Measuring Innovation and Smart Specialisation – What have we Learned?

Dirk Pilat, OECD

Outline

• What drives innovation performance?o Investment in education and knowledgeo Interactions and knowledge flowso Innovation dynamics

• Looking at outcomes and impacts• Linking innovation to policy• Innovation and smart specialisation• Gaps and a measurement agenda

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Top TL2 region within each country with the highest percentage of labour force with tertiary educational attainment compared to their country average, 2012

Source: OECD (2013), Regions at a Glance, http://rag.oecd.org/

.. and also in business investment in R&D

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National value Minimum Maximum

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Source: OECD (2013), Regions at a Glance, http://rag.oecd.org/

Range of TL2 regional business R&D intensity, 2010

But education is not the same as skills …

Share of young and old adults at the two highest proficiency levels in “problem solving in technology-rich environments”

Source: OECD Survey of Adult Skills, October 2013.

… and R&D is only one element of investment in innovation

Business investment in knowledge-based assets(as % of business sector value added, 2010)

Source: OECD calculations based on INTAN-Invest, Eurostat and multiple national sources.

An innovative economy is also about creative destruction …

7

Role of different firms in employment growth, average over 18 countries, 2001-2011, in %

Source: Criscuolo, Gal and Menon (2014), www.oecd.org/sti/dynemp.htm

… and about collaboration

8

Firms collaborating on innovation activities, by size, 2008-10(as a % of product and/or process innovative firms in each size category)

Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891321

0

10

20

30

40

50

60

70

80

%Large firms SMEs

We have some indicators on innovation outcomes …

Southern-Kanto (JPN) California (USA)

Capital Region (KOR)

Guangdong (CHN)

Kinki (JPN)

Bayern (DEU)

New York(USA)

Texas(USA)

Baden-Württemberg

(DEU)

Washington (USA)

île de France (FRA)

Northern-Kanto, Koshin (JPN)

Toukai (JPN)

Beijing (CHN)

Zuid-Nederland (NLD)

Ontario (CAN)New Jersey (USA)

Illinois (USA)

Stockholm (SWE)

Pennsylvania (USA)

West-Nederland (NLD)

North Carolina (USA)

Nordrhein-Westfalen (DEU)

Florida (USA)

Hovedstaden (DNK)

0.0

0.5

1.0

1.5

2.0

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Total patents, 2008-10 Total patents, 1998-2000

Massachusetts (USA)

Biotechnology and nanotechnology patents (normalised region's share)

Maryland (USA)(0.9-3.5)

ICT-related patents (normalised region's share)

Total patents by region

1 000 patents

5 000 patents

50 000 patents

Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932890238

Innovation hotspots in ICT, biotechnology and nanotechnology, 1998-2000 and 2008-10

… but lack a good link to impacts

• Ultimately, innovation is about increasing productivity (and thus economic growth), about new job creation, improved health outcomes, greener growth, etc.

• But the links between investment in innovation and these impacts are complex, often not linear and can take a long time to emerge.

• Some progress is being made:o R&D is now considered an investment in the national accounts, and therefore part

of GDP, enabling a stronger link to economic growth.o A lot of work is going on in countries to better understand impacts of science and

innovation.

Indicators of innovation policy are lacking, with some exceptions …

Implied tax subsidy on R&D expenditures, 2013

Source: OECD Science, Technology and Industry Scoreboard 2013. http://dx.doi.org/10.1787/888932891150

… and we need a stronger focus on policy evaluation

• Need an explicit commitment – at a high level - to the importance of evaluation.

• Insist on the development of data and evaluation strategies before programmes begin.

• Choose a evaluation technique appropriate to the programme concerned.

• Insist on full disclosure in evaluation reports.

• Robust governance to ensure evaluation is objective and free of political influence.

• Good mechanisms for policy learning.

Smart specialisation – what is it?

• Focus on a limited number of priority areas for knowledge-based investments, linked to a region's strengths and comparative advantages on the basis of:o More effective spending of public resources.o The creation of synergies between public support mechanisms for R&D and

innovation, industrial promotion and training institutions.o The elimination of fragmentation and duplication of policy interventions.o The identification of the most promising domains for entrepreneurship and growth

through a careful analysis of existing capabilities, assets and competences.o Mechanisms to enable strategic development.o Mapping and benchmarking of clusters.o Evidence-based monitoring and evaluation systems.

Smart specialisation – what is required (1)?

• Need for government interventions on a solid market basis – which implies robust framework conditions, that allow market driven allocation of innovation, capital and labour: only competitive and open markets are amenable to innovation.

• Government needs to listen to market signals when allocating its own budgets for innovation - entrepreneurial discovery – interventions should meet the market test.

• Avoid capture by vested interest – which implies transparency, accountability and evaluation of policies.

• Stand ready to terminate projects that don’t pass the evaluation test.

Smart specialisation – what is required (2)?

• Strong leadership and stakeholders‘ involvement.

• Ensuring mechanisms or structures for new ‘entrepreneurial bottom-up initiatives’ to emerge and to help mobilise the relevant stakeholders.

• Existing quantitative data can provide an overall picture of the situation, but it is limited to past and present specialisation.

• To capture the ‘entrepreneurial knowledge’ embedded in the region (e.g. to identify emerging activities, synergies and complementarities) may require new diagnostic tools.

Finally: A measurement (and analysis) agenda to support policies for innovation

• From education to skills – where are the gaps?

• From R&D to the full range of investments in innovation

• Better understanding the dynamics of an innovative economy – understanding the enormous heterogeneity in an economy, across regions, across firms, across …

• Better indicators of outcomes and impacts – and the link to investment

• Linking policy to performance – better policy indicators, more evaluation

• Complementing quantitative tools with qualitative analysis

For further reading – with all data available on-line

www.oecd.org/sti/scoreboardwww.oecd.org/regional/regions-at-a-glance.htm

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Website: www.oecd.org/sti

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Contact: Dirk.Pilat@oecd.org

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