the global stock of knowledge to solve social challenges, the increased activity and proficiency of non-member economies can be viewed as ultimately benefiting all countries.

6 At first glance, the national innovation strategies of OECD countries appear broadly similar and focus on strengthening innovation to improve industrial competitiveness, especially in terms of raising productivity growth, jobs and living standards. Non-member and emerging economies also view innovation as a means to modernise economic structures and to achieve sustainable growth. However, even among OECD countries the emphasis is different. For countries that already rank high in terms of business R&D and innovation, such as Korea, Japan and the United States, there is renewed focus on investing in the science base both public research and human resources to strengthen the base for future innovation. Government support for non-technological and user-driven innovation is increasing in some countries. Recognising that non-technological and other forms of innovation such as design and branding are important to competitiveness, especially in services sector firms, Member countries such as Chile, Denmark, Finland, the United Kingdom as well as non-members such as Brazil are trying to raise awareness and encourage non-technological innovation alongside technological innovation. The governance of science, technology and innovation is important to promote international collaboration to address global challenges and remains high on national agendas. Some countries have re-organised ministerial or departmental functions to strengthen the links between R&D and higher education, or between industry and research. Several countries, including Germany and the Nordic countries, have launched internationalisation strategies for their public research sector in order to facilitate and to build capacity for multi-lateral collaboration in science, technology and innovation. At the same time, countries continue to focus on key research areas and enabling technologies such as biotechnology, nanotechnology, ICT, new materials and advanced manufacturing. While most countries support research in similar technologies, there is a growing effort to better target policy support at different stages of the innovation value chain (i.e. providing incentives for R&D tax via grants or tax credits to fostering specific technology clusters and venture funds) in order to enhance the ability of firms to capitalise on public and private investments in emerging technologies. Direct public funding through grants, subsidies and loans remains the most frequent form of support to business R&D, although the focus has shifted to competitive and merit-based grants programmes. However, tax relief for R&D continues to complement more direct measures in many countries. More recently, tax credits on social charges for researchers engaged in R&D have been introduced as a subsidy for highly skilled human capital, especially in small research intensive firms. The balance between direct funding and indirect measures like R&D tax incentives varies across countries according to factors such as industrial structure, existence of large R&D intensive firms, R&D intensity and specialisation.

7 DESCRIPTION OF INDICATORS AND METHODOLOGY The radar graph for each country illustrates its position against the average performance on a set of common innovation indicators. In most cases, the OECD average is used and data for non-oecd countries are not included in the average. This shows how individual countries perform relative to the OECD average. The selected indicators are based on policy relevance, as well as on the availability of comparable data for the majority of countries in order to provide a broad snapshot of science and innovation performance. They focus on research and innovation inputs, scientific and innovation outcomes, linkages and networks, including international linkages and human resources. The indicators considered are as follows: Gross expenditure on R&D (GERD) as a percentage of GDP is the main aggregate used for international comparison of R&D expenditures. It represents a country s domestic R&D-related expenditure for a given year. Business enterprise expenditure on R&D (BERD) as a percentage of GDP is an indicator of R&D activities carried out in the business sector by performing firms and institutes, regardless of the origin of funding. Industrial R&D is most closely linked to the creation of new products and production techniques, as well as to a country s innovation efforts. Venture capital as a percentage of GDP is a measure of one important source of funding for new technology-based firms. Venture capital plays a crucial role in promoting the radical innovations often developed by such firms and is one of the decisive determinants of entrepreneurship. Triadic patents per million of the population is an indicator of innovation outputs, adjusted to account for the size of the country. Triadic patents are a set of patents taken at the European Patent Office, the Japan Patent Office and the US Patent and Trademark Office that protect the same invention. The use of triadic patents as an indicator eliminates the problems of home advantage and influence of geographical locations that are encountered with single-office patent indicators and thus improves the international comparability of the data. Scientific articles per million of the population is an indicator often used to highlight the scientific productivity of countries and is an important measure of research output, since publication is the main means of disseminating and validating research results. Article counts are based on science and engineering 1 articles, notes and reviews published in a set of the world s most influential scientific and technical journals. Some caveats regarding this indicator should be noted the journals have good international coverage, although journals of regional or local importance may not be included; there is an English-language bias; the propensity to publish differs across countries and fields of study; and incentives to publish can lead to questions about quality. Percentage of firms with new-to-market product innovations provides a measure of innovation and novelty. Firms that first develop innovations can be considered as drivers of the process of innovation. Many new ideas and knowledge originate from these firms, with the full economic impact of their innovations depending on their adoption by other firms. Percentage of firms undertaking non-technological innovation looks more closely at marketing and organisational innovations, an important dimension of many firms innovation activities. They are particularly relevant for service firms. Percentage of innovative firms collaborating aims to highlight the extent of active participation in joint innovation projects with other organisations. Collaboration is an important part of the innovation activities of many firms, and can involve the joint development of new products, 1 Science and engineering includes life sciences, physical sciences, social and behavioural sciences and computer sciences.

