More on this in our Series on Innovation Basics
The document is fully available online at Oslo Manual 2018: Guidelines for Collecting, Reporting and Using Data on Innovation, 4th Edition | en | OECD.
Yet it is rather hard to read through! Check our simple summary to grasp its key elements.
Find more on Best References Materials on Innovations & innovation basics.
Introduction
Understanding and measuring innovation is paramount for business success.
The Oslo Manual, jointly published by the OECD and Eurostat, is an undisputed reference. It provide clear guidelines for collecting and interpreting data on innovation.
In this blog post, we embark on a journey to unravel the complexities of the Oslo Manual 2018.
Let’s explore its significance, evolution, and the novelties introduced in its latest edition.
What is the Oslo Manual?
The Oslo Manual serves as a comprehensive guide for collecting and interpreting data on innovation.
Its primary objective is to enhance international comparability, acting as a valuable tool for research and experimentation in innovation measurement.
Tailored for national statistical offices and other data producers, the manual offers formal statistical standards, best practices, and suggestions for expanding innovation measurement into new domains.
Direct links to chapters
- Chapter 1. Introduction to innovation statistics and the Oslo Manual
- Chapter 2. Concepts for measuring innovation
- Chapter 3. Concepts and definitions for measuring business innovation
- Chapter 4. Measuring business innovation activities
- Chapter 5. Measuring business capabilities for innovation
- Chapter 6. Business innovation and knowledge flows
- Chapter 7. Measuring external factors influencing innovation in firms
- Chapter 8. Objectives and outcomes of business innovation
- Chapter 9. Methods for collecting data on business innovation
- Chapter 10. The object method for innovation measurement
- Chapter 11. Use of innovation data for statistical indicators and analysis
Why Measuring Innovation?
Accurate measurement of innovation is vital for policymakers to comprehend economic and social changes, assess the impact of innovation on societal goals, and evaluate the effectiveness of policies.
Innovation is a catalyst for improvements in living standards, influencing individuals, institutions, economic sectors, and entire countries.
The Oslo Manual guides the collection and reporting of innovation data, providing a common vocabulary and agreed-upon principles.
| Purpose of Measuring Innovation | Explanation |
|---|---|
| Policy Development and Evaluation | Innovation measurement informs the design, implementation, and evaluation of policies aimed at promoting and sustaining innovation. |
| Resource Allocation | Enables informed allocation of resources by identifying sectors and activities that significantly contribute to economic growth and competitiveness. |
| Competitiveness | Facilitates benchmarking and identification of areas for improvement, helping countries and businesses stay competitive in the global market. |
| Economic Growth | Assess the contribution of innovation to economic growth, allowing policymakers to identify growth opportunities and strategies for development. |
| International Comparisons | Consistent measurement across countries allows for comparisons, helping nations understand their relative strengths and weaknesses in innovation. |
| Research and Development (R&D) Investment | Includes indicators related to R&D expenditure and activities, providing insights into the level of investment in research and development and its potential impact. |
| Productivity Improvement | Helps organizations and governments understand how innovations contribute to improvements in productivity, efficiency, and overall economic performance. |
| Entrepreneurship and Business Development | Guides the creation and growth of innovative businesses by understanding the role of innovation in entrepreneurship and business development. |
| Job Creation | Assesses the contribution of innovative activities to job creation, guiding policies to support employment through the development of new industries and opportunities. |
Who are interested in measuring innovation?
The users for measuring innovations include research academics, business managers, and innovation and other public policy makers.
Research academics use innovation data to enhance societal understanding and conduct predictive and causal interpretations. Business managers benefit from aggregated results to benchmark their organization’s innovation activities. Innovation and other public policy makers rely on innovation data for informed policy decisions, benchmarking indicators, and research to achieve key policy objectives.
These users seek comparable data across industries, regions, and time to analyze innovation impacts and factors influencing innovation.
