Innovation Policy
Lecture 1: Introduction to Innovation | Prof. Knut Blind
Overview
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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Literature
A good background is the course Innovation Economics based on the following
literature:
• Introductory Reading: Peter Swann (2010): The Economics of Innovation – An
Introduction (Edward Elgar Publishing)
• Advanced Reading: Christine Greenalgh & Mark Rogers (2010): Innovation,
Intellectual Property and Economic Growth, Princeton University Press
Regarding innovation policy:
• Edler, J., Cunningham, P., Gök, A., & Shapira, P. (2013). Impacts of
innovation policy: synthesis and conclusions. Compendium of Evidence on the
Effectiveness of Innovation Policy Intervention Project) Manchester.
• Smits et al. (2010): The Theory and Practice of Innovation Policy (Edward
Elgar Publishing).
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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Introduction to Innovation
General Definitions
Schumpeter’s understanding of Innovation
Innovation Indicators
Public Innovation
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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Introduction – German Stars
1516 – Herzog
Wilhelm IV. von 1987 –
1949 –
Bayern Fraunhofer-
Herta Heuwer
Institut
1997 –
Otto Bock
Healthcare GMBH
1971 –
Mercedes-
1897 – Felix Benz
Hoffmann
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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Definitions of INNOVATION:
Used in various contexts with different meanings
No right or wrong definition
Technology and Use of new ideas,
Patents
knowledge perceptions of costumers
Law Business
Economics
Distribution of social
power and change
Sociology
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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What is the ‘Economics of Innovation’?
Microeconomics – understanding processes, including how incentives affect firms
Macroeconomics – ‘innovation’ drives economic growth.. and economic growth
drives living standards, environmental, political…
Business Strategy – this is not a course on advising firms how to innovate, but
does include some insight into this
Economic Policy – are there (market/state/system) failures in the innovation
process and what, if anything, should the government do?
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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OECD Definition - Innovation
“An innovation is a new or improved product or process (or combination thereof) that
differs significantly from the unit’s previous products or processes and that has been
made available to potential users (product) or brought into use by the unit (process).”
“Innovation activities include all developmental, financial and commercial activities
undertaken by a firm that are intended to result in an innovation for the firm.”
“A business innovation is a new or improved product or business process (or
combination there of) that differs significantly from the firm's previous products or
business processes and that has been introduced on the market or brought into use by
the firm.”
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation Source: OECD (2018)
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OECD Definition - Diffusion
“The concept of innovation diffusion encompasses both the process by which ideas underpinning
product and business process innovations spread (innovation knowledge diffusion), and the
adoption of such products, or business processes by other firms (innovation output diffusion).”
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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Emerging technology adoption rate in organizations worldwide 2020
Small Scale Large Scale
35%
31%
30% 29%
25%
25% 24%
23%
22%
21%
Adoption rate
20%
15%
10% 9%
7% 7%
6%
5%
5% 3%
2% 2%
1%
0%
SaaS Distributed Artificial Intelligent Internet of Augmented Blockchain Quantum
Marketplace Cloud Intelligence Automation Things Virtual Computing
Platforms Reality
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation Source: Sava, J. (2022)
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OECD Classification
Product Innovation
Is a new or improved good or service that differs
significantly from the firm’s previous goods or services
and that has been introduced on the market.
Business Process Innovation
Is a new or improved business process for one or more
business functions that differs significantly from the
firm’s previous business processes and that has been
brought into use by the firm.
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation Source: OECD/Eurostat (2018)
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OECD Classification
Product Innovation:
Goods
Types of products
Services
Business Process Innovation:
Production of goods and services
Distribution and logistics
Marketing and sales
Types of business processes
Information and communication systems
Administration and management
Product and business process development
?!? Can you think of any examples for these types of innovation?
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation Source: OECD/Eurostat (2018)
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OECD Classification
By definition, all innovations must contain a degree of novelty.
