- Email: [email protected]
The economics of research and development
European Economic Review 32 (1988) 604-610. North-Holland
THE ECONOMICS
OF RESEARCH AND DEVELOPMENT
Some East-West Comparisons Philip HANSON* Uniuersity
o/Birmingham. Birmingham
BI5 XT,
UK
1. Introduction What sort of economic system provides the most favourable setting for rapid introduction and diffusion of new technologies in production? Economic theory has provided several different hypotheses. The neo-classical tradition has generated arguments for some element of national planning and funding of research and development (R&D). If R&D output is deemed to be costlessly reproducible, it can be shown that the competitive market ‘undersupplies* research effort, and resource allocation can be improved by public funding of R&D, whose results are then made freely available [Arrow (1962/1971)]. If, however, the returns to particular investments in R&D are treated as uncertain, and the costs of transferring the resulting information are treated as positive, the case for planning is put in doubt. Knowledge of new products and processes then has many of the characteristics of a private good. Incentives to generate it and utilise it effectively become important. A Schumpeterian approach is then appropriate. Such an approach emphasizes the importance of uncertainty, the role of entrepreunership and the successful innovator’s temporary monopoly power as the source of incentives to develop and introduce new products and processes. Recent writings in the Schumpeterian tradition have conceived the process of change in capitalist economies as an evolutionary one, in which the generation, screening and diffusing of new technologies is a vital function, and in which organizational forms themselves are adapted to different contexts in which transaction costs are of varying importance. An economy which is organized as a single hierarchy, like that of the U.S.S.R., differs fundamentally from the private sectors of market economies. In the latter, hierarchies exist like islands in a sea of market transactions, and *The author is indebted to Keith Pavitt for guidance on the literature on innovation in the West, and to Pari Pate1 for providing data from the U.S. patent database. A more wide-ranging review of comparative economic analysis of RDI will be given in Hanson and Pavitt, forthcoming, 1987 0014-2921/88/163.50 0 1988, Elsevier Science Publishers B.V. (North-Holland)
P. Hanton,
Innovation,
technology and knowledge transjh,
easl and west
605
the shape and size of the islands is constantly subject to the action of the sea. The Soviet hierarchy was created by political action, and is not subject to modification by the competitive process described by Nelson and Winter. (It is insulated from the direct pressure of international economic competition by centralized administrative control of imports.) Unlike firms in the private sector in the West, the lower-level units in the hierarchy are immune to competitive pressures. Kornai’s writings on the ‘shortage economy’ provide hypotheses about the behaviour of such units. The absence of hard budget constraints for Soviet-type enterprises weakens pressures to introduce new products and processes [Kornai (l98O)J. A priori reasoning about the particular decision rules and incentive schemes operating in Soviet industry leads to similar conclusions for the specific case of the U.S.S.R. CBerIiner (1976)-J. The fact that most R&D in the West is conducted (though not necessarily funded) by the private sector, suggests that the performance of R&D itself may differ from that of R&D in Soviet-type systems because of the differences in incentives and decision rules. This paper offers some empirical evidence on that proposition. 2. Comparative studies of the application of new technology Empirical studies of comparative research, development and innovation (RDI) in East and West have focussed on the I in RDI: on comparative performance in the initial application and subsequent diffusion of new product and process technology. The most extensive of these studies, by the University of Birmingham group, analyzed Soviet and Western performance in comparative terms [Amann, Cooper and Davies (1977)]. The Birmingham group sought to compare Soviet and Western performance at several different stages of the RDI process. For nine industries and key technologies, they compared the level of relevant applied research, the dates of experimental development to the prototype stage, the dates of initial series production and the rates of diffusion. They found that on the whole the U.S.S.R. was a technological foilower so far as initial series production was concerned, and a relatively slow diffuser of the new products and processes surveyed. The lindings of the Birmingham and other studies are surveyed in some detail elsewhere [Hanson and Pavitt (1987)-j. All that need be noted here is that the general conclusion of sluggish technological performance holds across most industries (though less strongly for military than civilian production), and that this conclusion is consistent with the a priori reasoning about institutions by Nelson and Winter, Kornai and Berliner, discussed above. It is also consistent with the ‘premature’ slowdown of Soviet and East European growth since about 1970.
