Monday, February 25, 2013

Measuring Innovation in Organizations

Organizational innovation is an important aspect of growing products and services for international markets. Without innovation new revenue streams will not be developed and older revenue streams will suffer from higher levels of international pressure. Encouraging organizations to grow, develop, and overcome their market challenges is tantamount to innovating the economic system. Research helps indicate what measures organizations are using to measure innovation in an effort to improve their operational and financial performance.

Innovating organizations are often seen as improving the system that works to produce better and more relevant outputs.  An innovative system consists of the participants or actors and their activities that create a socio-economic environment where these actors function together to determine innovative performance of the system (Eggink, 2012).  Under such a definition the entire organization is a social-economic group or bubble where the internal activities produce meaningful outputs.

The elements that make up the innovative system may be specifically designed or come together through a more organic method. “There is no presumption that the system was, in some sense, consciously designed, or even that the set of institutions involved works together smoothly or coherently.”(Nelson, 1996).  Generally, economic systems are more organic and due to their circumstantial and historic development while the socio-economic groups of organizations are better planned and thought out.

To see how effective innovation is and the methods used to understand innovation within the organization it is often necessary to conduct a comparative analysis. A comparison of time periods and different systems helps to create better measures of innovative systems (Edquist & Zambala, 2009).  Through such analysis business leaders can better determine the overall effectiveness of their own measurement systems and methods of improvement.

Literary research conducted by Becheikh, Landry & Amara (2006) helps to highlight how firms measure innovation performance within their organization.  They reviewed 108 studies and built a composite of the findings that help business leaders and government officials understand how innovation is being measured in the economy. 

-24% used firm-based surveys
-25% used an innovation count
-18% used patent registrations
-6% used research and development expenditures
-15% used comparative indices
-9% other measurements such as sales, trademarks, time use, etc…
-4% made no attempt to measure
The research helps identify that the major of innovative measurements are based in firms and counts of developmental outputs. Other may use comparative indices as well as patent development.  At present the majority of firms are not using a measure of multiple factors that includes surveys, counts, and indices in order to more accurately engage their development. 

Becheikh, N., Landry, R. & Amara, N. (2006). Lessons from Innovation Empirical Studies in the Manufacturing Sector: A Systematic Review of the Literature from 1993-2003. Technovation, 26, 644-664.

Edquist, C. & Zabala, J. M. (2009). Outputs of Innovation Systems: A European Perspective, [Online], Lund University, (Paper no. 2009/14).

Eggink, M. E. (2012). The Role of Innovation in Economic Development, D.Com. Thesis, University of South Africa, Pretoria.

Nelson, R. (1996). The Sources of Economic Growth, Harvard University Press, London.

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