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.

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).

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.

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.

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.

The average share of trademark applications relating to service classes has increased over the last decade from 38% to 52%.

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.

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.

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.

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 are emerging on the research landscape and collaboration is intensifying.

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.

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.

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.

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.

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.

Innovation mostly occurs in OECD countries, but some transfer to developing countries will be needed to address environmental problems.