Measuring innovation
TRAINING WORKSHOP ON SCIENCE, TECHNOLOGY AND INNOVATION INDICATORS
Cairo, Egypt
28-30 September 2009
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Measuring Innovation
Oslo Manual - 2005: (Guidelines
for collecting and interpreting
innovation data)
(central reference document for the statistical
definition of innovation and forms the basis for
surveys of innovation throughout the world)
UIS - Annex to the Oslo Manual
Measuring Innovation in
Developing countries
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WHY measure innovation?
 Innovation – key to the growth of output and
productivity.
 The relationship between innovation and
economic development is widely
acknowledged.
 Innovation policy should be evidence-based.
 Innovation data – to better understand
innovation and its relation to economic
growth; to provide indicators for
benchmarking national performance.
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WHAT is innovation
An
innovation
is the implementation of a new or significantly
improved product (good or service), or process, a
new marketing method, or a new organisational
method in business practices, workplace
organisation or external relations.
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The innovation measurement framework
Business enterprise (all firms, organisations and institutions whose primary activity is the market production of
goods or services (other than higher education) for sale to the general public at an economically significant price,
as well as the private non-profit institutions mainly serving them. Includes public enterprises). This includes
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‘private enterprises’ as well as ‘public enterprises’.
Chain-linked model of innovation
(Rosenberg & Kline, 1986)
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Symbols
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Types of innovations
 Product innovation: introduction of a good or service that is
new or significantly improved with respect to its
characteristics or intended uses. This includes significant
improvements in technical specifications, components and
materials, incorporated software, user friendliness or other
functional characteristics.
 Process innovation: implementation of a new or significantly
improved production or delivery method. This includes
significant changes in techniques, equipment and/or software.
 Marketing innovation: implementation of a new marketing
method involving significant changes in product design or
packaging, product placement, product promotion or pricing.
 Organisational innovation: implementation of a new
organisational method in the firm’s business practices,
workplace organisation or external relations.
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Degree of novelty
 Diffusion
 New to the firm
 New to the market
 New to the world
 Disruptive innovations
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Degree of novelty
 Diffusion is the way in which innovations spread, through
market or non-market channels, from their first worldwide
implementation to different consumers, countries, regions,
sectors, markets, and firms. Without diffusion, an
innovation will have no economic impact. The minimum
entry for a change in a firm’s products or functions to be
considered as an innovation is that it must be new (or
significantly improved) to the firm.
 New to the firm: A product, process, marketing method, or
organisational method can already have been implemented
by other firms, but if it is new to the firm (or in case of
products and processes: significantly improved), then it is
an innovation for that firm.
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Degree of novelty (continued)
 New to the market:
• the firm is the first to introduce the innovation onto its market.
• The market is defined as the firm and its competitors.
• The geographical scope is subject to the firm’s own view of its
operating market and thus can include both domestic and
international firms.
 New to the world:
• the firm is the first to introduce the innovation for all markets and
industries, domestic and international.
• implies a qualitatively greater degree of novelty than new to the
market.
 Disruptive innovations:
• an innovation that has a significant impact on a market and on the
economic activity of firms in that market.
• focuses on the impact of innovations as opposed to their novelty.
• These impacts can, for example, change the structure of the
market, create new markets, or render existing products obsolete.
However, it might not be apparent whether an innovation is
disruptive until long after the innovation has been introduced.
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Innovation activities
Innovation activities
are all scientific, technological, organisational,
financial and commercial steps which actually, or
are intended to, lead to the implementation of
innovations. Some innovation activities are
themselves innovative, others are not novel
activities but are necessary for the implementation
of innovations. Innovation activities also include
R&D that is not directly related to the development
of a specific innovation.
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Innovation activities for product
and process innovations
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Intramural (in-house) R&D: This comprises all R&D conducted by the enterprise,
including basic research.
Acquisition of R&D (extramural R&D): R&D purchased from public or private
research organisations or from other enterprises (including other enterprises within
the group).
Acquisition of other external knowledge: Acquisition of rights to use patents and
non-patented inventions, trademarks, know-how and other types of knowledge from
other enterprises and institutions such as universities and government research
institutions, other than R&D.
Acquisition of machinery, equipment and other capital goods: Acquisitions of
advanced machinery, equipment, computer hardware or software, and land and
buildings (including major improvements, modifications and repairs), that are
required to implement product or process innovations.
Other preparations for product and process innovations: Other activities related
to the development and implementation of product and process innovations, such as
design, planning and testing for new products (goods and services), production
processes, and delivery methods that are not already included in R&D.
Market preparations for product innovations: Activities aimed at the market
introduction of new or significantly improved goods or services.
