Exploring the Capital Goods Economy: Complex product systems in the UK

Over the past decade, qualitative empirical research at the firm, project and industry levels has improved our understanding of the characteristics and dynamics of innovation in the high technology, high value capital goods or ‘complex product systems’ (CoPS) which underpin modern industrial activity. This paper describes the development of a new industrial classification system for CoPS which is able to estimate quantitative shares of production and value added accounted for by CoPS at the economy level. It is also able to provide insights into the capital, information technology and skill intensity of CoPS, as well as employment contributions. As an example, the method is applied to one major industrial economy, namely the UK. Through a comparison of CoPS with non-CoPS industries, the paper identifies some of the key factors which explain the different patterns of innovation between the two types of industrial activity. Although preliminary, the analysis shows that CoPS-based industries together represent a distinctive class of industrial activity. Based on the classification system provided, further research is underway to examine cross-country comparisons in both production and trade performance, through time.