much previous analysis, even though R&D spending is typically less than a quarter of spending on KBC; and there is a presumption that most econometric studies showing large returns to R&D suffer from misspecification due to non-included complementary KBC variables, with returns to other types of KBC incorrectly attributed to R&D. Spending on existing types of economic competencies is the most important broad category in the US, but less important in emerging economies, with reported spending on training particularly low.<sup>19</sup> Importantly, there is recent evidence that the measurement of global collaboration-related economic competencies as an additional type of KBC is important for developing countries, namely investments in joint learning through collaborating with global value chains to facilitate the capture and use of existing global knowledge that is new-to-the-firm (see Box 1).<sup>20</sup>

**Figure 1: KBC investments as % of expanded GDP, 2006**

||U|S|Chi|na|Bra|zil|Ind|ia|
|---|---|---|---|---|---|---|---|---|
|**1. COMPUTERIZED INFORMATION**|**1.24**|**12%**|**1.88**|**27%**|**1.10**|**26%**|**0.22**|**8%**|
|**2. INNOVATIVE PROPERTY**|**4.07**|**39%**|**3.40**|**48%**|**2.01**|**47%**|**1.48**|**56%**|
|Research and Development(R&D)|1.69|16%|1.02|14%|0.56|13%|0.80|30%|
|Mineral exploration & evaluation|0.78|8%|0.21|3%|0.03|1%|0.00|0%|
|Copyright & license costs|0.55|5%|0.08|1%|0.11|3%|0.05|2%|
|Development costs in financial ind.|0.55|5%|0.47|7%|1.10|26%|0.38|14%|
|Designs,incl. architectural & engineering|0.50|5%|1.62|23%|0.21|5%|0.25|9%|
|**3. ECONOMIC COMPETENCIES**|**5.04**|**49%**|**1.80**|**25%**|**1.17**|**27%**|**0.95**|**36%**|
|Reputation & Branding|1.35|13%|0.38|5%|0.56|13%|0.11|4%|
|_Advertising expenditure_|_1.24_|_12%_|_0.38_|_5%_|_0.51_|_12%_|_-_|_-_|
|_Market research/Branding_|_0.11_|_1%_|_-_|_-_|_0.05_|_1%_|_-_|_-_|
|Training& Development|1.05|10%|0.29|4%|0.34|8%|0.01|0%|
|_Continuing vocational training_|_-_|_-_|_0.29_|_4%_|_-_|_-_|_-_|_-_|
|_Apprentice training_|_-_|_-_|_-_|_-_|_-_|_-_|_-_|_-_|
|Businessprocess improvements|2.64|26%|1.13|16%|0.27|6%|0.83|31%|
|_Purchased_|_-_|_-_|_-_|_-_|_0.03_|_1%_|_-_|_-_|
|_Own-account_|_-_|_-_|_1.13_|_16%_|_0.24_|_6%_|_-_|_-_|
|**TOTAL INVESTMENT IN KBC**|**10.35**|**100%**|**7.08**|**100%**|**4.28**|**100%**|**2.65**|**100%**|

Source: Dutz et al. (2012b), Hulten and Hao (2012), Hulten, Hao and Jaeger (2012).

In addition to being an important source of total investment and growth, different types of enterprise investments in KBC play a critical role as investments in enterprises’ pillars of risk management, 19 This aligns with related findings from Bloom and Van Reenen (2010) on measuring management practices of medium and large manufacturing firms covering monitoring (collection and processing of production data), target setting (whether coherent and binding on operations, inventory and quality control), and worker incentives (meritbased pay, promotion, hiring & firing), where Brazil, China and India are at the bottom of the table relative to industrialized countries. It should be mentioned, however, that there is no presumption that US spending levels on KBC are optimal, either for the US or for other countries, and emerging market spending may be appropriate given local returns to different types of KBC (and are no doubt linked to other drivers of investment patterns such as endowments, industrial structure, technological capabilities, and the broader business environment).

20 The original KBC measurement agenda was launched by a request from then-US Fed Chairman Greenspan, and the types of KBC selected were driven by their perceived importance to the US economy, where a number of firms are relatively close to the technological frontier. Economic competencies related to the capture and learning from existing global knowledge is arguably less important for the US than for countries where most firms are relatively more distant from the prevailing global technological frontier.

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