8 processes or other innovations with customers and suppliers, as well as horizontal work with other enterprises or public research bodies. Patents with foreign co-inventors is a measure of the internationalisation of research. It constitutes an indicator of formal R&D co-operation and knowledge exchange between inventors located in different countries. It highlights how institutions seek competences or resources beyond their national borders. Percentage of GERD financed by abroad is another measure of internationalisation. Foreign funding of R&D is an important source of financing for many countries. Researchers per thousand of total measures one of the central human resource elements of the research and development system. Researchers are professionals engaged in the conception and creation of new knowledge, products, processes, methods and systems and are directly involved in the management of projects. Science and engineering degrees as a percentage of all new degrees is an indicator of a country s potential for assimilating, developing and diffusing advanced knowledge and supplying the labour market with human resources that possess critical skills for research and development. HRST occupations as a percentage of total is an indicator of the extent of innovation-related skills in the workforce. This category of workers corresponds to professionals and technicians as defined in the International Standard Classification of Occupations (ISCO-88). To construct the radar graphs, the raw data for each indicator (see Table 1.A1.1 in the Annex) is transformed into an index, with the OECD country with the maximum value of the indicator taking an index value of 100 and the other countries taking proportional values below this. For example, for the indicator on Gross expenditure on R&D (GERD) as a percentage of GDP, Israel was the country with the highest value (4.86%), but based on the data and the time of writing, was not yet an OECD country. Sweden had the highest OECD value (3.75%), and therefore took the index value of 100. Following the transformation of the raw data into indices, an OECD average for each indicator was obtained where possible. This allows the construction of an average value for each indicator (the dotted line in the radar graphs) against which individual country results were plotted (the solid line in the radar graphs). It should be noted that in some cases, OECD countries were excluded from the average due to data comparability (e.g. when the data only represented a particular sector, see notes to Table 1.A1.2). In addition, in some cases, it was not possible to construct an OECD average because the data were unavailable, e.g. not all countries run an innovation survey, so an arithmetic average was constructed with available data. In some instances of data unavailability, alternative indicators were used, if considered a suitable replacement. These alternative indicators are specified and discussed in Table 1.A1.1. For example, for the indicator on Venture capital as a percentage of GDP, the alternative indicator Industry-financed GERD as a percentage of GDP was used for a number of countries. To calculate the radar indicator in this case, an index for Industry-financed GERD as a percentage of GDP was constructed in the same manner as described above. The index values yielded for these countries were then used as an alternative for Venture capital as a percentage of GDP.

9 AUSTRALIA Australia s innovation landscape displays a number of strengths. Gross expenditure on R&D (GERD) has grown to a record 1.97% of GDP in Business expenditure on R&D (BERD) was 1.2% of GDP in 2007, below the OECD average that year of 1.6%. The share of GERD financed by industry increased from 54.3% to 58.3% from 2004 to 2006, while the share financed by government fell from 40.3% to 37.3%. Industry financed 96% of BERD in 2007, up from 89% in In 2006, the services sector performed 40% of BERD, the second highest in the OECD. Based on a broad definition of venture capital, venture capital intensity (0.13% of GDP) exceeded the average in Based on a narrower definition (excluding private equity), however, this ratio has fallen in recent years. The number of triadic patents increased by almost 6% between 1998 and 2008, to 14.6 per million of the population. However, at 0.6% of the world share of triadic patent families, this is below the OECD average. This result can be ascribed to the nature of the resource and agricultural sectors, combined with a decline in the high-technology manufacturing sector due to global competition. Scientific publications were well above the OECD average in 2008, with 1448 scientific articles per million of the population, or nearly 2% of world output. Innovation linkages indicators vary. Around 12% of firms collaborated with an external partner during and a comparatively high 15.6% of patents were developed with foreign co-inventors during Australian firms rank comparatively low on in-house product innovation and nontechnological innovation, but comparatively better on in-house process innovation. By firm size, a relatively low 28% of SMEs and 40% of large firms undertook non-technological innovation in In 2006, a relatively low 2.4% of GERD was financed by abroad. Science and engineering graduates in total university degrees (20.4%) are close to the OECD average. Human resources in science and technology (HRST) occupations as a share of total declined from 38% in 2004 to 36% in 2008 but remain above average and are distributed equally between men and women. Researchers per thousand total of total edged up to 8.5 in Australia avoided a technical recession in 2008 and Real GDP increased by 1.4% in 2009, and the un rate was a comparatively low 5.6%. Relative to the United States, GDP per capita was above average (82%) in 2008, while GDP per hour worked exceeded the OECD average by 4 percentage points. The government s innovation agency, the Department of Innovation, Industry, Science and Research, published its Powering Ideas in mid-2009, outlining a ten-year reform agenda to make Australia more productive and competitive, supported by a substantial boost in funding. Looking forward, the key policy issues include developing an integrated approach to science and innovation and improving links with global research and innovation systems.

