Lecture 1: Measuring innovative activities in developing countries: Conventional versus New Indicators. Professor Sunil Mani

Transcription

1 Lecture 1: Measuring innovative activities in developing countries: Conventional versus New Indicators Professor Sunil Mani

2 Outline of 1B Nature and extent of innovations in developing countries Engagement with the literature on measuring innovation New indicators for measuring innovation: use of results from innovation surveys Brazilian experience; South African experience; and Malaysian experience Four critical issues wrt innovation surveys from the policy point of view Policy conclusions 2 2

3 Nature and extent of innovations in developing countries Incremental innovations; Organized vs unorganized sector; Production organized largely in small and medium enterprises; Growing importance of service sector ; and Continued importance of government in both performance and financing of innovations although this is fast changing. 3

4 Overall structure of the lecture First part: review of various measures; Second part: application to one developing country 4

5 Structure of performance of R&D in select developing countries (Share of business enterprises in performance of R&D) 5 5

6 Measuring innovation: Two further dimensions Across countries;and Within a country but across actors 6

7 Engagement with the literature on measuring innovations Exponential growth of innovation indicators 7 Decades 50s and 60s 70s 80s 90s Main Indicators used R&D R&D R&D R&D Patents Patents Patents Technological balance of payments Technological balance of payments Technological balance of payments High-tech products and sectors High-tech products and sectors Bibliometrics Bibliometrics Human Resources Human Resources Innovation Surveys Innovation Surveys Innovations mentioned in technical literature Surveys of production technologies Intangible investment Productivity 7

8 A review of the conventional indicators Measure Strengths Weaknesses Research and Development Patenting Regular data collection Sectoral uniformity across industries Internationally comparable Regular data collection Detailed break down for technological Internationally comparable Direct measure of technological output Monetary adjustment required for international comparability Underestimate innovation in small firms Excludes design, part of software and production engineering Considers a small part of innovative activities in services Not all inventions are patented Not all inventions are patentable Differences in the propensity to patent across sectors Considers a small part of innovative activities in services 8

9 What are patents all about? A patent is a legal document that grants monopoly rights over a specific innovation for a specified period of time (~ 20 years). Why? To provide incentives to innovate: if inventions could be copied, nobody will incur the fix costs of developing it. So important that specified in the US Constitution. Patents involve a deal: monopoly rights in exchange for disclosure that further promotes innovation. As R&D and innovation become more important in the industrialized world, patent protection gains in stature. 9

10 Distinction Between Design and Utility Patents [R-2] In general terms, a "utility patent" protects the way an article is used and works ( 35 U.S.C. 101), while a "design patent" protects the way an article looks ( 35 U.S.C. 171). The ornamental appearance for an article includes its shape/configuration or surface ornamentation *>applied to< the article, or both. Both design and utility patents may be obtained on an article if invention resides both in its utility and ornamental appearance. While utility and design patents afford legally separate protection, the utility and ornamentality of an article may not be easily separable. ** >Articles of manufacture may possess both functional and ornamental characteristics.< Some of the more common differences between design and utility patents are summarized below: (A) The term of a utility patent on an application filed on or after June 8, 1995 is 20 years measured from the U.S. filing date; or if the application contains a specific reference to an earlier application under 35 U.S.C. 120, 121, or 365(c), 20 years from the earliest effective U.S. filing date, while the term of a design patent is 14 years measured from the date of grant (see 35 U.S.C. 173). (B) Maintenance fees are required for utility patents (see 37 CFR 1.20), while no maintenance fees are required for design patents. (C) Design patent applications include only a single claim, while utility patent applications can have multiple claims. 10

11 Patents as mechanism of appropriability Innovation: creation of new Knowledge Nice/nasty property of Knowledge: it leaks out easily! Costs of copying knowledge usually very low Hence need protection in order to reap benefits from innovation => Need appropriability mechanisms 11

12 International Issues Harmonization (e.g. first to file vs. first to invent) Pharmaceutical patents in third world Enforcement. countries. 12

