Innovation in Services - Department for Business, Innovation and Skills

Innovation in Services
example the presence or absence of R&D tax credits) and differences in methods
of data collection mean R&D statistics are rather less comparable than their
widespread use would suggest. Arguably, it is also becoming increasingly
difficult to measure R&D, as innovation practices have become more diffused
and less dependent on the centralised R&D laboratories of major companies
(which was the organisational model of innovation in the late 1950s to early
1960s when the Frascati Manual was first developed (see Roussel et al., 1991).
Beyond this, the fundamental criticism of R&D as a measure of innovation is that
it is an input, not an output, and firms and countries may differ markedly in their
ability to convert that input into innovative outputs.
The other traditional indicator of (technological) innovation is patents. Patents
are widely used because of the availability of large scale patent databases
(especially from the US patent office and more recently from the European
Patent Office). To patent, firms have to develop things that are patentable, and
this varies between countries (particularly with respect to software patents and
business process patents). It is also known that firms and industries differ widely
in their propensities to patent, and that patents are only really an effective
defence mechanism in the chemicals industry, and especially pharmaceuticals.
Ultimately, patents are not a measure of innovation, but invention – as many
patented devices are not commercialised. They are also only a partial measure
of invention, as many inventions are not patented.
Dissatisfaction with R&D and patents as measures of innovation (as opposed to
inventive effort and invention) led to the development of new measurement
approaches in the 1980s and 1990s. One was the so called ‘object-based
approach’, which was based around identifying innovations directly, either by
asking experts in various industries to identify major innovations, or by using
trade journals to identify and classify new product announcements. Although
these approaches showed a great deal of innovation does not flow directly from
investments in R&D, these methods tend to favour industries which produce
tangible things – as it is rather easier for experts to remember new devices
(which may be stored in museums) than new practices or procedures. Similarly,
trade journals are more likely to record the introduction of a new tangible
product than a practice, such as ‘just in time’.
The other main approach to measuring innovation is the ‘subject-based
approach’ which is based on asking firm (the subjects) whether they have
introduced innovations. Although used by the European Innobarometer
amongst other ad hoc surveys, the main instrument that uses the ‘subject-based
approach’ is the European Community Innovation Surveys (CIS), which were
first undertaken in 1992.
In principle, subject-based approaches are equally applicable to manufacturing
and services, but in practice – and particularly as operationalised through the
European Community Innovation Surveys – these have (arguably) tended to
favour manufacturing. Especially in the first edition of the Oslo Manual (OECD
1992) – the OECD’s guide to gathering innovation data through surveys – the
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