Decoding Innovation: Definitions and Components
The Oslo Manual distinguishes itself by emphasizing measurability, defining innovation as a new or improved product or process that significantly differs from previous iterations and is made available to potential users.
Innovation encompasses both an activity and its outcome, requiring implementation for classification.
The manual further refines this definition for business innovation, focusing on product and business process innovations.
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).
Home | OECD iLibrary (oecd-ilibrary.org)
Evolution and Revision of the Oslo Manual
The latest edition of the Oslo Manual reflects the evolving landscape of innovation measurement. Drawing on experiences since the 1990s, the revision engaged experts from over 45 countries and international organizations. The manual addresses gaps in evidence, answering outstanding questions about the role of innovation and its influence on policies. It introduces several novelties, emphasizing a conceptual framework applicable across sectors, streamlined definitions, and enhanced guidance on measuring intangible assets.
Practical Guidance and Methodological Insights
A significant enhancement in the Oslo Manual 2018 is the provision of extended methodological guidelines covering the entire innovation data lifecycle. From survey design to data dissemination, the manual offers insights into assessing question items, survey methods, and the importance of international convergence in survey practices. It also advocates for the integration of surveys with other sources and presents a blueprint for constructing statistical indicators of innovation.
Globalization, Digitalization, and Innovation
The manual acknowledges the impact of globalization on innovation, emphasizing the role of multinational enterprises and knowledge flows. It also delves into the connection between digitalization and innovation, recognizing digitized information as a potential innovation activity. The guidelines advocate for international coordination when interpreting data on the role of multinational enterprises.
Guidelines in Action: How to Use the Oslo Manual
As a statistical resource, the Oslo Manual provides recommendations and identifies possible approaches for experimentation. While not mandatory, member countries are encouraged to adopt the recommendations to ensure international comparability.
The manual allows flexibility in data collection methods, recognizing the sensitivity of results to survey choices. It also serves as a valuable reference for policy and regulatory purposes, facilitating the link between policies and specific innovation activities outlined in the manual.
Basic Concepts
Simplified Economic Model For The Firm
In a simplified economic model, firms create products (Goods or Services) using Business processes.
What Are Firms?
Firm can be defined as an organized economic entity engaged in productive activities, typically involved in the creation, production, and distribution of goods and services. A firm can take various forms, including corporations, partnerships, or sole proprietorships, and it operates within a market economy with the goal of generating revenue and, in many cases, profit.
What Are Goods?
Goods include tangible objects and some knowledge-capturing products over which ownership rights can be established and whose ownership can be transferred through market transactions.
What Are Services?
Services are intangible activities that are produced and consumed simultaneously and that change the conditions (e.g. physical, psychological, etc.) of users.
The engagement of users through their time, availability, attention, transmission of information, or effort is often a necessary condition that leads to the co-production of services by users and the firm. The attributes or experience of a service can therefore depend on the input of users. Services can also include some knowledge-capturing products (see below).
What Are Business Processes?
Business processes are as a set of interrelated or interacting activities that transform inputs into outputs. Business processes involve the organized coordination of resources, including human skills, technology, and information, with the aim of delivering goods or services.
General firm activities
A firm begins by identifying a market need, conducting research, and designing its product or service. Resources such as raw materials and labor are then procured, and the production or service delivery process begins. Quality control is maintained throughout, ensuring the final product meets standards. Distribution channels are established for product delivery or service deployment. Marketing and sales efforts make the product/service known, while customer support ensures ongoing satisfaction. Feedback is collected for continuous improvement. Financial management, adherence to regulations, and compliance with industry standards are maintained. The firm’s success relies on efficient processes, adaptability, and effective resource management.
Simplified Model For Innovation Activities
This model is based on the Oslo Manual.
What Are Innovation Activities?
Innovation activities include all developmental, financial and commercial activities undertaken by a firm that are intended to result in an innovation for the firm.
What Are Business Innovation?
A business innovation is a new or improved product or business process (or combination thereof) 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
What Are Business Process Innovation?
