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European Competitiveness Research Programme and ECR 2010 Michael Peneder (WIFO)

European Commission Enterprise and Industry. European Competitiveness Research Programme and ECR 2010 Michael Peneder (WIFO) Budapest, Institute for World Economics, 25.01.2011. Outline. European Competitiveness Research History & consortium Competitiveness

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European Competitiveness Research Programme and ECR 2010 Michael Peneder (WIFO)

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  1. European CommissionEnterprise and Industry European Competitiveness Research Programme and ECR 2010 Michael Peneder (WIFO) Budapest, Institute for World Economics, 25.01.2011

  2. Outline • European Competitiveness Research • History & consortium • Competitiveness • A “dangerous obsession”? • Firms, industries and the macro-level • The ECR 2010 • Guiding questions • Selected findings

  3. European CommissionEnterprise and Industry History of the ECR • 1994 – Decision of the Council • 1997 – First Competitiveness Report • 2005 – Refocusing more on Lisbon Agenda • 2010 – Support measure for Europe 2020 – New Framework Contract with ...

  4. The research consortium (a) Total of 16 partners from 11 countries • WIFO – Austrian Institute of Economic Research (consortium lead, Vienna) • CEPII – Centre d’Etudes Prospectives et d’Information Internationales (Paris) • CIREM – Centre d’Information et de Recherche sur L’Economie Mondiale (Paris) • CPB – Netherlands Bureau for Economic Policy Analysis (Den Haag) • ECORYS Nederland B.V. (Rotterdam) • Etlatieto Oy – The Research Inistitute of the Finnish Economy (Helsinki) • Idea Consult (Brussels)

  5. The research consortium (b) • IfW – The Kiel Institute for the World Economy • IVIE – Instituto Valenciano de Investigaciones Economicas • NIESR – National Institute of Economic and Social Research (London) • NIFU – Nordic Institute for Studies in Innovation, Research and Education (Oslo) • SGH – World Economy Research Institute, Warsaw • VKI – Institute for World Economics of the Hungarian Academy of Sciences (Budapest) • VTT – Technical Research Center Finland (Helsinki) • wiiw – Vienna Institute for International Economic Studies • ZEW – Center for European Economic Studies (Mannheim)

  6. The research consortium (c) Associated (subcontractors or academic advisers) • EIM Business and Policy Research (Zoetermeer, Brussels) • ETH Zurich – Prof. Peter Egger, Dr. Heinz Hollenstein • Harvard Business School – Prof. Christian Ketels • Harvard University – Prof. Dale Jorgenson • Swansea University – Dr. Catherine Robinson • TNO – Dr. Frans van der Zee • University of Birmingham – Prof. Mary O’Mahony • University of Innsbruck – Prof. Michael Pfaffermayr

  7. Competitiveness a “dangerous obsession”? • Paul Krugman (MIT Press, 1996) • “So let’s start telling the truth: competitiveness is a meaningless word when applied to national economies. And the obsession with competitiveness is both wrong and dangerous” • Main arguments • Illusion of conflict; trade is no zero-sum-game • Domestic spending has larger impact than negative terms of trade effects • Wages rise with productivity: low factor prices indicate low competitiveness!

  8. Competitiveness a natural concern • Competition arises from scarcity, e.g. of • Resources (capital, labour/skills, raw materials) • Access to markets (EU integration; international trade agreements; transport) • Knowledge & competences (seeking rents from high-value production) • Do these scarcities matter only for individual firms? • Sure, enterprisesare at the core, but e.g. • relative abundance of inputs affect industrial location • differences in productivity and industrial structure affect aggregate income and the standards of living!

