innovation measurement- present and future challenges

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Innovation Measurement

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  • R & D AND INNOVATION

    Innovation measurement: present and future challenges

    Carter Bloch The Danish Centre for Studies in Research and Research Policy

    Executive Summary From their beginnings in the 1980s, the measurement of innovation has grown at a rapid pace. Innovation surveys are now conducted in a broad range of countries, including EU countries, other OECD countries and a growing number of non-OECD economies. The first Oslo Manual set down guidelines for surveying technological product and process innovation in manufacturing industries, which has since been expanded to include innovation in service sectors. The recently completed third edition of the Oslo Manual broadens the coverage of the innovation concept to also include organizational and marketing innovation.

    These changes reflect changes in our understanding of innovation processes and in the economy, and also the accumulating experience in innovation measurement, allowing the extension of previous frameworks to new areas.

    The limitations of a linear view of innovation have long been recognized. Some more recent insights with relevance for innovation measurement are: that innovation is possible without conducting R&D; that the impetus to innovation projects may not be technology based, but may originate from contact with customers and suppliers, or market analysis; the growing importance of linkages between firms, institutions and other actors; and the importance of firms absorptive or learning capacity.

    A number of changes in the economic environment have had a large impact on innovation measurement. The service sector has grown dramatically in economic importance for the EU and other OECD countries, along with the recognition that a great deal of innovation may take place in services. Globalization has increased both the potential for interaction and pressures for firms of all types to innovate in order to maintain competitiveness. Progress in information and communication technologies (ICT) has dramatically enhanced opportunities for knowledge transfer, and the pervasiveness of ICT opens up the potential for firms in both low and high tech sectors to implement ICT-based product or process innovations.

    The Lisbon strategy for the EU outlines targets for innovation, competitiveness and economic performance. Central policy needs in designing innovation policy are determining what drives firm performance and economic growth and how the EU economies can best benefit from investments in R&D and other forms of innovation. While there is a notable emphasis on the importance of increasing R&D in the EU, there is also a clear need for more data on the full scope of innovation, including non-technical forms of innovation, linkages, and innovation

    The Danish Centre for Studies in Research and Research Policy, Finlandsgade 4, 8200 Aarhus N., Denmark; Tel. (+45) 8942 2398, Email: [email protected].

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  • that is driven by consumer or market demands. The regional dimension of innovation is also important, as are public sector innovation and improving the system for intellectual property rights (IPR).

    The new Oslo Manual has undergone a number of substantial revisions, with the aim of keeping innovation measurement abreast of policy needs and changes in innovation theory and the economy. Among the most important changes to the manual are: a broadened definition of innovation used in innovation surveys, a much expanded coverage of knowledge flows and the role of linkages in the innovation process, and an adaptation of the manual to reflect the importance of innovation in less R&D-intensive industries, such as services and low-tech manufacturing.

    The broadening of the definition of innovation reflects a number of developments. First, innovation is more market driven than in the past. This places focus not only on the design and development of new products, but also on new marketing strategies and concepts. Second, there is an increasing recognition of the importance of organizational practices for firms innovation, knowledge transfer and general economic performance.

    Marketing innovations are defined in the Oslo Manual as the implementation of new marketing methods involving significant changes in product design or packaging, product placement, product promotion or pricing. They thus include many design changes that are not considered product innovations and new marketing practices in sales channels, branding and pricing strategies.

    Organizational innovations are defined as the implementation of new organizational methods in firms business practices, workplace organization or external relations. They include organizational changes designed to improve efficiency, to foster innovation activities in the firm, and to increase knowledge exchange with other firms or institutions.

    Recent innovation surveys, among them CIS3 and CIS4, include questions on firms transfer of knowledge. The new Oslo Manual devotes considerable attention to knowledge transfers, identifying three types of linkages for innovation activity: open information sources, acquisition of knowledge and technology, and innovation cooperation.

    The guidelines in the new Oslo Manual allow for wider coverage of firm innovations and types of knowledge transfer. However, policy needs require not only a broader coverage of firm innovation but also a better use of data to understand firm innovation. Data on the implementation of innovations, knowledge transfer and from auxiliary questions can be used to compile composite indicators that provide valuable information on how firms innovate. Examples are indicators that identify whether firms are leaders or adopters, whether their innovation is primarily R&D or technology driven or market driven, and whether firms innovations are integrated over various firm activities.

    Other areas of relevance for innovation policy are not covered by the Oslo Manual, such as innovation in the public sector, or receive only limited coverage, such as the role of human resources. Work remains in these areas to develop indicators and to existing work with that of general innovation measurement.

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