Breakdown by type of innovation activity

304. The descriptions of expenditure items which should be included under various categories of TPP innovation activities are based on the definitions of TPP innovation activities in Chapter 3, Section 5. 305. The following breakdown should be viewed as a general guideline for both manufacturing and services. For the service sector, not all of the elements seem to be important, and some should be omitted. For example, recent experience suggests that expenditure items such as design, industrial engineering and trial production may not be relevant for the service sector. Conversely, an activity such as software, which pervades TPP activities, may be easier to identify and may be of interest for services.

306. In order to facilitate comparison with R&D expenditure it is recommended that information

should be collected on the breakdown by TPP innovation activity for total TPP innovation expenditure (current and capital expenditure). The following breakdown is recommended:

• R&D expenditure;

• expenditure for the acquisition of disembodied technology and know-how;

• expenditure for the acquisition of embodied technology;

• expenditure for tooling up, industrial engineering, industrial design and production start-up, including other expenditure for pilot plants and prototypes not already included in R&D;

• expenditure for training linked to TPP innovation activities;

• marketing for technologically new or improved products.

2.3.1 R&D expenditure

307. This includes total intramural and extramural expenditure on R&D as defined in the Frascati Manual (see also Chapter 3, Section 5.2.1.a). If intramural and extramural expenditure on R&D are evaluated separately, this will assist comparison with R&D survey data.

308. Intramural R&D expenditure: this item comprises all expenditure on R&D performed within the firm as defined in the Frascati Manual and as reported in R&D surveys. In most cases all this R&D is intended to contribute to the introduction of technologically new or improved products or processes in the firm concerned. However, where a firm carries out R&D purely as a service for another enterprise (or government agency), to contribute exclusively to innovation by the latter, an attempt should be made to identify the funds concerned so that they can be excluded in order to avoid double-counting when total (intramural and extramural) expenditure is summed over industries. R&D which is not directed towards specific new products and processes but is intended to expand the knowledge base of a firm is also covered here.

309. Extramural R&D expenditure: this comprises the acquisition of R&D services. 2.3.2 Expenditure for the acquisition of disembodied technology and know-how

310. This item comprises expenditure on the acquisition of disembodied technology as defined in Chapter 3, Section 5.2.1.b). Expenditure for R&D services is to be excluded here.

2.3.3 Expenditure for the acquisition of embodied technology

311. This item comprises expenditure on the acquisition of machinery and equipment with improved technological performance, including major software, directly related to technologically new or improved processes as defined in Chapter 3, Section 5.2.1.c).

2.3.4 Expenditure for tooling up, industrial engineering, industrial design and production start-up (including other expenditure for pilot plants and prototypes not already included in R&D)

312. This item comprises mainly:

• expenditure for tooling up and industrial engineering as defined in Chapter 3, Section 5.2.2.a), including organisational development in connection with production start-up;

• expenditure for industrial design of technologically new or improved products or processes as defined in Chapter 3, Section 5.2.2.b), insofar as it is not already included in R&D expenditure; • expenditure for testing technologically new or improved products or services (testing of prototypes

is part of R&D, and so excluded here);

• expenditure for other capital acquisition as defined in Chapter 3, Section 5.2.2.c), required for the implementation of TPP innovation;

• expenditure for production start-up as defined in Chapter 3, Section 5.2.2.d), except expenditure on retraining personnel which is proposed as part of a separate class;

• expenditure for trial production and pilot plants insofar as they are not already included in R&D (trial production is included in R&D if production implies full-scale testing and subsequent further design and engineering; pilot plants are included in R&D as long as the primary purpose is R&D); • other expenditure related to prototypes insofar as it is not already included in R&D;

• expenditure for satisfying regulatory requirements: these may include drug registration, satisfying environmental regulations, and a range of other standards and requirements (for environmental protection, for example).

2.3.5 Expenditure for training linked to TPP innovation activities

313. This item consists mainly of expenditure for training required for the implementation of technologically new or improved products or processes (training for other activities should be excluded, see Chapter 3, Section 5.3.2). Initial training is as a rule not part of innovation expenditure. TPP innovation expenditure, therefore, mainly comprises subsequent training which covers various different forms of training linked to TPP innovation. Measurement of training is discussed in more detail in Chapters II and III of the forthcoming OECD Training Statistics Manual.

2.3.6 Marketing for technologically new or improved products

314. This item comprises expenditure on activities in connection with the launching of technologically new or improved products as defined in Chapter 3, Section 5.2.3.