New to the firm
• when a product, process, marketing method or
organisational method that may already have been
implemented by other firms is new to the firm
New to the market
• when the firm is the first to introduce the innovation on
its market
New to the world
• when the firm is the first to introduce the innovation for
all markets and industries, domestic and international
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation Source: OECD/Eurostat (2018)
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Acquiring knowledge from a company perspective
Product imitations are products or
services that are offered by a company
for the first time but are already
available in the market by competitors
Novelty in Assortment are new or
significantly improved products and
services that have no predecessors in
the company
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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OECD Classification
Radical innovation can be defined as an innovation that has a significant impact on
a market and on the economic activity of firms in that market.
This concept focuses on the impact of innovations as opposed to their novelty
The impact can, for example, change the structure of the market, create new
markets or render existing products obsolete (Christensen 1997)
However, it might not be apparent whether an innovation is disruptive until long
after it has been introduced
?!? What radical innovations can you think of?
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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Intermediate Summary
Product Innovation
Character
Business Process
Innovation
Innovation
New to firm
Degree of novelty New to market
major impact
Radical
New to world innovation
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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Key Attributes of Innovation
Nature Type
• New • Product
• Improve • Service
• Change • Technical
• Process
Means Aim
• Technology • Succeed
• Ideas • Compete
• Inventions • Differentiate
• Creativity
• Market
Social Stages
• Firms • Creation
• Customers • Generation
• Social Systems
Innovation • Implementation
• Employees Process • Development
• Developers • Adoption
• Organizations
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation Source: Baregheh et al.(2009)
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Introduction to Innovation
General Definitions
Schumpeter’s understanding of Innovation
Innovation Indicators
Public Innovation
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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Schumpeter’s Understanding of Innovation
Innovations are defined by crucial changes in at least one production ‘force’ and its
implementation:
ENFORCEMENT OF NEW COMBINATIONS
1. Production of a new product or a new quality
2. New process
3. Opening of a new market
4. New suppliers
5. New organizational structures
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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The 3 Central Aspects of Schumpeter’s Concept
Creativity Destruction Dynamic
• Improved • Changes Entrepreneurs
Goods and market • Take the risk to
Services structures adopt and
• More cost • Could lead to introduce the
effective lock-out of old innovation as
production technology or the first
firm
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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Introduction to Innovation
General Definitions
Schumpeter’s understanding of Innovation
Innovation Indicators
Public Innovation
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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What are (Innovation) Indicators?
Indicators attribute properties to units of observation for points or periods in time
Indicators are proxies to measure „latent concepts“
Indicators are constructs all indicators can be challenged
An innovation indicator is a statistical summary measure of an innovation
phenomenon (activity, output, expenditure, etc.) observed in a population or a sample
thereof for a specific time or place. Indicators are usually corrected (or standardized)
to permit comparisons across units that differ in size or other characteristics.
(OECD, 2018)
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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The structure of all indicator-based argumentation
Example: patents as indicators for innovation:
• “The level of innovation is high...” (property)
• “... in sector X in country Y” (unit of observation)
• “in the year 2009” (time)
(Most) Innovation is
captured in patents
The relative share of patents
The level of
applications in sector X in
innovation was
country Y as total share of all
high in sector X in
patents application was high
country Y in the
for applications with a priority
year of 2019
year of 2019.
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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Some Dimensions of Innovation Indicators
Level of abstraction by units of observation
Individual | Firm | Sector | Region | Country | World
Level of complexity
Simple counts | composite indicators
Phases of the innovation process
Input | Activities | Output | Impact
Degree of user-driveness
Market pull | Technology Push
Data source
Surveys | Government databases | Webpages
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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R&D Intensity in selected OECD and China 2009-2019
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation Source: EFI (2022)
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R&D Intensity in selected OECD and China 2009-2019
R&D Spending as % of GDP R&D Spending in million USD
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation Source: OECD (2022)
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Patents & Publications basis for output-orientated STI
STI: = Science and technology indicators
• The indicators usually count patent applications (A-documents), not grants (B
documents)
• For most comparative country patent analyses, international filing routes are used
Publication statistics (also known as bibliometrics)
• Dominant databases are the Science Citation Index (SCI), the Social Science
Citation Index (SSCI), Scopus (gaining importance) as well as Google scholar
(fringe importance)
• Publication-based indicators can be deceptive as isolated measures because they
just show the indefinite scientific activity
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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Number of Transnational Patent Applications
Transnational patent applications comprise applications in patent families with at least
one application to the World Intellectual Property Organization (WIPO) via the PCT
route or one application to the European Patent Office
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation Source: EFI (2022)
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Top Countries for Transnational Patent Applications 2020-2021
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation Source: WIPO Statistics Database (2022)
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Top Technical Fields in Transnational Patent Applications 2021
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation Source: WIPO Statistics Database (2022)
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Introduction to Innovation
General Definitions
Schumpeter’s understanding of Innovation
Innovation Indicators
Public Innovation
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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Public Innovation
Innovation in the public sector
Innovation in cooperation with the public sector:
• Public-Private-Partnerships (PPP)
• Public Procurement (e.g. green public procurement, e-procurement)
Innovation in framework conditions set by the public sector to boost innovation in the
private sector
?!? Can you think of any concrete examples for public innovations?