Business process innovation involves the significant alteration or redesign of the methods, workflows, and procedures within an organization. The goal is to enhance efficiency, reduce costs, and improve overall effectiveness. It often includes the adoption of new technologies, the streamlining of operations, and the implementation of best practices to bring about positive changes in how the business functions.
Definition of Process_Innovation
What Are Product Innovation?
Product innovation refers to the development and introduction of new or improved products and services. This can involve the creation of entirely new offerings, enhancements to existing products, or the integration of innovative features. Product innovation is crucial for staying competitive in the market, meeting evolving customer needs, and capitalizing on emerging trends.
Definition of Product Innovation
Dimensions of innovations
An evaluation of innovation theories points to four dimensions of innovation that can guide measurement: knowledge, novelty, implementation, and value creation.
What is knowledge?
Knowledge refers to an understanding of information and the ability to use that information for different purposes.
It is obtained through cognitive effort and involves practical application of existing or newly developed information. Knowledge can be distinguished from mere data by its organizational structure and the cognitive effort required for its acquisition. In the context of innovation measurement, knowledge is a key component, as innovations often derive from knowledge-based activities. Knowledge is non-rivalrous, meaning its use by one entity does not diminish its potential use by others, but the resources required for its assimilation and effective use can be rivalrous.
what is novelty?
Novelty refers to the degree of newness or uniqueness associated with an innovation.
It involves the development of new ideas, models, methods, or prototypes that can serve as the foundation for innovations. The novelty of an innovation is determined by factors such as its potential uses, characteristics in comparison to alternatives, and the experiences of its providers and intended users.
It encompasses both objectively measurable attributes, such as physical characteristics, and more subjective aspects, like user satisfaction, usability, and emotional affinity. The concept of novelty helps assess the distinctiveness and originality of an innovation within its specific context.
what is implementation?
Implementation refers to the process of putting a new idea, model, method, or prototype into active use.
For an innovation to be considered as such, it needs to be implemented, either within the organization that developed it or made available for use by other parties, firms, individuals, or organizations. Implementation involves systematic efforts to ensure that the innovation is accessible to potential users, either for the organization’s own processes and procedures or for external users of its products. The act of implementation distinguishes innovation from mere inventions, prototypes, or new ideas.
what is Value creation?
Value creation, in the context of innovation, refers to the process of generating economic or social value through the development and implementation of new ideas, models, methods, or prototypes.
When an innovation is successfully implemented, it should offer benefits or advantages that contribute to the well-being of individuals, organizations, or society as a whole. Value creation is an implicit goal of innovation, as innovators aim to use resources effectively to bring about positive outcomes. The value created by an innovation can take various forms, including economic value, improvements in efficiency, enhanced user satisfaction, or contributions to societal goals such as sustainability and inclusion. The realization of value may unfold over time and can be assessed through measures such as economic indicators, user satisfaction, and overall societal impact.
What are the type of business processes?
The text describes six main types of business processes:
- Production of goods or services
- Distribution and logistics
- Marketing and sales
- Information and communication systems
- Administration and management
- Product and business process development
It categorizes production as the core business function, while the other five are considered ancillary functions that support production and bring products to market.
What changes are not innovations?
Changes that are not innovations include:
- Routine changes or updates like software updates to fix errors or seasonal fashion changes.
- Simple capital replacement or extension like purchasing identical equipment models.
- Minor aesthetic changes to products like a small design change or color change.
- One-off custom products or services unless they display significantly different attributes.
- Concepts, prototypes or models that have not been implemented.
- Standard outputs of professional service firms like consulting reports without novelty elements.
- Standard retail activities like adding a new product variety without significant process changes.
- Mergers or acquisitions on their own without new process development.
- Ceasing a process, outsourcing a process, or withdrawing a product.
- Changes due only to externally driven price factors like lowering a phone price due to lower component costs.
- New corporate strategies that are not implemented.
- Processes already in use identically elsewhere in the firm.
What is the opposite of innovation?
