1. JRC – Territorial Development Unit Petros Gkotsis 08 March 2017
IRITEC
Industrial Research and Innovation
Combining corporate R&D with patent data to proxy territorial business R&D
JRC – Territorial Development Unit Petros Gkotsis March 2017

2. IRITEC research topics
Focus on the world top R&D investors. Analysis of value chains in strategic knowledge intensive and high-value industrial segments
Investigate the actual location of economic and innovation activity
– matching company and territorial perspectives
- proxy allocation of private R&D inestment to regions
Assessing the capability of "EU industry" to develop key technologies
– characterise tech and industrial profile of region.
- Centrality of technologies/ firms in knowledge flows

3. Methodology
EU R&D Scoreboard: R&D data + PATSTAT and REGPAT: dates, addresses, technological fields, citation etc.
Link patents to applicants (Scoreboard companies) and subsidiaries. Information on inventors (proxy of international activities of companies). Networks of collaborations & knowledge flows.
Attempt to estimate territorial business R&D funded by the business sector, using R&D and patent data from top R&D investing companies:
industrial R&D is highly concentrated at company, country and sector levels. A representative subsample of the Scoreboard can be used.
Patents are an output of the R&D investment. BERD- patents positively related. Here they are used as a proxy in order to re distribute R&D of parent companies to subsidiaries.

4. IRITEC
Company data
Top 2500 companies invested €696bn in R&D in 2015/16, ca. 90% of world BERD
Understanding the scale and dynamics of industrial R&D at the firm level
Since 2004
ca. 90% of world BERD
including R&D of more than 600k subsidiaries
Strong evidence on concentration of R&D (top 100 account for 53%, top US, EU, JP for 63% etc)
PATSTAT (REGPAT)
Relational database from EPO.
Use of special string matching algorithms (IMALINKER) to establish links between entries in the 2 databases
Work with patents filed in at least one of the 5 main IPOs

5. Our Evidence Inventor's location
80% of patents are developed by inventors residing in the same world region as the company legally owning the rights
20% are developed by inventors residing in a different region
The recourse to international development of inventions varies across regions and industries
Source: The 2015 EU Industrial R&D Investment Scoreboard, European Commission, JRC/DG RTD.

6. Is it possible to proxy business Intramural R&D using Scoreboard data?
BERD vs Scoreboard
EU-BERD vs Scoreboard
US-BERD vs Scoreboard
JP-BERD vs Scoreboard
BERD vs Scoreboard and EU-BERD vs EU-1000 Scoreboard highly correlated >=0.98
US/ JP- BERD vs Scoreboard >=0.76

7. Scoreboard Subsample Key features:
To address time restrictions in data availability, R&D data promptly available (Same year).
Representative of countries and industries which appear in the Scoreboard
Focus on the EU and largest R&D countries.
350 (500) companies (382.9 EUR bn R&D), 63.0% of World R&D.
The EU subsample further improved by adding more DE, FR, UK companies
Sectoral classification based on ICB (macro sectors)

8. R&D flows Starting point: Cross- border activity of companies
BALANCE of private R&D flows in a region
Home
Outward
Inward
Territory
(BERD)
Performed at "home" from local companies
Performed at "home" from subsidiaries of "foreign" companies
Performed "abroad" from foreign affiliated subsidiaries of the "local" companies
Assumptions:
R&D distributed proportionately among technologies/ inventor countries based on share of patent families
No time lags between R&D investment and patent production

9. BERD vs Estimator
BERD historical data together with our best estimator of BERD (IndRD)
Correlation among the two statistics generally very good (0.99 for EU, 0.89 for France and UK)

10. Our Estimations Industrial R&D continued to grow in 2015:
Global R&D funded by industry +5.5% (6.5% 2014)
EU R&D by industry +5.6% (+3.4% 2014)
US R&D by industry +4.4%
R&D growth driven by increases in ICT services
Industrial Sector EU (%) US (%) Global (%)
ICT services
Automobiles
Health industries
ICT producers
Industrials
Aerospace & Def
Chemicals
Others
EU and US showed different sectoral performance
DE, FR and UK show mixed R&D performance
DE +8.9% to €59.6bn, mostly fuelled by the Automobiles & parts sector (60% of R&D growth) and by Pharmaceuticals (about 15% of R&D growth)
FR R&D +2.4% to €27.1bn driven by R&D growth from Automobiles, Pharmaceuticals, Software and Telecom equipment sectors.
UK -3.3% to €18.9bn, mainly due to UK's Oil sector and high R&D outward flows of UK companies in Pharmaceuticals and Automobiles.

11. Recent Developments
Methodology to estimate corporate R&D by technology: Analysis based on IPC classes
IPC technological classification hierarchical, tree like
Patent families from Company X and its subsidiaries matched from Scoreboard and PATSTAT
Fractionally count families per mother company
Fractionally count technological fields within families at 3, 4 digit level or using Schmoch classification
Next Steps:
Calculate RD allocated per company on the development of specific technology
Aggregate by inventor country and/ or sector
Update calculations

12. Conclusions- Future Work
BERD and Scoreboard figures not directly comparable.
Good correlation for high levels of aggregation of the data, (large countries/regions, large industrial sectors in terms of R&D) observed between the two datasets
A subsample of representative Scoreboard companies is selected to overcome problems regarding on-time data availability.
The use of patent data of companies' subsidiaries as a proxy indicator of the innovation output helps to characterise the location of companies' innovation activities worldwide.
Combining corporate R&D and patent data important to understand industrial R&D flows. EU headquartered companies contribute 80% of the EU's territorial business R&D.
High degree of heterogeneity across industrial sectors, e.g. EU shows an inward-outward R&D balance of % in the ICT producers sector and +5.5% in Health industries.
More detailed analysis is required in order to better understand the reasons behind these differences and their policy implications.

13. Thank you