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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Private vs. Public Innovation
Differences between private and public sector innovation
Private sector Public sector
Product innovation Service innovation
Business process innovation Process innovation
Organizational innovation
Communication innovation
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation Source: European Union (2013)
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Some Public Innovation Types
Service innovation:
• New or significantly improved service or good (in characteristics, customer access or use)
Process and organizational innovation:
New or improved …
• … methods of providing services or interacting with users
• … delivery or logistics systems for an organization’s inputs
• … supporting activities (e.g. maintenance, purchasing, accounting or computing systems)
• … management systems
• … methods of organising work responsibilities or decision making
Communication innovation:
New or improved methods …
• … of promoting the organization or its services
• … to influence the behavior of users, citizens or others
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation Source: European Union (2013)
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Public Innovation includes:
Social Innovation:
New services that improve the quality of life of individuals and communities by
using innovative processes aiming for instance at new labour market integration,
social inclusion, resource efficiency and environmental challenges (European
commission 2011).
Sustainable Innovation:
“Sustainable development is development that meets the needs of the present
without compromising the ability of future generations to meet their own needs.”
(United Nations General Assembly, 1987)
(more details in further lectures)
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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References
Baregheh, A., Rowley, J., & Sambrook, S. (2009). Towards a multidisciplinary definition of innovation. Management
decision, 47(8), 1323-1339. DOI: 10.1108/00251740910984578
Christensen (1997). The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail. Harvard
University Press, Boston.
EFI (2022). Gutachten 2020. Available at: https://www.e-fi.de/fileadmin/Assets/Gutachten/2022/EFI_Report_2022.pdf
European Union (2013): European Public Sector Innovation Scoreboard (2013). A pilot exercise
http://ec.europa.eu/enterprise/policies/innovation/files/epsis-2013_en.pdf
Greenalgh, Ch. & M. Rogers (2010): Innovation, Intellectual Property and Economic Growth, Princeton University
Press
OECD (2013). OECD Science, Technology and Industry Scoreboard 2013. Innovation for Growth.
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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References
OECD (2017). The Next Production Revolution. IMPLICATIONS FOR GOVERNMENTS AND BUSINESS. Online
version available: https://www.oecd-ilibrary.org/docserver/9789264271036-
en.pdf?expires=1523356748&id=id&accname=ocid56023174a&checksum=9606FA3B983F975E7B0068D892CAE3D8
OECD/Eurostat (2018). Oslo Manual 2018: Guidelines for Collecting, Reporting and Using Data on Innovation, 4th
Edition, The Measurement of Scientific, Technological and Innovation Activities.
OECD. (2022). Gross domestic spending on R&D (indicator). doi: 10.1787/d8b068b4-en (Accessed on 16 March 2022)
Sava, J. (2022). Adoption rate of emerging technologies in organizations worldwide as of 2020, by scale. Retrieved
from https://www.statista.com/statistics/661164/worldwide-cio-survey-operational-priorities/
Smits, R., Kuhlmann, S., & Shapira, P. (2010). The Theory and Practice of Innovation Policy. An International
Research Handbook. Edward Elgar.
Swann, G.M.P. (2009). The Economics of Innovation: An Introduction. Edward Elgar.
WIPO. (2022). WIPO Statistics Database. Retrieved from https://www.wipo.int/edocs/infogdocs/en/ipfactsandfigures/
Innovation Policy SS 2023 | Prof. Knut Blind | Lecture 1: Introduction to Innovation
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