Measuring Innovation

Measuring Innovation

A New Perspective You do not have access to this content

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27 May 2010
9789264059474 (PDF) ;9789264059467(print)

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Measuring Innovation: A New Perspective presents new measures and new ways of looking at traditional indicators. It builds on 50 years of indicator development by OECD and goes beyond R&D to describe the broader context in which innovation occurs. It includes some experimental indicators that provide insight into new areas of policy interest. It highlights measurement gaps and proposes directions for advancing the measurement agenda.

This publication begins by describing innovation today. It looks at what is driving innovation in firms, and how the scientific and research landscape is being reconfigured by convergence, interdisciplinarity and the new geography of innovation hot spots. It presents broader measures of innovation, for example using new indicators of investment in intangible assets and trademarks. 

Human capital is the basic input of innovation, and a series of indicators looks at how well education systems are contributing to the knowledge and research bases. Further series examine how firms transform skills and knowledge, and shed light on the different roles of public and private investment in fostering innovation and reaping its rewards, with concrete examples from major global challenges such as health and climate change.

Measuring Innovation is a major step towards evidence-based innovation policy making. It complements traditional "positioning"-type indicators with ones that show how innovation is, or could be, linked to policy.  It also recognises that much more remains to be done, and points to the  measurement challenges statisticians, researchers and policy makers alike need to address.

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  • Foreword
    Sound measurement of innovation is crucial for policy making. It helps policy makers to evaluate the efficiency of their policies and spending and to assess the contribution of innovation to achieving social and economic objectives, and it legitimises public intervention by enhancing public accountability. Yet, the measures of innovation currently available do not adequately take account of the full role of innovation in today’s economy.
  • Acronyms, Country Groupings and Abbreviations
  • Towards a Measurement Agenda for Innovation
    Towards a Measurement Agenda for Innovation builds on the OECD’s half-century of indicator development and the challenge presented by the broad horizontal focus of the OECD Innovation Strategy. It identifies five broad areas in which international action is needed: develop innovation metrics that can be linked to aggregate measures of economic performance; invest in a highquality and comprehensive statistical infrastructure to analyse innovation at the firm-level; promote metrics of innovation in the public sector and for public policy evaluation; find new and interdisciplinary approaches to capture knowledge creation and flows; promote the measurement of innovation for social goals and of social impacts of innovation. These five key areas of action, if endorsed, would be the basis for a forward-looking, longer-term, international measurement agenda for innovation. The development and implementation of such an agenda imply a relatively long time frame. It calls for the efforts of the statistical community but also the engagement of policy makers to define user needs and of researchers to use the data, analyse impacts and feed into the development of appropriate metrics and data infrastructures. It also requires the engagement of organisations, businesses, universities and the public sector, because the statistical system can only collect what it is feasible to measure inside organisations.
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  • Expand / Collapse Hide / Show all Abstracts Innovation Today

