The measurement of Innovation

• An historical perspective

• The “Frascati Manual” and the “Oslo Manual”

• S&T indicators

• Innovation indicators

• Some evidence from innovation surveys

• Concluding remarks

Period 1960's-1970's 1980's-early1990's

1990's - nextmillennium

Model Linear model Chain-linkedmodel

Systemsapproaches

Conception Simple Complex Extremelycomplex

Number ofindicators

Few(R&D, patents,TBP)

Many(R&D, patents,bibliometrics,innovation, hightech products,humanresources)

Too many(combinationsof existing andpossibly newindicators,quantitative/qualitative)

Development of indicators

The linear model

• Research-based

• Sequential

• Tecnocratic

“The Chain Link Model”

Chain Linked Model of Innovation

Potential Markets

Invention/analytical design

Detailed design & Test

Re-design & Production

Distribution & market

Knowledge

Research

Kline & Rosenberg

Technology platforms

BUS

“Communities of practice”

The exponential growth of S&T indicators at the international level

Decades 50s and 60s 70s 80s 90s

Main indicators used Re&D Re&D Re&D Re&DPatents Patents PatentsTechnological balance Technological balance Technological balanceof payments of payments of payments

High-tech products High-tech productsand sectors and sectorsBibliometrics BibliometricsHuman resources Human resources

Innovation surveys Innovation surveysInnovations mentioned intechnical literatureSurveys of productiontechnologiesGovernment support toindustrial technologyIntangible investmentIndicators of informationand communication technologiesInput-Output matrixes *Productivity *Venture capital *Mergers and acquisitions *

* Indicators mutuated from economic analysis.

Definition of research and development (Frascati Manual)

• R&D is defined as creative work undertaken on a systematic basis in order to increase the stock of knowledge including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications.

Technological innovation(Oslo Manual)

• Technological innovations comprise new products and processes and significant technological changes of products, services and processes.

• An innovation has been implemented if it has been introduced on the market (product and service innovation) or used within a production process (process innovation).

Technological innovation(Oslo Manual)

• Innovations involve a series of scientific, technological, organisational, financial and commercial activities.

• The product or process should be new (or rignificantly improved) to the firm (it does not necessarily have to be new to the relevant market)

Science and technology indicators

• S&T indicators may be defined as a series of data designed to answer questions about: - the state of the science and technology enterprise, - its internal structure, - its relationships with the outside world, and - the degree S&T is meeting the goals set it, and about its evolution.

Science and technology indicators

• Statistical data are the basic elements (atoms) with which indicators (molecules) are constructed.

• The questions indicators have to answer concern aspects which can be tacked using quantitavive techniques.

Science and technology indicators

• R&D

• Patents

• Bibliometrics

• Technological balance of payments

• Human resources for S&T

• Trade in high-tech products

Resources: Scale vs Intensity

R&D Expenditure (OECD)

Sweden

Finland Japan

France

Germanythe Netherlands

Denmark

UK

US

Belgium

Austria

Ireland

Italy

SpainPortugal

Greece

0

0,005

0,01

0,015

0,02

0,025

0,03

0,035

0,04

100 1000 10000 100000 1000000

Scale- Total Expenditure in R&D ($PPP; logarithmic scale)

Inte

nsi

ty-

Sh

are

of

GD

P s

pen

t o

n R

&D

Output: publications vs expenditure

US

JapanGermany

France

UK

Italy

Spain

The Netherlands

SwedenBelgium

Finland

Denmark

Austria

Ireland

Portugal

Greece

100

1,000

10,000

100,000

1,000,000

100.00 1,000.00 10,000.00 100,000.00 1,000,000.00

Total Expenditure in R&D ($PPP; logarithmic scale)

Num

ber

of A

rtic

les

Pub

lishe

d in

199

5 (lo

gari

thm

ic s

cale

)

Scientific and technological Scientific and technological capacities in OECDcapacities in OECD

