Challenges in Innovation Measurement: Oslo Manual Revision

1. Knowledge Economy – Challenges for Measurement Luxembourg, December 8-9, 2005 Innovation measurement: present and future challenges Carter Bloch Danish Centre for Studies in Research and Research Analysis

2. Outline • The Oslo Manual revision – how well is the new Oslo Manual able to meet policy (and other) needs? • Discuss the main changes to the Oslo Manual for collection of innovation data. • Oslo Manual addresses many of these policy needs, but too early to fully assess the usefulness of innovation data based on new guidelines Danish Centre for Studies in Research and Research Analysis

3. Oslo Manual revision impacted by recent developments in theory, policy and the economy Innovation concept Innovation measurement Policy Changes in the economy Danish Centre for Studies in Research and Research Analysis

4. The concept of innovation Greater focus given to: • Innovation as a system • Knowledge transfer and linkages • Firms’ ability to absorb and utilize new and existing knowledge • Market driven innovation – customer interaction and later stages of innovation Danish Centre for Studies in Research and Research Analysis

5. Firm innovation has many dimensions Technology- and product based innovations Service (and manufacturing) innovations Customer interfaces Delivery systems New network and value chain configurations Organisational innovations Based on: J. Kuusisto, 2005 Danish Centre for Studies in Research and Research Analysis

6. Major economic trends Major economic developments have had large influence on innovation processes: • Globalisation • Knowledge flows, linkages, new markets, competitive pressures • Information and communication technologies • ICT in products and processes, increase in potential for access to new knowledge...and in demands on firms’ ability to exploit this potential • Increasing importance of services • Service sector large and growing, increased focus on service products in manufacturing firms Danish Centre for Studies in Research and Research Analysis

7. Policy objectives – the Lisbon strategy • Focus on ’full scope’ of innovation • Transformation of research and technologies into innovations • Policy oriented to wide range of sectors • Regional dimension • Public sector innovation • Integrate/promote innovation in other policy areas (horizontal approach) Danish Centre for Studies in Research and Research Analysis

8. Oslo Manual revision – overview of the changes • Broadening the definition of innovation to include organisational changes and new marketing methods • New chapter on linkages in the innovation process • Novelty: new to the market • Innovation activities include preparations for marketing and organisational innovations Danish Centre for Studies in Research and Research Analysis

9. Product and process innovations A product innovation isthe 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. A process innovation is theimplementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software. • Removal of ’technological’ from definitions • Otherwise only minor changes Danish Centre for Studies in Research and Research Analysis

10. Organisational innovations An organisational innovation is the implementation of a new organizational method in the firm’s business practices, workplace organization or external relations. • Business practices are routines and procedures for how work conducted. • Workplace organisation includes organisational structure, distribution of work responsibilities • External relations Danish Centre for Studies in Research and Research Analysis

11. Marketing innovations A marketing innovation is the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing. • Draws on 4P’s marketing model: • Product design that does not change functional characteristics • New sales channels or outlets • New methods in product promotion or presentation • Use of new pricing strategies Danish Centre for Studies in Research and Research Analysis

12. Types of linkages Open information sources: 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: purchases of external knowledge and/or knowledge and technology embodied in capital goods (machinery, equipment, software) and services, which do not involve interaction with the source. Innovation co‑operation: active co‑operation with other enterprises or public research institutions for innovation activities (which may include purchases of knowledge and technology). • Purpose: form framework on innovation linkages that incorporates existing measurement and updates it, to better identify specific types of linkages. Danish Centre for Studies in Research and Research Analysis

13. Broadening the definition of innovation – main goals • Build framework better suited to measure innovation in services, with more complete coverage of innovation in manufacturing • Make it possible to examine how prevalent and important are ”non-technological” forms of innovation for performance. • Identifying ’integrated innovations’- innovations that span a number of different types of innovations (and thus potentially imply a coordinated innovation effort within the firm). Danish Centre for Studies in Research and Research Analysis

14. Illustration using Danish CIS4 data (Note: unweighted, preliminary) Product-process innovators: 49% Marketing and/or organisational innovation only: 13% Non-innovators: 38% Product-Process innovations 20% 15% 1% 13% Organisational innovations Marketing innovations 3% 9% 2% Danish Centre for Studies in Research and Research Analysis

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17. Overall assessment • New Oslo Manual expands coverage of types of innovations and linkages to reflect changes in policy and concepts. • However, a full assessment of their usefulness can only be made once data collected/analyzed using new guidelines • Usefulness of data also depends on how data is utilized (international comparability and composite indicators). Danish Centre for Studies in Research and Research Analysis

18. Overall assessment • Other related policy areas not covered, or only briefly covered in new OM • Overall coverage of marketing and organisational innovations somewhat limited – though there are also limits to how much they can be covered in surveys • Public sector innovation is important topic, but still in early stages of development (in terms of measurement) Danish Centre for Studies in Research and Research Analysis