E.E.R.-N
606
P. Hanson, Innmation,
technology and knowledge traqfm.
east and west
Studies of East European RDI performance are less numerous, but work by Ray (1984) and Poznanski (1984) suggests that similar conclusions apply to the smaller East European countries. And circumstantial evidence from export unit values and market shares for manufactures on competitive markets reinforces this conclusion, both for Eastern Europe and for the U.S.S.R. [Poznanski; UN ECE (1983)]. 3. R&D performance The assessment of comparative performance in R&D has been more problematic. Some 85 percent of Soviet R&D expenditure is incurred within the industrial sector, as distinct from the Academy of’sciences and the higher education system. The overwhelming bulk of industrial-sector R&D, and part of the remaining R&D, is intended to be applied, or mission-oriented work. Citations analysis of the scientific literature can provide some indications of comparative national performance in R&D, but these indications relate chiefly to pure, or curiosity-oriented research. Applied research, at least when it is reasonably close to practical application, is papyrophobic rather than papyrocentric, in Derek Price’s terminology; in other words, the output is confidential and not published. Direct comparisons of the ‘level’ of Soviet/East European and Western applied research have therefore been limited in scope and not capable of generating strong conclusions. There are grounds, however, for expecting some of the problems that affect innovation to extend back to applied research and development. How effectively R&D resources will be used will depend on their broad allocation between programmes, on project selection within programmes, on incentives to thorough and rapid work on given projects, and on the efftciency of arrangements for testing and evaluating research results. A priori arguments about the effects of Soviet-type institutions on these activities (in comparison with Western mixed-economy institutions) point to the critical importance of planners’ information about technological alternatives. The centre’s power to impose priorities in programme selection, and to avoid duplication, might be thought to contain some potential advantages insofar as it allows for externalities. If the central decision-makers can process a great deal of information and react swiftly and knowledgeably to new developments in different fields, the programme selection may be relatively good, and it could in principle be more firmly imposed than in a mixed economy. On the other hand, the centre may have difficulty in identifying growth points if the information coming up to it from below is weak with respect to consumer demand and lacks the insights derived by enterprises from implementing their own RDI at their own risk. There is a possibility that researchers who are in principle engaged on applied work will drift (for lack of market pressures) towards more fundamental research
P. Hanson, Innoration,
technology and knowledge transfers, east and west
607
topics and then propose further work of this kind in their draft plans. Unless the centre can resist this tendency, there is the possibility that national plans will in part be an amalgamation of plans from below, which are not in fact strongly mission-oriented. It is a familiar observation that feedback from customers to suppliers is weak in a Soviet-type system, outside certain priority (military) lines of production. This relative lack of customer influence, together with the soft budget constraints with which both producers and industrial research institutes operate, might reinforce any tendency towards inertia in programme and project selection. The performance in implementing given R&D projects may be subject to similar debilitating influences. The socialist countries have their versions of both contract and in-house research, but in both cases the prevailing sellers’ market (except for military R&D) may be expected to affect incentives. The pricing of R&D is based either on costs or on expected, rather than actual, ‘economic effects’ of the resulting designs and prototypes; neither basis for pricing will help to encourage the efficient supply of R&D services. Finally, the Soviet system of inventors’ certificates, the equivalent of Western patents, provides financial rewards for registered inventions, but does not allow the inventor to monopolize use. Broadly speaking, the Soviet system (though not all socialist systems) does not allow the inventor to hawk his invention around to find the highest bidder. He is faced, rather, with a monopoly buyer, the state, which sets the price to be paid him for his invention. His position is akin to that of an employee contributing to a company suggestions scheme which provides rewards for approved suggestions. 4. R&D inputs and intermediate outputs The output of the R&D sector is prototypes and designs for implementation in production. This is an intermediate, not a final, output, but some indicator related to the notion of designs-ready-for-use would seem to be needed if the productivity of applied research and development is to be measured. Patent statistics are the most widely available indicators of this kind. For all their limitations, patent data have proved to be useful in innovation studies. In particular, studies of patents registered abroad have served as a good measure of the intermediate output of R&D within the Western world. The shares of different countries in the patents taken out by non-residents in a major foreign market, and their distribution between industries and technical fields, are one such check on performance. Input measures reflecting the national R&D effort could be derived either from expenditure data or from what is arguably the key input: numbers of research scientists and engineers.