What are the strategies for measuring innovation?
General strategies for measuring innovation include addressing issues such as the choice between subject and object approaches, collecting both qualitative and quantitative data, selecting appropriate data sources (e.g., surveys, administrative data, commercial data, internet platforms), and determining responsibility for primary source data collection (e.g., by national statistical organizations or other entities). The measurement strategy can evolve over time to adapt to changing user needs and data collection opportunities. Combining subject- and object-based approaches, using qualitative measures, and leveraging various data sources contribute to a comprehensive measurement approach.
What are the Features of innovation Activities?
Firms can perform innovation activities in-house or source goods or services for innovation activities from external organizations.
Here are some additional details about this main feature of innovation activities:
- Firms have the option to conduct innovation activities internally using their own resources and employees, or externally by obtaining goods/services from other organizations.
- Sourcing innovation activities externally allows firms to leverage outside knowledge, expertise and resources that they may not have access to internally. This can help accelerate innovation efforts.
- However, managing external partners also requires coordination and comes with additional transaction costs. Firms must choose whether internal or external innovation activities are most suitable and cost-effective for their needs.
- The text implies both in-house and external sourcing are valid approaches for firms to pursue innovation. Different firms may utilize different combinations of internal vs. external activities depending on their capabilities and projects.
- Having flexibility to select internal or external options gives firms more control over how they structure their innovation processes. But it also means they must evaluate both approaches for different innovation needs.
- This feature highlights that innovation is not necessarily an isolated in-house function, but can involve collaborating with and drawing from external organizations as well. Open innovation is an option provided by this flexibility.
What are the Activities relevant to innovation?
There are eight types of activities relevant to innovation:
| Activity | Description | |
|---|---|---|
| 1 | Research and experimental development (R&D) activities | Creative and systematic work undertaken to increase knowledge and develop new applications, including basic research, applied research, and experimental development. |
| 2 | Engineering, design and other creative work activities | Experimental and creative activities related to but not meeting all criteria for R&D, including follow-up R&D activities, product design, and ideation. |
| 3 | Marketing and brand equity activities | Market research, testing, pricing, advertising, promotion, and activities building reputation and brand equity. |
| 4 | IP-related activities | Activities related to protecting, exploiting, acquiring, and trading intellectual property like patents and copyrights. |
| 5 | Employee training activities | Training activities paid for by the firm to develop employee skills and knowledge. |
| 6 | Software development and database activities | Developing, purchasing, and analyzing software and databases. |
| 7 | Activities related to the acquisition or lease of tangible assets | Purchasing, leasing, producing buildings, machinery, equipment, and other tangible goods. |
| 8 | Innovation management activities | Systematic activities to plan, govern, and control innovation resources and performance. |
What type of data shall be use to measure innovation?
Both qualitative and quantitative data on innovation activities should be collected.
Specifically, Oslo Manual recommends collecting:
- Qualitative data on whether specific innovation activities were conducted and whether they were for innovation purposes.
- Total expenditures for various innovation activities.
- Total innovation expenditures using an accounting method that collects expenditures by categories.
- Funding sources for innovation activities.
What are the methods for collecting data on innovation activities?
There are two main methods recommended for collecting expenditure data on innovation activities:
Collecting data for specific innovation activities:
- Collect total expenditure data for each of seven specific innovation activities (R&D, engineering/design, marketing, IP-related, training, software development, acquisition of tangible assets) for all firms.
- For innovation-active firms, collect additional data on the expenditures for each activity that were for innovation purposes.
Collecting expenditure data by accounting categories (for innovation-active firms only):
- Collect data on innovation expenditures using five standard accounting categories – R&D, personnel costs, purchases of external services, purchases of materials, capital expenditures.
