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Innovation is a multifaceted phenomenon and is not easily confined to a typical indicator. This is also the case for the measurement of economic growth, which is expressed, despite the limitations of this indicator, by the evolution of gross domestic product (GDP). Research & Development (R&D) and patents have long been considered as key indicators of innovation, the former measuring the resources allocated to innovation and the latter evaluating the results of the activity.

The measurement of R&D is based on data collected from companies and research organizations, according to the codification carried out by the Frascati Manual, the seventh edition of which was published in 2015. Gross domestic expenditure on R&D (GERD) refers to the total expenditure on R&D performed by businesses, the government, higher education and the private non-profit sector at the heart of the economy. These expenditures include R&D financed from abroad, but exclude the financing of the R&D activities of foreign businesses. R&D intensity is established by the ratio of R&D expenditure to GDP for a country or the ratio of R&D expenditure to turnover for companies.

Global R&D capacity, as measured by public and private investment, has doubled since the mid-1990s. This increase in global R&D capacity is due in particular to the growth in corporate spending, which accounts for about 70% of total R&D spending. While the financial crises that marked the period (the crisis in emerging countries in the early 1990s, the crisis of new economy start-ups in 2001, the financial crisis of 2008) have led to cyclical reductions in R&D investment, companies are also relying on innovation to boost the growth of their activities. This can also be explained by the strong increase in spending as a percentage of GDP in emerging countries (China, Korea and Israel), compared with slower growth in the EU-28, the United States or Japan.

One of the major limitations of this indicator is that R&D appears to be mainly focused on science and technology and has difficulty capturing the expenditure incurred to bring about other forms of innovation, whether organizational or commercial. The services that make up an important part of the new solutions offered by companies are better evaluated by marketing expenses, which are not included in the R&D measurement. As a result, the expenditures made by small firms (which rarely employ researchers) to innovate organizationally or commercially are poorly understood and, therefore, not considered as being very innovative.

A patent is an industrial property title granted to an inventor for a period of 20 years, often used as an indicator of results and innovation performance. It has the advantage of being an available and reliable indicator, whose databases are public. Worldwide patent registration statistics show a strong growth in patent registrations from the 1970s onwards. Innovators around the world filed some 3.3 million patent applications in 2018, an increase of 5.2% for the ninth consecutive year of growth. At that time, approximately 14 million patents were in force worldwide. The largest numbers of patents in force were registered in the United States (3.1 million), China (2.4 million) and Japan (2.1 million) (WIPO 2019).

However, as an indicator of innovation, the patent also suffers from many limitations. On the one hand, it only measures registered “inventions”, thus leaving aside all other possible forms of innovation. On the other hand, many inventions are not patented, especially if they do not meet the criteria of novelty, inventive step and industrial application. An invention that is useful, but not innovative (so if it is already part of the state of the art, in other words everything that has been made public at the filing date), will not normally be able to pass the stage of the research report carried out by the industrial property institute. A registered patent does not always result in an innovation, i.e. a new product launched on the market or a new process integrated into the production process. Many patented inventions remain unexploited, often for strategic reasons. For example, some patents are intended to deceive competitors about the technological trajectories followed. Sleeping patents are also very common. In this case, they are not exploited because the profit prospects are lower than the costs of bringing them to market. The company holding the patent may not have the resources necessary to exploit the invention or may prefer to wait for the previous invention to become fully profitable before launching a new one (in this case, one can speak of “technological Malthusianism”).

However, criticisms have been made about the quality of patents, particularly those granted in the United States in the years 1990–2000, given the favorable attitude of this country towards inventors. In reality, the criteria for patentability have, in many cases, been little respected, leading to the multiplication of low-quality patents and numerous challenges and lawsuits. The statistics would thus be distorted by the multiplication of these “rotten” patents. Another difficulty related to the measurement of patents lies in the fact that they are national titles valid in the countries where protection has been claimed (apart from the unitary patent in Europe, the use of which still depends on the ratification of certain agreements between signatory countries). In order to avoid counting them several times, statisticians have defined an indicator called a “patent family” which designates a set of patents filed in several countries to protect the same invention. We distinguish, for example, triadic “patent families”, which are a set of patents filed with three of the main offices, namely the European Patent Office (EPO), the Japanese Patent Office (JPO) and the United States Patent and Trademark Office (USPTO).

Innovation indicators are not limited to these two; they also include the number of researchers, scientific publications, amounts devoted to financing innovative firms (venture capital), registrations of other intellectual property titles (trademarks, designs), revenue generated by innovative firms, diffusion of key technologies, etc. A better understanding of the innovation process leads not to limiting research to traditional indicators but to refining the evaluation of innovation efforts and performance by using other indicators. For example, at the firm level, statisticians (see OECD 2019) seek to better measure intangible investments that are not R&D (such as software and databases), or the interactions that firms develop with other firms or institutions. At the country level, indicator scoreboard and summary indicators are being developed to quantify innovation.

In Europe, the European Union Innovation Scoreboard (created in 2001) provides a synthetic indicator for ranking countries according to their innovation performance. Four categories of countries are defined: modest innovators, moderate innovators, notable innovators and innovation champions. The results for 2019 were as follows.

Sweden, Finland, Denmark and the Netherlands appeared to be the leaders in innovation, positioning themselves well above the European average. Notable innovators included the following countries: Luxembourg, Belgium, the United Kingdom, Germany, Austria, Ireland, France and Estonia. Their results were slightly above (or close to) the European average. The performance of moderate innovators was between 50% and 90% of the European average. This category included many countries in Eastern and Southern Europe, such as Portugal, Czech Republic, Slovenia, Cyprus, Malta, Italy, Spain, Greece, Lithuania, Slovakia, Hungary, Latvia, Poland and Croatia. Finally, the modest innovators, Romania and Bulgaria, had a performance below 50% of the European average.

This synthetic indicator – the Summary Innovation Index – is based on four broad categories of indicators and 10 dimensions of innovation. The “framework conditions” take into account the essential factors of innovation performance, and this category includes human resources, the attractiveness of the research system and the environment conducive to innovation. “Investments” measures public and private investment in innovation. “Innovation activities” seeks to measure the efforts made by firms, distinguishing between the characteristics of innovators, networks and intellectual assets. Finally, the “Impacts” category considers impacts on employment and sales. In total, the composite indicator is constructed from 27 indicators.

Figure 1.1. Member countries' innovation performance (source: European Innovation Scoreboard 2019). For a color version of this figure, see www.iste.co.uk/uzunidis/innovation1.zip

Such an indicator makes it possible to monitor the performance of the European Union and of each country over time, as well as serves as a guide for the definition of public policies adapted to the specific problems encountered in each country. One notable result is that the countries that champion innovation show similar performance in each dimension of innovation measured. This leads to a view that the overall strength of the national innovation system plays a key role in innovation performance (see section 1.5).