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Benchmarking Innovation Policy and Innovation Framework Conditions January 2004 Ministry of Economic and Business Affairs Centre for Economic and Business Research Foreword In the report “The New Economy: Beyond the Hype – The OECD Growth Project (2001)”, the OECD identified 4 areas that are likely to be the princi- pal factors in driving economic growth in the future: innovation, entrepre- neurship, ICT and human resources. In the future innovation and technology diffusion will be even more critical to the economic and social progress of advanced industrialized countries. In order to pursue an effective innovation policy it is therefore necessary to build a comprehensive methodology for strengthening knowledge-transfer across the OECD. Based on the “Roadmap for Benchmarking Business Policies” (OECD, 2002), this publication investigates innovation performance and innovation framework conditions across 27 OECD countries using a variety of quanti- tative and qualitative data and analysis. The report is made in cooperation with the Norwegian Ministry for Trade and Industry and Inside Consulting. 2/41 Summary This report benchmarks innovation and innovation policy across 27 OECD countries. In the future innovation and innovation diffusion will be even more critical to the economic and social progress of advanced industrialized countries, ...
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| Publié par | Difef |
| Nombre de lectures | 23 |
| Langue | English |
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Benchmarking Innovation Policy and Innovation Framework Conditions January 2004 Foreword In the report “The New Economy: Beyond the Hype The OECD Growth Project (2001), the OECD identified 4 areas that are likely to be the princi-pal factors in driving economic growth in the future: innovation, entrepre-neurship, ICT and human resources. In the future innovation and technology diffusion will be even more critical to the economic and social progress of advanced industrialized countries. In order to pursue an effective innovation policy it is therefore necessary to build a comprehensive methodology for strengthening knowledge-transfer across the OECD. Based on the “Roadmap for Benchmarking Business Policies (OECD, 2002), this publication investigates innovation performance and innovation framework conditions across 27 OECD countries using a variety of quanti-tative and qualitative data and analysis. The report is made in cooperation with the Norwegian Ministry for Trade and Industry and Inside Consulting.
Ministry of Economic and Business Affairs Centre for Economic and Business Research
Summary This report benchmarks innovation and innovation policy across 27 OECD countries. In the future innovation and innovation diffusion will be even more critical to the economic and social progress of advanced industrialized countries, highlighting the need for building comprehensive methodologies in measur-ing innovation and innovation performance across the OECD. The analysis presented in this report is based on two assumptions: 1) that government initiatives have a significant impact on innovation activity and 2) that methodology can be applied to compare micro-policies in selected countries and provide policy-direction at the individual country level. The report identifies a group of 7 countries as leaders in innovation per-formance: Sweden, Switzerland, Japan, Finland, the US, Germany and the Netherlands. The analyses show that: is a strong link between innovation performance and innova-There tion framework conditions. A high innovation performance is directly related to an active inno-vation policy, i.e. policy has a key role to play in ensuring that new innovations are developed and technology properly diffused throughout the economy. Policy measures need to be applied in a manner that suits the na-tional context in which countries operate if any attempt to learn from top-performing countries is to be made Based on a mix of qualitative and quantitative information in assessing in-novation performance and innovation framework conditions, the report con-siders the effectiveness of policies in the specific economic and institutional context in which they operate. A number of country case studies have been prepared to compare micro-policies to provide policy-direction at the individual country level. A country's innovation performance will depend not only on how it per-forms in each individual element of thenational innovation system(NIS), but how these separate elements interact. Different configurations can result in a successful overall innovation performance.
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It also follows that policy measures need to be altered to suit the national context, including institutional factors, industry specialization and size. As a result, policy instruments that may be effective in improving innovative per-formance in one country may be less effective or even inappropriate in an-other. A simple “cut-and-paste approach, where policy areas are randomly copied and applied by low-performing countries could easily be detrimental to in-novation performance. However, we are confident that the analysis put for-ward will serve as an inspiration in designing policies that help improve overall innovation performance. It is important to bear in mind that individual elements or particular combi-nations of the NIS may only have an effect on innovation performance with a significant lag. Thus an assessment made today of performance may imply changes both for better or for worse in the future. Chapter I of the report defines and measures innovation performance and technology diffusion across 27 OECD. Chapter II explores and quantifies innovation framework conditions across a range of policy areas. Chapter III is devoted to exploring the link between innovation performance and inno-vation framework conditions. The accompanying paper titled“Benchmarking Innovation Policy and In-novation Framework Conditions Country Case Studiesexamines the re-lationship between innovation performance and innovation framework con-ditions in selected countries and illustrates how these countries can learn from top performing countries in designing effective policies to boost inno-vation performance.