10 Science and innovation profile of Australia Australia Average GERD as % of GDP HRST occupations as % of total BERD as % of GDP Science & Engineering degrees as % of all new degrees Venture capital as % GDP Researchers per thousand total Triadic patents per million population % of GERD financed by abroad Scientific articles per million population Patents with foreign co inventors % of firms collaborating (as % of all firms) % of firms with new to market product innovations (as % of all firms) % of firms undertaking non technological innovation (as % of all firms) 10

11 AUSTRIA Austria performs well on a number of science and innovation indicators. Since 1998 gross expenditure on R&D (GERD) has increased consistently as a share of GDP to 2.7% in 2008, mainly owing to higher business expenditure on R&D (BERD) (1.9% of GDP). The 23.8% of GERD performed by the higher education sector was slightly lower than in preceding years; that of government (5.3%) increased slightly. BERD growth has been particularly strong in the office machinery, computer and pharmaceutical industries. The share performed in service industries also increased slightly to The 23.3% funded from abroad in 2007 was the OECD leader, owing to the strong presence of foreign multinationals. Industry financed 66.3% of BERD in 2007, and the government-funded share increased sharply from 5.5% in 1998 to 10.3%. In 2008, venture capital investment was 0.03% of GDP, well below the average (0.1%). Triadic patents increased by 53% in the decade to 2008 to 52 per million of the population. Publishing 973 scientific articles per million of the population in 2008, Austria was above the OECD average and accounted for 0.5% of world output. Almost a quarter of all firms introduced new-to-market product innovations during , and 56% of firms undertook non-technological innovation. Innovation links are strong. The percentage of firms collaborating on innovation activities was a relatively high 20% in During , Austria lodged 27% of Patent Cooperation Treaty (PCT) patent applications with foreign co-inventors, three times the OECD average. In 2008, 16.5% of GERD was financed from abroad. Austria s human resources in science and technology (HRST) indicators firmed over the past two years. Science and engineering degrees represent 31% of all new degrees, well above the OECD average. HRST occupations represented almost 30% of total in The number of researchers increased to 8 per thousand of total, slightly above average. GDP grew by a strong average 2.4% a year between 2001 and 2008, but contracted by 3.6% in Un increased to a modest 4.8%. GDP per capita was 80% relative to the United States in 2008, and remained above the OECD average. Labour productivity growth slowed to 0.8%. The Austrian federal government launched its Research Strategy 2020 in the second half of 2010, outlining the government s science, technology and innovation activities for the next decade. Despite the recent economic crisis, Austria aims to be among the top three European innovation leaders by 2020, and to become a country with production structures at the technological frontier with substantially higher productivity. 11

12 Science and innovation profile of Austria Austria Average GERD as % of GDP HRST occupations as % of total BERD as % of GDP Science & Engineering degrees as % of all new degrees Venture capital as % GDP Researchers per thousand total Triadic patents per million population % of GERD financed by abroad Scientific articles per million population Patents with foreign co inventors % of firms collaborating (as % of all firms) % of firms with new to market product innovations (as % of all firms) % of firms undertaking non technological innovation (as % of all firms) 12

