Innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations (the Oslo Manual). More simply put, innovation is about doing things in new ways as well as doing new things.
This definition implicitly identifies the following four types of innovation:
- Technological innovation:
- Product innovation: the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses.
- Process innovation: the implementation of a new or significantly improved production or delivery method.
- Organisational innovation: the implementation of a new organisational method in the firm’s business practices, workplace organisation or external relations.
- Marketing innovation: the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing.
The first two are traditionally more closely related to technological innovation. The last two are non-technological in nature. Specifically, innovation in services is more geared towards organisational changes than towards the development of new products and processes. Indeed, it is an inherent feature of services that the final product is difficult to distinguish from the organisation that provides it, or from the manner in which it is provided.
Innovation is reflected in value creation; innovation is thus inseparable from the economic value that it generates. This is a very serviceable definition of innovation, since it makes it measurable in quantitative/monetary terms. Innovation cannot be separated from productivity growth.
The European Innovation Scoreboard (EIS) has defined 8 dimensions of innovation performance, which are grouped in 3 main blocks covering enablers, firm activities and outputs.
Innovation performance in the EIS was measured using data from 29 innovation indicators; EIS was revised in 2008 and, at present, the Innovation Union Scoreboard (IUS) uses data from only 24 innovation indicators.
Many scoreboards use composite innovation indexes to summarise the statistical information from the innovation indicators in a single number providing an easy-to-grasp summary statistic of a country's innovation performance.
Sectors innovate differently, emphasising different stages of the innovation value chain. The NESTA survey identifies three distinct phases in the innovation process:
- Accessing knowledge (through in-house investment in knowledge, collaboration with other organisations or acquisition of external knowledge); includes internal R&D and design expenditure.
- Building innovation capacity (as firms translate their knowledge investments into innovation outputs); includes spending on process change and the extent of new products and services in total sales.
- Commercialisation / value creation (as firms seek to exploit their innovations in the market place); includes metrics relevant to successfully taking an innovation to market, such as the nature of involvement with customers and the use of IP protection.
Two main innovation strategies have been studied and promoted: (i) searching for technological competitiveness, through knowledge generation, product innovation and expansion to new markets, or (ii) searching for cost competitiveness, through labour saving investment, flexibility and restructuring. Such strategies may coexist in firms and industries, but one is likely to be dominant in the innovative efforts of each sector.
Companies involve users, both as individuals and as firms, in supporting their innovative activities; such companies, engaged in user innovation are more likely to introduce new products, processes or services.
- European Innovation Scoreboard 2008 (Authors: European Commission Publication Date: 2008)
- Innovation Union Scoreboard 2013 (Authors: European Commission Publication Date: 2013)
- Innovation and productivity growth in the EU services sector (Authors: Kristian Uppenberg Hubert Strauss Publication Date: 2010)
- Innovation scoreboards: indicators and policy use (Authors: Anthony Arundel Hugo Hollanders Editors: Claire Nauwelaers Rene Wintjes Published In: Innovation Policy In Europe Publication Date: 2008)
- Measuring innovation: the European Innovation Scoreboard (Authors: Hugo Hollanders Publication Date: 2012)
- Measuring intangible capital and its contribution to economic growth in Europe (Authors: Bart van Ark Janet X. Hao Carol Corrado Charles Hulten)
- Measuring sectoral innovation capability in nine areas of the UK economy (Authors: Stephen Roper Chantal Hales John R. Bryson Jim Love Published In: NESTA Innovation Index project Publication Date: 2009)
- Oslo Manual: The Measurement of Scientific and Technological Activities (Authors: European Commission OECD Eurostat Publication Date: 2005)
- The Global Innovation Scoreboard 2008: The Dynamics of the Innovative Performances of Countries (Authors: Daniele Archibugi Mario Denni Andrea Filippetti Publication Date: 2009)