Investment in knowledge

There has been considerable talk in recent decades about the information society, and undoubtedly the ability to create, distribute and exploit knowledge is increasingly central to a country's competitive advantage and rising standard of living. So investing in these areas is important for innovation, job creation and continuing economic growth. To investigate this, the OECD has constructed a new concept of ‘investment in knowledge’, defined as spending on higher education, research and development (R&D) and software. It covers spending by both the public and private sectors, but excludes consumer spending on software, and differs from the cumulative spending in the three areas by seeking to eliminate overlap, and also to isolate, for example, the research aspects of higher education.

It can be seen in Table 11.1 that, by 2004, total annual spending on knowledge averaged 4.3% of GDP across the selected countries. Between 1997 and 2004, investment in knowledge had grown somewhat more quickly than the economy as a whole.

The United States' high level of total investment in knowledge is not surprising – it is, after all, the country at the world's technological frontier. Similarly, Japan in fourth place is consistent with that country's reputation for innovation. Perhaps more surprising may be the presence of three Nordic countries in the top five places. Ireland, Italy, Belgium and Austria often seem to lag behind on measures to do with technology and innovation.