13 BELGIUM The shape of Belgium s science and innovation profile reveals a number of strong features. Investment in human resources in science and technology (HRST) is a policy priority. Belgium has 8 researchers per thousand of total, slightly above the OECD average. Science and engineering degrees represented 23% of new degrees in 2007, marginally above the OECD average, and in 2008 HRST occupations accounted for 32.5% of total. Belgium s profile also reveals areas for improvement. In 2008, gross expenditure on R&D (GERD) was a relatively low 1.9% of GDP, although it has grown in constant terms in recent years. In that year, business expenditure on R&D (BERD) was a steady 1.3%, while venture capital was on the average at 0.10% of GDP. R&D expenditure in the pharmaceutical industry exceeds the OECD average as a percentage of both BERD and GDP. Belgium accounted for a relatively low 0.8% of total triadic patent families in With 39 triadic patents per million of the population, it is marginally below the OECD average, and lower than a decade earlier. Its 1110 scientific articles per million of the population are above the average and account for 1% of the world total. More than one in five Belgian firms introduced new-to-market product innovations in , and 48% of SMEs and 76% of large firms undertook nontechnological innovation, predominantly in the manufacturing sector. Innovation linkages in Belgium are strong. A relatively high 18% of firms collaborated on innovation activities during , and a high 44% of Patent Cooperation Treaty (PCT) patent applications were with foreign co-inventors. In 2007, 13% of GERD was financed from abroad, a further sign of strong international integration. Another indication of Belgium s openness is the 59% of R&D expenditure by foreign affiliates as a percentage of total R&D the third highest in the OECD area. Belgium s GDP grew at a compound annual rate of 2% between 2001 and 2008, but in 2009 the economy contracted by 3.1%, with the un rate increasing to 7.9%. Belgium s GDP per capita relative to the United States was 75% in 2008, while GDP per hour worked relative to the United States was 98%. Innovation in Belgium is guided by policies in the three regional governments: Flanders, Wallonia and Brussels Capital. In 2005, Wallonia adopted a number of documents that remain the baseline for policy in the period to The Marshall Plan2.Green was recently updated to reflect the integration of sustainable development as a priority. Flanders in Action (FIA) is the action plan meant to lead Flanders to the top five regions in Europe, and the main document governing innovation policy in the Brussels Capital region is the 2006 Regional Innovation Plan for The federal finance agency (FPS Finance) has recently increased R&D tax credits to EUR 470 million, nearly doubling the share of the federal government in public R&D funding. 13

14 Science and innovation profile of Belgium Belgium Average GERD as % of GDP HRST occupations as % of total BERD as % of GDP Science & Engineering degrees as % of all new degrees Venture capital as % GDP Researchers per thousand total Triadic patents per million population % of GERD financed by abroad Scientific articles per million population Patents with foreign co inventors % of firms collaborating (as % of all firms) % of firms with new to market product innovations (as % of all firms) % of firms undertaking non technological innovation (as % of all firms) 14

15 BRAZIL Brazil s economy is characterised by large and well-developed agricultural, mining, manufacturing and services sectors. Its USD 2 trillion economy is expanding rapidly into world markets, and is also changing structurally. Over the decade to 2008, high-technology manufacturing exports increased at an average annual 16%, faster than total manufacturing exports (13%) indicative of higher competitiveness. Brazil s science and technology profile shows weaknesses, but some areas have improved over the past two years. In 2008, gross expenditure on R&D (GERD) was 1.1% of GDP. While this is below the OECD average, it is higher than in India, Russia and South Africa. Business expenditure on R&D (BERD) was 0.5% of GDP in To raise this, Brazil has a generous 25.5% tax subsidy rate for every US dollar of R&D. Emerging economies produce few patents relative to R&D, as illustrated by Brazil s 0.3 triadic patents per million of the population in However, Brazil is increasingly involved in patent development in waste management, water pollution control and renewable energy. In 2008 it published scientific articles; at 141 per million of the population, this indicator is well below the OECD average but has increased sharply over the past two years. In 2008, it had 1.6% of world scientific articles, more than the Netherlands, for example. Between 1998 and 2008, publications increased by 12.2% on an average annual basis. Only 3.6% of Brazil s firms introduced new-to-market product innovation during , and a below average 36% of firms undertook non-technological innovation. International integration appears weak. While the average ratio of exports and imports to GDP increased in all OECD countries between 1997 and 2007, it was less than 20% in Brazil. A small 3% of firms collaborated on innovation activities in , but the percentage of Patent Cooperation Treaty (PCT) applications in with foreign co-inventors (18%) was above the OECD average of 7.7%. Brazil s indicators for human resources in science and technology (HRST) remain weak. In 2006, there were only 1.5 researchers per thousand of total. Science and engineering degrees increased to 11% of all new degrees in 2007, around half the OECD average. A comparatively low 11% of the population aged is qualified at the tertiary level. However, there is a rising trend in doctorates awarded. In spite of low graduation rates, Brazil, like Russia, awards more doctorates per capita than the OECD average. Brazil s GDP grew by 6.1% in 2007 and 5.1% in 2008 but contracted by 0.2% in However, it was one of the first emerging economies to begin to recover. The labour market remained resilient, and un fell from 7.9% in 2008 to 7.4% in GDP per capita was 22% relative to the United States in To complement the government's Growth Acceleration Plan, the Ministry of Science and Technology has launched its own Action Plan for Science, Technology and Innovation Plano de Ação para Ciência, Tecnologia e Inovação (PACTI) with initiatives and programmes to enhance the role of science, technology and innovation in Brazil. 15

