Cross-Country Estimates of Employment and Investment in Organisational Capital

Abstract

This work proposes a task-based methodology for the measurement of employment and investment in organisational capital (OC) in 20 OECD countries. It builds on the methodology of Squicciarini and Le Mouel (2012) and uses information from the OECD Programme for the International Assessment of Adult Competencies (PIAAC). OC is defined as firm-specific organisational knowledge resulting from the performance of tasks affecting the long-term functioning of firms, such as developing objectives and strategies; organising, planning and supervising production; and managing human resources. Crosscountry heterogeneity in OC-related occupations emerges: while 20 occupational classes of the International Standard Classification of Occupations (ISCO 2008) are on average identified as being OC-related, country-specific values range between 14 (in Korea) and 24 occupations (in Poland). A core group of managerial occupations are consistently identified as OC occupations across countries, whereas differences arise in the selection of professionals and associate professionals in science and engineering, health, education, and business administration. Estimates suggest the share of OC occupations in total employment to amount to 16% on average, with country-specific values that vary between 9.5% (Denmark) and 26% (United Kingdom); and that total investment in OC, as a share of value-added, ranges from 1.4% in the Czech Republic to 3.7% in the United Kingdom, with an average 2.2% across all countries. Managers appear to account for less than half of total employment and investment in OC. Total investment in OC results higher in services than in manufacturing. In the services sector, on average half of investment in OC comes from small firms, while in manufacturing, 45% of investment in OC comes from large firms. Finally, the importance of OC investment in the public sector is investigated. With only few exceptions, investment in OC is higher in the public sector than in the private sector. These estimates of OC investment can be used to analyse its role with respect to skill use and mismatch, its impact on the routinisation of tasks and resulting polarisation of wage distribution, and its role in firms' integration and upgrading along global value chains (GVC).

New evidence on intangibles, diffusion and productivity

“…The econometric analysis suggests a positive and statistically significant relationship between intangible investment and the diffusion of digital technologies (measured by several indicators of information and communication technology [ICT] intensity at the industry level) to the least productive firms within industries. Intangible investment is found to be linked to a significant increase in the productivity dispersion between the 1 This finding is in line with recent empirical contributions such as Lashkari, Bauer and Boussard (2018 [37]), who find that bigger firms invest a higher share of their sales in intangibles capital. In similar studies, McKinsey (2018 [38]) show that the most profitable firms invest more in software and R&D. Bessen (Bessen, 2019[39]) provides sector-level evidence that industries with higher IT intensity experienced higher growth in the sales share of the largest firms and highlights the scalability of intangibles as an advantage for firms that are already large (Bajgar, Criscuolo and Timmis, forthcoming [1]).…”

“…One of the key arguments to assume intangible investment to be correlated with higher productivity dispersion is the potential for scalability of intangible assets. Recent empirical contributions such as Lashkari, Bauer and Boussard (2018 [37]) and McKinsey (2018 [38]) show that the most profitable firms invest larger shares of their revenues in intangible capital. Bessen (2019[39]) further highlights the scalability of intangibles as an advantage for firms that are already large.…”

Skills and global value chains

“…Bloom and Van Reenen, 2010;Bloom et al, 2012), thus warning about generalising results obtained in the context of specific industries and countries. Also, OECD efforts aimed to better define and measure organisational capital find that managers are not the sole to perform managerial tasks affecting the long-term functioning of firms such as developing objectives and strategies, organising, planning, supervising production and managing human resources (Squicciarini and Le Mouel, 2012;Le Mouel and Squicciarini, 2015). Such findings support Caroli and Van Reenen's (2001) and von Krogh et al's (2012) argument about the progressive devolution of tasks traditionally carried out by managers to a wider array of non-managerial occupational profiles.…”

Returns to intangible capital in global value chains

“…While tariffs affecting trade in goods frequently take centre stage in the debate about trade policies, there is a growing awareness of the importance of services as key inputs to manufacturing activities in GVCs (Miroudot and Cadestin, 2017 [35]; Andrenelli et al, 2018 [36]). Services inputs have been shown to enhance manufacturing firms' capacity of entering foreign markets (Berlingieri and Marcolin, 2018 [37]) and strengthen firms' ability to source foreign manufacturing inputs (Debaere, Görg and Raff, 2013 [38]). As a further dimension of policies shaping a country's economic openness, the results displayed in Table 5.1 therefore also relate a country's openness to services trade as measured by the OECD Services Trade Restrictiveness Index (STRI) to estimates of the returns to measured intangible capital (column 3) and unmeasured intangible capital (column 7).…”