R & D AND INNOVATION

Innovation measurement: present and future challenges

Carter Bloch
The Danish Centre for Studies in Research and Research Policy
Executive Summary
From their beginnings in the 1980s, the measurement of innovation has grown at a rapid
pace. Innovation surveys are now conducted in a broad range of countries, including EU
countries, other OECD countries and a growing number of non-OECD economies. The first
Oslo Manual set down guidelines for surveying technological product and process innovation
in manufacturing industries, which has since been expanded to include innovation in service
sectors. The recently completed third edition of the Oslo Manual broadens the coverage of the
innovation concept to also include organizational and marketing innovation.
These changes reflect changes in our understanding of innovation processes and in the
economy, and also the accumulating experience in innovation measurement, allowing the
extension of previous frameworks to new areas.
The limitations of a linear view of innovation have long been recognized. Some more recent
insights with relevance for innovation measurement are: that innovation is possible without
conducting R&D; that the impetus to innovation projects may not be technology based, but
may originate from contact with customers and suppliers, or market analysis; the growing
importance of linkages between firms, institutions and other actors; and the importance of
firms absorptive or learning capacity.
A number of changes in the economic environment have had a large impact on innovation
measurement. The service sector has grown dramatically in economic importance for the EU
and other OECD countries, along with the recognition that a great deal of innovation may take
place in services. Globalization has increased both the potential for interaction and pressures
for firms of all types to innovate in order to maintain competitiveness. Progress in information
and communication technologies (ICT) has dramatically enhanced opportunities for
knowledge transfer, and the pervasiveness of ICT opens up the potential for firms in both low
and high tech sectors to implement ICT-based product or process innovations.
The Lisbon strategy for the EU outlines targets for innovation, competitiveness and economic
performance. Central policy needs in designing innovation policy are determining what drives
firm performance and economic growth and how the EU economies can best benefit from
investments in R&D and other forms of innovation. While there is a notable emphasis on the
importance of increasing R&D in the EU, there is also a clear need for more data on the full
scope of innovation, including non-technical forms of innovation, linkages, and innovation

The Danish Centre for Studies in Research and Research Policy, Finlandsgade 4, 8200 Aarhus N., Denmark;
Tel. (+45) 8942 2398, Email: carter.bloch@cfa.au.dk.

that is driven by consumer or market demands. The regional dimension of innovation is also
important, as are public sector innovation and improving the system for intellectual property
rights (IPR).
The new Oslo Manual has undergone a number of substantial revisions, with the aim of
keeping innovation measurement abreast of policy needs and changes in innovation theory
and the economy. Among the most important changes to the manual are: a broadened
definition of innovation used in innovation surveys, a much expanded coverage of knowledge
flows and the role of linkages in the innovation process, and an adaptation of the manual to
reflect the importance of innovation in less R&D-intensive industries, such as services and
low-tech manufacturing.
The broadening of the definition of innovation reflects a number of developments. First,
innovation is more market driven than in the past. This places focus not only on the design
and development of new products, but also on new marketing strategies and concepts.
Second, there is an increasing recognition of the importance of organizational practices for
firms innovation, knowledge transfer and general economic performance.
Marketing innovations are defined in the Oslo Manual as the implementation of new
marketing methods involving significant changes in product design or packaging, product
placement, product promotion or pricing. They thus include many design changes that are not
considered product innovations and new marketing practices in sales channels, branding and
pricing strategies.
Organizational innovations are defined as the implementation of new organizational methods
in firms business practices, workplace organization or external relations. They include
organizational changes designed to improve efficiency, to foster innovation activities in the
firm, and to increase knowledge exchange with other firms or institutions.
Recent innovation surveys, among them CIS3 and CIS4, include questions on firms transfer
of knowledge. The new Oslo Manual devotes considerable attention to knowledge transfers,
identifying three types of linkages for innovation activity: open information sources,
acquisition of knowledge and technology, and innovation cooperation.
The guidelines in the new Oslo Manual allow for wider coverage of firm innovations and
types of knowledge transfer. However, policy needs require not only a broader coverage of
firm innovation but also a better use of data to understand firm innovation. Data on the
implementation of innovations, knowledge transfer and from auxiliary questions can be used
to compile composite indicators that provide valuable information on how firms innovate.
Examples are indicators that identify whether firms are leaders or adopters, whether their
innovation is primarily R&D or technology driven or market driven, and whether firms
innovations are integrated over various firm activities.
Other areas of relevance for innovation policy are not covered by the Oslo Manual, such as
innovation in the public sector, or receive only limited coverage, such as the role of human
resources. Work remains in these areas to develop indicators and to existing work with that of
general innovation measurement.