408
P. Hansaa,
fnaavation, teckdagy
and kmwbdge ~an$ffs, east ad west
For capitalist countries other than the U.S., non-resident patents taken out in the U.S. are a usefui source of data. The U.S. market is a large one, in which owners of proprietary technology that is of substantial commercial value (actual or expected) in international transactions, will want protection. And the U.S. patent data-base can be readily used for research purposes. The use of these data for assessing Soviet and East European research productivity, however, is problematic. The difficulties in comparing R&D inputs between Western countries are considerable; they are still worse when it comes to East-West comparisons. And the political distance between the U.S. and the Warsaw Pact countries might be thought to affect motivation to register patents in the U.S. The arguments in favour of at least a tentative use of these data, however, are the following. The registration of patents in Western countries is treated within the U.S.S.R. and Eastern Europe as a performance indicator for the national research effort [Obukhov (1986)]; numbers of Soviet and East European patents registered in the U.S. have grown strongly since the 1960s; and if the R&D expenditure figures present formidable difftculties for any comparison, careful assessment of at least the Soviet manpower data has provided a series for total numbers of full-time equivalent (FTE) research scientists and engineers (RSEs) that is comparable with Western series [Nolting and Feshbach (1981)-J; East European manpower series can be crudely adjusted by analogy with the recalculations for the U.S.S.R., where national data appear to require this. The following summary of part of the work done on these input and output measures covers the results obtained with RSE numbers as the input measure. Estimates using gross expenditure on research and development (GERD) in U.S. 1975 $ yielded broadly similar results. The numbers of RSEs in comparable (FTE) terms has been estimated as follows: U.S.A. 625.6, Canada + Japan 370.5, Western Europe 397.6, U.S.S.R. 975.0, Eastern Europe 195.5, Yugoslavia 22.4. [Solrrces: OECD (1985); Nolting and Feshbach (1981); for other sources and for methods of estimation, see Hanson and Pavitt (1987).) Table 1 puts individual countries’ R&D inputs and R&D ‘outputs’ (in patents registered in the U.S.) in the form of shares of non-US. totals. The GERD shares are given for comparison with the RSE shares. Column (3) incorporates Eastern European figures without adjustment for comparability with the Soviet figures as adjusted by Nolting and Feshbach. In table 2 the regression results are based on the column (2) input shares from table 1. The RSE shares are good predictors of the Western countries’ shares in non-resident U.S. patents when the Western countries are considered alone. On the face of it, the same is true for the Eastern countries, but is very small and the result is in fact dominated by the difference in scale between the U.S.S.R. and the others. When both groups are combined and a dummy
P. Hanson, Innovarion, technology
and knowledge transr/ers, erut and west
609
Table 1 Some measures of R and D inputs and intermediate outputs.
Percentage share of non-resident U.S. patents, 1978-1983 (1)
Percentage share of Developed West and European CMEA and Yugoslav RSE’s, late 197Os,excluding U.S.A. (2) (3)
Percentage share of Developed West and European CMEA and Yugoslav GERD in 1982, excluding U.S.A. (4)
Canada Japan
4.48 30.81
1.30 17.60
1.23 17.02
2.4 15.9
Netherlands F.R.G. France U.K. Sweden Switzerland Italy Belgium Denmark Eire
2.65 23.39 8.21 9.59 3.06 4.97 3.14 0.99
0.90 5.73 3.51 5.39 0.76 0.61 2.05 0.47 0.31 0.14
0.87 5.53 3.39 5.20 0.74 0.59 0.46 0.30 0.14
1.7 10.1 7.2 7.0 1.5 1.1 2.9 1.0 0.4 0.1
20.52
19.81
36.8
1.45
49.37
47.68
36.9
0.09 0.23 0.17 0.37 0.12 0.04
0.3
1.77 1.66 1.13 3.63 1.12
0.70 2.98 2.45 1.26 4.67 1.09
0.6 1.4 1.3 0.7 2.8 0.8
1.02
10.08
13.15
7.38
1.16
1.12
Total Western Europe (incl. others)
0.58
0.08
-
U.S.S.R. Bulgaria Czechoslovakia G.D.R. Hungary Poland Total Eastern Europe (6) Yugoslavia
-
1.98
0.6
Sources: cot. I: derived from U.S. Patent Database; CJIS. 2 and 3: from text; col. 4: OECD (1985) and Hanson and Pavitt (1987).