Training: Training (including external training) linked to the development of product
or process innovations and their implementation.
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Innovation activities for marketing
and organisational innovations
 Preparations for marketing innovations:
Activities related to the development and
implementation of new marketing methods.
Includes acquisitions of other external knowledge
and other capital goods that are specifically
related to marketing innovations.
 Preparations for organisational innovations:
Activities undertaken for the planning and
implementation of new organisation methods.
Includes acquisitions of other external knowledge
and other capital goods that are specifically
related to organisational innovations.
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Kinds of innovation activities
 Successful in having resulted in the
implementation of a new innovation (though they
need not have been commercially successful).
 Ongoing, work in progress, which has not yet
resulted in the implementation of an innovation.
 Abandoned before the implementation of an
innovation.
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Classifying firms by degree of
innovativeness
 The innovative firm is one that has introduced an
innovation during the period under review. The innovations
need not have been a commercial success – many
innovations fail.
 An innovation active firm is one that has had innovation
activities during the period under review, including those
with ongoing and abandoned activities. In other words,
firms that have had innovation activities during the period
under review, regardless of whether the activity resulted in
the implementation of an innovation, are innovation active.
 A potentially innovative firm is one type of “innovation
active firm”, that has made innovation efforts but not
achieved results. This is a key element in innovation
policies: to help them overcome the obstacles that
prevent them from being innovative (converting efforts
into innovations) – Annex for developing countries.
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Factors influencing innovation
 Objectives: Identifying enterprises’ motives for
innovating and measuring their importance
 Hampering factors: reasons for not starting
innovation activities at all, or factors that slow
innovation activity or have a negative effect on
expected results. These include economic factors,
such as high costs or lack of demand, enterprise
factors such as lack of skilled personnel or
knowledge, and legal factors such as regulations
or tax rules. The ability of enterprises to
appropriate the gains from their innovation
activities is also a factor affecting innovation.
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Objectives and effects of
innovation
 Competition, demand and
markets
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Replace products being phased out
Increase range of goods and services
Develop environment-friendly products
Increase or maintain market share
Enter new markets
Increase visibility or exposure for
products
Reduced time to respond to customer
needs
 Production and delivery
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Improve quality of goods and services
Improve flexibility of production or
service provision
Increase capacity of production or
service provision
Reduce unit labour costs
Reduce consumption of materials and
energy
Reduce product design costs
Achieve industry technical standards
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Reduce production lead times
Reduce operating costs for service
provision
Increase efficiency or speed of
supplying and/or delivering goods or
services
Improve IT capabilities
 Workplace organisation
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Improve communication and interaction
among different business activities
Increase sharing or transferring of
knowledge with other organisations
Increase the ability to adapt to different
client demands
Develop stronger relationships with
customers
Improve working conditions
 Other
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Reduce environmental impacts or
improve health and safety
Meet regulatory requirements
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Factors hampering innovation
activities
 Knowledge factors:
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Innovation potential (R&D, design, etc.)
insufficient
Lack of qualified personnel: Within the
enterprise / In the labour market
Lack of information on technology / markets
Deficiencies in the availability of external
services
Difficulty in finding co-operation partners
for: Product or process development /
Marketing partnerships
Organisational rigidities within the
enterprise: Attitude of personnel/ managers
towards change, Managerial structure of
enterprise
Inability to devote staff to innovation activity
due to production requirements
 Institutional factors:
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Lack of infrastructure
Weakness of property rights
Legislation, regulations, standards, taxation
 Cost factors:
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Excessive perceived risks
Cost too high
Lack of funds within the enterprise
Lack of finance from sources outside the
enterprise: Venture capital / Public sources
of funding
 Market factors:
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Uncertain demand for innovative goods or
services
Potential market dominated by established
enterprises
 Other reasons for not
innovating:
•
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No need to innovate due to earlier
innovations
No need because of lack of demand for
innovations
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Impacts and outcomes
 Impacts of innovations on firm performance range
from effects on sales and market share to changes
in productivity and efficiency. Important impacts at
industry and national levels are changes in
international competitiveness and in total factor
productivity, knowledge spillovers of firm-level
innovations, and an increase in the amount of
knowledge flowing through networks.
 The outcomes of product innovations can be
measured by the percentage of sales derived from
new or improved products.
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Linkages

The innovative activities of a firm partly depend on the variety and structure of
its links to sources of information, knowledge, technologies, practices, and
human and financial resources. Each linkage connects the innovating firm to
other actors in the innovation system: government laboratories, universities,
policy departments, regulators, competitors, suppliers, and customers.
Innovation surveys can obtain information on the prevalence and importance of
different types of linkages, plus the factors that influence the use of specific
linkages.
