R&D in services industries and the EU-US R&D investment gap

This paper focuses on the impact of differences in practice between European and US national statistical offices when classifying R&D expenditure by industry. We examine the impact of these differences on the role of the services sector in the EU-US R&D investment gap. According to official statistics, services industries appear to explain nearly the entire EU-US R&D intensity gap (US services have much higher R&D intensities). We argue that this is almost entirely the result of a statistical artefact: EU statistical offices redistribute R&D in the services sector to the corresponding manufacturing sectors to a much greater extent than in the US. Thus the EU R&D deficit against the US does not specifically emanate from the services sector.