variable for system is used (capitalist I, socialist 0), the explanatory power of the regression falls sharply, but the system coefficient is significant and (for equation 1) the F-statistic (at 4.39) indicates significance at 5 per cent. Hungary’s output-input ratio lies well above that of the other members of the group; experimentally swapping Hungary’s system variable from 0 to 1 has little effect on the regression results. A possible interpretation could be that the reformed Hungarian system is intermediate in R&D performance between ‘East’ and ‘West’. It is possible, of course, to see the dummy variable as an indicator of political and commercial ‘distance’ from the U.S. rather than of systemic performance in R&D. Fragmentary evidence, however, can be adduced for
610
P. Hanson, lntwvaion,
tcchtwlogy
and knowledge
tran&rss, east and west
Table 2 Regression results: system and RSE shares (N-F series) as determinants patent shares, 1978-1983.
Constant (1) Eastern and Western countries
- 1.6831 (-0.5368
(2) ditto, switching system for Hungary’
-2.1081 (-0.5011)
(3) Western countries only
System coefficient + 8.5707b (2.3428) + 8.4332b (2.1460
1.8431 0.125Sb (2.4029)
RSE share coeficient
n
R2
+0.2397 ( 1.5087) +0.2529 (1.5377)
19
0.1996
19
0.1653
+1.8012=
12
0.8299
7
0.9380
( + 7.3945)
( + 1.3239) (4) Eastern countries only
of foreign-origin U.S.
+
+0.267’ (9.5762)
‘Le., changing Hungary’s system dummy to Western. %gnificant at 5 per cent. ‘Significant at 1 per cent.
the latter interpretation: incomplete data for West German patents show a similar picture; incomplete CMEA data show the CMEA countries apparently acquiring more licences from the West than from one another, and the very fact that changing the dummy variable with respect to Hungary has little effect, given that Hungary’s economic system is a semi-market one, suggests that systemic factors are at work. Further empirical work with patent data would be useful.
References Amann, R., J.M. Cooper and R.W. Davies, eds., 1977, The technological level of Soviet industry (Yale University Press, New Haven, CT). Arrow, K., 1971. Economic welfare and the allocation of resources for invention, in: N. Rosenberg, ed.. The economia of technological change (Penguin, Harmondsworth). Berliner, J., 1976. The innovation decision in Soviet industry (MIT Press, Cambridge, MA). Hanson, P. and K. Pavitt, 1987, The comparative economics of research, development and innovation: A survey (Harwood Academic Publishers, New York) forthcoming. Komai, J., 1980. The economia of shortage (North-Holland, Amsterdam). Nelson, R. and S.G. Winter, 1982, An evolutionary theory of economic change (Belknap Press, Cambridge, MA). Nolting, L. and M. Feshbach. 1981, Statistics on research and development employment in the U.S.S.R. (U.S. Dept. of Commerce, Bureau of the Census, Washington, DC). Obukhov. V.. 1985. Izobresti i spol’tovat, Pravda, Jan. 7, 1986. p.2. OECD, 1985. Resources devoted to R and D, technological performance and industrial competitiveness (OECD, Paris). Poznanski, K., 1984, Technological levels and word trade: A global view, draft. Ray, G., 1984, A Magyar ipar szinvonala nchany mutatosaam tukreben, Ipargazdasagi Szemle. 1984, no. 10. UN Economic Commission for Europe, (UN ECE). 1983, Economic Bulletin for Europe no. 35.
