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Sectoral Innovation Metrics

 

Sectors innovate differently and the metrics used to measure innovation in one sector may therefore not be as important to others.  For example, architectural services learn a lot from the  international nature of their business, whereas  automotive uses the insights gained from a  more domestic supply chain. Designers use  project engineers to develop new designs,  whereas innovation in legal services, where  it occurs, is more responsive to client needs.  There are often significant differences  between sectors as to forms and processes  of innovation, making the reliance on a very  small set of metrics supposedly common across  sectors unsuitable to providing an accurate  overview of innovation performance in the economy.

The Community  Innovation Survey (CIS) is currently the most  widely used and detailed source of innovation data, but it does not provide the detail that makes it possible to examine how firms perform at different stages of the innovation process. This approach gains information from firms about their behavior separately for all stages of the innovation process. While the CIS, for example, looks at some aspects of the process, such as the use of external knowledge sources to gain ideas for innovation, this approach allows more detailed metrics, broken down by sector, across the whole process.

The structure of the CIS does not include any questions tailored towards
sector-specific metrics of innovation or any differentiation as to which types of metrics might be more appropriate for which sectors.  It therefore understates some elements of innovation which may be important to particular sectors.

Earlier work in the Innovation Index has highlighted  the diversity of innovation processes between  sectors – even within areas such as high-tech manufacturing – and the value of both  final and intermediate innovation indicators.  Similar diversity has been evident in studies  on innovation processes in biotechnology, aerospace, business services and design  services.

This suggests that metrics of innovative behavior should be able to reflect sectoral variation, but this is rarely the case in practice. There are often significant differences  between sectors as to forms and processes of  innovation, making reliance on a very small set  of metrics supposedly common across sectors  unsuitable to providing an accurate overview of innovation performance in the economy.

The innovation metrics can be scaled to different levels. At an economy wide level, information can be combined from the individual sectoral value chains in a chart to provide a quick  visual comparison between sectors.

Within each sector metrics are identified for each of the three stages of the innovation value chain. Three steps were taken to achieve this:

First, a group of metrics was identified, which related to firms’ activities in Accessing Knowledge for innovation including both the scale of firms’ financial investments in new knowledge and ideas.

Second, a group of metrics was identified that related to Building Innovation as firms translate their knowledge investments into innovation outputs.

Finally, a group of metrics was identified that was designed to capture firms’ Commercialization activities as they seek to exploit their innovations in the market place.

These innovation metrics were then combined to form firm-level innovation indices for each of the above stages. Subsequently a grid showing how well each sector performs at each stage of the innovation value chain was developed.

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Five of these metrics relate to  Accessing Knowledge; six to firms’ Building  innovation; and, five to their Commercialization  activities.

Some elements of the index are common across  the three stages  such as the use  of different internal skill groups (A4, B4, C3)  and the use of external partners (A5, B5, C4).  In each case the relevant metric is measured  specifically for that stage.

Other elements of the index are unique to a  particular stage. For example, the accessing  knowledge stage includes metrics reflecting  both the firm’s internal R&D and design  expenditure (relative to sales) as well as the  extent to which innovative ideas are sourced  externally. Building innovation includes metrics which reflect both the input and  output elements of the process of building  innovations, including spending on process  change, a measure of the extent of new  products and services in total sales, and a  measure of the diversity of innovative activities  undertaken by the company (including  organisational changes, the introduction of  new management or marketing techniques  etc). Commercialising innovation includes  metrics relevant to successfully taking an  innovation to market, such as the nature of  involvement with customers, spending on  reputation and branding, and the use of IP  protection.

To compare sectors, it is necessary to place a  value on different aspects of the innovation  process, and on the extent to which firms  draw on different sources of innovation.
Combining those metrics – the 16 outlined  above – into three indices representing the  stages of the process in each sector allows such  comparisons to be made.

 

 

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