- Provide guidance to help firms identify non-R&D innovation expenditures within each category.
| Activity | Definition | Example | Details |
|---|---|---|---|
| R&D activities | Creative work undertaken on a systematic basis to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications. | Expenditures on R&D staff salaries, materials, equipment used for R&D projects. | Should include expenditures on IP licenses for R&D, tangible goods for R&D. Design/software development meeting R&D criteria. Exclude R&D depreciation costs. |
| Engineering, design and other creative work activities | Creative work to develop new or improved products/processes, excluding R&D. | Expenditures on design staff salaries, fees paid to external designers. | All activities except design/engineering meeting R&D criteria. Training in design/engineering/creative methods. External design service costs. |
| Marketing and brand equity activities | Activities to introduce innovations to the market, build brand awareness/loyalty. | Advertising campaigns, market research, trade show exhibitions. | All activities identified. Training for marketing/brand activities. Trademarks. External marketing/advertising service costs. |
| IP-related activities | Activities to protect and exploit intellectual property, such as patents, trademarks, designs. | Registration and maintenance of patents and trademarks, licensing fees paid/received. | Current expenditures. Training for IP management. Trademarks for marketing. External IP costs. |
| Employee training activities | Training of personnel to develop skills relevant to innovation. | Courses/workshops on new technologies, fees for external training programs. | Direct/indirect training costs. Exclude external/initial training. |
| Software development and database activities | In-house software development, purchase of new software/databases. | Salaries of in-house programmers, purchase of new software licenses. | All expenditures. Software for R&D under R&D. Data collection for market research under marketing. |
| Activities related to tangible assets | Purchase or lease of physical assets to enable innovation. | Purchase of new machinery/equipment, building upgrades, leases of factory facilities. | Capital/current expenditures. Leasing costs. Own-produced capitalised assets. Exclude assets for R&D. |
| Activity | Definition | Example | Details |
|---|---|---|---|
| R&D activities | Creative work undertaken on a systematic basis to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this stock of knowledge to devise new applications. | Expenditures on R&D staff salaries, materials, equipment used for R&D projects. | Should include expenditures on IP licenses for R&D, tangible goods for R&D. Design/software development meeting R&D criteria. Exclude R&D depreciation costs. |
| Engineering, design and other creative work activities | Creative work to develop new or improved products/processes, excluding R&D. | Expenditures on design staff salaries, fees paid to external designers. | All activities except design/engineering meeting R&D criteria. Training in design/engineering/creative methods. External design service costs. |
| Marketing and brand equity activities | Activities to introduce innovations to the market, build brand awareness/loyalty. | Advertising campaigns, market research, trade show exhibitions. | All activities identified. Training for marketing/brand activities. Trademarks. External marketing/advertising service costs. |
| IP-related activities | Activities to protect and exploit intellectual property, such as patents, trademarks, designs. | Registration and maintenance of patents and trademarks, licensing fees paid/received. | Current expenditures. Training for IP management. Trademarks for marketing. External IP costs. |
| Employee training activities | Training of personnel to develop skills relevant to innovation. | Courses/workshops on new technologies, fees for external training programs. | Direct/indirect training costs. Exclude external/initial training. |
| Software development and database activities | In-house software development, purchase of new software/databases. | Salaries of in-house programmers, purchase of new software licenses. | All expenditures. Software for R&D under R&D. Data collection for market research under marketing. |
| Activities related to tangible assets | Purchase or lease of physical assets to enable innovation. | Purchase of new machinery/equipment, building upgrades, leases of factory facilities. | Capital/current expenditures. Leasing costs. Own-produced capitalised assets. Exclude assets for R&D. |
The accounting method collects total innovation expenditure data according to 5 standard accounting categories: 1) R&D, 2) Personnel costs, 3) Purchases of external services, 4) Purchases of materials, and 5) Capital goods expenditures. Detailed guidance is provided on what costs fall under each category.
| Expenditure on | Details |
|---|---|
| 1. R&D | |
| 1a. Intramural R&D | Personnel cost, materials, other supplies, purchase of capital goods for R&D activities. Includes capital expenditures and gross fixed assets for R&D, excludes depreciation. |
| 1b. Extramural R&D | Purchase of R&D services from other parties. |
| 2. Innovation activities other than R&D | |
| 2a. Own personnel | Excluding cost of R&D personnel. |
| 2b. Services purchased from other parties | Excluding purchase of R&D services. |
| 2c. Materials and other supplies | Excluding materials/supplies for R&D. |
| 2d. Capital goods | Purchased tangible and intangible assets, excluding capital goods directly related to R&D activities. Includes capitalised own-produced assets. |
What are the source of funding for innovation activities
There are five main sources of funds that companies should provide data on when reporting funding sources for their innovation activities.