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1. Defining and measuring performance in fostering innovation and technology diffusion Countries that fail to nurture innovation activities will find themselves in di-rect competition with newly industrialized countries as the latter increas-ingly apply existing technologies and business methods. The development and exploitation of new products, processes, services and systems and the constant upgrading of those which a country already possesses is the only way in which advanced industrialized countries can maintain and increase their levels of economic and social prosperity. Thus the impact of innovation on productivity and growth creation is not limited to the initial introduction of new products, processes, services and systems, but also to the subsequent diffusion of new technology throughout 1 the economy. Benchmarking innovation and innovation framework conditions is by no means an easy task. For policy making purposes it is not sufficient to meas-ure the output of a country’s innovation performance, it is also necessary to ascertain how that performance was achieved. Assessing national innovation performance is determined by 1) innovation activity, i.e. the number of products, processes, services and concepts devel-oped and 2) technology diffusion, i.e. the diffusion of those innovations throughout the economy. For all but the largest OECD countries, the vast majority of novel innovations will come from abroad. However all OECD countries must be effective at exploiting new science and technology appro-priate to their needs from wherever it is to be found in the world. When comparing and ranking countries in the areas of innovation, competi-tiveness, and globalisation, composite indicators are valued for their ability to integrate large amounts of information into easily understood formats. The proliferation of composite indicators will raise questions regarding their accuracy and reliability. Due to the sensitivity of the results to different weighting and aggregation techniques as well as the problems of missing data, composite indicators can result in distorted findings on country per-formance. However composite indicators will continue to be developed due to their usefulness as a communication tool and for analytical purposes.2
1View of Innovation Policy: A Proposed Methodology for AssessingSee also “A Strategic Innovation Policy and Performance, John Barber, OECD DSTI/STP/TIP(2003)4 2See also “Composite Indicators of Country Performance: A Critical Assessment, Michael Freudenberg, OECD DSTI/IND(2003)5
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Measuring innovation activity Data on innovation activity is based on surveys carried out by the EU Commission, the World Economic Forum (WEF), and the International In-stitute for Management Development (IMD). In addition to the survey data the number of patents in ‘triadic’ families has been added to the innovation index. The latter measures innovation activity in businesses and technolo-gies that typically patent new products. The following indicators have been applied in sizing overall innovation ac-tivity: Number of companies having introduced new or significantly im-proved products/processes innovation activity“Business’ assessment ofis based on 3 individ-ual indicators and measures 1) the extent to which companies de-velop new products and processes, 2) to which extent companies de-velop new designs and 3) an assessment of the extent to which inno-vation influences on corporate revenues. The number of patents in ‘triadic’ patent familiesmeasures the number of patented innovations introduced across the US, EU, and Japan. To measure the quality of survey data a number of test have been conducted leaving us to conclude that the data used is indeed valid.3 The three indicators have been combined into one composite index for all 27 countries (please refer to appendix 5). Switzerland, Germany and Japan are identified as leaders in innovation activity with Sweden and the US rounding up the top-5. Measuring technology diffusion Measuring innovation diffusion across companies is by no means a straight-forward exercise. Diffusion is facilitated by job rotation, networking, for-malized collaboration, and by intra-company purchase of products and tech-nologies. Available data from the OECD allows for comparisons of formal diffusion, while data on informal diffusion (personal networks, job rotation) is cur-rently unavailable. The following indicators have been applied in sizing innovation diffusion:
3Please refer to Appendix 4 for an in-depth discussion on the use of survey data in benchmarking innovation
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Import of technology, patents, franchising, and purchase of research and technical consulting.The indicator measures to which extent companies are able to use innovations developed in other countries. of new technology“Business’ assessment of the applicationmeas-ures the ability of companies in introducing and using new technol-ogy. Share of firms collaborating with other firms on innovation and technologymeasures the ability of companies in applying knowl-edge, know-how and ideas developed by other companies. The first two indicators illustrate the speed at which new technology is ap-plied, while the third indicator measures the application of knowledge, know-how and ideas developed by other companies. The 3 indicators have been combined into a composite index (please refer to appendix 5). The index identifies Sweden, Ireland and Finland as top per-formers in terms of technology diffusion. Japan and Switzerland, ranked 5 and 6, perform well and were also ranked in the top-3 on innovation activ-ity.