16 Science and innovation profile of Brazil Brazil Average GERD as % of GDP % of population aged with tertiary degree BERD as % of GDP Science & Engineering degrees as % of all new degrees Triadic patents per million population Researchers per thousand total Scientific articles per million population Patents with foreign co inventors % of firms with new to market product innovations (as a % of all firms) % of firms collaborating (as a % of all firms) % of firms undertaking non technological innovation (as a % of all firms) 16

17 CANADA Canada has a strong innovation landscape and its science and innovation profile displays notable strengths. It has strong human resources in science and technology (HRST) and HRST occupations are well represented in total. It counts 22.4% of science and engineering graduates in total university graduates, slightly above the OECD average. Canada has a high share of tertiary-level graduates in total, of which 58% are women. Researcher numbers increased more slowly in 2007 to 8.3 per thousand of total, but remained above average. However, gross expenditure on R&D (GERD) has declined as a share of GDP since After reaching around 2.1% of GDP between 2001 and 2005, it fell to 1.8% in GERD per capita is also relatively low. GERD financed by industry fell from 50% in 2004 to 48% in 2008, while government financing increased from 31% to 32%. Business expenditure on R&D (BERD) fell to 1% of GDP in 2008, below the OECD average of 1.6%. Defined broadly, venture capital represented 0.08% of GDP in In 2008, triadic patents were 19 per million of the population, about half the OECD average, and accounted for 1.4% of total triadic patent families. Scientific publication output was above average in 2008 with 1356 scientific articles per million of the population, for 2.7% of the world s scientific publications, the sixth highest in the OECD. Canadian manufacturing firms performed well in terms of new-to-market product innovations during Around 36% of BERD was performed in the service industries in Canada displays sound linkages and collaboration. The percentage of manufacturing firms collaborating on innovation activities is above average, and in 2008 a relatively high 9% of GERD was financed from abroad. Almost 30% of patents were developed with foreign co-inventors in Canada s average annual real GDP growth was around 2.4% between 2001 and 2008, but contracted by 2.6 % in 2009, while the un rate increased to 8.5%. Relative to the United States, GDP per capita was 83% in 2008, and GDP per hour worked was 78%. The 2007 Federal S&T Strategy, Mobilizing Science and Technology to Canada s Advantage, remains the main policy framework for Canada s innovation policies. It aims to foster competitiveness through investments in three key areas: entrepreneurial advantage, knowledge advantage and people advantage. It is founded on four core principles: promoting world-class excellence; focusing on priorities; fostering partnerships; and enhancing accountability. In June 2009 the government released a progress report on the implementation of the strategy, expressing its commitment to bring forward investments to make Canada a world leader in science and technology. 17

18 Science and innovation profile of Canada Canada Average GERD as % of GDP HRST occupations as % of total BERD as % of GDP Science & Engineering degrees as % of all new degrees Venture capital as % GDP Researchers per thousand total Triadic patents per million population % of GERD financed by abroad Scientific articles per million population Patents with foreign co inventors % of firms with new to market product innovations (as a % of all firms) % of firms collaborating (as a % of all firms) Share of services in business R&D 18

