TBP Manual

How the manual came about

The balance of payments for licences and patents was among the data series identified in the OECD's early pilot study of science and technology measurement, but they proved hard to compare across countries. Workshops and conferences between 1978 and 1987 pointed to the lack of uniform national statistics, difficult access, and the need for breakdowns by industry, type of transaction and partner country (Preface).

The manual followed a seminar on the technology balance of payments held at the OECD on 15–16 December 1987. It was drafted by Bernadette Madeuf of Paris University X under the direction of the OECD Secretariat, adopted by the group of national experts on science and technology indicators (NESTI) in December 1988, and approved by the Committee for Scientific and Technological Policy in October 1989. The preface describes it as the first of the OECD's “second-generation” manuals, measuring the output of science and technology rather than the input, and notes that, unlike the Frascati Manual, it includes guidance on interpreting the data.

Technology and technology transfer

The manual starts by asking what technology is and how it travels. Technology moves in three ways: embodied in machines and products, embodied in people, or disembodied, in documents and other media (§35). It can be freely available or appropriated by its owner through patents or secrecy (§§39–41). Know-how, the knowledge and experience acquired in applying a technique, cannot be fully written down, so its transmission needs the active involvement of the firm that has it (§25).

From this the manual derives a strict definition of international technology transfer: it concerns knowledge held exclusively by one enterprise, by right or by secrecy, and passed on under a licensing or know-how agreement (§49). The transaction must have an explicit technological content, involve two identifiable enterprises, and transfer ownership or the right to use the technology on commercial terms (§50). Engineering services, sales of equipment, general training and free technical co-operation are not transfers in this strict sense, but part of the wider diffusion of technology (§51).

What the TBP is

“The TBP may be defined as a sub-division of the balance of payments used to collate invisible transactions relating to trade in technical knowledge.”

TBP Manual (1990), §81

A transaction belongs in the TBP if it meets three conditions: it is international, between partners in different countries; it is commercial, with receipts and payments between them; and it concerns trade in techniques (§93).

The manual deliberately does not limit the TBP to transfers in the strict sense. Technical services are often part of the same deal as a licence, and in complex contracts even the partners may not know which payment is for what (§82).

Four standard components

Component 4 is the odd one out. All the others are payments for the results of past R&D; financing R&D abroad pays for inputs, or at most for future results, and the manual asks users to keep that in mind (§171). Funding of scientific research, such as contributions to CERN, is not included (§170).

What stays out

The manual's list of special cases (Table 2.4) excludes:

• Trade in goods, even high-tech goods and turn-key plants, although such trade spreads technology; the engineering, licence and know-how parts of a turn-key contract should be separated out and recorded where possible (§§96–100).
• Unilateral transfers, such as official technical co-operation and contributions to scientific organisations: they are not trade, and the knowledge involved is generally public (§§101–103).
• Direct investment and related cases: technology contributed in exchange for equity, and royalties converted into shares (§§106–113).
• Films, recordings and copyright material, and, in 1990, software, except where it is part of a patented process. The manual's reason: software is highly diverse in novelty and general application, and its technology-related part is hard to estimate; it is also covered by copyright rather than industrial property law (§129, §§135–136, Table 2.4).
• Commercial, financial, managerial and legal services, advertising, insurance and transport (§167, Table 2.4).

Three limits better data will not remove

The manual is frank that better data collection will probably not solve three problems (§§77–80); later it calls them “unremovable” (§86):

1. Technology transferred with no specific payment, such as flows within multinational groups or cross-licensing between firms.
2. The total price of technology: royalties are only part of what a buyer pays, and the rest appears elsewhere in the balance of payments.
3. Distortions from different tax systems, tax havens and exchange controls, which separate declared payments from real transfers of technology.

It also warns that the TBP “is not, of course, meant to be a direct indicator of technological competitiveness” (§76).

Multinationals and tax

Much of the trade is “controlled”: payments between parent companies and their subsidiaries. In the United States at the time, the manual notes, such intra-firm flows accounted for roughly 80% of receipts (§269). It therefore recommends recording separately whether the partners are related or unrelated companies (§201).

Tax creates two kinds of bias (§§289–294). Receipts may be routed to a holding company in a low-tax country, which inflates that country's technology sales and deflates the parent's. And when royalties are taxed differently from dividends, groups may set internal prices high or low to suit. The manual considers reallocating holding-company receipts to the parent country but does not recommend it: the correction is too radical, would have to be done firm by firm and would require detailed knowledge of the receipts (§296).

The trade is also concentrated: in France in 1986, 97 companies accounted for 77% of technology expenditure and 62 for 88% of receipts (§267).

Collecting the data

Because the trade is concentrated and tax-sensitive, the manual recommends full coverage of the firms involved rather than sampling, through collection designed specifically for the TBP, reported directly by the firms, yearly (§§268, 275–276, Table 4.1). Respondents can be found by combining the files of R&D surveys with lists of firms that have foreign subsidiaries or foreign owners (§274). Data should cover both payments (form, amount, currency, partner country) and contracts (date, duration, parties, purpose, product) (§277).

Sectors follow the Frascati Manual, so that TBP and R&D data can be analysed together (§§181–182). Two countries often report different values for the same flow, one as receipts, the other as payments; common definitions and exchanges of information between countries are the proposed remedy (§§301–303).

Currency conversion and deflation

For international comparisons the manual recommends converting TBP data at market exchange rates, as an annual or moving average, and allows purchasing power parities only for exploratory analysis (§318). For real-terms trends it recommends the GDP deflator, or deflators based on import and export prices; a deflator specific to the TBP is left as an experimental idea (§§326–327).

Reading TBP figures

The Annex explains how to use TBP data as science and technology indicators. Its central point is asymmetry. Paying for a licence is a way of acquiring knowledge, closer to an R&D input; receiving royalties is a return on knowledge already produced, closer to an export. Receipts and payments should therefore be analysed separately before looking at balances or ratios (Annex, §§8–9).

A TBP surplus or deficit on its own says little (§68; Annex, §9). A firm can exploit its technology by licensing it, by exporting goods that embody it, or through subsidiaries (§67), so TBP data need to be read alongside trade in high-tech goods, international patent filings and the activities of multinational firms (§§68–71, §89).

The TBP today

The 1990 manual has not been revised, and some of its choices reflect its time, notably the exclusion of most software. National statistical offices still refer to it, but now build TBP statistics from the current classification of services in the balance of payments. The Czech Statistical Office, for example, bases its TBP concept on the 1990 manual and compiles it from four service items of the Extended Balance of Payments Services Classification (EBOPS 2010): charges for the use of intellectual property (licence fees), research and development services, architectural, engineering, scientific and other technical services, and computer services including software.

Polish data on related items

Poland has no statistic published under the name “technology balance of payments”, but the National Bank of Poland (NBP) publishes international trade in services by EBOPS item, including two items close to the TBP's core. They are not the TBP in the manual's sense: charges for the use of intellectual property also cover trademarks and franchising, which the manual records separately (Table 2.2).

The figures show the asymmetry the manual's Annex warns about. Poland pays far more for the use of intellectual property than it receives, and in 2025 about two fifths of those payments were franchise and trademark fees; at the same time it earns a growing surplus on R&D services sold abroad. Read separately, receipts and payments tell different stories, which is why the manual advises analysing them before looking at the balance (Annex, §§8–9).

We have not found a Polish edition of the manual, so the Polish version of this page uses our own translations.