Measures ofinnovation input inCisInnovationDefinitionAdvantagesDisadvantagesIndicatorR&Defforts-ExpenditureonR&D-Mostpopularindicator-Impreciseandsubjecttomeasurementerror(asapercentageofa-Longtraditionofdatacollection,R&Dexpenditureisneitheranecessarynorafirm'stotalsales)sufficientconditionforinnovation-Harmonizeddatacollections(e.g-BasisFrascatiatOECDlevel)-Excludeindividualand independentDefinitionofOECDinventorsand inventionsmadebyinnon-R&D-For inter-country,inter-industry.jobsinter-firmcomparisons-Inventions areoftenmade fornon-pecuniarymotives (e.g.personalsatisfaction)Firm-andindustrvdifferencesintechnologicalopportunitiesandR&Defficiencyusuallyunknown-maketheinterpretationofinnovation inputdata difficult-UnderestimateR&DactivitiesofSMEsVeryhighlevelofsectoralaggregationKnowledge-AccumulatedR&D(seeabove)-Depreciation(Whendoesnewknowledgestockcapitalloseitscommercialvalue?)Spillovers(Afirmmightuseknowledgegeneratedelsewhere-this usuallydoesnotshowupinR&Dcosts)-Lags(SpendingonR&Dgeneratesnewknowledgeonlywithasignificanttimegap-howlongbeforeR&Dspendingshouldcountaspartofknowledgestock)Technische UniversiteitTUEindhovenUniversityofTechnology9/12/2013PAGE10EconomicsofInnovation2013
Measures of innovation input in CIS Economics of Innovation 2013 9/12/2013 PAGE 10 Innovation Indicator Definition Advantages Disadvantages R&D efforts - Expenditure on R&D (as a percentage of a firm’s total sales) - Basis Frascati Definition of OECD - Most popular indicator - Long tradition of data collection, - Harmonized data collections (e.g. at OECD level) - For inter-country, inter-industry, inter-firm comparisons - Imprecise and subject to measurement error R&D expenditure is neither a necessary nor a sufficient condition for innovation - Exclude individual and independent inventors and inventions made by in non-R&D jobs - Inventions are often made for non-pecuniary motives (e.g. personal satisfaction) -Firm- and industry differences in technological opportunities and R&D efficiency usually unknown - make the interpretation of innovation input data difficult - Underestimate R&D activities of SMEs - Very high level of sectoral aggregation Knowledge stock - Accumulated R&D capital (see above) -Depreciation (When does new knowledge lose its commercial value? ) -Spillovers (A firm might use knowledge generated elsewhere - this usually does not show up in R&D costs) -Lags (Spending on R&D generates new knowledge only with a significant time gap - how long before R&D spending should count as part of knowledge stock)
Measures of innovation input in CiSInnovationDefinitionDisadvantagesAdvantagesIndicatorTotal innovationNon-R&DinputsLargevarietyofinputsBetterestimationofinputin innovationexpenditureintoinnovationprocess"Roughestimates”process(e.ginvestmentsinfixedassets)TechnischeUniversiteitTUEindhoveneUniversity of Technology9/12/2013PAGE11EconomicsofInnovation2013
Measures of innovation input in CIS Economics of Innovation 2013 9/12/2013 PAGE 11 Innovation Indicator Definition Advantages Disadvantages Total innovation expenditure Large variety of inputs into innovation process (e.g. investments in fixed assets) Better estimation of input in innovation process Non-R&D inputs “Rough estimates
Measuring innovative output in CisAdvantagesInnovationDefinitionDisadvantagesIndicatorPatentsAn (intermediate)Second bestsolutionNotall inventionsarepatentedoutputmeasureofVerylongtimeseriesavailableUncleartowhatextenttransformedininnovationcommerciallyviableproduct/processClassificationindifferenttechnicalfieldsNotalwayseasilyclassifiedbyeconomicrelevantindustryorproductlinesRelativeimportanceofpatents-Valueofpatentsvarysignificantly,highly(citationanalysis)skeweddistribution-notall patentshavetheRegionaldisaggregationsamevalue-InventorsbeliefineconomicvalueMostpatentsareneverused-measureofofthepatentwhichwarrantstheinvention,notofinnovationexpenseofapplication-Firmsand inventorsmightpatentstrategicallyVerystrongempiricalrelationshiptopreventcompetitorsfromcommercializingbetweenanideaR&DintensityandpatentsAveragevalueofpatentislikelytovary-MFproductivityandpatentsacrosstimeandspace-Importancediffersofpatentsacrossindustries-comparisondifficultldentificationofinnovatorisnotalwaysstraightforward(e.g.subsidiariesorspin-offsoflargefirms)Technische UniversiteitTUEindhovenUniversityof Technology9/12/2013PAGE12EconomicsofInnovation2013
