Sectoral Innovation Metrics- Valutrics
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.
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.