Economics of Innovation Chapter 0 PDF

Economics of Innovation Master 1 SDIN and Master 1 MEI Chapter 0: Introduction – Characterization, measurement, and benefits of innovation Dorgyles C.M. Kouakou Maître de Conférences CREM-CNRS et Faculté des Sciences Econ...

Economics of Innovation Master 1 SDIN and Master 1 MEI Chapter 0: Introduction – Characterization, measurement, and benefits of innovation Dorgyles C.M. Kouakou Maître de Conférences CREM-CNRS et Faculté des Sciences Economiques Université de Rennes Website: https://www.dorgylescmkouakou.com/ Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 0 / 41 Economics of innovation Economics of innovation is a subfield of applied economics Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on how innovation occurs and Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on how innovation occurs and its effects on the economic system. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on how innovation occurs and its effects on the economic system. Innovation plays a critical role in driving progress across industries and societies, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on how innovation occurs and its effects on the economic system. Innovation plays a critical role in driving progress across industries and societies, fueling advancements in technology, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on how innovation occurs and its effects on the economic system. Innovation plays a critical role in driving progress across industries and societies, fueling advancements in technology, business models, and Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on how innovation occurs and its effects on the economic system. Innovation plays a critical role in driving progress across industries and societies, fueling advancements in technology, business models, and social systems that shape our everyday lives. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on how innovation occurs and its effects on the economic system. Innovation plays a critical role in driving progress across industries and societies, fueling advancements in technology, business models, and social systems that shape our everyday lives. It is the engine behind the development of new products, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on how innovation occurs and its effects on the economic system. Innovation plays a critical role in driving progress across industries and societies, fueling advancements in technology, business models, and social systems that shape our everyday lives. It is the engine behind the development of new products, services, and Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on how innovation occurs and its effects on the economic system. Innovation plays a critical role in driving progress across industries and societies, fueling advancements in technology, business models, and social systems that shape our everyday lives. It is the engine behind the development of new products, services, and processes that not only enhance efficiency but Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on how innovation occurs and its effects on the economic system. Innovation plays a critical role in driving progress across industries and societies, fueling advancements in technology, business models, and social systems that shape our everyday lives. It is the engine behind the development of new products, services, and processes that not only enhance efficiency but also open up entirely new markets and opportunities. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on how innovation occurs and its effects on the economic system. Innovation plays a critical role in driving progress across industries and societies, fueling advancements in technology, business models, and social systems that shape our everyday lives. It is the engine behind the development of new products, services, and processes that not only enhance efficiency but also open up entirely new markets and opportunities. As global challenges such as climate change, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on how innovation occurs and its effects on the economic system. Innovation plays a critical role in driving progress across industries and societies, fueling advancements in technology, business models, and social systems that shape our everyday lives. It is the engine behind the development of new products, services, and processes that not only enhance efficiency but also open up entirely new markets and opportunities. As global challenges such as climate change, health crises, and Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on how innovation occurs and its effects on the economic system. Innovation plays a critical role in driving progress across industries and societies, fueling advancements in technology, business models, and social systems that shape our everyday lives. It is the engine behind the development of new products, services, and processes that not only enhance efficiency but also open up entirely new markets and opportunities. As global challenges such as climate change, health crises, and eco- nomic disruptions demand creative solutions, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Economics of innovation Economics of innovation is a subfield of applied economics that focuses on how innovation occurs and its effects on the economic system. Innovation plays a critical role in driving progress across industries and societies, fueling advancements in technology, business models, and social systems that shape our everyday lives. It is the engine behind the development of new products, services, and processes that not only enhance efficiency but also open up entirely new markets and opportunities. As global challenges such as climate change, health crises, and eco- nomic disruptions demand creative solutions, understanding innova- tion has become more important than ever. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 1 / 41 Creative destruction Joseph Schumpeter: Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 2 / 41 Creative destruction Joseph Schumpeter: Understanding Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 2 / 41 Creative destruction Joseph Schumpeter: Understanding how the economic system generates economic change, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 2 / 41 Creative destruction Joseph Schumpeter: Understanding how the economic system generates economic change, through purely endogenous forces (The Theory of Economic Devel- opment, 1912). Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 2 / 41 Creative destruction Joseph Schumpeter: Understanding how the economic system generates economic change, through purely endogenous forces (The Theory of Economic Devel- opment, 1912). The process of creative destruction: The destruction of pre-existing industries that are not innovative enough and Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 2 / 41 Creative destruction Joseph Schumpeter: Understanding how the economic system generates economic change, through purely endogenous forces (The Theory of Economic Devel- opment, 1912). The process of creative destruction: The destruction of pre-existing industries that are not innovative enough and the birth of new industries. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 2 / 41 Creative destruction Joseph Schumpeter: Understanding how the economic system generates economic change, through purely endogenous forces (The Theory of Economic Devel- opment, 1912). The process of creative destruction: The destruction of pre-existing industries that are not innovative enough and the birth of new industries. New innovations continuously emerge, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 2 / 41 Creative destruction Joseph Schumpeter: Understanding how the economic system generates economic change, through purely endogenous forces (The Theory of Economic Devel- opment, 1912). The process of creative destruction: The destruction of pre-existing industries that are not innovative enough and the birth of new industries. New innovations continuously emerge, existing technologies become obsolete, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 2 / 41 Creative destruction Joseph Schumpeter: Understanding how the economic system generates economic change, through purely endogenous forces (The Theory of Economic Devel- opment, 1912). The process of creative destruction: The destruction of pre-existing industries that are not innovative enough and the birth of new industries. New innovations continuously emerge, existing technologies become obsolete, new firms compete with existing firms, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 2 / 41 Creative destruction Joseph Schumpeter: Understanding how the economic system generates economic change, through purely endogenous forces (The Theory of Economic Devel- opment, 1912). The process of creative destruction: The destruction of pre-existing industries that are not innovative enough and the birth of new industries. New innovations continuously emerge, existing technologies become obsolete, new firms compete with existing firms, new jobs and activities arise and Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 2 / 41 Creative destruction Joseph Schumpeter: Understanding how the economic system generates economic change, through purely endogenous forces (The Theory of Economic Devel- opment, 1912). The process of creative destruction: The destruction of pre-existing industries that are not innovative enough and the birth of new industries. New innovations continuously emerge, existing technologies become obsolete, new firms compete with existing firms, new jobs and activities arise and replace existing jobs and activities (Capitalism, Socialism, and Democracy , 1942). Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 2 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, markets, and Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, markets, and civil society in the innovation system. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, markets, and civil society in the innovation system. It also examines Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, markets, and civil society in the innovation system. It also examines the interaction of innovation with key economic fac- tors such as Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, markets, and civil society in the innovation system. It also examines the interaction of innovation with key economic fac- tors such as the environment, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, markets, and civil society in the innovation system. It also examines the interaction of innovation with key economic fac- tors such as the environment, unemployment, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, markets, and civil society in the innovation system. It also examines the interaction of innovation with key economic fac- tors such as the environment, unemployment, health, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, markets, and civil society in the innovation system. It also examines the interaction of innovation with key economic fac- tors such as the environment, unemployment, health, inequality, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, markets, and civil society in the innovation system. It also examines the interaction of innovation with key economic fac- tors such as the environment, unemployment, health, inequality, com- petition, and Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, markets, and civil society in the innovation system. It also examines the interaction of innovation with key economic fac- tors such as the environment, unemployment, health, inequality, com- petition, and globalization. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, markets, and civil society in the innovation system. It also examines the interaction of innovation with key economic fac- tors such as the environment, unemployment, health, inequality, com- petition, and globalization. A special focus will be placed on the process of creative destruction. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, markets, and civil society in the innovation system. It also examines the interaction of innovation with key economic fac- tors such as the environment, unemployment, health, inequality, com- petition, and globalization. A special focus will be placed on the process of creative destruction. This will allow us to better understand Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, markets, and civil society in the innovation system. It also examines the interaction of innovation with key economic fac- tors such as the environment, unemployment, health, inequality, com- petition, and globalization. A special focus will be placed on the process of creative destruction. This will allow us to better understand how and why economic change takes place, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 Objective of the course This course introduces students to questions related to the process of innovation that are of interest to economists, including its definition, typologies, measures, benefits to the economy, and the roles of the state, markets, and civil society in the innovation system. It also examines the interaction of innovation with key economic fac- tors such as the environment, unemployment, health, inequality, com- petition, and globalization. A special focus will be placed on the process of creative destruction. This will allow us to better understand how and why economic change takes place, as well as the role of innovation in achieving economic change. