Archived — Research Summaries: Working Paper 2007-04: Benchmarking Indicators of Innovation: Theory and Best Practices

by Marie Lavoie.

Innovation plays an increasingly strategic role in economic growth and firm performance. Even though many efforts have recently been made to develop indicators, measuring innovation remains a difficult, if not impossible, task. The fact is that the sources of innovation are numerous and vary from one sector to another and from one country to another. A large body of literature in economics, business management and management of technology has explored the potential of input and output indicators to reflect different aspects and stages of the innovation process, whether at the firm, industrial, national, and international levels. The paper begins with a few reflections on the concept of innovation and technology in different theoretical economics traditions at the macro, sectoral and micro levels. The most commonly used indicators as well as those newly developed are pointed out, along with a mention of their respective strengths and weaknesses. What can be concluded for now is that there is no sole, unique indicator enabling us to better understand the reality of innovation. The challenge is to better understand the dynamics of innovation. Too often, indicators depict a static image of a phenomenon, but technology changes and a solid understanding of how technology progresses or stagnates is required in order to design the right innovation policy. Composite indicators are valuable as a starting point for an analysis. They allow cross-national comparisons of country performance and are quite useful especially for further analytical purposes. However, they are not sufficient to understand why a country has a national performance below expectations. We propose to study innovation capacity in a more systemic way by examining the dynamics of inter-industry flows. This implies the development of a taxonomy whose aim would be to produce different scoreboards for each category of firms sharing similarities in the innovation process. This exploration should be guided by 'appreciative theorizing'.

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