0.00 0.10 0.20 0.30 0.40 0.50 0.60Patents/R&D spending by com panies (m illion PPS, 1987 prices)

0

2

4

6

8

10

12

Pu

blic

atio

ns/

no

n-B

ER

D(m

illio

n S

PP

, 198

7 p

rice

s)

GR

PT

ES

FR IT

BE

SE

UK DK

EU

ADE

FI USNL

JP

IRL

Fonte: Caracostas & Muldur (1998)

Main indicators from innovation surveys

• Number of innovating firms– by sector– by firm size

• Cost of innovation

• Percentage of sales due to new products

The Community Innovation Survey (CIS)The harmonised EU/OECD questionnaire

• General information about the firm

• Type of innovation (product, process)

• Sources of information for innovation

• Objectives of innovation

• Factors hampering innovation

• Cost of innovation

• Impact of innovation

Innovation in EUsource: Community Innovation Survey, OCT-PT

IrelandAustria

Germany

Netherlands

UK

Sweden

Norway

France

Luxembourg

Finland

Belgium

Portugal

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100%

Share of Innovative Firms in Manufacturing

Sh

are

of

Inn

ova

tive

Fir

ms

in S

ervi

ces

The Community Innovation Survey (CIS)The harmonised EU/OECD questionnaire

• R&D

• Cooperation in innovation

• User sector of innovation

• Public policies for innovation

• Impact of innovation on employment, the environment, firm’s organisation

Innovative firms in manufacturing and services in Italy (1990-92)

25,9

65,1

79

40,8

48

58,5

31,0

38,6

43,4

50,9

25,9

84,3

33,1

74

0 20 40 60 80 100

20-44

50-99

100-199

200-499

500-999

1,000 over

Total

Services Manufacturing

Institute for Studies on Scientific Research and Documentation National Research Council of Italy

58

28

27

21

20

14

37

74

42

37

0 10 20 30 40 50 60 70

Quality of products

New markets

Reduce labour cost

Extend product range

Improve flexibility

Comply with standards, regulations

Reduce impact on environment

Reduce energy consumption

Reduce materials consumption

Replace existing products

Objectives of innovation Manufacturing in Italy1994-96

(percentage of firms for which the factor is very relevant)

Institute for Studies on Scientific Research and Documentation National Research Council of Italy

55

28

28

13

13

11

14

39

29

0 10 20 30 40 50 60

Cost too high

Risk too high

Lack of financing

Standards, regulations

Lack of qualified personnel

Comply with standards, regulations

Lack of interest from customers

Lack of information on markets

Lack of information on technologies

Organisational rigidity of the firm

Obstacles to innovation Manufacturing in Italy1994-96

(percentage of firms for which the factor is relevant)

42

Institute for Studies on Scientific Research and Documentation National Research Council of Italy

77

53

44

24

14

14

13

13

37

74

74

70

0 20 40 60 80 100

Internal sources

Consultants

Fairs, exibitions

Customers

Cmpetitors

Conferences

Suppliers

Telematic networks

Patents

Other firms

University

Public/private R&D

Sources of information for innovation Manufacturing in Italy1994-96

(percentage of firms for which the factor is relevant)

Institute for Studies on Scientific Research and Documentation National Research Council of Italy

29

50

57

63

68

62

33

39

48

0 10 20 30 40 50 60 70 80

Leather, footware

Apparel

Textiles

Printing, publishing

Average manufacturing

Electrical engineering

Chemicals

Mechanical engineering

Office machinery

Innovating firms in manufacturing in Italy (1994-96)

Institute for Studies on Scientific Research and Documentation National Research Council of Italy

Cost of innovation (percentage) - Italy (1990-92)

Computers Chemicals Textiles Clothing

R&D 65 43 12 16

Design engineering 22 9 18 38

Production investment 12 44 68 27

Marketing 1 4 2 19

Total 100 100 100 100

Institute for Studies on Scientific Research and Documentation National Research Council of Italy