THE ECONOMICS
OF RESEARCH AND DEVELOPMENT
Some East-West Comparisons Philip HANSON* Uniuersity
o/Birmingham. Birmingham
BI5 XT,
UK
1. Introduction What sort of economic system provides the most favourable setting for rapid introduction and diffusion of new technologies in production? Economic theory has provided several different hypotheses. The neo-classical tradition has generated arguments for some element of national planning and funding of research and development (R&D). If R&D output is deemed to be costlessly reproducible, it can be shown that the competitive market ‘undersupplies* research effort, and resource allocation can be improved by public funding of R&D, whose results are then made freely available [Arrow (1962/1971)]. If, however, the returns to particular investments in R&D are treated as uncertain, and the costs of transferring the resulting information are treated as positive, the case for planning is put in doubt. Knowledge of new products and processes then has many of the characteristics of a private good. Incentives to generate it and utilise it effectively become important. A Schumpeterian approach is then appropriate. Such an approach emphasizes the importance of uncertainty, the role of entrepreunership and the successful innovator’s temporary monopoly power as the source of incentives to develop and introduce new products and processes. Recent writings in the Schumpeterian tradition have conceived the process of change in capitalist economies as an evolutionary one, in which the generation, screening and diffusing of new technologies is a vital function, and in which organizational forms themselves are adapted to different contexts in which transaction costs are of varying importance. An economy which is organized as a single hierarchy, like that of the U.S.S.R., differs fundamentally from the private sectors of market economies. In the latter, hierarchies exist like islands in a sea of market transactions, and *The author is indebted to Keith Pavitt for guidance on the literature on innovation in the West, and to Pari Pate1 for providing data from the U.S. patent database. A more wide-ranging review of comparative economic analysis of RDI will be given in Hanson and Pavitt, forthcoming, 1987 0014-2921/88/163.50 0 1988, Elsevier Science Publishers B.V. (North-Holland)
P. Hanton,
Innovation,
technology and knowledge transjh,
easl and west
605
the shape and size of the islands is constantly subject to the action of the sea. The Soviet hierarchy was created by political action, and is not subject to modification by the competitive process described by Nelson and Winter. (It is insulated from the direct pressure of international economic competition by centralized administrative control of imports.) Unlike firms in the private sector in the West, the lower-level units in the hierarchy are immune to competitive pressures. Kornai’s writings on the ‘shortage economy’ provide hypotheses about the behaviour of such units. The absence of hard budget constraints for Soviet-type enterprises weakens pressures to introduce new products and processes [Kornai (l98O)J. A priori reasoning about the particular decision rules and incentive schemes operating in Soviet industry leads to similar conclusions for the specific case of the U.S.S.R. CBerIiner (1976)-J. The fact that most R&D in the West is conducted (though not necessarily funded) by the private sector, suggests that the performance of R&D itself may differ from that of R&D in Soviet-type systems because of the differences in incentives and decision rules. This paper offers some empirical evidence on that proposition. 2. Comparative studies of the application of new technology Empirical studies of comparative research, development and innovation (RDI) in East and West have focussed on the I in RDI: on comparative performance in the initial application and subsequent diffusion of new product and process technology. The most extensive of these studies, by the University of Birmingham group, analyzed Soviet and Western performance in comparative terms [Amann, Cooper and Davies (1977)]. The Birmingham group sought to compare Soviet and Western performance at several different stages of the RDI process. For nine industries and key technologies, they compared the level of relevant applied research, the dates of experimental development to the prototype stage, the dates of initial series production and the rates of diffusion. They found that on the whole the U.S.S.R. was a technological foilower so far as initial series production was concerned, and a relatively slow diffuser of the new products and processes surveyed. The lindings of the Birmingham and other studies are surveyed in some detail elsewhere [Hanson and Pavitt (1987)-j. All that need be noted here is that the general conclusion of sluggish technological performance holds across most industries (though less strongly for military than civilian production), and that this conclusion is consistent with the a priori reasoning about institutions by Nelson and Winter, Kornai and Berliner, discussed above. It is also consistent with the ‘premature’ slowdown of Soviet and East European growth since about 1970.
