An Innovation Index Based on Knowledge Capital Investment: Definition and Results for the UK Market Sector
AbstractWe (a) propose an implementable innovation index, (b) relate it to existing innovation definitions and (c) show whole-economy and industry-specific results for the UK market sector, 2000-2005. Our innovation measure starts by observing that we could get more GDP without innovation by simply duplicating existing physical capital and labour (e.g. adding a second aircraft and crew on an existing route). Thus we propose to measure innovation as the additional GDP over and above the addition existing physical capital and labour. In our measure this is the contribution to GDP growth of market sector investment in knowledge (or intangible) capital. This contribution is measured from company spending on knowledge/intangible assets and TFP growth. We relate our measure to the literature on innovation definitions, TFP, creative industries and hidden innovation. We implement it for six UK market sector industries, 2000-2005, combining with output and tangible investment data from the EUKLEMS database. Our main findings are as follows. Over 2000-2005, market sector labour productivity grew at 2.74% per annum, of which the contribution of knowledge capital, our innovation measure, was 1.24% pa. In turn, manufacturing accounted for about 60% of this latter figure. If one includes increase in labour skill deepening (0.45% pa) as innovation, then innovation contributed 61% (=(1.24+0.45)/2.74)of labour productivity growth over the period.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7158.
Date of creation: Feb 2009
Date of revision:
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Other versions of this item:
- Clayton, Tony & Dal Borgo, Mariela & Haskel, Jonathan, 2009. "An Innovation Index Based on Knowledge Capital Investment: Definition and Results for the UK Market Sector," IZA Discussion Papers 4021, Institute for the Study of Labor (IZA).
- E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-28 (All new papers)
- NEP-CSE-2009-02-28 (Economics of Strategic Management)
- NEP-EFF-2009-02-28 (Efficiency & Productivity)
- NEP-MAC-2009-02-28 (Macroeconomics)
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- Mauro Giorgio Marrano & Jonathan Haskel & Gavin Wallis, 2007.
"What Happened to the Knowledge Economy? ICT, Intangible Investment and Britain's Productivity Record Revisited,"
603, Queen Mary, University of London, School of Economics and Finance.
- Mauro Giorgio Marrano & Jonathan Haskel & Gavin Wallis, 2009. "What Happened To The Knowledge Economy? Ict, Intangible Investment, And Britain'S Productivity Record Revisited," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 686-716, 09.
- Marcel P. Timmer & Mary O’Mahony & Bart van Ark, 2007. "EU KLEMS Growth and Productivity Accounts: An Overview," International Productivity Monitor, Centre for the Study of Living Standards, vol. 14, pages 71-85, Spring.
- Edquist, Harald, 2011. "Intangible Investment and the Swedish Manufacturing and Service Sector Paradox," Working Paper Series 863, Research Institute of Industrial Economics.
- Bracco, Emanuele & Redoano, Michela & Porcelli, Francesco, 2012. "Incumbent Effects and Partisan Alignment in Local Elections: a Regression Discontinuity Analysis Using Italian Data," CAGE Online Working Paper Series 87, Competitive Advantage in the Global Economy (CAGE).
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