Canada's Investments in Science and Innovation: Is the Existing Concept of Research and Development Sufficient?
AbstractEstimates of GDP are sensitive to whether a business expenditure is treated as an investment or an intermediate input. Shifting an expenditure category from intermediate expenditures to investment expenditures increases GDP. While the international guide to measurement (the SNA (93)) recognizes that R&D has certain characteristics that make it more akin to an investment than an intermediate expenditure, it did not recommend that R&D be treated as an investment because of problems in finding a "clear criteria for delineating [R&D] from other activities". This paper examines whether the use of the OECD Frascati definition is adequate for this purpose. It argues that it is too narrow and that attempts to modify the National Accounts would not be well served by its adoption. In particular, it argues that the appropriate concept of R&D that is required for the Accounts should incorporate a broad range of science-based innovation costs and that this broader R&D concept is amenable to measurement. Finally, the paper argues that failing to move in the direction of an expanded definition of R&D capital will have consequences for comparisons of Canadian GDP to that of other countries - in particular, our largest trading partner, the United States. It would provide a biased estimate of Canada's GDP relative to the United States. If all science-based innovation expenditures are to be capitalized, GDP will increase. But it appears that Canada's innovation system is directed more towards non-R&D science-based expenditures than the innovation systems of many other countries. If Canada were to only capitalize the narrow Frascati definition of R&D expenditures and not a broader class of science-based innovation expenditures, we would significantly bias estimates of Canadian GDP relative to those for other countries, such as the United States, whose innovation systems concentrate more on traditional R&D expenditures.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Statistics Canada, Analytical Studies Branch in its series Economic Analysis (EA) Research Paper Series with number 2005032e.
Date of creation: 12 Apr 2005
Date of revision:
Science and technology; Innovation; Research and development;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-05 (All new papers)
- NEP-INO-2006-02-05 (Innovation)
- NEP-MAC-2006-02-05 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Audretsch, D-B & Menkveld, A-J & Thurik, A-R, 1996. "The Decision Between Internal and External R&D," Papers 9603/e, NEUHUYS - RESEARCH INSTITUTE FOR SMALL AND MEDIUM.
- George Papaconstantinou & Norihisa Sakurai & Andrew Wyckoff, 1996. "Embodied Technology Diffusion: An Empirical Analysis for 10 OECD Countries," OECD Science, Technology and Industry Working Papers 1996/1, OECD Publishing.
- Veugelers, Reinhilde & Cassiman, Bruno, 1999.
"Make and buy in innovation strategies: evidence from Belgian manufacturing firms,"
Elsevier, vol. 28(1), pages 63-80, January.
- Veugelers, Reinhilde & Cassiman, Bruno, 1999. "Make and buy in innovation strategies: evidence from Belgian manufacturing firms," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/101500, Katholieke Universiteit Leuven.
- Baldwin,John R. & Hanel,Petr, 2003.
"Innovation and Knowledge Creation in an Open Economy,"
Cambridge University Press, number 9780521810869, October.
- Baldwin,John R. & Hanel,Petr, 2007. "Innovation and Knowledge Creation in an Open Economy," Cambridge Books, Cambridge University Press, number 9780521037136, October.
- Kaiser, Ulrich, 2002. "An empirical test of models explaining research expenditures and research cooperation: evidence for the German service sector," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 747-774, June.
- Edwin Mansfield, 1988. "The Speed and Cost of Industrial Innovation in Japan and the United States: External vs. Internal Technology," Management Science, INFORMS, vol. 34(10), pages 1157-1168, October.
- Veugelers, Reinhilde, 1997.
"Internal R&D expenditures and external technology sourcing,"
Open Access publications from Katholieke Universiteit Leuven
urn:hdl:123456789/101584, Katholieke Universiteit Leuven.
- Veugelers, Reinhilde, 1997. "Internal R & D expenditures and external technology sourcing," Research Policy, Elsevier, vol. 26(3), pages 303-315, October.
- John Baldwin & W. Brown, 2004.