13 Patents as depositories of wealth of information on innovation Very detailed information, millions of patents Can study countries, firms, inventors; Can study links over time and across institutions. (see front page of patent) geography and 13

14 Front page of patent (partial) United States Patent 6,539,988 Pressurized container adapter for charging automotive systems Inventors: Cowan; David M. (Brooklyn, NY); Schapers; Jochen (New York, NY); Trachtenberg; Saul (New York, NY); Nikolayev; Nikolay V. (Flushing, NY) Assignee: Interdynamics, Inc. (Brooklyn, NY) Filed: December 28, 2001 Current U.S. Class:141/67; 137/614.04; 141/351; 251/149.1 Intern'l Class: B65B Primary Examiner: Douglas; Steven O. Attorney, Agent or Firm: Levisohn, Lerner, Berger & Langsam LLP 14

15 Front page cont. References Cited May., 1964 Monahon Jun., 1969 Horwitt Sep., 1975 Burke Aug., 1976 White Feb., 1987 Hatch Feb., 1990 Ibanez 141/ Feb., 1991 Naku Sep., 1993 Fritch et al Mar., 1997 Stricklin et al. 141/ May., 1997 Groult Jun., 2000 Harris et al. 137/ Oct., 2001 Knowles et al Mar., 2002 Bothe et al. 141/

16 Patent Citations: Spillovers, Importance Compaq 4/1995 TX spillovers Intel 11/1996 AZ IBM 3/1997 TX, FL Compaq 7/1995 TX Self-citations importance Compaq 10/1998 CA 16

17 Patent citations: Do they actually indicate patent quality and knowledge flows? (Juan Alcácer, Michelle Gittelman, Bhaven Sampat, Applicant and examiner citations in U.S. patents: An overview and analysis Research Policy, Volume 38, Issue 2, March 2009, Pages Prior art patent citations have become a popular measure of patent quality and knowledge flow between firms. Interpreting these measurements is complicated, in some cases, because prior art citations are added by patent examiners as well as by patent applicants. The U.S. Patent and Trademark Office (USPTO) adopted new reporting procedures in 2001, making it possible to measure examiner and applicant citations separately for the first time. The (above authors) analyzed prior art citations listed in all U.S. patents granted in , and found that examiners played a significant role in identifying prior art, adding 63% of citations on the average patent, and all citations on 40% of patents granted. An analysis of variance found that firm-specific variables explain most of the variation in examiner-citation shares. Using multivariate regression, we found that foreign applicants to the USPTO had the highest proportion of citations added by examiners. High-volume patent applicants had a greater proportion of examiner citations, and a substantial number of firms won patents without listing a single applicant citation. In terms of technology, the authors found higher examiner shares among patents in electronics, communications, and computer-related fields. Taken together, their findings suggest that firm-level patenting practices, particularly among high-volume applicants, have a strong influence on citation data and merit additional research. 17

18 How do firms measure innovations? Box 1: Measuring innovation at the firm level: Findings from a senior management survey Only 32 percent of executives are satisfied with their company s innovation-measurement practices. And that percentage has been falling. While most executives-73 percent of respondents-believe that innovation should be tracked as rigorously as other business operations, only 46 percent said that their company actually does so. The majority of companies continue to rely on a handful of metrics to measure the full scope of their innovation activities. Fifty-two percent of respondents said their company uses five or fewer metrics. But that number is starting to rise. A surprisingly small no of companies-27 percent of respondents-attempt to drive innovation by linking employee incentives metrics. But that number, too, is edging up. The most widely tracked components of innovation are overall company profitability (79 percent of respondents said their company measures it), overall customer satisfaction (75 percent), and incremental revenue from innovation (73 percent) The metrics that employees pay the most attention to-the ones that have the greatest impact on their behavior and attitudes towards the company s innovation efforts-are incremental revenue from innovation and overall customer satisfaction. Companies consider themselves most effective at measuring innovation outputs (such as revenue growth, shareholder returns, and brand impact). They consider themselves far less successful at tracking innovation inputs (for example, dedicated resources, such as people and funds invested) and the quality of their innovation processes. 18