19 CHILE Chile joined the OECD on 7 May Its economy is characterised by a high level of foreign trade. It has a reputation for strong financial institutions and sound policy, and has the strongest sovereign bond rating in South America. Chile s science and innovation profile show particular strengths and improvement over the two years to 2008, but also some weaknesses. A relatively high 9% of gross expenditure on R&D (GERD) was funded from abroad in 2004 and an above average 17.5% of firms collaborated on innovation activities during In addition, almost 40% of Patent Cooperation Treaty (PCT) applications during involved foreign collaboration. Other indicators of openness are the quadrupling of foreign direct investment inflows in the five years to 2008, and the significant 20% contribution of exports to GDP in Although the GERD intensity of 0.7% of GDP in 2004 is well below the OECD average, it exceeds that of OECD countries such as Greece, Mexico and the Slovak Republic. At 0.3% of GDP business expenditure on R&D (BERD) is also low. This is due to Chile s economic structure: the services sector makes up 64% of GDP, agriculture contributes 15% and a low-technology manufacturing sector, which includes energy, comprises 23%. Commodities account for almost three-quarters of total exports. Chile produced 0.36 triadic patents per million of the population in It had only 185 scientific articles per million of the population in 2008, although these have been growing by a robust 10% a year since A comparatively low 12% of firms introduced new-to-market product innovations during , while a below-average 33% of firms engaged in non-technological innovation. Human resources in science and technology (HRST) indicators are below average. In 2004, Chile had 3 researchers per thousand of total. The level of tertiary education attainment is below the OECD average; 24% of the population aged had tertiary-level qualification in However, a relatively high 18% of all new degrees, close to the OECD average, were in the science and engineering disciplines in Chile s GDP grew by an average annual 4.5% during Growth slowed to 3.7% in 2008 and GDP contracted by 1.5% in 2009; the un rate increased from 7.8% in 2008 to 10% in Relative to the United States, GDP per capita was 31% in 2008, while GDP per hour worked was 28%. In recent years, the Chilean government has put in place a framework aimed at improving scientific and technological development. The two key agencies are the Chilean Economic Development Agency (CORFO) and the National Scientific and Technological Research Commission (CONICYT). CORFO s innovation component is focused on technology innovation for companies, technology transfer and promoting entrepreneurship, while CONICYT aims mainly at promoting and strengthening scientific and technological research through a scholarship programme. 19

20 Science and innovation profile of Chile Chile Average GERD as % of GDP % of population aged with tertiary degree BERD as % of GDP Science & Engineering degrees as % of all new degrees Triadic patents per million population Researchers per thousand total Scientific articles per million population % of GERD financed by abroad % of firms with new to market product innovations (as a % of all firms) Patents with foreign co inventors % of firms undertaking non technological innovation (as a % of all firms) % of firms collaborating (as a % of all firms) 20

21 CHINA Over the past three decades China's economy has moved from being largely closed to becoming a major global player. Its innovation system has undergone considerable change and its innovation performance has improved noticeably. Gross expenditure on R&D (GERD) increased consistently from 0.73% in 1991 to 1.5% of GDP in 2008, the equivalent of around 13% of total OECD GERD. Industry funded about 70% of GERD, and the government 24%. Business expenditure on R&D (BERD) was 1% of GDP in 2008, and increased by 27% a year in real terms in the decade since In 2007, business R&D was equivalent to almost 12% of OECD BERD, up from 2% in China has few triadic patents, but its 1.1% share in triadic patent families in 2008 nonetheless ranked twelfth among the countries covered here. The publication of scientific articles in China grew by 23.4% a year in the decade to 2008, the fastest in the world over the period. Although its 156 articles per million of the population were below the average, China accounted in 2008 for 12% of the world s scientific articles, up from 3% ten years earlier and not far behind the United States 16.3%. During almost 15% of firms introduced new-to-market product innovations. China has invested extensively in human resources in science and technology (HRST) in recent years. The number of first-stage university graduates has almost tripled since 2000, although the 12% graduation rate is still low compared to the OECD average. However, a substantial 39% of China s university graduates obtained degrees in science and engineering in Tertiary qualifications remain comparatively low; less than 10% of the age group have a tertiary degree. Although researchers numbered only 2.1 per thousand of total in 2008, China has as many researchers as the United States (1.4 million), and their numbers have grown by 9.4% a year since Innovation linkages remain weak, but show potential. A small share of GERD was funded from abroad (1.2%) in 2008, and only 6% of firms collaborated on innovation activities during However, Patent Cooperation Treaty (PCT) applications with foreign co-inventors rose to 12.6% during While most R&D investment still flows to OECD countries, China is increasingly considered an attractive R&D location. The restructuring of China s economy and efficiency gains have made it the world s second largest economy after the United States. Average annual GDP growth was 13% between 2000 and 2008, but slowed to 7.8% in GDP per capita was around 14% relative to the United States in 2009 and its urban un rate was around 4.3%. China s innovation policy, put forward in the Medium- and Long-Term Plan of Science & Technology Strategic Development: , aims to achieve an innovation-oriented society by Some recent policy actions, such as increasing export rebates, reducing property transaction taxes and interest rates, will help stimulate the domestic market. Moreover, a large portion of the stimulus package is expected to be invested in fixed infrastructure and human capital assets, and China s research budget will be pushed upward accordingly. 21

