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.
