This morning, Athena Alliance published a new Working Paper: Frameworks for Measuring Innovation: Initial Approaches by Susan Rose, Stephanie Shipp, Bhavya Lal and Alexandra Stone of the Science and Technology Policy Institute. This paper utilizes and builds on the discussion of innovation published in an earlier report by the authors for the BEA – Measuring Innovation and Intangibles: A Business Perspective (also available on the Athena Alliance website).
We know that innovation is a key driver of economic growth. As such, governments and private firms seek to foster and manage innovative activity. However, our understanding of innovation, including our measurement ability, is still not adequate. As the Commerce Department’s Advisory Committee on Measuring Innovation in the 21st Century Economy noted last year, we need “a stronger framework for identifying and measuring innovation in the national economy.” In this paper, the authors seek to answer that challenge.
The report begins with a working definition of innovation that includes 10 attributes:
- Attribute 1: Innovation involves the combination of inputs in the creation of outputs.
- Attribute 2: Inputs to innovation can be tangible and intangible.
- Attribute 3: Knowledge is a key input to innovation.
- Attribute 4: The inputs to innovation are assets.
- Attribute 5: Innovation involves activity for the purpose of creating economic value.
- Attribute 6: The process of innovation is complex.
- Attribute 7: Innovation involves risk.
- Attribute 8: The outputs in innovation are unpredictable.
- Attribute 9: Knowledge is a key output of innovation.
- Attribute 10: Innovation involves research, development, and commercialization.
One of the important points under attribute 4 is how intangible & tangible assets relate to innovation. The authors offer the following diagram (as also elaborated more on in the companion piece, Measuring Innovation and Intangibles: A Business Perspective).
Intangibles are not innovation — but are inputs into the innovation process and are outputs from innovation. That is an important point to keep in mind.
The report then proposes two frameworks for measuring innovation:
- Framework 1 – Measures innovation activity by measuring the intangible assets that are created by and fed back into the innovation process at the firm or organizational level, which can then be scaled to the national level.
- Framework 2 – Measures innovation investments, especially the broader investments that set the stage for innovation.
The report goes on to provide an illustrative set of data sources for both frameworks, which demonstrates that appropriate data can be collected. Some of that data is already collected by the government, such as the National Science Foundation’s data on R&D spending. Others are collected by private sources, such as Computer Economics data on information technology (IT) spending, staffing, and technology trends. Other data, such as the organizational capital embodied in design and prototyping, can be proxied from other data, in this case, by the revenues of engineering and design firms as collected by Census.
As the authors point out, the choice of framework used depends on the goal of the exercise. If the goal is to understand which parts of innovation (for example, R&D or alliances) contribute to growth and to understand the process, the first framework is more useful. Innovation researchers would prefer this framework because it would provide more detailed insight into the innovation black box.
The second framework is the one most able to capture the basic investments contributing to productivity and growth. This approach is much more fundamental and flexible in that it encompasses all innovative activities, even those that are not now known.
I am especially happy that Athena was able to publish this report. The frameworks presented in this report provide an important guide for future research, especially in the development of future data sources.