This includes internal funds as well as various external public and private funding sources.
| Source of Funds | Description |
|---|---|
| Internal Funds | Funds generated internally by the company from revenues, profits, depreciation allowances, etc. |
| Government Funds | Funds received from government agencies in the form of grants, tax incentives, subsidies, etc. targeted toward innovation activities. |
| Investor Funds | Funds received from equity investors, venture capital funds targeted toward innovation activities. |
| Customer Funds | Funds received from major customers/clients in the form of contracts, reimbursements, cost sharing payments specifically for innovation activities. |
| Other External Funds | Funds received from other external sources like charities, foundations targeted toward innovation. Also includes funds from collaborations and consortium partnerships. |
What are the other type of data to collect on innovation activities?
This table summarizes other recommended qualitative and quantitative data to collect on innovation objectives, outputs, barriers, impacts and collaborations to provide fuller context around companies’ innovation activities.
| Data | Description |
|---|---|
| Innovation Objectives | Qualitative data on the main objectives for conducting innovation activities (e.g. developing new products, entering new markets, improving processes etc). |
| Type of Innovation | Categorization of innovation output as product, process, marketing or organizational innovation based on OECD definitions. |
| Innovation Status | Categorization of whether innovation activities resulted in implemented innovations or abandoned/ongoing projects. |
| Barriers to Innovation | Qualitative data on obstacles/barriers faced in innovation activities (e.g. financial issues, lack of skilled workforce, regulations etc). |
| Impacts of Innovation | Qualitative and quantitative data on impacts of innovation activities (e.g. increased sales from new products, productivity gains, market share gains etc). |
| Collaboration | Details on innovative collaborations including partners, objectives and outcomes. |
| Human resources for innovation activities | Number of person-months allocated to activities like training, design work, marketing to estimate labor costs |
| Innovation projects | Number of projects, projects completed/ceased/ongoing, projects for product vs process innovations to understand diversity and organization of activities |
| Follow-on activities | Marketing, employee/user training, after-sales services after innovation introduction to understand commercialization and adoption |
| Planned innovation activities and expenditures | Near future (1-2 years) plans for activities, spending levels, uncertainty to understand future direction and spending |
| R&D Personnel | Average number of full-time equivalent R&D personnel employed during the reference period. |
Further qualitative and quantitative data to collect on innovation objectives:
What is the impact of knowledge over Business innovation?
What is knowledge in the context of business innovation?
In the context of business innovation, knowledge refers to information, insights, and expertise that contribute to the development and improvement of products, services, or processes.
Knowledge is considered a strategically significant resource for firms, and its effective access and deployment are crucial for those engaged in innovation activities.
How is knowledge accessed and deployed in the context of business innovation?
Knowledge is accessed and deployed through knowledge flows, which involve the intentional and unintentional transmission of knowledge. Knowledge exchange, or knowledge transfer, is the deliberate transmission of knowledge from one entity to another.
Firms can draw on both internal and external sources of knowledge for their innovation activities, including sources such as universities, public research institutions, customers, investors, experts, and other potential contributors.
What supports knowledge flows and the formation of knowledge networks in the business context?
Factors supporting knowledge flows and the formation of knowledge networks have evolved with advancements in technology and business models. Digital information and communication technologies have reduced the cost of copying, storing, and distributing data, enabling various models for sourcing and exploiting knowledge. New methods and platforms, such as crowdsourcing, crowdfunding, and online collaboration, have emerged as effective means of obtaining knowledge from diverse sources. Intellectual property (IP) rights play a role in creating knowledge markets that facilitate knowledge flows while ensuring creators can benefit from their investments in developing new knowledge.