22 Science and innovation profile of China China Average GERD as % of GDP % of population aged with tertiary degree BERD as % of GDP Science & Engineering degrees as % of all new degrees Industry financed GERD as % GDP Researchers per thousand total Triadic patents per million population % of GERD financed by abroad Scientific articles per million population Patents with foreign co inventors % of firms with new to market product innovations (as a % of all firms) % of firms collaborating (as a % of all firms) 22

23 CZECH REPUBLIC The Czech Republic is rapidly catching up with key OECD countries and performs above east European OECD countries on a number of indicators. High-technology exports, for example, grew substantially faster than medium-high technology exports between 1998 and Inflows of foreign direct investment were also strong up to Gross expenditure on R&D (GERD) has grown over the past decade. It peaked at 1.6% of GDP in 2006 and edged down to 1.5% in Although this is well up on the 1.15% a decade earlier, it is still well below the OECD average. Industry financed 52% of GERD in 2008 and government 41%. Business expenditure on R&D (BERD) has also increased in recent years, albeit to a comparatively low 0.9% of GDP in Just over one-third of BERD is performed by small and medium-sized firms, and 37% of total business R&D was performed in the services sector in In 2008, venture capital represented 0.12% of GDP, just above the average. Triadic patents per million of the population are at a low level, but scientific publishing performs relatively better. In 2008, the Czech Republic produced 715 scientific articles per million of the population, contributing 0.4% of world output. An average 14% of firms introduced new-to-market product innovations in , while a below-average 38% were non-technological innovators. Nontechnological innovation was more prevalent among large firms and occurred predominantly in the services sector. In , 34% of Patent Cooperation Treaty (PCT) patent applications had international coinventors, and 13% of firms collaborated on innovation during Although the share of GERD financed from abroad almost doubled to 5.4% between 2006 and 2008, it remained modest and close to the OECD average. The Czech Republic s performance in human resources in science and technology (HRST) ranges from strong to below average. HRST occupations accounted for 34% of total in 2008, a level similar to those in key European countries, the United States and Canada, and higher than the average. In 2007, science and engineering degrees accounted for 25% of all new degrees, above the OECD average; however, there were a relatively low 5.6 researchers per thousand of total. The Czech economy has performed well in recent years. Real GDP grew at a compound annual rate of 4.5% between 2001 and 2008, but contracted by 4.2% in 2009, with un increasing to 6.7%. Average annual labour productivity growth of 3.9% during exceeded the OECD average of 1.8%. GDP per capita in 2008 was significantly lower in comparison. There is strong policy support for innovation in the Czech Republic. Currently three Operational Programmes focus on R&D and innovation issues, targeting improvements by 2013 in three key indicators: expenditures on R&D in the business sector, in R&D and high-technology production. 23

24 Science and innovation profile of the Czech Republic Czech Republic Average GERD as % of GDP HRST occupations as % of total BERD as % of GDP Science & Engineering degrees as % of all new degrees Venture capital as % GDP Researchers per thousand total Triadic patents per million population % of GERD financed by abroad Scientific articles per million population Patents with foreign co inventors % of firms collaborating (as a % of all firms) % of firms with new to market product innovations (as a % of all firms) % of firms undertaking non technological innovation (as a % of all firms) 24