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    • Sources of growth
      Today’s world faces extraordinary challenges. In particular, effects of the economic downturn will be felt for years to come. The measure used to gauge welfare is GDP per capita, and changes in welfare can result from changes in labour productivity (GDP per hours worked) and labour utilisation (hours worked per person employed). Slowing labour productivity was already eroding growth performance prior to the crisis (2007-08), which has made it even more imperative for countries to find new and sustainable sources of growth.
    • New sources of growth
      A new stream of research argues that firms’ spending on new knowledge, i.e. investment in intangible assets, contributes to their output growth not only at the time of investment but also in later years. Estimates of the contribution of intangible assets to labour productivity growth show that, in some countries, they explain a good portion of multifactor productivity growth (a measure of technological change and the inability to fully measure the sources of economic performance).
    • Intangible assets
      Innovation results from a range of complementary assets that go beyond R&D, such as software, human capital and new organisational structures. Investment in these intangible assets is rising and overtaking investment in physical capital (machinery and equipment) in Finland, Sweden, the United Kingdom and the United States.
    • Innovation beyond R&D
      Firms may introduce new products on the market without engaging in R&D. New indicators reveal that in Australia and Norway the propensity to introduce a new-to-market product innovation is similar whether or not the firm performs R&D.
    • Protection of innovation
      New indicators based on trademarks point to a wealth of incremental and marketing innovations in addition to technological innovations. Countries with strong manufacturers or a specialisation in information and communication technology tend to turn to patents rather than trademarks. Countries with a large services sector tend to engage more in trademark protection. Catching-up countries have a lower propensity to innovate or to seek protection (patent or trademark) for their innovations than OECD countries.
    • Trademarks
      The average share of trademark applications relating to service classes has increased over the last decade from 38% to 52%.
    • Mixed modes of innovation
      Firm-level innovation data reveal complementary strategies. Terms such as "technological" or "non-technological" innovation are simplifications and to some extent misleading. Most innovative firms introduce both product and process innovations, as well as marketing or organisational innovations. This is true for firms in both manufacturing and services. There are, of course, differences by sector or firm size. For instance, a larger share of firms in services than in manufacturing introduce only marketing or organisational innovation.
    • Collaboration in innovation
      New firm-level analysis reveals that firms that collaborate on innovation spend more on innovation than those that do not. This suggests that collaboration is likely to be undertaken to extend the scope of a project or to complement firms’ competencies more than to save on costs. In most countries collaboration with foreign partners is as least as important as domestic co-operation. Collaboration is used in innovation processes whether firms perform a lot of R&D, a little R&D or no R&D at all. In this respect, policies that stimulate collaboration and network initiatives will have an impact on the entire spectrum of innovative firms.
    • Mapping hot research areas
      Increasingly, innovations are achieved through the convergence of scientific fields and technologies. The interaction of research disciplines may also lead to new research areas. For example, "nanoscience" research has arisen from the interaction of physics and chemistry and is interdisciplinary in character. "Nanoscience" is also somewhat attracted to the life sciences, both directly and indirectly, as measured by co-citation links. While interactions between nanoscience and life sciences are not yet strong enough to establish a research domain, the space between them may become the ground for a new area, e.g. bio-nanoscience.
    • Multidisciplinary and interdisciplinary research
      Science maps are helpful for distinguishing multidisciplinary research, e.g. environmental research, from interdisciplinary research, e.g. nanoscience. In the figure, research areas related to nanoscience stake out a clear domain between chemical synthesis and physics, while research areas related to the environment are spread out. Interdisciplinary research that relies on shared knowledge is created when fields such as physics and chemistry interact. Nanoscience typifies this phenomenon. In multidisciplinary research, various disciplines address scientific and social challenges independently rather than in collaboration and thus share research goals. Environmental research is of this type.
    • New players in research
      New players are emerging on the research landscape and collaboration is intensifying.
    • Scientific collaboration
      Production of scientific knowledge is shifting from individuals to groups, from single to multiple institutions, and from national to international. Researchers increasingly network across national and organisational borders. Europe’s collaboration in the European research area increases, while the rest of the world reaches out to the BRIC (Brazil, Russian Federation, India and China) countries.
    • Clusters of knowledge
      Drivers of economic change, particularly globalisation and technological advances, are not necessarily "flattening" the world economy. While firms can access factors of production from anywhere, local knowledge is still relevant. In the United States, most patent applications come from just a few regions: California contributed more than 22% of patents originating in the United States. In Japan, the Southern-Kanto region accounted for nearly 49% of patent filings.
    • Innovation hotspots
      Many of the leading firms in knowledge-intensive industries, such as information and communication technology and life sciences, have emerged in a limited number of regions. Such regions appear to provide more conducive environments for business innovation. Policy makers in other regions seek to replicate or nurture the positive environmental conditions offered by the best-performing regions.
    • Science for environmental innovation
      What are the links between innovation and the science base? A new indicator uses co-citation analysis and matches environmental patents and scientific publications. It shows that "green" innovations (patents) draw on a broad base of scientific knowledge.
    • Technological innovation for climate change
      Despite limited progress in Copenhagen, investment in technological innovation for climate change mitigation is likely to increase as many OECD countries implement binding national policies. However, reaching agreement on emission cuts at the international level would certainly provide a significant spur to innovation.
    • Transfers of environmental technologies, notes and References
      Innovation mostly occurs in OECD countries, but some transfer to developing countries will be needed to address environmental problems.
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  • Expand / Collapse Hide / Show all Abstracts Empowering People to Innovate