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Measuring overall innovation performance Combining innovation activity and technology diffusion into one composite indicator should take into account, the methodological weaknesses of con-structing composite indicators described above. No direct solution to the weighting4problem exists, but the robustness of the ranking is tested by assigning weights randomly and repeating the calcula-tion. This provides a possible ranking for each country. Based on the distri-bution the probability of being among for example the top 5 performing countries can be calculated. For this purpose the calculation was repeated 3600 times for each of the 27 countries. The distribution does not suggest a specific ranking but rather a very robust division of countries. Figure 1.1 Possible innovation performance ranking based on 3600 randomly generated weights 100 90 80 70 60 50 40 30 20 10 0
T op 10 T op 5 T op 3
4In addition to the weighting issue, this work points to two additional problems missing data and standardization with composite indicators. Appendix 2 and 3 details the methodology applied in attempting to solve these issues.
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The analysis shows that Sweden, Switzerland and Japan are ranked in the top 5 in 80% of the outcomes. The 3 top performers are followed by a group of 5 countries (Finland, the US, Ireland, Germany, and the Netherlands) which all rank among the top 5 in more than 20% of the outcomes. The US, Germany and The Netherlands scores well on all indicators and are in the top 3 on 1-2 indicators. The high Irish ranking should be treated with caution, as the country is not ranked in the top 10 in 20% of the outcomes. The selected indicators show that Ireland is ranked first on “import of foreign technology, but only has one other top-ranking and ranks in the lower one-third on two other indica-tors.5 In conclusion, 7 countries are identified as being top performers in overall innovation performance. This group is referred to as the “top-7 throughout the report: Sweden Switzerland Japan Finland USA Germany The Netherlands
5 For further analyses of the Irish ranking please refer to Chapter 3
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2. Defining and measuring performance in innovation framework con-ditions A total of 12 individual policy areas have been identified in sizing innova-tion framework conditions. For each of the policy areas a number of indica-tors have been selected to further investigate framework conditions across the selected countries (see appendix 1). Table 2.1 highlights current data co-verage for each of the policy areas. Table 2.1 Data coverage Good Partial No Policy coverage coverage coverage √ Public investment in R&D Quality of research Relevance of research √ Cooperation in R&D Commercialization of research √ Highly educated workers Subsidies and tax incentives√ Access to venture capital Customers and suppliers√ Competition policy√ Access to technology√ Access to competencies ÷ The overall benchmarking of innovation framework conditions follows the structure presented in Figure 2.1 below. Benchmarking is carried out for each of the 11 policy areas with sufficient data coverage. The policy areas are then grouped in 4 sub-indices and finally one composite indicator for in-novation framework conditions is presented. Figure 2.1 Benchmarking innovation framework conditions Index for framework conditions
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Coorperation in innovation Public research between knowledge institutions Innovation finance Market conditions and the private sector Public inv. in Coorperationin R&DiSubsidiesand taxAccess to knowledge ncentives for R&D technology Relevance of Commercialisation Access to venture Competition policy research in research capital Competencies of QualityofresearchHwiogrhkleyrseducatedusers& suppliers
To further break down individual policy areas the following section high-lights country performances on each of the 4 sub-indices: Public research Public research can be split up into three individual policy areas: Level of public investment in research The level of public research is typically measured by the level of govern-ment funding allocated to research as well as the number of public research-ers as a share of the total work force: Government appropriations or outlays for R&D in share of GDP Government researchers pr. 10 000 labour force. Researchers are defined as professionals that are involved in the development and creation of new products, processes, methods and systems. Figure 2.2 combines the two indicators in a composite index. Finland, Aus-tralia and Sweden make up the top-three. All top-7 countries are ranked above the OECD average. Figure 2.2 Index for public investment in research
100 90 80 70 60 50 40 30 20 10 0
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Relevance of research Available data fails to accurately measure the degree of relevance of public research. In response to this, the OECD and the EU has published data that helps measure relevance of public research by measuring how individual countries prioritize the allocation of government funds in technology/natural sciences, social sciences, health, humanities, etc. The more funds allocated to technology/natural sciences the higher the rating on EU/OECD indica-tors. The OECD and the EU also provides data on: The number of scientific papers cited in patentswhich measures the number of patented innovations introduced in the US market The number of scientific and technical articles published in industry-related periodicalswhich measures the degree of specialisation in, areas of high industry relevance. Figure 2.3 ranks countries based on a composite index for the above men-tioned indicators. As far as the top-7 is concerned, the US, Finland and Switzerland head the ranking, whereas Sweden, The Netherlands and Japan are lacking behind. Germany is ranked in the bottom one-third. Figure 2.3 Index for relevance of public research 100 90 80 70 60 50 40 30 20 10 0
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