New Economic Reports Out on IP & Innovation

Two economic reports were recently published, analyzing the effects of IP on innovation, productivity and competitiveness. Not surprisingly, each report concludes that strong IP regimes are a prerequisite for robust innovation and growth.

The first report, entitled "Economic Effects of Intellectual Property-Intensive Manufacturing" was written by Robert Shapiro and Nam Pham under the auspices of the non-profit, non-governmental organization World Growth. Shapiro was formerly a principal economic advisor to Bill Clinton, and senior economic advisor to Al Gore and John Kerry. Pham was formerly a vice president at Kemper Investments, economist for the World Bank, and consultant to the Department of Commerce and FTC. Both are currently lead economic advisers in their own respective consulting firms.

Economists trace 30 percent to 40 percent of all U.S. gains in productivity and growth over the course of the 20th century to economic innovation in its various forms. Today, some two-thirds of the value of America’s large businesses can be traced to the intangible assets that embody ideas, especially the intellectual property (IP) of patents and trademarks. Needless to say, the report concludes that "promoting and protecting new intellectual property should be a high priority for U.S. policymakers."

The report looks at the performance of IP-intensive industries vs. non-IP-intensive industries, and finds that IP-intensive industries hold distinct advantages:

• From 2000 to 2004, IP-intensive manufacturing produced much more value per employee than non-IP intensive manufacturing — some $181,000 per worker, per year, compared to less than $106,000 — and in the most IP-intensive industry, pharmaceuticals, an average worker produced more than $425,000 in value every year.

• From 2000 to 2004, IP-intensive manufacturing paid much higher wages, on average, than non-IP intensive manufacturing — nearly $51,000 per worker compared to just over $35,000 — and in the most IP-intensive industry, an average worker earned almost $66,000 a year.

• Manufacturing employment contracted sharply from 2000 to 2004, with both IP-intensive and non-IP intensive industries shrinking their workforce, on average, by 15 percent to 16 percent. The one manufacturing area that expanded its workforce was the most IP-intensive: Jobs in pharmaceutical companies increased by more than 8 percent over this period.

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A second report, titled "The means to compete: Benchmarking IT industry competitiveness", was issued by the Economist Intelligence Unit under the sponsorship of the Business Software Alliance. The index and report are the first attempt to compare countries' performance in building an environment for IT industry competitiveness; 64 countries are covered across seven regions.

One interesting aspect of this report is that it placed less emphasis on the legal infrastructure, and more on the IT infrastructure, R&D, and support for IT industry development. In this related report from the Economist, the top patent-granting countries (per millions of people, 2002-05 average) are:

(1) Japan - 1,213 patents/mil.
(2) Switzerland - 500 patents/mil.
(3) United States - 350 patents/mil.
(4) Sweden - 330 patents/mil.
(5) Finland - 310 patents/mil.
(6) Germany - 300 patents/mil.
(8) Taiwan - 275 patents/mil.
(10) Israel - 190 patents/mil.
(15) South Korea - 110 patents/mil.
(18) Britain - 100 patents/mil.

The top-ranked countries for IT industry competitiveness are:

(1) Unites States
(2) Japan
(3) South Korea
(4) United Kingdom
(5) Australia
(6) Taiwan
(7) Sweden
(8) Denmark
(9) Canada
(10) Switzerland
(11) Singapore
(12) Netherlands
(13) Finland
(14) Norway
(15) Ireland
(16) Germany
(17) New Zealand
(18) France
(19) Austria
(20) Israel

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- Download the full report, "Economic Effects of Intellectual Property-Intensive Manufacturing" (link)

- Download the full report, "The means to compete: Benchmarking IT industry competitiveness" (link)