# **3.2 Data Intensities**

For our measure of data‐intensity as defined in equation (1), we use information on software use from the 2011 US Census ICT Survey. These data are survey‐based and record at detailed 4‐digit NAICS sector‐level how much each industry and services sector spends on inputs from the ICT‐sector in terms of ICT equipment and types of computer software in million USD.

We take computer software expenditure to compute data‐intensity. The ICT Survey records two separate variables on software expenditure, namely capitalized and non‐capitalized. Non‐capitalized computer software expenditure is comprised of purchases and payroll for developing software and software licensing and service/maintenance agreements for software. Capitalized computer software expenditures cover capital expenditures of equipment and software itself. Although this proxy of software does not entirely capture the extent to which sectors use electronic data, it nonetheless is the closest kind of data‐use variable we can publicly find. Note however that inside firms, data‐based innovation is based on software and therefore provides a good reason to use software as a proxy. We take the year 2010 for our regressions and divide this software expenditure over labor, also for 2010, and use it for our data linkage variable.

Admittedly, this proxy for data‐intensity is not ideal. Currently there is no data on the extent to which data is used by sectors. There are only some guesstimates on how much data are used by countries, such as recorded by Cisco or Teleography, but even these sources provide data for only a handful of observations. Having said that, what is clear is that the transmission of data for innovation within and across borders over the internet is performed using software technologies. Software is needed to develop digital innovations in its simplest form and with the help of software data are transmitted. In addition, more technology advanced transmissions of data over the internet are done with the help of cloud computing technologies which in themselves are a form of software. Hence, despite not entirely capturing how much data are really being used in sectors, using the intensity of each sector’s use of software is in our view the first‐best available proxy.

<mark>Figure 1 provides an overview of the data‐intensities for each sector calculated on the basis of non‐ capitalized expenditures of software.</mark><sup>3</sup> <mark>The data to construct these intensities are downloaded at various digits levels in NAICS given that the US Census records this information at mixed levels between 2‐digit and 4‐digit. All data are re‐concorded into the ISIC Rev 3.1 2‐digit level. Employment data are from the US Labor statistics and given in 6‐digit level and also re‐concorded into the ISIC Rev 3.1 2‐digit level. We have developed our own concordance matrix at the most disaggregated level between the two data sources and then aggregated up to 2‐digit level by taking the simple average. The reason for re‐classifying these data points is that our innovation variables are provided in 2‐digit ISIC Rev. 3.1. Since data are given at two different aggregations across the software and labor, we first concord all data into ISIC and then compute the intensities.</mark> The 15 sectors in Figure 1 show the ranking sectors that have the highest data‐intensities based on our proxy of software expenditure. Not surprisingly, telecommunication is the sector that shows the highest data‐intensity level and is therefore very software‐intense compared to labor. Other very high data‐intensity sectors are computer and insurance and finance, which is also unsurprising. They also use a high amount of software compared to labor. The latter two sectors are more broadly considered as very technological‐intensive and internet technologies have massively increased in the 3 Of note, we take that part of non‐capitalized software expenditures which measures how much each industry spends on purchases and payroll for developing software, which represents, on average, 47 percent of total non‐capitalized software expenditures. The other 53 percent of non‐capitalized software expenditures covers for each industry the software licensing and service/ maintenance agreements.

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