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    • Basic scientific skills
      Education systems play a broad role in supporting innovation because knowledge-based societies rely on a highly qualified and flexible labour force in all sectors of the economy and society. Innovation requires the capacity to continually learn and upgrade skills.
    • Tertiary education
      High graduation rates at university level indicate a country’s capacity to develop a highly skilled labour force. Increasing the number of students who enter and successfully complete a university programme requires efficient and flexible higher education systems. The cost and duration of studies and the lack of bridges between university and work may prompt students to leave their studies before graduation to enter the labour market.
    • Doctorate holders
      Doctoral graduates have attained the highest education level and are key players in research and innovation. They have been specifically trained to conduct research and are considered the best qualified to create and diffuse knowledge.
    • Skills mismatch
      Getting people to the labour market is crucial to foster innovation, economic growth and social well-being. Ensuring the right balance between specific labour market needs and generic competencies is a challenge faced today by higher education institutions around the world.
    • International mobility
      Mobility – and in particular international mobility – of skilled human resources plays an important role in innovation. It contributes to the creation and diffusion of knowledge, particularly tacit knowledge, which is more effectively shared within a common social and geographical context. Coherent and efficient migration regimes help making the most of brain circulation.
    • Entrepreneurial talent
      Entrepreneurship provides an expanded set of employment opportunities, wider skill development and greater opportunities to innovate. Entrepreneurship education plays a key role by raising awareness about entrepreneurship as a potential career path and developing skills for starting and growing companies.
    • Innovative workplace and skills for innovation
      For any organisation, an important source of continuing productivity growth is effective management of the organisation of work and ensuring that the talents of individuals are being tapped. Innovative capabilities are strengthened in work places which provide a fertile environment for innovation. Better measures are needed of the skills required and of ways in which the workplace promotes such skills.
    • Consumers' demand for innovation, notes and references
      Enabled by new technologies, users and consumers play a growing role in the innovation process and can directly influence innovation and encourage the development of new technologies.
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  • Expand / Collapse Hide / Show all Abstracts Unleashing Innovation in Firms

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    • Entry and exit
      The contribution of enterprises to innovation is crucial, and a dynamic business sector is a key source and channel of technological and non-technological innovation. New companies frequently exploit technological or commercial opportunities which have been neglected by more established companies and bring them to market.
    • Mobilising private funding
      Private funding, whether in the form of debt or equity, plays a key role in fuelling innovation. However, significant amount of funding has dried up owing to the recent economic crisis, particularly for seed and start-up companies.
    • Policy environment
      While entry and growth of new firms is important, so is their adaptability to changes in the economy and their ability to exit when necessary. New enterprises drive a large number of obsolete firms out of the market and often do not survive very long themselves. A policy environment that fosters the start-up and growth of new firms is essential for innovation to flourish.
    • Young and innovative firms, notes and references
      Entrepreneurship is not about firm size. It concerns a process that results in growth, creativity and innovation. Young dynamic firms fuel innovation by developing new or improving existing goods, services or processes.
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  • Expand / Collapse Hide / Show all Abstracts Investing in Innovation