19 Diffusion of innovation surveys across developing countries 19 Country Argentina (Sengunda Encuesta Nacional Innovation y Conducta Tecnologica de las empresas Argentinas ) Brazil PINTEC 2000 (Pesquisa Industrial-Innovacao Tecnologica 2000) Malaysia NIS-3 (Third National Survey of Innovation) Mexico (Sengunda Encuesta Nacional de Innovation en los sectores manufacturero y de Servicios 2001) South Africa (First official innovation survey) Methodological Basis Oslo Manual and Bogota Manual Oslo Manual Oslo Manual Oslo Manual Oslo Manual Oslo Manual Questionnaire Reference CIS3 (major adaptation) CIS3 (minor adaptation) CIS3 (minor adaptation) CIS3 (minor adaptation) CIS2 (major adaptation) CIS 4 Period Activit es Manufac uring Manufac uring and Mining and quarrying Manufac uring Manufac uring Manufac uring and Services (merged) do 19

20 The Country experiences 20 The rate of innovation Innovation activities and expenditures Sources of information and partnerships for effecting innovations Factors hampering innovation Effects of innovation on specific dimensions of performance 20

21 Developing country experiences wrt innovation surveys 21 Brazil Malaysia South Africa Survey Period Response rate in percentage Not clearly indicated Scope Manufacturing and services Manufacturing only Manufacturing and services Innovation rate (in Percentage) Most important innovation activity Acquisition of capital goods Acquisition of R&D Acquisition of capital goods Intensity if innovation expenditures Greater than unity Greater than unity Greater than unity Importance of intramural R&D Source of information on innovation and partnership for effecting innovations Importance of universities and research instates as a source of information on innovation Factors hampering innovation Importance of governmental source of financing innovation Not very importantless than one third than one Not very important- less third Customers and suppliers Not very important Innovation costs Not important Customers and suppliers Not very important Innovation costs Not important Not very important- less than one third Customers and suppliers Not very important Competition from established firms and Innovation costs Ambiguous 21

22 The Four Critical Issues wrt Innovation Surveys 22 22

23 Conclusions 23 There is need to increase response rates to at least 50 per cent. Combining the innovation survey as part of other mandatory surveys may do the trick as in the case of France, Norway and Portugal for instance; Care needs to be placed while tabulating and interpreting the data on innovation activity expenditures. Age of the unit need to be taken explicitly into account; Results of innovation surveys must feed into public policy making. Systemic failures must be detected; and Time series data on innovation activity and expenditure must be developed. 23

24 Measuring innovation in Developing Countries as seen through conventional indicators Based on the number of US Patents 24 24

25 Measuring innovation in developing countries as seen through conventional indicators 25 (Based on GERD to GDP ratio, c2002) 25

26 Second part Has India (and China) become more innovative? 26

27 Innovation indicators used Input indicators: (i) R&D expenditure data; Output indicators: (i) US Patents granted to Indian inventors; (ii) Patents secured by Indians in India; (iii) Number of triadic patents granted to Indian inventors; and (iv) Bibliometric data Other indicators: (i) Technology Balance of Payments; (ii) Diversification of exports from merchandise to technology- intensive services; ((iii) Technology content of manufactured exports; (iv) Acquisition of technology-based companies abroad; (v) Growth of high technology-based industries; and (vi) Growth of knowledge-intensive entrepreneurship 27 27

28 Input-based indicators Overall Gross Expenditure on R&D (GERD)- rate of increase in GERD during pre and post reform periods- GERD to GDP ratio; Sector of performance of GERD and changes in it- the growing importance of industrial sector; Growing privatisation of industrial R&D; Industry-wide distribution of industrial R&D; 28

29 Trends in India s overall investments in R&D, through (Current and Constant values are in Rs Crores; Constant values are in prices); Source of data: Department of Science and Technology (2006 and 2008) 29

