Investment and intangible capital
This event featured a presentation of the EIB's 2018 Investment Report.
VIDEO AND AUDIO RECORDING
Presentation by Debora Revoltella
Presentation by Roma Arjona
The event presented the EIB Investment Report, which is the bank’s flagship economic publication. Published once a year, it is designed to provide a comprehensive overview of the developments and drivers of investment and credit conditions in the EU. The presentation also covered an in-depth study of innovation, investment in intangible assets and digitalisation as drivers of productivity growth.
Both the EIB’s presentation of its annual report and the subsequent discussion identified key weaknesses of European institutions and firms that impede innovation and the diffusion of technology. In particular, the lack of skilled workers, competition from other innovators (namely, the US), and the strong regulation have been highlighted as disadvantages compared to the United States. The costs of a lagged response to technological progress are considered to be large, seeing as Europe’s competitiveness is decreasing (especially in the service sector) and the skill mismatch could stifle economic growth. The response of European policy makers should be a process of ‘retooling’, which includes enhanced financing options, reskilling, and an improved regulatory framework to foster technological diffusion.
- The lack of workers with the right skills is the number one reason why firms’ investment remained subdued. This constraint is especially prominent in innovative firms and eastern European economies which suffer from large emigration waves.
- Overall investment of European firms in intangibles and machinery compared to the US is low and is particularly problematic in ‘periphery’ countries. High potential for investment has been identified in software, R&D and training.
- US firms are faster in adopting new technologies as well as in developing them. Therefore, the EU has relatively few young and globally leading innovators. It is considered that national barriers to financing and a strong bias towards banking financing are a key driver of this development. The bias towards banking financing especially constraints the development of intangible assets where collateral is generally unavailable.
- European firms are struggling to adjust to an environment in which several different technology streams and trends are evolving. The slow diffusion of technology leads to a business environment in which a few ‘superstar’ firms dominate sectors.
- Infrastructure investment remains low compared to pre-crisis periods as there has been a shift of public expenditure towards current rather than capital expenditure.
- Overcome national financing bias and facilitate shift towards capital financing, in particular because monetary tightening will lead to less favourable financing conditions in the euro area.
- The design of education and training systems needs to be prioritised to supply workers with skills that are demanded by employers. This situation is difficult, in particular, for countries that face large outflows of human capital built in the national education system.
- Infrastructure investment needs to be coordinated between and financed by public and private sector to guarantee the implementation of ‘critical’ infrastructure that fosters innovation and its diffusion.
- (Anonymised) Data collected by firms should be made accessible for scientific research in order to identify potential trends and bottlenecks.
- Enhance incentives for long-term investment projects.
Event notes by David Pichler
Check-in and lunch
Debora Revoltella, Director, Economics Department, European Investment Bank
Chief Economist, European Commission, DG RTD
Director, Economics Department, European Investment Bank
Director, Horizontal policies, European Commission, DG FISMA
Location & Contact