 Types of external linkages:
• Open information sources provide openly available information that does
not require the purchase of technology or intellectual property rights, or
interaction with the source.
• Acquisition of knowledge and technology are purchases of external
knowledge and capital goods (machinery, equipment, software) and
services embodied with new knowledge or technology that do not involve
interaction with the source.
• Innovation co-operation is active co-operation with other firms or public
research institutions for innovation activities (which may include purchases
of knowledge and technology).
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Sources for transfers of
knowledge and technology
Internal sources within the enterprise:
R&D
Production
Marketing
Distribution
Other enterprises within the enterprise group
Open
information
sources
Sources for
purchases of
knowledge
& technology
Co-operation
partners
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External market and commercial sources:
Competitors
Other enterprises in the industry
Clients or customers
Consultants/consultancy firms
Suppliers
Commercial laboratories
Public sector sources:
Universities and other higher education institutions
Government/public research institutes
Private non profit research institutes
Specialised public innovation support svcs
General information sources:
Patent disclosures / Professional conferences, meetings,
literature and journals / Fairs and exhibitions /
Professional associations, trade unions / Other local
associations / Informal contacts or networks / Standards
or standardisation agencies / Public regulations (i.e.
*
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Data collection: The survey
approach
 The “subject” based approach starts from the innovative
behaviour and activities of the firm as a whole. The idea is
to explore the factors influencing the innovative behaviour
of the firm (strategies, incentives and barriers to
innovation) and the scope of various innovation activities,
and above all to examine the outputs and effects of
innovation. These surveys are designed to be
representative of all industries so the results can be
grossed up and comparisons made between industries.
 The “object” approach involves the collection of data about
specific innovations (usually a ‘significant innovation’ of
some kind, or the main innovation of a firm). The approach
involves collecting some descriptive, quantitative and
qualitative data about the particular innovation at the same
time as data is sought about the firm.
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Innovation & R&D surveys
 R&D and innovation are related phenomena which can lead
some countries to consider the combination of R&D and
innovation surveys. There are a number of points for and
against:
•Overall response burden of the reporting units will be reduced.
•Length of questionnaire could lead to a decline in response rates.
•Possibility of analysing the relations between R&D and innovation activities at the
unit level.
•Units not familiar with the concepts of R&D and innovation can confuse them.
•Efficient method of increasing the frequency of innovation surveys.
•The frames for the two surveys will generally be different. For example, the frame
population for innovation surveys may cover industrial classifications (and small
units) that are not included in R&D surveys. Combining them might involve sending
questions about R&D to a large number of non-R&D performers that are included
in the frame population for the innovation survey, and this would increase the cost
of the joint survey.
 In principle, other business surveys can also be merged with
innovation surveys, including surveys on the diffusion of ICTs,
and on the adoption of knowledge management practices.
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Expenditures
 Total expenditure for innovation activities comprises current
and capital expenditure incurred for the innovation
activities defined above. Current innovation expenditures
are composed of labour costs and other current costs.
Capital expenditures for innovations are composed of
gross expenditures on land and buildings, on instruments
and equipment and on computer software. Capital
expenditures that are part of R&D are included in
intramural R&D, while non-R&D capital expenditures linked
to product and process innovations are included in
acquisition of machinery, equipment and other capital
goods. Non-R&D capital expenditures specifically linked to
marketing or organisational innovations are included in
preparations for marketing innovations and preparations for
organisational innovations, respectively. The remaining
categories of innovation activity consist solely of current
expenditure.
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Classification by main economic
activity
 Statistical units of innovation surveys can be
broken down by different classifications. The most
important classification is the principal economic
activity of the statistical unit (“industry”). The
International Standard Industrial Classification
(ISIC Rev. 3.1) is the appropriate international
classifications for this purpose. Countries that use
a national industrial classification system rather
than ISIC Rev. 3.1 should use concordance tables
to convert their industrially classified data to ISIC
Rev. 3.1.
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Classification by size – detailed:
number of employees
 0
 1-9
 10 - 49
 50 - 99
 100 - 249
 250 - 499
 500 - 999
 1 000 - 4 999
 5 000 and above.
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Classification by type of institution
 Private enterprise:
• National (no Controlled Affiliates (CA) abroad)
• Multinational:
» Foreign-controlled affiliates (where the affiliate does not control
any other affiliates abroad).
» Foreign-controlled affiliates with CAs (parent companies under
foreign control).
» Parent companies with CAs abroad (parent company not under
foreign control).
 Public enterprise,
• Resident non-financial corporations and quasicorporations that are subject to control by government
units.
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Annex to the Oslo Manual
 After the publication of the 2nd Oslo Manual, also
developing countries started conducting innovation
surveys.
