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Table 1. Summary of sectors in the SNA and in the Frascati Manual

	SNA	Frascati Manual
	Non-financial corporations	Business enterprise sector
	Financial corporations
	General government	Government sector
	Non-profit institutions serving households	Private non-profit sector
	Households
	(Included in other SNA sectors)	Higher education sector
	Rest of the world	Abroad

Source: OECD.

Table 2. Sectors and producers in the SNA

Sectors	Market producers	Non-market producers
Non-financial corporate sector	Non-financial corporations
	or quasi-corporations
	Non-profit institutions (NPIs) engaging
	in market production1
	NPIs serving business
Financial corporate sector	Financial corporations
	and quasi-corporations

General government sector	[Government units engaged in market
	production]2

Non-profit institutions serving households (NPISH)

Government units n.e.c. Social security funds NPIs mainly financed by government n.e.c.

NPISH

Households	Unincorporated enterprises engaged	Households n.e.c. including
	in market production	unincorporated enterprises
		engaged in production of goods
		mainly or wholly for own final use

1.Supplying goods and services at an economically significant price.

2.These are treated as quasi-corporations as long as they have a separate set of accounts.

Source: OECD.

approaches (see Table 2), and the treatment of R&D in the Frascati Manual, especially performance, is closer to the second of these.

17. The main difference is that the Frascati Manual separates out the higher education sector. This separation is considered very important by R&D statisticians and policy makers, for the reasons given in Chapter 3 of the Manual. However, this additional sector causes problems in an SNA context. While public universities and colleges belong in the SNA government sector, the other components of the Frascati Manual higher education sector may belong almost anywhere in the SNA. Table 3 shows where they might be classified.

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Table 3. The SNA sectoring of units definitely and possibly included in the Frascati Manual higher education sector

Market producers

Non-market producers

Teaching establishments

i.e. producing higher education services (PHES) as a main activity

University hospitals providing healthcare services (PHSS) controlled by administered by or associated with higher education (CAAHE) and/or with a significant teaching commitment

Research institutes or experimental stations CAAHE3 (“borderline” research institutions)

Postgraduate students supported by grants

All non-financial corporations (or quasi-corporations) PHES1 Any unincorporated enterprises

PHES1 at an economically significant price

NPIs PHES at an economically significant price

NPIs serving enterprises PHES1

Non-financial corporations (or quasicorporations) PHSS2 CAAHE3

NPIs PHSS2 at an economically significant price CAAHE3

Non-financial corporations (or quasicorporations) selling R&D but CAAHE3 NPIs selling R&D at an economically significant price CAAHE3

NPIs serving enterprises CAAHE3

Government units PHES1 Non-profit institutions (NPIs) controlled and mainly financed by government PHES1

NPISHs PHES’

Government units PHSS2 CAAHE3 NPIs controlled and mainly financed by government PHSS2 and CAAHE3

NPIs serving households PHSS2

Government units CAAHE3

NPIs controlled and mainly financed by government but associated with HE

NPISHs which are CAAHE3

Households benefiting from subsidies

1.Providing higher education services.

2.Providing healthcare services.

3.Controlled, administrated by or associated with higher education establishments.

Source: OECD.

18.If the Frascati Manual system had no higher education sector, there would be an almost complete match between the SNA sector classification and the R&D sectors, as has been intended since the 1970 version of the Frascati Manual (OECD, 1970). For example, distribution of private non-profit (PNP) institutions among sectors in the Frascati Manual is clearly based on the SNA; and the section of Chapter 4 of the SNA 1993 devoted to this topic usefully supplements the discussion in Chapter 3 of this Manual.

19.Nevertheless, non-higher education units may be treated somewhat differently in the latest versions of the Manual and of the SNA, as the Manual adapted the original SNA definitions to reflect R&D institutional practice. The institutions are often attributed to sectors by two different agencies which may interpret the same instruction differently.

Classifications

20. The SNA does not always recommend the same classification as the Frascati Manual for what the latter refers to as “sector sub-classifications”. Both use ISIC, but the breakdown of R&D among industries may differ because of

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variation in the unit classified and the classification criteria. In the SNA, government outlays are broken down by the classification of the functions of government outlays (COFOG); R&D experts have rejected this classification, in favour of the NABS classification for GBAORD, as they have been unable to agree on a classification for R&D performed in the government sector. In OECD national accounts publications, the government and NPISHs are subdivided by main types of unit (see Table 4), whereas a field of science classification is recommended in this Manual.

Table 4. SNA classifications of government outlays and final consumption expenditure of NPI serving households

A.Government outlays1

1.General public services (including basic research)

2.Defence

3.Public order and safety

4.Education (includes universities and colleges)

5.Health

6.Social security and welfare

7.Housing and community amenities

8.Recreational, cultural and religious affairs

9.Economic services

9.1.Fuel and energy

9.2.Agriculture, forestry, fishing and hunting

9.3.Mining, manufacturing and construction, except fuel and energy

9.4.Transportation and communication

9.5.Other economic affairs

10.Other functions

Total

B. Final consumption expenditure of non-profit institutions serving households

1.Research and science

2.Education

3.Medical and other health services

4.Welfare services

5.Recreational and related cultural services

6.Religious organisations

7.Professional and labour organisations serving households

8.Miscellaneous

Total

1.Final consumption expenditure (of which compensation of employees and other subsidies), other current transfers and property income, gross capital formation

and other capital outlays.

Source: OECD National Accounts, Detailed Tables, Vol. II.

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Measuring R&D spending in the SNA

21. The SNA and the Frascati Manual also differ in the way they account for R&D, as they rely on different conceptual frameworks. Moreover, as the Frascati Manual also serves as a manual for the collection of data, it is more directly influenced by feasibility concerns. The following description of the treatment of R&D in the various accounts is largely based on quotations from the SNA 1993 (CEC et al., 1994).

Identifying and valuing R&D in the production account

22. “Research and development by a market producer is an activity undertaken for the purpose of discovering or developing new products, including improved versions or qualities of existing products, or discovering or developing new or more efficient processes of production. Research and development is not an ancillary activity, and a separate establishment should be distinguished for it, when possible. The research and development undertaken by market producers on their own behalf should, in principle, be valued on the basis of the estimated basic prices that would be paid if the research were subcontracted commercially, but is likely to have to be valued on the basis of the total production costs, in practice. Research and development undertaken by specialised commercial research laboratories or institutes is valued by receipts from sales, contracts, commissions, fees, etc., in the usual way. Research and development undertaken by government units, universities, non-profit research institutes, etc., is non-market production and is valued on the basis of the total costs incurred. The activity of research and development is different from teaching and is classified separately in ISIC. In principle, the two activities ought to be distinguished from each other when undertaken within a university or other institute of higher education, although there may be considerable practical difficulties when the same staff divide their time between both activities. There may also be interaction between teaching and research which makes it difficult to separate them, even conceptually, in some cases.”

(CEC et al., 1994, paragraph 6.142.)

23. The definition of R&D by the SNA as an activity aimed at developing new products and processes differs somewhat from the Frascati Manual definition. It characterises R&D only by its purpose, which is innovation, whereas the major characteristic of R&D according to the Frascati Manual is the production of new knowledge. While the two approaches are quite similar, they do not entirely overlap. The SNA definition is closer to the Oslo Manual definition of innovative activities, which encompasses activities such as training and tooling up related to innovation, which are not R&D. In addition, the SNA definition may lead the user to overlook basic research performed by business, for which innovation is only a very indirect goal.

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