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 3 / 41 List of topics 1 Characterization, measurement, and benefits of innovation (Introduc- tion; Chapter 0) Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 4 / 41 List of topics 1 Characterization, measurement, and benefits of innovation (Introduc- tion; Chapter 0) 2 Innovation and inequality (Chapter 1) Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 4 / 41 List of topics 1 Characterization, measurement, and benefits of innovation (Introduc- tion; Chapter 0) 2 Innovation and inequality (Chapter 1) 3 Innovation and competition (Chapter 2) Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 4 / 41 List of topics 1 Characterization, measurement, and benefits of innovation (Introduc- tion; Chapter 0) 2 Innovation and inequality (Chapter 1) 3 Innovation and competition (Chapter 2) 4 Green innovation (Chapter 3) Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 4 / 41 List of topics 1 Characterization, measurement, and benefits of innovation (Introduc- tion; Chapter 0) 2 Innovation and inequality (Chapter 1) 3 Innovation and competition (Chapter 2) 4 Green innovation (Chapter 3) 5 Innovation, unemployment, and health (Chapter 4) Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 4 / 41 List of topics 1 Characterization, measurement, and benefits of innovation (Introduc- tion; Chapter 0) 2 Innovation and inequality (Chapter 1) 3 Innovation and competition (Chapter 2) 4 Green innovation (Chapter 3) 5 Innovation, unemployment, and health (Chapter 4) 6 Funding innovation (Chapter 5) Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 4 / 41 List of topics 1 Characterization, measurement, and benefits of innovation (Introduc- tion; Chapter 0) 2 Innovation and inequality (Chapter 1) 3 Innovation and competition (Chapter 2) 4 Green innovation (Chapter 3) 5 Innovation, unemployment, and health (Chapter 4) 6 Funding innovation (Chapter 5) 7 Globalization and innovation (Chapter 6) Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 4 / 41 List of topics 1 Characterization, measurement, and benefits of innovation (Introduc- tion; Chapter 0) 2 Innovation and inequality (Chapter 1) 3 Innovation and competition (Chapter 2) 4 Green innovation (Chapter 3) 5 Innovation, unemployment, and health (Chapter 4) 6 Funding innovation (Chapter 5) 7 Globalization and innovation (Chapter 6) 8 Innovation, state, markets, and civil society (Chapter 7) Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 4 / 41 Main textbook Aghion, Antonin, and Bunel, The Power of Creative Destruction: Economic Upheaval and the Wealth of Nations. The Belknap Press of Harvard University Press: 2021. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 5 / 41 Main textbook Aghion, Antonin, and Bunel, The Power of Creative Destruction: Economic Upheaval and the Wealth of Nations. The Belknap Press of Harvard University Press: 2021. The course will draw on selected chapters from this book. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 5 / 41 Main textbook Aghion, Antonin, and Bunel, The Power of Creative Destruction: Economic Upheaval and the Wealth of Nations. The Belknap Press of Harvard University Press: 2021. The course will draw on selected chapters from this book. This book is also available in French at the University Library (BU). Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 5 / 41 Recommended reading Hall and Rosenberg, Handbook of The Economics of Innovation. North Holland: 2010. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 6 / 41 Recommended reading Hall and Rosenberg, Handbook of The Economics of Innovation. North Holland: 2010. Barro and Sala-i-Martin, Economic Growth. The MIT Press: 2004 (second edition). Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 6 / 41 Recommended reading Hall and Rosenberg, Handbook of The Economics of Innovation. North Holland: 2010. Barro and Sala-i-Martin, Economic Growth. The MIT Press: 2004 (second edition). Available in French at BU. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 6 / 41 Recommended reading Hall and Rosenberg, Handbook of The Economics of Innovation. North Holland: 2010. Barro and Sala-i-Martin, Economic Growth. The MIT Press: 2004 (second edition). Available in French at BU. Shy, Industrial Organization: Theory and Applications. The MIT Press: 1995. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 6 / 41 Recommended reading Hall and Rosenberg, Handbook of The Economics of Innovation. North Holland: 2010. Barro and Sala-i-Martin, Economic Growth. The MIT Press: 2004 (second edition). Available in French at BU. Shy, Industrial Organization: Theory and Applications. The MIT Press: 1995. Carlton and Perloff, Économie industrielle. Traduction de la 2ème édition américane par Fabrice Mazerolle. Ouvertures économiques. De Boeck: 2008. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 6 / 41 Recommended reading Hall and Rosenberg, Handbook of The Economics of Innovation. North Holland: 2010. Barro and Sala-i-Martin, Economic Growth. The MIT Press: 2004 (second edition). Available in French at BU. Shy, Industrial Organization: Theory and Applications. The MIT Press: 1995. Carlton and Perloff, Économie industrielle. Traduction de la 2ème édition américane par Fabrice Mazerolle. Ouvertures économiques. De Boeck: 2008. Available at BU. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 6 / 41 Grading The final grade is composed of two components: Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 7 / 41 Grading The final grade is composed of two components: 1 Quizzes: 5/20 points Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 7 / 41 Grading The final grade is composed of two components: 1 Quizzes: 5/20 points At the end of each chapter, a quiz will be available on Moodle to assess your understanding. This quiz will be accessible during the week following the completion of the chapter. These quizzes will contribute to a grade out of 5. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 7 / 41 Grading The final grade is composed of two components: 1 Quizzes: 5/20 points At the end of each chapter, a quiz will be available on Moodle to assess your understanding. This quiz will be accessible during the week following the completion of the chapter. These quizzes will contribute to a grade out of 5. 