"Regional manufacturing employment volatility in Canada: The effects of specialisation and trade,"
Papers in Regional Science,
Springer, vol. 83(3), pages 519-541, 07.
- John Baldwin & W. Brown, 2004. "Regional manufacturing employment volatility in Canada: The effects of specialisation and trade," Economics of Governance, Springer, vol. 83(3), pages 519-541, 07.
- Baldwin, John R. Brown, W. Mark, 2003. "Regional Manufacturing Employment Volatility in Canada: The Effects of Specialization and Trade," Economic Analysis (EA) Research Paper Series 2003005e, Statistics Canada, Analytical Studies Branch.
- Baldwin, John R. Beckstead, Desmond Caves, Richard, 2002. "Changes in the Diversification of Canadian Manufacturing Firms and Plants (1973-1997): A Move to Specialization," Analytical Studies Branch Research Paper Series 2002179e, Statistics Canada, Analytical Studies Branch.
- Kleinknecht, Alfred, 1987. "Measuring R&D in Small Firms: How Much Are We Missing?," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 253-56, December.
- Ulset, Svein, 1996. "R&D outsourcing and contractual governance: An empirical study of commercial R&D projects," Journal of Economic Behavior & Organization, Elsevier, vol. 30(1), pages 63-82, July.
- Stead, H., 1976. "The costs of technological innovation," Research Policy, Elsevier, vol. 5(1), pages 2-9, January.
- Kamin, J. Y. & Bijaoui, I. & Horesh, R., 1982. "Some determinants of cost distributions in the process of technological innovation," Research Policy, Elsevier, vol. 11(2), pages 83-94, April.
- Niosi, Jorge & Godin, Benoit, 1999. "Canadian R&D abroad management practices," Research Policy, Elsevier, vol. 28(2-3), pages 215-230, March.
- Evangelista, Rinaldo & Perani, Giulio & Rapiti, Fabio & Archibugi, Daniele, 1997. "Nature and impact of innovation in manufacturing industry: some evidence from the Italian innovation survey," Research Policy, Elsevier, vol. 26(4-5), pages 521-536, December.
- Baldwin, John R., 1997. "The Importance of Research and Development for Innovation in Small and Large Canadian Manufacturing Firms," Analytical Studies Branch Research Paper Series 1997107e, Statistics Canada, Analytical Studies Branch.
- Herbert K. Weiss, 1965. "Some Growth Considerations of Research and Development and the National Economy," Management Science, INFORMS, vol. 11(3), pages 368-394, January.
- Mohnen, Pierre & Lepine, Normand, 1991. "R&D, R&D spillovers and payments for technology: Canadian evidence," Structural Change and Economic Dynamics, Elsevier, vol. 2(1), pages 213-228, June.
- James Love & Stephen Roper, 2002. "Internal Versus External R&D: A Study of R&D Choice with Sample Selection," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 9(2), pages 239-255.
- Masao Nakamura & Hiroyuki Odagiri, 2003. "Transaction costs and capabilities as determinants of the R&D boundaries of the firm: a case study of the ten largest pharmaceutical firms in Japan," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(2-3), pages 187-211.
- Nazim Belhocine, 2008.
"Treating Intangible Inputs as Investment Goods: the Impact on Canadian GDP,"
1215, Queen's University, Department of Economics.
- Nazim Belhocine, 2009. "Treating Intangible Inputs as Investment Goods: the Impact on Canadian GDP," IMF Working Papers 09/240, International Monetary Fund.
- Baldwin, John R. Gellatly, Guy, 2006. "Innovation Capabilities: The Knowledge Capital Behind the Survival and Growth of Firms," The Canadian Economy in Transition 2006013e, Statistics Canada, Economic Analysis Division.
- Elad Gafni, 2005. "The Diffusion and Adoption of Advanced Technologies in Canada: An Overview of the Issues," CSLS Research Reports 2005-05, Centre for the Study of Living Standards.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Brown).
If references are entirely missing, you can add them using this form.