Service firms which have carried out innovation activities in Italy 1993-1995 (percentage)

• R&D• Design• Know-how• Software• Training• Marketing• Investment

• 13.8• 18.5• 12.7• 52.2• 28.9• 12.2• 53.8

Institute for Studies on Scientific Research and Documentation National Research Council of Italy

Innovation activities of service firms (percentages)

• R&D 13.8• Design 18.5• Know-how 12.7• Software 52.2• Training 28.9• Marketing 12.2• Investment 53.8• Total -

• 23.7• 8.1• 3.5• 14.1• 2.6• 1.9• 46.0• 100.0

Firms which have carried out the activity

Innovationexpenditure

Institute for Studies on Scientific Research and Documentation National Research Council of Italy

R&D25%Design

7%

Know-how3%

Software15%

Marketing2%

Investment46%

Training2%

Innovation expenditure of Italian service firms

Institute for Studies on Scientific Research and Documentation National Research Council of Italy

Innovation expenditure (percentages)

• R&D 23.7• Design 8.1• Know-how 3.5• Software 14.1• Training 2.6• Tooling-up, patents -• Marketing 1.9• Investment 46.0• Total 100.0

• 35.8• 7.4• -• -• -• 8.1• 1.5• 47.2• 100.0

Service firms (1993-95)

Manufacturingfirms (1990-92)

Institute for Studies on Scientific Research and Documentation National Research Council of Italy

Lessons from the CIS survey (1994-1996) Percentage of innovating firms

• Germany 83

• Austria 81

• Ireland 79

• Finland 69

• Spain 53

• Italy 50 Poland 34

• Turkey 33

• 82• 64• 62• 46• -• 31• -• -

Manufacturing firms Service firms

Institute for Studies on Scientific Research and Documentation National Research Council of Italy

Concluding remarks

• Innovation can be measured

• We have learnt a lot from innovation surveys and other indicators

• Still many challenges ahead of us

Lessons learned

• Technological innovation is quite a diffused phenomenon

• There are wide differences across sectors and size of firm

• Firms rely on a wide range of innovation sources: investment, R&D and software are the major components of firms' innovation expenditure

Lessons learned

• Major obstacles for introducing technological innovation are of an economic nature - i.e. cost and risk too high

• Technological information is drawn mainly from outside suppliers of equipment, materials and components as well as from in-house technical departments

• Internal sources of information are much more important than public research institutions

Some challenges

• Software

• Services

• Organisation

• Information and communication technologies

• Biotechnologies

• Employment

• Environmental sustainability

Growth of Knowledge-based industriesOECD(2000)OECD(2000)

UK*

Belgium

Portugal**

Greece*

Sweden***

NL*Austria

Japan

Norway

Canada

Denmark

Spain***

Denmark

Mexico

ItalyUS

France

Korea

Germany

0

2

4

6

8

10

12

14

0 10 20 30 40 50 60

Share in Business Sector Value Added of Knowledge Based Industries (share year 1996 except: *1995;**1993; ***1994)

Ave

rag

e A

nn

ual

Rea

l V

alu

e A

dd

ed G

row

th

of

Kn

ow

led

ge

Bas

ed I

nd

ust

ries

(19

85-s

har

e ye

ar)

Incentives to BERD

1990-1998

-0.2 -0.15 -0.1 -0.05 0 0.05 0.1 0.15 0.2

Australia

US

Korea

Denmark

Switzerland

France

Belgium

Iceland

UK

Canada

Germany

Finland

Sweden

Italy

Norway

Mexico

Austria

Ireland

Spain

Netherlands

JapanPortugal

Change in the Amount of Tax Subsidies for 1 US Dollar of R&D

SOURCE: OCDE (1999).

Some challenges

• Further development of theories in the knowledge-based economy

• Innovation surveys allow to take into account complexity

• Linkage with other industrial data

• Risk of too much information

• The advantage of international comparability (“Big science”)