30 Nominal R&D expenditure by private sector enterprises, Comparison n between two data sources: DST vs CMIE (Rs in Millions) 30 30

31 Sector-wide performance of R&D in India (percentage shares) Source: Department of Science and Technology (2009) 31 31

32 Nominal R&D expenditure by private sector enterprises (Rs in Millions) 32

33 Industry-wide distribution of Industrial R&D (Cumulative shares in per cent through ) 33

34 Trends in the growth of average R&D expenditure per enterprise in the pharmaceutical industry (Rs in crores) 34 34

35 Trends in patent applications by Indian inventors in the USPTO in comparison with BRICS (Number of patent applications) 35

36 Trends in patents granted to Indian inventors in the USPTO in comparison with those granted to BRICS (Number of patent granted) 36

37 Relationship between USPTO patent applications and grants, (grants are lagged by two years) Sunil Mani, CSTM, University of Twente, May

38 Structural breaks in Patent applications and grants and their growth rates Sunil Mani, CSTM, University of Twente, May

39 Distribution of US patents according to ownership, 1991 and 2007 Sunil Mani, CSTM, University of Twente, May

40 Trends in the number of US patents granted to MNCs operating from m India, Domestic private enterprises and CSIR,

41 Domestic private sector enterprises active in patenting abroad 41 41

42 MNCs operating from India and active in patenting abroad 42 42

43 The top 15 most emphasised patents by Indian inventors in the US, Sunil Mani, CSTM, University of Twente, May

44 Specialisation of Indian patenting in the US, (percentage shares) 44 44

45 Revealed Technological Advantage of two of the leading inventions s from India ( US Patent Class 424 and 532), Sunil Mani, CSTM, University of Twente, May

46 Trends in the number of Triadic patents granted to Indian inventors,

47 Share of countries in Triadic patent families, 1995 and 2005 Sunil Mani, CSTM, University of Twente, May

48 PCT applications by Indian inventors

49 Patents granted to Indian and foreign inventors by Indian PTO, through

50 Technology-wide distribution of patents granted in India, to

51 Quantity of scientific publications from India, Publications by Indian and Chinese scientists in high impact journals, Note: All research articles in the SCI/SSCI having at least one author with an India address were retrieved for selected years. The same was done for China. Source: Kostoff et al (2006). Sunil Mani, CSTM, University of Twente, May

52 Share of technology-intensive service exports in total service exports from India, through Sunil Mani, CSTM, University of Twente, May

53 R&D outsourcing from India is very much on the increase (Values are in Millions of US $) Sunil Mani, CSTM, University of Twente, May

54 India has become the largest IT services exporter in the world (US $ billion) 54 54

55 Technology content of India s manufactured exports, (Percentage shares of manufactured exports) 55 55

56 India s Technology Balance of Payments, through (Millions of US $) 56 56

57 Summing up on innovative activity Overall research intensity of the country as judged by rates of growth of GERD and GERD to GDP ratio has actually gone down since 1991; But the share of industrial sector within the overall GERD has actually increased by a factor of 2 since 1991 and the industrial sector now performs close to a third of overall GERD; Within the industrial sector over two thirds of the industry is performed by private enterprises and most of these are concentrated in the pharmaceutical industry; Analysis of various types of patent data and notably the USPTO data shows that much of it is actually done by MNCs operating from India, although the domestic private sector and enterprises and government research institutes (read CSIR) has also increased their share of innovative activity during the period since 1991; Once again, the patent data too shows that there is a specialisation in pharmaceutical technologies although MNCs operating from India tend to specialise in IT related activities; This prompts us to conclude that India s national system of innovation is largely dominated by the sectoral system of innovation of her pharmaceutical and IT industries. The former is largely in the hands of domestic enterprises while the latter is in the hands of MNCs; The not so conventional indicators too lend, although some what, further support to the above line of reasoning. Sunil Mani, CSTM, University of Twente, May