25 DENMARK Denmark is one of the stronger OECD members on a number of science and innovation indicators. It has a modern open market economy featuring a high-technology agricultural sector and a sophisticated manufacturing industry, with world leaders in pharmaceuticals, maritime shipping and renewable energy. It has a large government R&D budget and high expenditure on biotechnology and pharmaceutical R&D. In 2008, Denmark s gross domestic expenditure on R&D (GERD) was 2.7% of GDP, firmly above the OECD average of 2.3%. Industry-financed GERD increased to 61%, while governmentfunded GERD declined to 25%. Business expenditure on R&D (BERD) was a comparatively high 1.9% of GDP in 2008; as a percentage of industry value added, this was almost double the OECD average. In that year, Denmark also had a high venture capital intensity of 0.16%, well above the average. Denmark s R&D inputs translate into solid outcomes. It has a comparatively high 60 triadic patents per million of the population and its 1359 scientific articles per million of the population are well above the average. During an above-average 16% of firms introduced new-to-market product innovations, while a close-to-average 47% of firms undertook non-technological innovation. Innovation linkages are strong: in , a relatively high 16% of firms collaborated on innovation activities, and a noteworthy 19% of patents were developed with foreign co-inventors. In 2008, 9.7% of GERD was financed from abroad, above the OECD average. Denmark s indicators on human resources in science and technology (HRST) are quite robust. With ten researchers per thousand of, it ranks fifth in the OECD area. Science and engineering degrees account for 20% of all new degrees, slightly below the OECD average, but the 39% of HRST occupations in total is the third highest in the OECD area. During , average annual growth of GDP eased compared to previous periods. The global financial crisis severely affected the economy, with GDP contracting by 1% in 2008 and by 5% in The historically low un rate doubled to 6.5% in GDP per capita was 78% relative to the United States in Denmark s labour productivity growth has been declining since the 1980s, and its average annual growth rate of 0.5% between 2001 and 2008 is well below the OECD average of 1.7%. Denmark s Globalisation Strategy aims to invest more than DKK 40 billion by 2012 in research, education, innovation and entrepreneurship. R&D and innovation policies in Denmark have been broad-based. A period of co-ordination and evaluation is now under way. 25

26 Science and innovation profile of Denmark Denmark Average GERD as % of GDP HRST occupations as % of total BERD as % of GDP Science & Engineering degrees as % of all new degrees Venture capital as % GDP Researchers per thousand total Triadic patents per million population % of GERD financed by abroad Scientific articles per million population Patents with foreign co inventors % of firms collaborating (as a % of all firms) % of firms with new to market product innovations (as a % of all firms) % of firms undertaking non technological innovation (as a % of all firms) 26

27 ESTONIA Estonia has one of the higher per capita income levels in central Europe. Successive governments have carried out significant reforms. The economy benefits from strong electronics and telecommunications sectors and has strong trade ties with Finland, Germany and Sweden. The services sector has grown rapidly to account for 75% of GDP. Estonia's economic growth out-performed most of the rest of Europe in the early 2000s, with robust average annual growth in GDP of 8.2% from 2001 to It slowed markedly and fell into recession in mid GDP contracted by nearly 15% in 2009, among the world s highest rates; un rose from 5.7% in 2008 to more than 14% in Labour productivity grew by 6% during , but declined by 2.3% in Relative to the United States, GDP per capita was 44% in that year. Estonia s innovation profile reveals a few strong areas. In the decade to 2008, business R&D grew at a high annual rate of 27.5%, and the government s R&D budget grew by more than 10% a year. In 2006, gross expenditure on R&D (GERD) was 1.1% of GDP and business expenditure on R&D (BERD) was 0.5% of GDP. Health R&D is a strong growth area and has expanded by an average annual 36.3% since In 2008, Estonia s 4.5 triadic patents per million of the population were low, but still higher than in a few OECD countries and some prominent BRIICS economies. Other innovation outcomes performed around or above average. In that year, the 668 scientific articles per million of the population were just below the OECD average, but had increased by a robust 8.3% a year since Around 16% of firms introduced new-to-market product innovations during , and almost 50% undertook nontechnological innovation. Estonia has a very open economy, and the average ratio of exports and imports to GDP increased by more than 160% in the decade to However, the share of high-technology manufactured exports relative to the total is still relatively low. Almost one out of five firms collaborated on innovation activities during , an indication of strong innovation linkages. During % of patents were developed with foreign co-inventors, well above the average. Indicators on human resources in science and technology (HRST) vary. In 2007, Estonia s 23.4% of science and engineering degrees among all new degrees exceeded the OECD average (20.9%). Business researchers increased by almost 15% during , among the highest growth rates in researcher numbers, although with 5.4 researchers per thousand of in 2006, this was below the OECD average of 7.5. Estonian innovation policy started formally in 2000 with Knowledge-Based Estonia which drew on Finland s experience. This has developed into the current policy document, Knowledge- Based Estonia: Estonian Research and Development and Innovation Strategy Central to its innovation policy is the need to increase value added in manufacturing and services and to enhance the export capability of its small domestic market. 27