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    • Firms investing in R&D
      Innovation requires a wide array of public and private investments. However, private investment in R&D and innovation may be below a socially optimal level, mainly because returns are uncertain or the innovator cannot appropriate all the benefits. Governments play an important role in fostering investment in R&D and innovation.
    • Firms investing in innovation
      Spending on innovation is more than spending on R&D. To develop new products or processes, firms invest in R&D and in other tangible and intangible assets. Governments play a role through programmes that encourage firms to continue investing in innovation-related activities.
    • Government funding R&D
      Governments perform in-house R&D and also finance R&D in various sectors of the economy. They play many roles in the innovation system, such as providing education, training and skills development, fostering knowledge creation and diffusion, and supporting the R&D efforts of firms.
    • Higher education and basic research
      Most basic research is performed in universities and in public research organisations. Public support for such research remains crucial. It is essential for developing new scientific and technological knowledge and the human capital that can lead to innovation to benefit the economy and society.
    • Information and communication technologies
      Investment in information and communication technology (ICT) is important for a country’s economic growth. At the firm level, it provides an essential platform for changing organisational methods and introducing new products and processes.
    • Firms and smart infrastructure
      Today, high-speed broadband networks support innovation throughout the economy much as electricity and transport networks spurred innovation in the past. Innovations such as smart electrical grids, tele-medicine, intelligent transport networks, interactive learning and cloud computing will require fast communication networks to operate efficiently.
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  • Expand / Collapse Hide / Show all Abstracts Investing in Innovation

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    • Measuring innovation in the public sector
      Governments are important actors in the innovation process. Not only can they foster innovative activities by firms, they can also develop their own innovations in order to develop more efficient processes and enhance the quality and availability of public services. Even though internationally agreed concepts and metrics for measuring innovation exist for the private sector, there is not as yet a similar framework for the public sector.
    • Multilevel governance of innovation, notes and references
      There are major gaps in our understanding of investments to support innovation and related responsibilities at different levels of government and of the mechanisms for managing this shared innovation policy competence. The OECD is working to develop indicators in this area.
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  • Expand / Collapse Hide / Show all Abstracts Reaping Returns from Innovation

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    • Scientific collaboration
      Collaboration is important for innovation at all stages of knowledge production. The increasing specialisation of scientific disciplines and the increasing complexity of research encourage scientists to engage in collaborative research.
    • Science and industry linkages
      Public research has always been an important part of innovation systems and the source of significant scientific and technological breakthroughs. Effective linkages between public research institutions and industry are necessary to optimise the benefits from research.
    • Knowledge clusters
      While different forms of innovation activity may occur in all regions, R&D-based innovation is geographically concentrated. Industrial structure, research capabilities and other territorial characteristics affect the capacity of actors to generate and absorb knowledge. Governments increasingly focus on regional clusters of innovation.
    • Commercialisation
      Investing in innovation is risky. Several R&D projects will not result in an invention, and not all patent applications will be novel enough to receive a patent.
    • Knowledge circulation, notes and references
      Circulation of knowledge – in particular international circulation of knowledge – has increased over time and is now an important component of technology transfer. Well-designed knowledge networks and markets can reduce transaction costs, enable new knowledge transfers and make existing transfers more efficient.
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  • Expand / Collapse Hide / Show all Abstracts Addressing Global Challenges

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    • Health
      Improving world health is an enormous policy challenge which requires both national and international policy action. Over the coming decades, innovation – both technical and organisational – will play a major role in delivering more personal, predictive and preventive health-care products and will radically change how medicine is practised and health care is delivered.
    • Climate change
      Climate change is one of the most significant policy challenges faced by OECD and non-OECD countries. The costs of meeting this challenge depend crucially on the pace of innovation in mitigation technologies. While there is some evidence that the pace is accelerating, further policy efforts are needed to ensure a sufficient response.
    • Other environmental challenges, notes and references
      Technological change is essential to ensure that economic growth and environmental improvements progress together. It is important for environmental and technology policies to provide appropriate incentives to develop and diffuse environmental technologies.
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