Fred Gault UNU-MERIT and TUT-IERI

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International Workshop: Sharing Best Practices in R&D and Education Statistics

1 Policy implications of user innovation: measurement and interpretation The role of users in innovation activities Fred Gault UNU-MERIT and TUT-IERI 5 th International Workshop: Sharing Best Practices in R&D and Education Statistics Informing National and Institutional Policy Centro Cientifico e Cultural de Macau, Lisbon 1

2 Users and Innovation

3 Users matter Firms produce goods and services Consumers and other firms use the goods and services they are USERS Users are a leading source of Information for innovation Collaboration for innovation Users Change or develop goods or services for their own use Is this innovation? Are there policy implications? Can this activity be measured?

4 What is an innovation? For statistical purposes, the definition of innovation is taken from the Oslo Manual (OECD/Eurostat 2005). An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations (OECD/Eurostat 2005, para. 146). A common feature of an innovation is that it must have been implemented. A new or improved product is implemented when it is introduced on the market. New processes, marketing methods or organizational methods are implemented when they are brought into actual use in the firm s operations (OECD/Eurostat 2005, para. 150).

5 Who innovates? Firms engaged in process change for their own benefit are innovative firms as the process connects to the market Firms also make use of products modified or developed by users. They are innovative more on this later Consumers changing goods and services for their own benefit are not Unless?

6 Are consumers innovators? Consumer modifies or develops a product What happens to the knowledge? Knowledge transferred to Kind of innovation resulting Producer Self as new firm Peer Group or Community of Practice No Transfer Product innovation for producer (user innovation) Product innovation for the entrepreneur (new firm) Not an innovation Not an innovation

7 A proposal A common feature of an innovation is that it must have been implemented. A new or improved product is implemented when it is introduced on the market. New processes, marketing methods or organizational methods are implemented when they are brought into actual use in the firm s operations (OECD/Eurostat 2005, para. 150). A common feature of an innovation is that it must have been implemented. A new or improved product is implemented when it is made available to potential users. New processes, marketing methods or organizational methods are implemented when they are brought into actual use in the firm s operations.

8 Result of the proposal for consumers Consumer modifies or develops a product What happens to the knowledge? Knowledge transferred to Kind of innovation resulting Producer Self as new firm Peer Group or Community of Practice No Transfer Product innovation for producer (user innovation) Product innovation for the entrepreneur (new firm) Product innovation for the consumer Not an innovation

9 Consumers Surveys and Policy

10 Implications for consumer surveys Divide the consumer responses, giving rise to the large signal in the surveys, into four categories using a question like: Did you: 1. transfer the knowledge to a producer; 2. keep it yourself and start a business; 3. share it with a peer group or community of practice (potential users); or, 4. keep the knowledge and use it yourself?

11 Policy implications? Cases 1 and 2 are covered by CIS in Europe and CIS-like surveys. In the US, the NSF Business R&D and Innovation Survey (BRDIS) is moving in this direction. Innovation and industrial policies are in place Small Business Innovation Research (SBIR) R&D tax credit Could encourage Firms to seek innovations from consumers (see next section) Not information, not collaboration, but innovations

12 Implications? Cases 3 and 4 can be probed by social surveys General Social Survey American Community Survey Consumer expenditure surveys Social policy? Building an innovation culture Education at all levels (sharing of knowledge) Innovation fairs, prizes and recognition Supporting consumer innovation Programs to help communities of practice or peer groups to commercialize knowledge

13 Firms and Users

14 Firms and users Finland added questions to its 2010 CIS Rank the importance of the statements Users modified existing products, and your enterprise further developed and commercialized it Users developed a new product and your enterprise further developed and commercialized it They found that firms that ranked user modification or development at high or medium level had a higher propensity to produce new to the market product innovations than new to the firm innovation. That was an interesting result, but wait for the next presentation!

15 Firms and users For CIS 2012 Portugal and Switzerland added the Finnish questions and two more: During the three years , did your enterprise introduce new or significantly improved products (goods or services) that were partly or entirely developed by customers and users of the product? Y/N. If yes, what percentage of the total turnover corresponds to new or significantly improved products (goods or services) put on the market by your enterprise during the three years ?

16 A research question concerning firms, consumers and innovation

17 A research question using CIS results Following the product question in CIS is the Who did it question Who developed this product innovation? 1. Your enterprise by itself 2. Your enterprise together with other enterprises or institutions 3. Your enterprise by adapting or modifying goods or services originally developed by other enterprises or institutions 4. Other enterprises or institutions What is the correlation between the first new Portuguese question and 3 and 4 above?

18 A research question If firms responding to the first Portuguese question also respond to options 3 or 4 of the Who did it? question, There is: Confirmation that the firm knows that it is adopting or adapting user products leading to A possibility of analysing the CIS Who did it? question to identify the adoption or adapting of user products in other CIS surveys There are still some issues Consumers are not distinguished from other firms More work to be done

19 More? The Oslo Manual (Now being revised) The proposed change to the definition Fred Gault (2012), User innovation and the market, Science and Public Policy, 39, pp A review of the subject de Jong, Jeroen P.J. and Eric von Hippel (2013), User innovation: Business and consumers, in Fred Gault (ed.), Handbook for Innovation Indicators and Measurement, Cheltenham, UK and Northampton MA, USA: Edward Elgar. ( Analysis of the Finnish questions in their 2010 CIS Kuusisto, Jari, Mervi Niemi and Fred Gault (2014) User Innovators and their influence on innovation activities of firms in Finland, UNU-MERIT Working Paper

User innovators and their influence on innovation activities of firms in Finland Jari Kuusisto, Mervi Niemi and Fred Gault

Working Paper Series #2014-003 User innovators and their influence on innovation activities of firms in Finland Jari Kuusisto, Mervi Niemi and Fred Gault Maastricht Economic and social Research institute