E.E.R.-N
606
P. Hanson, Innmation,
technology and knowledge traqfm.
east and west
Studies of East European RDI performance are less numerous, but work by Ray (1984) and Poznanski (1984) suggests that similar conclusions apply to the smaller East European countries. And circumstantial evidence from export unit values and market shares for manufactures on competitive markets reinforces this conclusion, both for Eastern Europe and for the U.S.S.R. [Poznanski; UN ECE (1983)]. 3. R&D performance The assessment of comparative performance in R&D has been more problematic. Some 85 percent of Soviet R&D expenditure is incurred within the industrial sector, as distinct from the Academy of’sciences and the higher education system. The overwhelming bulk of industrial-sector R&D, and part of the remaining R&D, is intended to be applied, or mission-oriented work. Citations analysis of the scientific literature can provide some indications of comparative national performance in R&D, but these indications relate chiefly to pure, or curiosity-oriented research. Applied research, at least when it is reasonably close to practical application, is papyrophobic rather than papyrocentric, in Derek Price’s terminology; in other words, the output is confidential and not published. Direct comparisons of the ‘level’ of Soviet/East European and Western applied research have therefore been limited in scope and not capable of generating strong conclusions. There are grounds, however, for expecting some of the problems that affect innovation to extend back to applied research and development. How effectively R&D resources will be used will depend on their broad allocation between programmes, on project selection within programmes, on incentives to thorough and rapid work on given projects, and on the efftciency of arrangements for testing and evaluating research results. A priori arguments about the effects of Soviet-type institutions on these activities (in comparison with Western mixed-economy institutions) point to the critical importance of planners’ information about technological alternatives. The centre’s power to impose priorities in programme selection, and to avoid duplication, might be thought to contain some potential advantages insofar as it allows for externalities. If the central decision-makers can process a great deal of information and react swiftly and knowledgeably to new developments in different fields, the programme selection may be relatively good, and it could in principle be more firmly imposed than in a mixed economy. On the other hand, the centre may have difficulty in identifying growth points if the information coming up to it from below is weak with respect to consumer demand and lacks the insights derived by enterprises from implementing their own RDI at their own risk. There is a possibility that researchers who are in principle engaged on applied work will drift (for lack of market pressures) towards more fundamental research
P. Hanson, Innoration,
technology and knowledge transfers, east and west
607
topics and then propose further work of this kind in their draft plans. Unless the centre can resist this tendency, there is the possibility that national plans will in part be an amalgamation of plans from below, which are not in fact strongly mission-oriented. It is a familiar observation that feedback from customers to suppliers is weak in a Soviet-type system, outside certain priority (military) lines of production. This relative lack of customer influence, together with the soft budget constraints with which both producers and industrial research institutes operate, might reinforce any tendency towards inertia in programme and project selection. The performance in implementing given R&D projects may be subject to similar debilitating influences. The socialist countries have their versions of both contract and in-house research, but in both cases the prevailing sellers’ market (except for military R&D) may be expected to affect incentives. The pricing of R&D is based either on costs or on expected, rather than actual, ‘economic effects’ of the resulting designs and prototypes; neither basis for pricing will help to encourage the efficient supply of R&D services. Finally, the Soviet system of inventors’ certificates, the equivalent of Western patents, provides financial rewards for registered inventions, but does not allow the inventor to monopolize use. Broadly speaking, the Soviet system (though not all socialist systems) does not allow the inventor to hawk his invention around to find the highest bidder. He is faced, rather, with a monopoly buyer, the state, which sets the price to be paid him for his invention. His position is akin to that of an employee contributing to a company suggestions scheme which provides rewards for approved suggestions. 4. R&D inputs and intermediate outputs The output of the R&D sector is prototypes and designs for implementation in production. This is an intermediate, not a final, output, but some indicator related to the notion of designs-ready-for-use would seem to be needed if the productivity of applied research and development is to be measured. Patent statistics are the most widely available indicators of this kind. For all their limitations, patent data have proved to be useful in innovation studies. In particular, studies of patents registered abroad have served as a good measure of the intermediate output of R&D within the Western world. The shares of different countries in the patents taken out by non-residents in a major foreign market, and their distribution between industries and technical fields, are one such check on performance. Input measures reflecting the national R&D effort could be derived either from expenditure data or from what is arguably the key input: numbers of research scientists and engineers.
