Immaterial Value Creation in Europe

By Nima Sanandaji 

Immaterial value creation plays a key role in what is commonly referred to as the knowledge-intensive economy. Intellectual property rights (IPR) – such as patents, design rights, trademarks,
and copyrights – are used to protect the intellectual property that results from immaterial value creation.

While nearly all businesses rely on IPR to some extent, some are intensely reliant on this form of protection. This study examines the European Union business sectors, to determine the share of the economic value created and the share of jobs that exist in IPR-intensive businesses. The survey is based on data for 2011, 2012 and 2013. It covers the most detailed information available for the
European Union business sector, collected from the Eurostat database.

The key finding is that 40 per cent of employment in the European business sector and 51 percent of value created in the sector occurs in IPR-intensive businesses. All business activity in publishing, film, music and software are classified as IPR-intensive. The reason is that the value produced mainly has the form of digital content, protected by copyright. The majority of value added in a number of other sectors is also IPR-intensive. This includes ICT, manufacturing, professional services, real estate and trade. Utilities, as well as accommodation and food services, on the other hand, have negligible shares of IPR-intensive businesses.

Although differences exist among European Union member states, the share of IPR-intensive business activity is high across the union. Besides the direct effect on job creation, it is likely that, as pointed out by an American study, IPR-intensive businesses also indirectly stimulate job creation in the rest of the economy. This is in line with the observation that knowledge-intensive businesses are the driver for job growth in modern economies.