Page 41 - Intangible value

Measuring intangible investments is challenging
ESTIMATING THE AMOUNT OF COMPANIES' INVESTMENTS IN INTANGIBLE ECONOMY AND PRODUCTION FACTORS IS CHAL- LENGING. HOW, FOR EXAMPLE, COULD COMPANIES' INVESTMENTS IN EXPERTISE BE ASSESSED IN A UNIFORM WAY WHEN THEY MANIFEST THEMSELVES IN SUCH DIVERSE WAYS AND QUANTIFYING THEM, IS DIFFICULT.
FORTUNATELY, INTERNATIONALLY UNIFORM METHODS HAVE FOR YEARS BEEN USED
TO MEASURE HOW COMPANIES USE THEIR MOST IMPORTANT INTANGIBLE INVEST- MENTS, I.E., RESEARCH AND DEVELOPMENT ACTIVITY.
COMPANIES' INVESTMENTS IN RESEARCH AND DEVELOPMENT ACTIVITY ARE USED
AS A ROUGH ESTIMATE FOR COMPANIES' INTANGIBLE INVESTMENTS. IN REALITY, COMPANIES' INTANGIBLE INVESTMENTS IN A BROAD SENSE ARE CLEARLY HIGHER THAN THEIR R&D ACTIVITIES.
COMPANIES' INTANGIBLE INVESTMENTS CAN ROUGHLY BE ESTIMATED ON THE BASIS OF HOW LARGE THE COMPANIES' SHARE
IS IN THE R&D ACTIVITY OF THE WHOLE OF FINLAND. ON THE OTHER HAND, SOME OF THE R&D ACTIVITY OF FINNISH COMPANIES IS CARRIED OUT IN FOREIGN SUBSIDIARIES. FROM ECONOMIC POLICY'S POINT OF VIEW, IT IS JUSTIFIED TO FOCUS ON THE RESEARCH AND DEVELOPMENT ACTIVITIES OF COMPA- NIES OPERATING IN FINLAND. OF COURSE, IT IS ALSO IMPORTANT TO MONITOR THE DEVELOPMENT OF R&D ACTIVITIES IN SUBSIDIARIES OPERATING IN FINLAND AND, ON THE OTHER HAND, IN SUBSIDIARIES OPERATING ABROAD.
The research and development expenditures in the chem- ical industry are the second highest of the main industrial sectors. This year the R&D expenditures in the chemical industry are estimated to be around €340 million.
According to the surveys, R&D activity in the forest indus- try will increase in 2014–2015. This year, the forest indus- try will use about €110 million to research and product development activities and over €900 million to xed in- vestments. In other words, the structure of forest industry is very capital-intensive.
The share of the forest industry in intangible R&D ex- penditures in particular is considerably small and it is anticipated that the industry will only employ about 600 persons in R&D activities.
RESEARCH AND DEVELOPMENT EXPENDITURE ABROAD DECLINING
The research and product development expenditure that Finnish companies incur abroad declined fairly steeply last year. It is forecast that they will continue to decline slightly. According to the surveys on investments, over € 2.2 billion was spent on R&D activity abroad in 2013. This expenditure is expected to decrease to the level of about €1.8 billion this year.
R&D activity abroad is signi cant in companies in the technology industry and especially in the electronics and electrical industry. R&D activity abroad is clearly less signi cant in other sectors.
CONCLUSIONS
From a long-term perspective, intangible investments have become as signi cant as tangible investments during the past ten years. There is a steady increase in digital business and services linked to it globally. The breakthrough of digital tools and business requires that companies make strong intangible investments that are typically similar to investments in R&D.
However, after Nokia's collapse, research and development activity in companies has been slightly in decline and the anticipated steep increase of investments this year focuses on xed investments in industry after a very in a long time.
Confederation of Finnish Industries' Investment Survey June 2015
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