draft – not to be quoted measuring investment in intangible asset in the uk: results from a unique...
TRANSCRIPT
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UOTEDMeasuring Investment in Intangible Asset in the UK: results from a unique survey
Presentation by Gaganan Awano, UK Office for National Statistics, to COINVEST Conference, Lisbon , 19 March 2010
This work is a component of NESTA’s innovation index project and carried out by a team at Imperial College Business School and ONS. The team are (ONS) Gaganan Awano, Mark Franklin, Andrew Thomas and (Imperial) Jonathan
Haskel, Zafeira Kastrinaki.
This work contains statistical data from ONS which is Crown copyright and reproduced with the permission of the controller of HMSO and Queen's Printer for
Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research datasets which may not exactly
reproduce National Statistics aggregates.
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UOTEDIntangible Asset Survey- Pilot
• Part of Imperial/ONS initiative and sponsored by NESTA- Autumn 2008
• Telephone and Face to Face interview of 40 firms with the aim of:Obtaining data on spending through cognitive interview techniques
Seek answers to the service life of intangible assets
• Important findings of pilot survey:• Most important conclusion was that firms could generally provide the
information required.• The concept of “projects” was more easily understood by
respondents• Some large firms
Have logs of innovation “projects” with time spend and payoffs
Have functional organisation related to intangible headings e.g. marketing dept, HR dept, design dept. They can get information more easily if questions aligned to these functions
Organisational capital very hard for them and us to measure• Life lengths seems to be something they can recognise
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UOTEDIIA Survey- Phase II
• Conducted by the ONS in October 2009• Voluntary postal survey of 2000 UK companies• Objectives are to measure:
– Firms’ spending on main intangible assets: R&D, software, training, branding, design, organisation or business process improvement
– Extra mural– Intra mural– Life lengths
• Linkable via business register• Minimum burden on respondents, i.e. short as possible
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UOTEDLayout of questionnaire
Assets divided into sections
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UOTEDEach section has a filter question which defines the asset with examples
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UOTEDThen asks purchased and own-account
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UOTEDFinally life lengths
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UOTEDSampling
• Sample 2000 firms drawn from the Business Register
• Market sector - consistent with intangibles growth accounting framework
• Stratified by industry and employment
• Mild bias informed by pilot and UK Innovation Survey results:
Over-sample Under-sampleEngineering ConstructionICT UtilitiesFinancial Services Distribution
TransportAccommodation
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UOTEDSurvey findings: response rates
Response Rate: by firm size
Firm Size Usable Response Rate (%) % Positive Response*
10-99 47 50
100-499 48 68
500-4999 33 80
5000+ 21 76
Total 42 58
*Percentage of usable responses reporting positive spending in one or more category of intangible asset
•More large firms answered affirmative to investing in at least one intangible asset than small firms
•Sample size: 2000•Total response: ~ 1400•Usable response: 838
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UOTEDIncidence
Intangible Asset Category Firms’ Propensity
Training 35%
Software 30%
Reputation & Branding 22%
R&D 8%
Design 10%
Business Process Improvement 13%
•Most firms do not invest in intangible assets
•Of those that do, most firms invest in training and least in R&D
% of respondent firms conducting intangible investment by asset category
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UOTEDIncidence: by size bands
Firm Size Incidence of Intangible Asset Spending (%)
Training Software Reputation & Branding R&D Design BPI
10-99 32 29 21 7 10 12
100-499 64 43 30 11 12 19
500-4999 70 57 38 19 19 33
5000+ 66 64 40 14 18 24
•The propensity for investing in intangible assets generally increases with firm size
•By contrast, response rates are higher for smaller firms
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UOTEDAverage Expenditure
Intangible Asset Category
Mean Expenditure
(£,k)
Training 94*
Software 191
Reputation & Branding 192
R&D 579
Design 53
Business Process
Improvement48
• Data were weighted to reflect the characteristics of the population from which the sample was drawn and the pattern of responses received.
• Average of firms conducting the activity
• R&D has the highest mean expenditure
• A small number of very large firms make huge spending on R&D
*Note includes imputed value of employee time while undertaking training
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UOTEDPurchased vs own-account expenditure
Mean Expenditure (£,k)
Intangible Asset Category Extra Intra
Training 32 68
Software 56 192
Reputation & Branding 143 64
R&D 325 300
Design 15 43
Business Process Improvement 27 30
•R&D has the highest extramural and intramural spending among the assets
•Average intramural spending is higher in all intangible assets except reputation & branding and R&D
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UOTEDMean Expenditure by broad sector
Asset Manufacturing (£,k) Services (£,k)
Training 104 92
Software 81 215
Reputation & Branding 289 175
R&D 1280 234
Design 122 30
BPI 90 38
•Except for Software, the manufacturing sector has higher average spending for all other assets
•Average spending on R&D by the manufacturing sector is exceptionally high
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UOTEDLife length
Asset Category Meal benefit life (yrs)
CHS(2006) estimates (yrs)
Training 2.7 2.5
Software 3.2 3
Reputation & Branding 2.7 2
R&D 4.6 5
Design 4.0 5
Business Process Improvement 4.2 2.5
•Using single declining balance, life length is the reciprocal of depreciation
•Our life lengths although varied are not that far off from literature estimates, and are distributed around CHS estimates
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UOTEDLife lengths by broad sector
Asset Manufacturing (yr) Services (yr)
Training 2.9 2.7
Software 3.4 3.2
Reputation & Branding 4.1 2.5
R&D 5.5 4.3
Design 4.6 3.7
BPI 5.4 4.0
•Manufacturing sector has longer life lengths for investments in intangible assets than the services on all asset categories
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UOTEDExpenditure Levels (£,Million)
0
2000
4000
6000
8000
10000
12000
Training Softw are Reputation & Branding R&D Design Business ProcessImprovement
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UOTEDSome comparison with other sources
Software
• Chamberlin et al (2007) valued own-account software investment in the UK at £10b and contributes about 50% of total.
• IIA survey total for own-account software expenditure is £7b and contributes 70% of total
R&D
• UK Business Enterprise Research & Development (BERD) survey (2008) states the total R&D expenditure in the UK at £15.9b
• Total R&D expenditure in IIA survey stood at £8.1b
• Innovation Survey (2009) shows the manufacturing sector generally more innovative than the services sector.
• The manufacturing sector in the IIA survey has higher mean spending and life lengths than the services sector. Any links?
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UOTEDConclusions
• Most firms are small and do not invest in intangible assets
• Most firms engage in staff training and fewer in R&D, albeit mean spending is highest on R&D
• Spending on 4 out of 6 assets is more on in-house than purchased
• Asset life lengths although varied are not too far from literature estimates
• A larger survey may help clarify the variations of data with other sources and provide lower confidence intervals around estimates
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UOTEDNext Steps
• Present results to NESTA
• Analyse data against 2009 Innovation Survey
• Detailed analysis against software estimates
• Expanded survey- subject to funding
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UOTED
Thank you!
Andrew D Thomas: [email protected]
Gaganan Awano: [email protected]
Mark Franklin: [email protected]
Jonathan Haskel: [email protected]
Zafeira Kastrinaki: [email protected]