Measuring innovative output in CIS Economics of Innovation 2013 9/12/2013 PAGE 12 Innovation Indicator Definition Advantages Disadvantages Patents An (intermediate) output measure of innovation - Second best solution -Very long time series available -Classification in different technical fields -Relative importance of patents (citation analysis) -Regional disaggregation - Inventors belief in economic value of the patent which warrants the expense of application -Very strong empirical relationship between - R&D intensity and patents - MF productivity and patents -Not all inventions are patented -Unclear to what extent transformed in commercially viable product/process -Not always easily classified by economic relevant industry or product lines -Value of patents vary significantly, highly skewed distribution - not all patents have the same value -Most patents are never used - measure of invention, not of innovation -Firms and inventors might patent strategically to prevent competitors from commercializing an idea -Average value of patent is likely to vary across time and space -Importance differs of patents across industries - comparison difficult -Identification of innovator is not always straightforward (e.g. subsidiaries or spin-offs of large firms)
Innovation output indicatorsin CisInnovationDefinitionAdvantagesDisadvantagesIndicatorSales ofDivisionofproducts in-Directmeasureofsuccessfulinnovation"Roughestimates"imitativeandMaybesensitivetobusiness-remainessentiallyInnovationsthatareintroducedintheinnovativeunchangedmarketandcontributetopositivecash-cyclesproductsflow-underwentDistinctionbetween"true"and"imitative”incrementalchange,-subjectto radicalinnovations("Newtothefirmornewtothemarket")changeNewproductScreeningnewDirectmeasureofsuccessful innovation-dependentonadequateannouncementsproductjournalselectionCheaptocollectannouncementsin-numberofinnovationsCoveringinnovation in firms atall sizestradeandtechnicaldependingonnumberofCoverageofsectorsjoumalsjournals selected-IntersectoraltechnologyflowscanbeOnlypublishedinnovationsidentifiedaremeasuredRegionaldisaggregationofdataTechnische UniversiteitTUEindhovenUniversity of Technology9/12/201313Economics@fneevRti9nk2R1Rtetal.2002
Economics of Innovation 2013 9/12/2013 13 Innovation output indicators in CIS Innovation Indicator Definition Advantages Disadvantages Sales of imitative and innovative products Division of products in -remain essentially unchanged, - underwent incremental change, - subject to radical change -Direct measure of successful innovation - Innovations that are introduced in the market and contribute to positive cashflow - Distinction between “true” and “imitative” innovations (“New to the firm or new to the market”) “Rough estimates” Maybe sensitive to business cycles New product announcements Screening new product announcements in trade and technical journals -Direct measure of successful innovation -Cheap to collect - Covering innovation in firms at all sizes - Coverage of sectors - Intersectoral technology flows can be identified - Regional disaggregation of data -dependent on adequate journal selection - number of innovations depending on number of journals selected -Only published innovations are measured Source: Kleinknecht et al. 2002
Measuring innovative output in CiSInnovationDefinitionAdvantagesDisadvantagesIndicatorPatentAn (intermediate)NumberofcitationsisaproxyforNotallinventionsarepatentedCitationsoutputmeasureofthetechnologicalvalueofapatent-Difficulttocompareacrosscountries,sectorsinnovation-Moreinformationaboutthetimeperiods,economicvalueofapatentOlderpatentsmorelikelytohavemoreHavelegalrelevancecitations,althoughtheymightnotbemorevaluablethannewerpatentsCitationsarereadilyavailableTechnische UniversiteitTUEindhoveneUniversityofTechnology9/12/2013PAGE14EconomicsofInnovation2013
Measuring innovative output in CIS Economics of Innovation 2013 9/12/2013 PAGE 14 Innovation Indicator Definition Advantages Disadvantages Patent Citations An (intermediate) output measure of innovation - Number of citations is a proxy for the technological value of a patent -More information about the economic value of a patent -Have legal relevance -Citations are readily available -Not all inventions are patented -Difficult to compare across countries, sectors, time periods,. -Older patents more likely to have more citations, although they might not be more valuable than newer patents