408
P. Hansaa,
fnaavation, teckdagy
and kmwbdge ~an$ffs, east ad west
For capitalist countries other than the U.S., non-resident patents taken out in the U.S. are a usefui source of data. The U.S. market is a large one, in which owners of proprietary technology that is of substantial commercial value (actual or expected) in international transactions, will want protection. And the U.S. patent data-base can be readily used for research purposes. The use of these data for assessing Soviet and East European research productivity, however, is problematic. The difficulties in comparing R&D inputs between Western countries are considerable; they are still worse when it comes to East-West comparisons. And the political distance between the U.S. and the Warsaw Pact countries might be thought to affect motivation to register patents in the U.S. The arguments in favour of at least a tentative use of these data, however, are the following. The registration of patents in Western countries is treated within the U.S.S.R. and Eastern Europe as a performance indicator for the national research effort [Obukhov (1986)]; numbers of Soviet and East European patents registered in the U.S. have grown strongly since the 1960s; and if the R&D expenditure figures present formidable difftculties for any comparison, careful assessment of at least the Soviet manpower data has provided a series for total numbers of full-time equivalent (FTE) research scientists and engineers (RSEs) that is comparable with Western series [Nolting and Feshbach (1981)-J; East European manpower series can be crudely adjusted by analogy with the recalculations for the U.S.S.R., where national data appear to require this. The following summary of part of the work done on these input and output measures covers the results obtained with RSE numbers as the input measure. Estimates using gross expenditure on research and development (GERD) in U.S. 1975 $ yielded broadly similar results. The numbers of RSEs in comparable (FTE) terms has been estimated as follows: U.S.A. 625.6, Canada + Japan 370.5, Western Europe 397.6, U.S.S.R. 975.0, Eastern Europe 195.5, Yugoslavia 22.4. [Solrrces: OECD (1985); Nolting and Feshbach (1981); for other sources and for methods of estimation, see Hanson and Pavitt (1987).) Table 1 puts individual countries’ R&D inputs and R&D ‘outputs’ (in patents registered in the U.S.) in the form of shares of non-US. totals. The GERD shares are given for comparison with the RSE shares. Column (3) incorporates Eastern European figures without adjustment for comparability with the Soviet figures as adjusted by Nolting and Feshbach. In table 2 the regression results are based on the column (2) input shares from table 1. The RSE shares are good predictors of the Western countries’ shares in non-resident U.S. patents when the Western countries are considered alone. On the face of it, the same is true for the Eastern countries, but is very small and the result is in fact dominated by the difference in scale between the U.S.S.R. and the others. When both groups are combined and a dummy
P. Hanson, Innovarion, technology
and knowledge transr/ers, erut and west
609
Table 1 Some measures of R and D inputs and intermediate outputs.
Percentage share of non-resident U.S. patents, 1978-1983 (1)
Percentage share of Developed West and European CMEA and Yugoslav RSE’s, late 197Os,excluding U.S.A. (2) (3)
Percentage share of Developed West and European CMEA and Yugoslav GERD in 1982, excluding U.S.A. (4)
Canada Japan
4.48 30.81
1.30 17.60
1.23 17.02
2.4 15.9
Netherlands F.R.G. France U.K. Sweden Switzerland Italy Belgium Denmark Eire
2.65 23.39 8.21 9.59 3.06 4.97 3.14 0.99
0.90 5.73 3.51 5.39 0.76 0.61 2.05 0.47 0.31 0.14
0.87 5.53 3.39 5.20 0.74 0.59 0.46 0.30 0.14
1.7 10.1 7.2 7.0 1.5 1.1 2.9 1.0 0.4 0.1
20.52
19.81
36.8
1.45
49.37
47.68
36.9
0.09 0.23 0.17 0.37 0.12 0.04
0.3
1.77 1.66 1.13 3.63 1.12
0.70 2.98 2.45 1.26 4.67 1.09
0.6 1.4 1.3 0.7 2.8 0.8
1.02
10.08
13.15
7.38
1.16
1.12
Total Western Europe (incl. others)
0.58
0.08
-
U.S.S.R. Bulgaria Czechoslovakia G.D.R. Hungary Poland Total Eastern Europe (6) Yugoslavia
-
1.98
0.6
Sources: cot. I: derived from U.S. Patent Database; CJIS. 2 and 3: from text; col. 4: OECD (1985) and Hanson and Pavitt (1987).