How can the measurement of knowledge flows contribute to understanding innovation activities?
The measurement of knowledge flows between firms and other actors in the innovation system provides insights into the relative importance of these flows in the division of labor supporting innovation activities. It helps understand differences in knowledge networks by industry, changes in these networks over time, the impact of knowledge flows on innovation outcomes, and the methods firms use to manage their knowledge capabilities. Data on knowledge flows assist policy analysts and business managers in identifying opportunities, constraints, and factors enabling firms to absorb external knowledge.
What is the impact of knowledge flows over Business innovation?
What is the concept of innovation diffusion?
The concept of innovation diffusion encompasses both the process by which ideas supporting product and business process innovations spread (innovation knowledge diffusion) and the adoption of such products or business processes by other firms (innovation output diffusion). It involves the spread of ideas and technology, leading to economic and social impacts, especially when synergies and complementarities exist. Innovation diffusion can result in the adoption of new products or business processes by other firms, potentially replacing or rendering obsolete previously used ones.
Why are the process and outcomes of innovation diffusion of policy and research interest?
The process and outcomes of innovation diffusion are of policy and research interest because diffusion amplifies the economic and social impacts of ideas and technology, especially when there are synergies and complementarities in their use. Innovation diffusion can create knowledge flows that lead to further innovations, for example, when learning from using an adopted business process results in significant improvements. The speed and nature of innovation diffusion also shape the incentives to innovate.
How are firms active in innovation diffusion?
Firms are active in innovation diffusion when they:
- Adopt products or business processes with no or very little additional modification, as long as the adopted product or business process differs significantly from what the firm previously offered or used. These innovations are only new to the firm.
- Draw upon the ideas, experiences, products, or business processes of other firms or actors to develop a product or business process that differs from what was originally offered or used by the source firm.
- Enable other parties to make use of their innovations or relevant knowledge, for example, by providing another firm with IP rights or the tacit knowledge required to use the innovation or knowledge in a practical application.
What is a knowledge network, and what does it consist of?
A knowledge network consists of knowledge-based interactions or linkages shared by a group of firms and possibly other actors. It includes knowledge elements, repositories, and agents that search for, transmit, and create knowledge. Knowledge networks are interconnected by relationships that enable, shape, or constrain the acquisition, transfer, and creation of knowledge. Two main components of knowledge networks are the type of knowledge and the actors that receive, supply, or exchange knowledge.
How is knowledge classified based on certain criteria?
Knowledge can be classified based on the following criteria:
- The extent to which knowledge is codified or tacit, affecting its ease of transfer to other parties. Codified knowledge, which can be easily copied, includes articles, books, formulas, models, materials, databases, and IP rights like patents. Tacit knowledge may only be available in the minds of people who use it.
- Excludability, indicating the ability to prevent other parties from using knowledge. Tacit knowledge and knowledge requiring considerable expertise for understanding exhibit partial excludability.
- The extent to which knowledge already exists or has a prospective nature, i.e., whether knowledge is yet to be developed.
Who can be involved in knowledge flows, and how are they classified?
All organizations, agents, or individuals can be involved in knowledge flows and are classified based on several criteria:
- Economic activity (e.g., industry) of actors in knowledge flows.
- Institutional affiliation, such as being a PRI, a stand-alone firm, or part of a domestic or multinational group.
- Supplier or user of knowledge: actors can use, supply, or search for knowledge, or act as both suppliers and users of knowledge.
- Capability attributes, determining the absorptive capacity of individuals and organizations to apply knowledge obtained from other entities.
- Relatedness or distance between entities, considering ownership ties, geographic distance, past knowledge flows, and common network membership.
What are the types of knowledge flows, and how can they occur?
