5.1. Knowledge base
Investment in knowledge is key to driving and adapting to the digital transformation. Among other things, this can take the form of investment in education, information and communication technologies (ICT) and in intangible assets such as Software, and Research and Development (R&D).
Tertiary education has expanded worldwide to support the supply of highly educated individuals and to meet rising demand for skills, especially cognitive skills. Policy makers are particularly focused on the supply of scientists, engineers and ICT experts, because of their direct involvement in technical change and the ongoing digital transformation (OECD, 2017a). In 2016, 23% of students graduating at tertiary level within the OECD did so with a degree in the natural sciences, engineering, and information and communication technologies (NSE & ICTs, which includes qualifications in mathematics and statistics). NSE and ICT graduates accounted for around one-third of all tertiary graduates in Germany and India.
In the OECD area, 31% of graduates in NSE & ICT in 2016 were women. This indicates considerable under-representation compared to men. Shares range from 16% in Japan and 18% in Chile to 43% in India and 44% in Poland, the countries closest to achieving gender parity in this area.
Investment in knowledge-based capital as recorded in National Accounts (KBC), which includes Software and databases alongside R&D and other intellectual property products, is an important element of the knowledge base. Computer software and databases (which excludes the value of any data therein) constitute the main component of ICT investment in most countries, ranging from 23% of total ICT investment in Latvia to 86% in France. Comparing 2016 to 2006, OECD investment in ICT assets remained stable at 2.4% of GDP. This stability, at a time of on-going digital transformation, might be explained in part by decreasing prices of ICT products and by substitution between capital investment and purchases of cloud computing and other ICT services, which allow users to access software, storage, processing power and other systems through the Internet without buying ICT assets outright.
Software and databases account for below half of KBC investment in most countries. On average across the OECD, 62% consists of “R&D and other intellectual property products”, which include Creative, artistic and literary originals. Typically, investment in R&D assets is the vast majority; these accumulate both as a result of R&D being conducted in the country and from R&D assets being imported (often in the form of patented entities).
As an activity defined by the pursuit of new knowledge, R&D is an important facet of the knowledge base that helps to bring about advances in digital technologies. Businesses are the main drivers of R&D performance, with 2016 R&D expenditures equivalent to 1.6% of GDP, on average, in the OECD area and as much as 3.3% in Korea and 3.8% in Israel. Information industries are particularly strong contributors in these countries, accounting for just over half of all business R&D. Information industries also represent over 40% of business R&D in Estonia, Finland, the United States, Turkey and Ireland, further confirming the knowledge-intensive nature of these industries.
In India there are almost 600 000 tertiary ICT graduates a year, about five times as many as in the United States.
Definitions
The natural sciences, engineering and ICT fields of study correspond to the following fields in the International Standard Classification of Education (ISCED) 2013 classification: 05 Natural sciences, mathematics and statistics; 06 Information and Communication Technologies; and 07 Engineering, manufacturing and construction.
Tertiary level graduates are individuals that have obtained a degree at ISCED-2011 Levels 5 to 8 in the given year (2016).
ICT investment refers to gross fixed capital formation (GFCF) of “information and communication equipment” and “computer software and databases”. The value of data within databases is not included.
Business expenditure on R&D (BERD) includes all expenditure on R&D performed by business enterprises, irrespective of funding sources.
Information industries includes ICT manufacturing and information services i.e. ISIC Rev.4 Divisions 26 and 58 to 63. See page 2.1 for more detail.
Measurability
Indicators on graduates by field of education are computed on the basis of annual data jointly collected by the UNESCO Institute for Statistics, the OECD and Eurostat. The data collection aims to provide internationally comparable information on key aspects of education systems in more than 60 countries worldwide http://www.oecd.org/education/database.htm.
The value of ICT investment comes from National Accounts. However, the availability and timeliness of detailed capital formation data varies. In particular, some economies do not isolate all ICT items, resulting in under-estimation.
BERD is measured through official surveys on the volume and nature of businesses’ R&D expenditures. The surveys, or related sources such as business registers, also provide relevant contextual information such as the number of persons employed and the main productive activity undertaken (i.e. main source of value added). This is the primary way in which R&D activities are classified to industries, as recommended in the OECD Frascati Manual 2015 (http://oe.cd/frascati).
Source: OECD calculations based on OECD, Education Database, September 2018.
Source: OECD, National Accounts Statistics; Eurostat, National Accounts Statistics and national sources, February 2019. See 1. StatLink contains more data.
← 1. Investment is based on gross fixed capital formation.
For Germany, Korea and Spain, ICT equipment are estimates based on last available share.
For Iceland, data correspond to business sector investment in “office machinery and computers”.
For Mexico, data only include ICT equipment (i.e. “computer hardware and telecommunications”).
Source: OECD, ANBERD Database, http://oe.cd/anberd, December 2018, and Main Science and Technology Indicators Database, http://oe.cd/msti, July 2018. See 1. StatLink contains more data.
← 1. “Information industries” are defined according to ISIC Rev.4 and cover ICT manufacturing under “Computer, electronic and optical products” (Division 26), and information services under “Publishing, audiovisual and broadcasting activities” (Divisions 58 to 60”), “Telecommunications” (Division 61) and “IT and other information services” (Divisions 62 to 63).
Data on total business expenditure on R&D (BERD) refer to 2016, except for Australia (2015), New Zealand (2015), South Africa (2015) and Switzerland (2015).
Estimates on R&D expenditure in the information industries are not available for Australia, China, Luxembourg, New Zealand, the Russian Federation, South Africa and Switzerland. Figures on information industries correspond to the same reference year as total BERD or, in their absence, are based on shares for the most recent available year: Austria (2015), Belgium (2015), Canada (2015), Chile (2015), France (2013), Greece (2015), Ireland (2015), Korea (2015), Latvia (2015), Poland (2015) and Sweden (2015).
Zone estimates (OECD and EU28) correspond to member countries’ R&D intensity averages weighted by GDP in purchasing power parity. For information industries, they exclude countries where no data are available: Australia, Luxembourg, New Zealand and Switzerland for the OECD aggregate, and Bulgaria, Croatia, Cyprus, Luxembourg and Malta for the EU28.