1. Innovation, Knowledge Spending and Productivity Growth in the UK Jonathan Haskel and Annarosa Pesole Imperial College Business School, Imperial College London j.haskel@ic.ac.uk Project funded by the European Commission under the Seventh Framework Programme Grant No 217512 www.coinvest.org

2. Broad questions Better understanding of the “new” or “knowledge” economy: data, facts, policy Popular discussion: “Old economy”: tangible capital traditional machines, production lines etc “New Economy”: intangible captial Software, hardware, ICT Move to knowledge-intensive activities Rise of the service sector Innovation as a key economic driver

3. Sources of growth with intangibles Excluding intangibles: Including intangibles: Innovation = contribution to growth of freely available knowledge plus the contribution of knowledge/intangible capital Lessons: a. productivity growth changes b. TFPG changes c. “innovation” changes

4. Types of intangibles, details A. Computerised information

5. B. Scientific and creative property

6. C. Economic competencies

8. Intangible and tangible investment (£bn)

9. Trends in intangible spend

10. Computers tangible contribution halved wrt prev estimates due to revision on hardware capital stock Takeaways: 1.LPG changes, particularly in 1990s 2.TFPG reduced Lab Prod Growth Contrib. of Lab. Quality Contrib. of Computers per hour Contrib. of Other Tang K, per hour Contrib. of Intang K per hour TFP Growth

11. More intangible categories Detail on intangible categories…software, design, training, organisation important

12. Results: %s of ALPG (1)

13. Results: %s of ALPG (2)

14. Robustness: it’s not all just software…..

15. Robustness: depreciation not key…