Knowledge flows can occur intentionally or unintentionally:
- Intentional flows occur through formal linkages between two or more parties, such as ownership ties, collaborations, or agreements.
- Unintentional flows can result from activities like reverse engineering or reading publications.
- Some intentional flows involve explicit agreements, while others occur informally, such as through discussions at trade fairs or conferences.
What is the typology and examples of mechanisms for intentional knowledge flows?
Table 6.1 provides a typology and examples of mechanisms for intentional knowledge flows for both existing knowledge (ex post) and prospective knowledge (ex ante) conditions. Mechanisms include disembodied intellectual property rights (IPR)-based mechanisms, sourcing knowledge solutions, confidentiality and non-disclosure agreements, IP licensing, pooling agreements for IP, sale or assignment of IP rights, co-development of new knowledge, and various forms of research and commercialization alliances.
What is the concept of open innovation?
Open innovation, as defined by Chesbrough in 2003, emphasizes the advantages to firms of “the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the markets for external use of innovation, respectively.” It recognizes the distributed nature of knowledge production and usage across actors and the importance of accessing knowledge from specialized networks and markets.
How is open innovation defined in terms of inbound and outbound knowledge flows?
In the context of open innovation, inbound knowledge flows occur when a firm acquires and absorbs externally sourced knowledge in its innovation activities. Outbound knowledge exchanges occur when a firm intentionally enables other firms or organizations to use, combine, or further develop its knowledge or ideas for their own innovation activities. Companies engaging in both inbound and outbound knowledge flows are described as “ambidextrous” and may involve processes that search for new sources of knowledge and recombine knowledge from inside and outside the company.
What are co-operation, collaboration, and co-innovation defined as in this manual?
For the purposes of this manual:
- Co-operation: Two or more participants agree to take responsibility for a task or series of tasks, sharing information between parties to facilitate the agreement.
- Collaboration: Coordinated activity across different parties to address a jointly defined problem, requiring explicit definition of common objectives, including the distribution of inputs, risks, and potential benefits. Collaboration may not necessarily result in an innovation, as partners can use resulting knowledge for different purposes.
- Co-innovation: Occurs when collaboration between two or more partners results in an innovation.
How are alliances, consortia, and joint ventures utilized for knowledge flows in innovation activities?
Alliances, consortia, joint ventures, and other forms of partnerships serve as mechanisms for knowledge flows in innovation activities. These entities can be used to pool resources, achieve common goals, and engage in joint activities. While alliances and consortia involve firms participating in a common activity or pooling resources with limited control over each other’s activities, joint ventures arise when companies invest funds to create a jointly owned company, often involving the transfer of resources like IP.
Where to Explore Further
As a freely available online resource, the Oslo Manual is easily accessible in multiple formats. Additional annex material, akin to the 2015 edition of the Frascati Manual, complements the printed edition, offering a wealth of resources. Interested readers can explore updated classifications and statistics on innovation provided by the OECD, Eurostat, and other international and national bodies at OECD’s official site.
Direct links to chapters
- Chapter 1. Introduction to innovation statistics and the Oslo Manual
- Chapter 2. Concepts for measuring innovation
- Chapter 3. Concepts and definitions for measuring business innovation
- Chapter 4. Measuring business innovation activities
- Chapter 5. Measuring business capabilities for innovation
- Chapter 6. Business innovation and knowledge flows
- Chapter 7. Measuring external factors influencing innovation in firms
- Chapter 8. Objectives and outcomes of business innovation
- Chapter 9. Methods for collecting data on business innovation
- Chapter 10. The object method for innovation measurement
- Chapter 11. Use of innovation data for statistical indicators and analysis
About the authors
Dr. Alan Mitchell is a leading expert in innovation strategy, as a guest writer for our upcoming Innovation Strategy Series. With his extensive experience and practical insights, Dr. Mitchell will provide valuable guidance and thought-provoking content. Stay tuned for his expert insights as we explore the dynamic world of innovation strategy together.