  9. Competitiveness a refined view • Openness: the very notion of “competitiveness” implies the willingness and ability to face competition, being domestic or from abroad • Focus on productivity: the objective is to raise incomes, not lower wages ! • Policy must define the preferences and constraints to account for interdependencies with other goals of society, e.g. • Social cohesion • Sustainable environment

  10. Competitiveness definitions – ECR 2010 • “Competitiveness refers to the overall economic performance of a nation measured in terms of its ability to provide its citizens with growing living standards on a sustainable basis and broad access to jobs” • “... refers to the institutional and policy arrangements that create the conditions under which productivitycan grow sustainably” • “external competitiveness refers to the ability to export goods and services in order to afford imports”

  11. Competitiveness firms Processes Outcomes Inputs • Labour & skills • Capital • Intermediates • Rawmaterials (incl. energy) • Entrepreneurship • Management • Organisation • Technology • Productivity • Survival • Profits • Growth • Market shares

  12. Competitiveness industries Processes Outcomes Inputs • Industrial Organisation, e.g. • Competition • Value chains • Technological • Regimes • Industrial Location, e.g. • Firm entry • ForeignDirect • Investment • Advanced • customerbase • Productivity • Growth • International • marketshares • Profitability

  13. Competitivenesscountries & regions Inputs Processes Outcomes • Regulation & institutions, e.g. • Efficiency offactor • markets • Administrative • burden • National systemsofinnovation • Locational Advantages, e.g. • Relative prices & abundanceofinputs • Infrastructure • Market access • Productivity • Factorincomes • Employment • Growth

  14. Competitivenessan integrated puzzle Inputs Processes Outcomes Firm-leveldrivers Firm performance Firm-levelinputs Firms IndustrialLocation Industrial Organisation Industries Industrial performance Locationaladvantages Regulation & institutions Countries/Regions Macro-performance

  15. European CommissionEnterprise and Industry How did imbalances accumulate, and did they affect the external competitiveness of EU industries ?

  16. ECR 2010 Growingimbalances • Accumulation of disequilibria: speculative bubble and spiral in real estate prices >> overstated wealth • Distorted choices: consumption vs. saving and lending vs. borrowing • Adjustment when bubble burst: households save more and consume less • Contagion of other countries (trade, financial system) • Was there a direct impact of imbalances on EU external competitiveness? • no obvious indication forcrowding out of productive investments or a decline in export performance because of wage inflation

  17. European CommissionEnterprise and Industry What share of value added does the EU capture when the production of a single phone is scattered all over the world?

  18. ECR 2010Trade in intermediate goods • Example of a Nokia ‘high-end’ mobile phone • Even when assembled in China and sold to the US, Europe captures 51% of the value • For high-tech goods, capturing value is largely detached from the physical flows, while attributed mainly to R&D, design, marketing, distribution and management • See presentation by Mats Marcusson …

  19. European CommissionEnterprise and Industry What if corporate R&D and innovation activities are increasingly off-shored?

  20. ECR 2010Foreign R&D and innovation • Increasing internationalisation of R&D (though traditionally less easily offshored) • Only 5% of all patents of EU firms are invented outside Europe, mostly in the US • 17% of EU patent inventions are foreign-owned, 9% by non-EU organisations • Foreign-owned firms have a • lower innovation input intensity, but • similar innovation output and • similardegreeof cooperationin host country • Links between EU-12 and EU-15 are rare • Language, culture and history matter much !

  21. European CommissionEnterprise and Industry Do you know which technologies can radically change the future of EU manufacturing?

  22. ECR 2010Key enabling technologies • New technologies of systemic relevance that facilitate innovation in many other industries • Selected areas • Nanotechnology, micro- and nanoelectronics • Industrial biotechnology • Photonics • Advanced materials • Advanced manufacturing technologies • See presentation by Agnes Magai …

  23. European CommissionEnterprise and Industry Why do activities such as media, design, software, video games and advertising matter so much for economic growth?

  24. ECR 2010Creative industries • Activities at the Crossroads between the Arts, Business and Technology • Ideas & IPRs are major input and output • Competitive edge derived from originality, service and customization • Concentrated in urban areas • Promote technology diffusion & development • Positive impact on growth of local GDP p.c.

  25. Thankyouforyourattention!

  26. Annex: Old andnewtopics inputs

  27. Old andnewtopics processes

  28. Old andnewtopics processes

  29. Old andnewtopics processes

  30. Old andnewtopics outcomes

  31. Old andnewtopics outcomes

  32. Old andnewtopics other

  33. Old andnewtopics other

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