 The design of the surveys was intended to comply
with Oslo Manual standards, with adaptations for
capturing the particular characteristics of innovation
processes. Adaptations were prepared by each
country separately and with different approaches.
 Bogotá Manual published by RICYT (Ibero American
Network on S&T Indicators) first effort to compile
particularities and guide the design of crossnationally comparable innovation surveys.
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Annex to OM (continued)
 Annex to Oslo Manual 3rd edition: Innovation
surveys in developing countries
 UIS circulated a base document prepared by
RICYT to a vast network of experts in the
developing world covering China, Thailand,
Singapore, Malaysia, Hungary, India, Lebanon,
South Africa, and Tanzania.
 UIS drafted the final annex based on this input.
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Characteristics of innovation in
developing countries

Size and structure of markets and firms:
- SMEs, Large firms (operate sub optimal production scale, higher unit cost, less efficiency)
- Competitiveness (based on cheap labour, exploitation of natural resources. Not on efficiency,
differentiated products)  leads to fewer R&D and innovation projects.

Instability: - wide difference in potential for innovation  limits long term innovation activity.

Informality:
- rely on informal practices  lack of systematic application  not favourable for
innovation
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Particular economic and innovation environments:
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Reduced innovation decision-making powers:
- prevalence of state-owned enterprises, para-statal enterprises  lack of competitiveness discourage
innovation. Some state-owned enterprises  technological leader
- S&T policies in countries with less developed economic system  more impact on innovation than
strategise of private enterprises. - Innovation in agriculture sector  high economic impact.
- externally controlled or multinational organization. Technology transfer is a fundamental source of
innovation.

Weak innovation systems: - fewer resources to innovation activities. - Government

Characteristics of innovation:
perform and finance R&D. - low level of resources are devoted to R&D by businesses  reduce
innovation potential of enterprises. - weak linkages (Uni/R&D Inst/BE)  challenge capabilities to
overcome technology related problems in BE.
(equipment); Incremental changes; organizational changes.
-
acquisition
of
embodied
technology
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Innovation measurement in
developing countries
 The definition of innovation needs to
remain unchanged, as well as those
concerning its subtypes.
 The concept of potentially innovative firm
is incorporated.
 Measurement priorities:
• Innovation capabilities (Human resources, Linkages,
Quality assurance systems, ICTs)
• Expenditure on innovation activities
• Organizational innovation
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Principal adaptations
 ICTs in innovation surveys
• strategic use of new technologies (“Front office” vs “Back office”)
 Linkages
• To understand firm’s different linkages  matrix of ‘linkage agents’ and
‘types of linkage’
• geographical location of linkages; local, regional, national
 Innovation Activities
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•
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“Hardware purchase”, and “Software purchase”
“Industrial design”, and “Engineering activities”
“Lease or rental of machinery, equipment and other capital goods”
“In-house software system development”
“Reverse engineering”
 Human resources (by qualification, occupation, gender)
training
+
 Quality and environmental management
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Methodological issues for
developing country contexts
 Information systems specificities – relative weakness
of statistical systems – weak linkages between ‘surveys’ and ‘data sets’ 
prevent use of info. from other surveys in the design of innovation surveys. – lack of business
registers  problems in the sample frame. – Involvement of NSO  experience in the design
of industrial surveys; registers and background info.; higher response rate; wider-ranging
analysis. – no basic info. on firms’ performances (sales, investment, exports)  relationship
between action taken by the firm for innovation and market performance.
 Application of the survey -
interviews made in person; trained staff
 Questionnaire design – separate sections (economic data; finance div.,
innovation process; product/plant manager). – include guidelines, definitions, present in more
than one language
 Frequency – 3 to 4 years, high cost
 Publication – results should be published and distributed widely. Increase further
participation and awareness.
 Difficulties – lack of appreciation of the importance of innovation. – Managers are
secretive about finance. – lack of adequate legislative base.
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Thinking ahead
 The role of entrepreneurs and their attitudes towards
innovation.
 The intention to capture innovations driven by factors other than
market forces, and in particular innovations conducted by the
public sector.
 The adaptation of methodology to measure innovation in the
primary sector (particularly in agriculture).
 The need for better measuring minor or incremental
changes, including innovative applications of existing products
or processes, and the so-called 'backwards integration' of
technological capability.
 The development of indicators reflecting sub-national (regional)
innovation systems.
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Issues arising in the follow-up to
the Annex
 Innovation in informal sector?
 Innovation from traditional knowledge?
 Surveying innovation, rather than R&D, in
business (and informal) sector?
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Thank you!
http://www.uis.unesco.org
m.schaaper@uis.unesco.org
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