variable for system is used (capitalist I, socialist 0), the explanatory power of the regression falls sharply, but the system coefficient is significant and (for equation 1) the F-statistic (at 4.39) indicates significance at 5 per cent. Hungary’s output-input ratio lies well above that of the other members of the group; experimentally swapping Hungary’s system variable from 0 to 1 has little effect on the regression results. A possible interpretation could be that the reformed Hungarian system is intermediate in R&D performance between ‘East’ and ‘West’. It is possible, of course, to see the dummy variable as an indicator of political and commercial ‘distance’ from the U.S. rather than of systemic performance in R&D. Fragmentary evidence, however, can be adduced for
610
P. Hanson, lntwvaion,
tcchtwlogy
and knowledge
tran&rss, east and west
Table 2 Regression results: system and RSE shares (N-F series) as determinants patent shares, 1978-1983.
Constant (1) Eastern and Western countries
- 1.6831 (-0.5368
(2) ditto, switching system for Hungary’
-2.1081 (-0.5011)
(3) Western countries only
System coefficient + 8.5707b (2.3428) + 8.4332b (2.1460
1.8431 0.125Sb (2.4029)
RSE share coeficient
n
R2
+0.2397 ( 1.5087) +0.2529 (1.5377)
19
0.1996
19
0.1653
+1.8012=
12
0.8299
7
0.9380
( + 7.3945)
( + 1.3239) (4) Eastern countries only
of foreign-origin U.S.
+
+0.267’ (9.5762)
‘Le., changing Hungary’s system dummy to Western. %gnificant at 5 per cent. ‘Significant at 1 per cent.
the latter interpretation: incomplete data for West German patents show a similar picture; incomplete CMEA data show the CMEA countries apparently acquiring more licences from the West than from one another, and the very fact that changing the dummy variable with respect to Hungary has little effect, given that Hungary’s economic system is a semi-market one, suggests that systemic factors are at work. Further empirical work with patent data would be useful.
References Amann, R., J.M. Cooper and R.W. Davies, eds., 1977, The technological level of Soviet industry (Yale University Press, New Haven, CT). Arrow, K., 1971. Economic welfare and the allocation of resources for invention, in: N. Rosenberg, ed.. The economia of technological change (Penguin, Harmondsworth). Berliner, J., 1976. The innovation decision in Soviet industry (MIT Press, Cambridge, MA). Hanson, P. and K. Pavitt, 1987, The comparative economics of research, development and innovation: A survey (Harwood Academic Publishers, New York) forthcoming. Komai, J., 1980. The economia of shortage (North-Holland, Amsterdam). Nelson, R. and S.G. Winter, 1982, An evolutionary theory of economic change (Belknap Press, Cambridge, MA). Nolting, L. and M. Feshbach. 1981, Statistics on research and development employment in the U.S.S.R. (U.S. Dept. of Commerce, Bureau of the Census, Washington, DC). Obukhov. V.. 1985. Izobresti i spol’tovat, Pravda, Jan. 7, 1986. p.2. OECD, 1985. Resources devoted to R and D, technological performance and industrial competitiveness (OECD, Paris). Poznanski, K., 1984, Technological levels and word trade: A global view, draft. Ray, G., 1984, A Magyar ipar szinvonala nchany mutatosaam tukreben, Ipargazdasagi Szemle. 1984, no. 10. UN Economic Commission for Europe, (UN ECE). 1983, Economic Bulletin for Europe no. 35.