TAFTIE Policy Forum „Measuring innovation” New trends and challenges in innovation measurement Fred Gault UNU-MERIT and TUT-IERI Brussels, November 25, 2014

Definition of innovation For statistical purposes, the definition of innovation is taken from the Oslo Manual (OECD/Eurostat 2005). An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations (OECD/Eurostat 2005, para. 146). A common feature of an innovation is that it must have been implemented. A new or improved product is implemented when it is introduced on the market (to potential users). New processes, marketing methods or organizational methods are implemented when they are brought into actual use in the firm’s operations (OECD/Eurostat 2005, para. 150). Innovation can only happen in a firm, but firms do not act in isolation Gault (2012)

Domain of definition – Aggregate estimates Included Business sector (formal) Firms as innovators including user innovators Private non-profit organizations Business sector (informal) Question about the production unit Excluded Public sector Government departments Education institutions Health institutions Research institutions Consumers Groups not constituted as a firm Social interest groups Religious, common interest, … Professional interest groups Communities of practice Peer groups

Innovation now Firms innovate More firms innovate than do research and development (R&D) Innovative firms are widely distributed – R&D performers are concentrated in a few countries, in a few industries in those countries and in a few firms in those industries. Measurement is different for innovation and for R&D Innovation measurement (Oslo) is not normative Measure innovation and then do analysis to identify Correlations (repeated cross-sectional surveys) Causal links (longitudinal panel data) Innovation systems Complex, dynamic, non-linear in response to policy intervention, global There are several time scales There is no single indicator to measure innovation

Innovation systems Actors Governments, education and research institutions, firms, … Activities R&D, invention, diffusion of technologies and practices, design, HR development Linkages Contracts, collaborations, co-publications, grants and monitoring, … Outcomes Jobs, growth, productivity, inclusion, greater equity, … Impacts Wellbeing, culture change, global influence, …

Innovation policy Policy approaches Innovators (firms) Regional Sectoral Technologies or practices Linkages Flows of energy, materiel, people, knowledge, … Framework conditions Short term (one mandate) Longer term (more than one mandate) Unexpected/uncontrolled events Look at and see what countries are doing with innovation policyhttps://

Building an innovation policy Key questions – Purpose and targets Jobs and growth, equity, inclusiveness, … – Scope Sector, region, technology, science, innovation … policy Mix of these and more? – Components Few? Some? Many? – Consultation and collaboration Input from the private sector, international organizations, civil society, … – Governance At what level(s)? Key questions guide evaluation leading to policy learning Indicators contribute to this process

Changes in indicators?

Headline Indicator 2013 A composite indicator Number of Patent Co-operation Treaty (PCT) applications per million of GDP (Measures technological innovation?) Employment in knowledge-intensive activities (KIA) as a percentage of total employment (Measures skills needed to innovate?) Contribution to the trade balance of high-tech products and medium- tech products to the total trade balance and knowledge intensive services as a share of total services exports (Measures competiveness of knowledge-intensive goods and services?) Employment in fast-growing firms of innovative sectors (Measures the capacity of a country to transform its economy?)

Change the definition A common feature of an innovation is that it must have been implemented. A new or improved product is implemented when it is introduced on the market (to potential users). New processes, marketing methods or organizational methods are implemented when they are brought into actual use in the firm’s operations (OECD/Eurostat 2005, para. 150). Consider changing the definition to include the Public sector Consumers – if they share the knowledge Still work to be done on social innovation

Promoting innovation at project level What is the outcome?

Return on investment in innovation Question posed by the government of Ontario to the Council of Canadian Academies How can the actual and potential outcomes and impacts of Ontario government spending on innovation and scientific activities be measured including but not limited to the effects on GDP in Ontario, generation and transfer of knowledge; creation of new ventures; and access to seed, development and growth capital? See what the Panel responded in Innovation Impacts: Measurement and Assessment CCA(2013)

Readings CCA(2013), Innovation Impacts: Measurement and Assessment, The Expert Panel on the Socio-Economic Impacts of Innovation Investments, Ottawa: Council of Canadian Academies. Gault, Fred (2010), Innovation Strategies for a Global Economy: Development, Implementation, Measurement and Management, Cheltenham: Edward Elgar and Ottawa: IDRC. Gault, Fred (2012), ‘User Innovation and the Market’, Science and Public Policy, 39: Gault, Fred, (ed.) (2013), Handbook of Innovation Indicators and Measurement, Cheltenham, UK and Northampton, MA, USA: Edward Elgar. NRC (2014), Capturing change in science, technology and innovation indicators: Improving indicators to inform policy, Washington, DC: National Academy Press. OECD (2010), Measuring Innovation: A New Perspective, Paris: OECD. OECD/Eurostat (2005), Oslo Manual, Guidelines for Collecting and Interpreting Innovation Data, Paris: OECD.

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