Bernardo Rodrigues Manuel Bóia

1. Innovation Measurement “Expenditures, Outcomes, and the Nature of Innovation in Italy” Archibugi, D., Evangelista, R., Perani, G., & Rapiti, F. (2000) Bernardo Rodrigues Manuel Bóia 2001/03/16

2. Expenditure, Outcomes, and the Nature of Innovation in Italy • Methodology • Results • Inputs to Innovation • Test Model • Outputs Generated by Innovation • Final Comments

3. Expenditure, Outcomes, and the Nature of Innovation in Italy How many firms innovate? In the long run firms are forced to innovate or perish, but some might be consistent Innovators, while others are lower, and they could also change their nature over time. What is the amount of resources devoted to innovation? Firms innovate trough a variety of sources which are industry-specific, but they value differently inputs to innovation. What is the amount and significance of innovated production? New processes and products will not replace entirely old ones, so the degree of novelty and the share of new versus old is to be assessed.

4. Expenditure, Outcomes, and the Nature of Innovation in Italy • Methodology • Two main approaches: • Collecting information on the innovations introduced (concentration on the objects of innovative activities) • Questioning firms about input, output, and the nature of the innovative process (focus on the subjects of innovative activities) Novelty => heterogeneous adoptions (questionnaires & methods) => No clear temporal & International comparison Permanent Standardization is needed!

5. Expenditure, Outcomes, and the Nature of Innovation in Italy + -

6. Expenditure, Outcomes, and the Nature of Innovation in Italy Methodology Survey on Innovation in the Italian Manufacturing Industry (CIS) 1990-92 • At that time, involved a larger number of firms than any other European Country. • Accounts for 40% of returned questionnaires • Assess for:

7. Expenditure, Outcomes, and the Nature of Innovation in Italy Results (Inputs to Innovation) • In the same class, firms show close valuations in all variables • Innovation variables grows on importance while firm size increases

8. Expenditure, Outcomes, and the Nature of Innovation in Italy Concentration Results (Inputs to Innovation)

9. Expenditure, Outcomes, and the Nature of Innovation in Italy Results (Inputs to Innovation) • Sources: • Innovative industrial processes consists first and foremost of the purchase and use of embodied technologies (adoption & diffusion of Technologies), and secondly of R&D activities (most important intangible innovation expenditure)

10. Expenditure, Outcomes, and the Nature of Innovation in Italy Results (Inputs to Innovation) • The role of small and large firms: • Large firms – radical innovative process centered on R&D activities • Small firms – informal innovative activities, but technologically creative • R&D requires a minimum threshold • Small and large innovating firms have no highly significant differences in total innovation expenditure per employee

11. Expenditure, Outcomes, and the Nature of Innovation in Italy Capital IntensiveSectors Traditional ConsumerGoods Science-Based Results (Inputs to Innovation)

12. Expenditure, Outcomes, and the Nature of Innovation in Italy Results (Inputs to Innovation) • R&D-intensive and scale-intensive industries account for 71% of total innovation expenditure • Even in Italy in which traditional sectors and small firms play an important role, innovation is highly concentrated within a few industries and a restricted club of large firms

13. Expenditure, Outcomes, and the Nature of Innovation in Italy Results (Test Model) • Effect of Size and Industrial Sectors • Would firm size be determinant in resource allocation within any of the sectors analyzed? • Would industrial sector be determinant in resource allocation within any firm size class? • Model: • Prob(Innov.)= f(size, sector, region, group) 0<Prob(Innov.)<1 • Hyp.:Size – positively affect innovation Sector - consistent with the latter observed ranking • Region – decrease from north to south Group – positive influence on innovation • Conclusions: • 70% of firm behavior is predicted by the model • The probability of a firm being innovative, • - increases monotonically with firm size • - increases considerably for some sectors with high technological opportunity • - increases if the firm is a member of a industrial group • - is much higher among firms of the Northwest and lower in the others, with minimum levels in the south and Islands

14. Expenditure, Outcomes, and the Nature of Innovation in Italy Results (Outputs Generated by Innovation) • Does not measures the economic impact • Provides direct direct info on how production output changed related to innovation 1 1 Nature of innovations

15. Expenditure, Outcomes, and the Nature of Innovation in Italy New Product sales Total Sales Results (Outputs Generated by Innovation) Degrees of innovation by industry • Only 14.2% of sales (from innovation) generated by new products • Pace of change is slower than generally believed • Length of the life cycle of the product

16. Expenditure, Outcomes, and the Nature of Innovation in Italy Results (Outputs Generated by Innovation) Degrees of innovation by size of firm • Italian production relies heavily on imitation and adaptation from other countries (adoption & diffusion) • innovating firms translate only a small portion of innovative inputs into turnover

17. Expenditure, Outcomes, and the Nature of Innovation in Italy Final Comments • Different Innovation Sources • R&D, most important, however 1/3 of expenditure • innovation patterns differs from firm size and sector • Few small companies innovate • Small firms expenditure in innovation is quite significant but, • innovating small firms are a minority • R&D requires a minimum threshold • Concentration of innovation

18. Expenditure, Outcomes, and the Nature of Innovation in Italy Final Comments • The inputs are concentrated in a small number of firms and sectors • Innovative inputs are not entirely translated into output Strengthen technological core and broaden the innovating industrial base