2 Written exam (on December 4, 2024, at 8:00 a.m.): 15/20 points Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 7 / 41 Grading The final grade is composed of two components: 1 Quizzes: 5/20 points At the end of each chapter, a quiz will be available on Moodle to assess your understanding. This quiz will be accessible during the week following the completion of the chapter. These quizzes will contribute to a grade out of 5. 2 Written exam (on December 4, 2024, at 8:00 a.m.): 15/20 points The sum of these two grades will determine the final grade out of 20. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 7 / 41 Remainder of the chapter In the remainder of the chapter, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 8 / 41 Remainder of the chapter In the remainder of the chapter, we will explore various aspects of innovation Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 8 / 41 Remainder of the chapter In the remainder of the chapter, we will explore various aspects of innovation to deepen our understanding of its significance. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 8 / 41 Remainder of the chapter In the remainder of the chapter, we will explore various aspects of innovation to deepen our understanding of its significance. First, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 8 / 41 Remainder of the chapter In the remainder of the chapter, we will explore various aspects of innovation to deepen our understanding of its significance. First, we will define what innovation is. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 8 / 41 Remainder of the chapter In the remainder of the chapter, we will explore various aspects of innovation to deepen our understanding of its significance. First, we will define what innovation is. Next, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 8 / 41 Remainder of the chapter In the remainder of the chapter, we will explore various aspects of innovation to deepen our understanding of its significance. First, we will define what innovation is. Next, we will delve into the typologies of innovation, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 8 / 41 Remainder of the chapter In the remainder of the chapter, we will explore various aspects of innovation to deepen our understanding of its significance. First, we will define what innovation is. Next, we will delve into the typologies of innovation, identifying dif- ferent forms it can take, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 8 / 41 Remainder of the chapter In the remainder of the chapter, we will explore various aspects of innovation to deepen our understanding of its significance. First, we will define what innovation is. Next, we will delve into the typologies of innovation, identifying dif- ferent forms it can take, from incremental improvements to disruptive breakthroughs. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 8 / 41 Remainder of the chapter We will then address how innovation is measured, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 9 / 41 Remainder of the chapter We will then address how innovation is measured, highlighting key metrics. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 9 / 41 Remainder of the chapter We will then address how innovation is measured, highlighting key metrics. Finally, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 9 / 41 Remainder of the chapter We will then address how innovation is measured, highlighting key metrics. Finally, we will explore why innovation is worth studying, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 9 / 41 Remainder of the chapter We will then address how innovation is measured, highlighting key metrics. Finally, we will explore why innovation is worth studying, emphasizing its role at both the microeconomic and Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 9 / 41 Remainder of the chapter We will then address how innovation is measured, highlighting key metrics. Finally, we will explore why innovation is worth studying, emphasizing its role at both the microeconomic and macroeconomic levels. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 9 / 41 Outline 1 What is innovation? Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 10 / 41 Outline 1 What is innovation? 2 Typologies of innovation Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 10 / 41 Outline 1 What is innovation? 2 Typologies of innovation 3 How is innovation measured? Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 10 / 41 Outline 1 What is innovation? 2 Typologies of innovation 3 How is innovation measured? 4 Why is innovation worth studying? Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 10 / 41 Outline 1 What is innovation? 2 Typologies of innovation 3 How is innovation measured? 4 Why is innovation worth studying? Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 11 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) The first characterization of innovation was made by Ricardo (1817). Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 12 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) The first characterization of innovation was made by Ricardo (1817). For Ricardo (1817), Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 12 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) The first characterization of innovation was made by Ricardo (1817). For Ricardo (1817), innovation consists of five essential elements: Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 12 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) The first characterization of innovation was made by Ricardo (1817). For Ricardo (1817), innovation consists of five essential elements: the manufacturing of a new good; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 12 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) The first characterization of innovation was made by Ricardo (1817). For Ricardo (1817), innovation consists of five essential elements: the manufacturing of a new good; the introduction of a new production method; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 12 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) The first characterization of innovation was made by Ricardo (1817). For Ricardo (1817), innovation consists of five essential elements: the manufacturing of a new good; the introduction of a new production method; the opening of a new market; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 12 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) The first characterization of innovation was made by Ricardo (1817). For Ricardo (1817), innovation consists of five essential elements: the manufacturing of a new good; the introduction of a new production method; the opening of a new market; the acquisition of a new source of raw materials; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 12 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) The first characterization of innovation was made by Ricardo (1817). For Ricardo (1817), innovation consists of five essential elements: the manufacturing of a new good; the introduction of a new production method; the opening of a new market; the acquisition of a new source of raw materials; and the creation of a new organization (establishing a monopoly situ- ation). Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 12 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) This Ricardian approach to innovation foreshadows the Schumpeterian definition and typology of innovation. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 13 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) This Ricardian approach to innovation foreshadows the Schumpeterian definition and typology of innovation. For Schumpeter (1912), Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 13 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) This Ricardian approach to innovation foreshadows the Schumpeterian definition and typology of innovation. For Schumpeter (1912), innovation is the introduction of "new combinations." Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 13 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) Building on Ricardian thought, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 14 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) Building on Ricardian thought, these "new combinations" are said by Schumpeter (1912) to take five forms, namely: Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 14 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) Building on Ricardian thought, these "new combinations" are said by Schumpeter (1912) to take five forms, namely: the introduction of new products; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 14 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) Building on Ricardian thought, these "new combinations" are said by Schumpeter (1912) to take five forms, namely: the introduction of new products; the introduction of new production methods; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 14 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) Building on Ricardian thought, these "new combinations" are said by Schumpeter (1912) to take five forms, namely: the introduction of new products; the introduction of new production methods; the opening of new markets; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 14 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) Building on Ricardian thought, these "new combinations" are said by Schumpeter (1912) to take five forms, namely: the introduction of new products; the introduction of new production methods; the opening of new markets; the development of new sources of supply for raw materials or other inputs; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 14 / 41 Early characterizations of innovation From Ricardo (1817) to Schumpeter (1912) Building on Ricardian thought, these "new combinations" are said by Schumpeter (1912) to take five forms, namely: the introduction of new products; the introduction of new production methods; the opening of new markets; the development of new sources of supply for raw materials or other inputs; and the creation of new market structures within an industry. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 14 / 41 A variety of definitions of innovation Building on the Ricardian and Schumpeterian characterizations of in- novation, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 15 / 41 A variety of definitions of innovation Building on the Ricardian and Schumpeterian characterizations of in- novation, numerous definitions of innovation have emerged. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 15 / 41 A variety of definitions of innovation Building on the Ricardian and Schumpeterian characterizations of in- novation, numerous definitions of innovation have emerged. They differ in both formulation and conception, without altering the common understanding. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 15 / 41 A variety of definitions of innovation Building on the Ricardian and Schumpeterian characterizations of in- novation, numerous definitions of innovation have emerged. They differ in both formulation and conception, without altering the common understanding. This common understanding refers to a phenomenon characterized by its "novelty." Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 15 / 41 A variety of definitions of innovation However, it remains difficult to precisely define innovation, and the distinction between types of innovation is often incomplete. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 16 / 41 A variety of definitions of innovation However, it remains difficult to precisely define innovation, and the distinction between types of innovation is often incomplete. The problem is that the meaning given to innovation does not differen- tiate between the novelty "perceived by the individual or organization" and that "observed objectively." Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 16 / 41 The definition by OECD and Eurostat (2005): The usual characterization of innovation Despite the conceptual issue raised previously, it is customary in eco- nomic analyses to adopt the definition stated by the OECD and Eu- rostat (2005) in the Oslo Manual. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 17 / 41 The definition by OECD and Eurostat (2005): The usual characterization of innovation Despite the conceptual issue raised previously, it is customary in eco- nomic analyses to adopt the definition stated by the OECD and Eu- rostat (2005) in the Oslo Manual. "An innovation is the implementation of a new or significantly im- proved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organ- isation or external relations.", OECD and Eurostat (2005, p.46). Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 17 / 41 The definition by OECD and Eurostat (2005): The usual characterization of innovation Despite the conceptual issue raised previously, it is customary in eco- nomic analyses to adopt the definition stated by the OECD and Eu- rostat (2005) in the Oslo Manual. "An innovation is the implementation of a new or significantly im- proved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organ- isation or external relations.", OECD and Eurostat (2005, p.46). The five-element typology proposed by Ricardo (1817) and later adopted by Schumpeter (1912) is thus restructured around four types of inno- vation. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 17 / 41 Innovation versus Invention In the definition by the OECD and Eurostat (2005), the concept of "implementation" helps distinguish between creativity (invention) and the execution of generated ideas (innovation). Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 18 / 41 Innovation versus Invention In the definition by the OECD and Eurostat (2005), the concept of "implementation" helps distinguish between creativity (invention) and the execution of generated ideas (innovation). Invention involves creativity; it is the act of creating something. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 18 / 41 Innovation versus Invention In the definition by the OECD and Eurostat (2005), the concept of "implementation" helps distinguish between creativity (invention) and the execution of generated ideas (innovation). Invention involves creativity; it is the act of creating something. Innovation, on the other hand, is the industrial and/or commercial implementation of an invention. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 18 / 41 Outline 1 What is innovation? 2 Typologies of innovation 3 How is innovation measured? 4 Why is innovation worth studying? Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 19 / 41 Main typologies There are three "main" typologies of innovation, namely: Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 20 / 41 Main typologies There are three "main" typologies of innovation, namely: The typology based on the "nature of innovation;" Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 20 / 41 Main typologies There are three "main" typologies of innovation, namely: The typology based on the "nature of innovation;" The typology based on the "degree of novelty of innovation;" Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 20 / 41 Main typologies There are three "main" typologies of innovation, namely: The typology based on the "nature of innovation;" The typology based on the "degree of novelty of innovation;" The typology based on the "impact of innovation on price." Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 20 / 41 The typology based on the "nature of innovation" This typology is related to the level of application of innovation: Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 21 / 41 The typology based on the "nature of innovation" This typology is related to the level of application of innovation: prod- uct, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 21 / 41 The typology based on the "nature of innovation" This typology is related to the level of application of innovation: prod- uct, process, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 21 / 41 The typology based on the "nature of innovation" This typology is related to the level of application of innovation: prod- uct, process, organization, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 21 / 41 The typology based on the "nature of innovation" This typology is related to the level of application of innovation: prod- uct, process, organization, marketing. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 21 / 41 The typology based on the "nature of innovation" This typology is related to the level of application of innovation: prod- uct, process, organization, marketing. Hence, this typology considers four types of innovation: Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 21 / 41 The typology based on the "nature of innovation" This typology is related to the level of application of innovation: prod- uct, process, organization, marketing. Hence, this typology considers four types of innovation: Product innovation: the implementation of a new or significantly improved good or service; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 21 / 41 The typology based on the "nature of innovation" This typology is related to the level of application of innovation: prod- uct, process, organization, marketing. Hence, this typology considers four types of innovation: Product innovation: the implementation of a new or significantly improved good or service; Process innovation: the implementation of a new or significantly improved method of production or distribution; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 21 / 41 The typology based on the "nature of innovation" This typology is related to the level of application of innovation: prod- uct, process, organization, marketing. Hence, this typology considers four types of innovation: Product innovation: the implementation of a new or significantly improved good or service; Process innovation: the implementation of a new or significantly improved method of production or distribution; Organizational innovation: the implementation of a new organization in practices, workplace, or external relations of the company; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 21 / 41 The typology based on the "nature of innovation" This typology is related to the level of application of innovation: prod- uct, process, organization, marketing. Hence, this typology considers four types of innovation: Product innovation: the implementation of a new or significantly improved good or service; Process innovation: the implementation of a new or significantly improved method of production or distribution; Organizational innovation: the implementation of a new organization in practices, workplace, or external relations of the company; Marketing innovation: the implementation of a new strategy aimed at better satisfying consumer needs, opening new markets, or positioning a company’s product in a new way in the market. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 21 / 41 The typology based on the "nature of innovation" Technological versus non-technological innovations Product and Process innovations: Technological innovations Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 22 / 41 The typology based on the "nature of innovation" Technological versus non-technological innovations Product and Process innovations: Technological innovations Organizational and Marketing innovations: Non-technological inno- vations Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 22 / 41 The typology based on the "degree of novelty of innovation" According to the degree of novelty, there are two types of innovation: Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 23 / 41 The typology based on the "degree of novelty of innovation" According to the degree of novelty, there are two types of innovation: "radical" innovation and Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 23 / 41 The typology based on the "degree of novelty of innovation" According to the degree of novelty, there are two types of innovation: "radical" innovation and "incremental" innovation. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 23 / 41 The typology based on the "degree of novelty of innovation" According to the degree of novelty, there are two types of innovation: "radical" innovation and "incremental" innovation. A radical innovation: Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 23 / 41 The typology based on the "degree of novelty of innovation" According to the degree of novelty, there are two types of innovation: "radical" innovation and "incremental" innovation. A radical innovation: is a "major" innovation; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 23 / 41 The typology based on the "degree of novelty of innovation" According to the degree of novelty, there are two types of innovation: "radical" innovation and "incremental" innovation. A radical innovation: is a "major" innovation; corresponds to the introduction of a technology that affects the orga- nization of work and productivity across a wide range of activities; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 23 / 41 The typology based on the "degree of novelty of innovation" According to the degree of novelty, there are two types of innovation: "radical" innovation and "incremental" innovation. A radical innovation: is a "major" innovation; corresponds to the introduction of a technology that affects the orga- nization of work and productivity across a wide range of activities; revolutionizes the economic structure; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 23 / 41 The typology based on the "degree of novelty of innovation" According to the degree of novelty, there are two types of innovation: "radical" innovation and "incremental" innovation. A radical innovation: is a "major" innovation; corresponds to the introduction of a technology that affects the orga- nization of work and productivity across a wide range of activities; revolutionizes the economic structure; generally, creates unexpressed demand rather than responding to ex- pressed demand; Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 23 / 41 The typology based on the "degree of novelty of innovation" According to the degree of novelty, there are two types of innovation: "radical" innovation and "incremental" innovation. A radical innovation: is a "major" innovation; corresponds to the introduction of a technology that affects the orga- nization of work and productivity across a wide range of activities; revolutionizes the economic structure; generally, creates unexpressed demand rather than responding to ex- pressed demand; corresponds to "technology-push" innovation. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 23 / 41 The typology based on the "degree of novelty of innovation" Radical innovation, a source of creative destruction Radical innovation is a source of "creative destruction." Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 24 / 41 The typology based on the "degree of novelty of innovation" Radical innovation, a source of creative destruction Radical innovation is a source of "creative destruction." That is, it leads to the destruction of pre-existing industries that are not innovative enough and the birth of new industries. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 24 / 41 The typology based on the "degree of novelty of innovation" Incremental innovation In contrast to radical innovation, an "incremental" innovation is a "minor" innovation. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 25 / 41 The typology based on the "degree of novelty of innovation" Incremental innovation In contrast to radical innovation, an "incremental" innovation is a "minor" innovation. It mainly consists of improvements derived from a radical innovation, thereby improving existing products. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 25 / 41 The typology based on the "degree of novelty of innovation" Incremental innovation In contrast to radical innovation, an "incremental" innovation is a "minor" innovation. It mainly consists of improvements derived from a radical innovation, thereby improving existing products. It can also involve the implementation of products or production meth- ods that are not innovative enough from the market’s perspective. (these are often referred to as the "small innovations") Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 25 / 41 The typology based on the "impact of innovation on price" Based on the impact of innovation on price, there are two other types of innovation: Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 26 / 41 The typology based on the "impact of innovation on price" Based on the impact of innovation on price, there are two other types of innovation: "drastic" innovation and Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 26 / 41 The typology based on the "impact of innovation on price" Based on the impact of innovation on price, there are two other types of innovation: "drastic" innovation and "non-drastic" innovation. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 26 / 41 The typology based on the "impact of innovation on price" Based on the impact of innovation on price, there are two other types of innovation: "drastic" innovation and "non-drastic" innovation. A drastic innovation allows for such great cost savings that the in- novator can price as an unconstrained monopolist. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 26 / 41 The typology based on the "impact of innovation on price" Based on the impact of innovation on price, there are two other types of innovation: "drastic" innovation and "non-drastic" innovation. A drastic innovation allows for such great cost savings that the in- novator can price as an unconstrained monopolist. To be precise, an innovation is considered "drastic" if the price chosen by a monopolistic firm after innovation is lower than the marginal cost before the innovation. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 26 / 41 The typology based on the "impact of innovation on price" Based on the impact of innovation on price, there are two other types of innovation: "drastic" innovation and "non-drastic" innovation. A drastic innovation allows for such great cost savings that the in- novator can price as an unconstrained monopolist. To be precise, an innovation is considered "drastic" if the price chosen by a monopolistic firm after innovation is lower than the marginal cost before the innovation. It is "non-drastic" otherwise. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 26 / 41 The typology based on the "impact of innovation on price" Based on the impact of innovation on price, there are two other types of innovation: "drastic" innovation and "non-drastic" innovation. A drastic innovation allows for such great cost savings that the in- novator can price as an unconstrained monopolist. To be precise, an innovation is considered "drastic" if the price chosen by a monopolistic firm after innovation is lower than the marginal cost before the innovation. It is "non-drastic" otherwise. Indeed, drastic innovation, if it can be subject to intellectual property rights (legal, commercial, or technical protection), allows the exclusion of competitors from the market. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 26 / 41 Summarizing the typologies of innovation Table 1. Main typologies of innovation. Axes of typology Corresponding types of innovation Nature of innovation Product innovation; Process innovation; Organizational innovation; Marketing inno- vation Degree of novelty of Radical innovation; Incremental innovation innovation Impact of innovation Drastic innovation; Non-drastic innovation on price Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 27 / 41 Outline 1 What is innovation? 2 Typologies of innovation 3 How is innovation measured? 4 Why is innovation worth studying? Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 28 / 41 Direct measures of innovation Two main measures Firms are surveyed to determine whether they have innovated or not. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 29 / 41 Direct measures of innovation Two main measures Firms are surveyed to determine whether they have innovated or not. Generally, this leads to two main measures of innovation. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 29 / 41 Direct measures of innovation Two main measures Firms are surveyed to determine whether they have innovated or not. Generally, this leads to two main measures of innovation. A binary variable indicating whether a firm has introduced any (or a specific type of) innovation over a specific period, and 0 otherwise. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 29 / 41 Direct measures of innovation Two main measures Firms are surveyed to determine whether they have innovated or not. Generally, this leads to two main measures of innovation. A binary variable indicating whether a firm has introduced any (or a specific type of) innovation over a specific period, and 0 otherwise. Innovation counts: A variable recording the number of innovations introduced by a firm over a specific period. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 29 / 41 Proxy-measures of innovation Two main measures They provide an indirect measure of innovation by assessing innovation capacity. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 30 / 41 Proxy-measures of innovation Two main measures They provide an indirect measure of innovation by assessing innovation capacity. In general, two proxy-measures of innovation are considered. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 30 / 41 Proxy-measures of innovation Two main measures They provide an indirect measure of innovation by assessing innovation capacity. In general, two proxy-measures of innovation are considered. The number of patents granted. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 30 / 41 Proxy-measures of innovation Two main measures They provide an indirect measure of innovation by assessing innovation capacity. In general, two proxy-measures of innovation are considered. The number of patents granted. Research and development (R&D) expenditure. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 30 / 41 Proxy-measures of innovation Patents Patents are intellectual property rights: "protect" inventions/inventors. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 31 / 41 Proxy-measures of innovation Patents Patents are intellectual property rights: "protect" inventions/inventors. Three observations on patents: Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 31 / 41 Proxy-measures of innovation Patents Patents are intellectual property rights: "protect" inventions/inventors. Three observations on patents: First, patents are granted for "inventions" and not "innovations." Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 31 / 41 Proxy-measures of innovation Patents Patents are intellectual property rights: "protect" inventions/inventors. Three observations on patents: First, patents are granted for "inventions" and not "innovations." Second, not all inventions are patented, frequently because firms opt against pursuing patents. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 31 / 41 Proxy-measures of innovation Patents Patents are intellectual property rights: "protect" inventions/inventors. Three observations on patents: First, patents are granted for "inventions" and not "innovations." Second, not all inventions are patented, frequently because firms opt against pursuing patents. Third, not all patented inventions become innovations. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 31 / 41 Proxy-measures of innovation R&D: Definition Concerning R&D, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 32 / 41 Proxy-measures of innovation R&D: Definition Concerning R&D, it is customary in economic analyses to adopt the definition stated by the OECD (2015) in the Frascati Manual. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 32 / 41 Proxy-measures of innovation R&D: Definition Concerning R&D, it is customary in economic analyses to adopt the definition stated by the OECD (2015) in the Frascati Manual. "R&D comprise creative and systematic work undertaken in order to increase the stock of knowledge – including knowledge of humankind, culture and society – and to devise new applications of available knowl- edge." (OECD, 2015, p.44) Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 32 / 41 Proxy-measures of innovation R&D: Components The term R&D covers three types of activity: Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 33 / 41 Proxy-measures of innovation R&D: Components The term R&D covers three types of activity: basic research, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 33 / 41 Proxy-measures of innovation R&D: Components The term R&D covers three types of activity: basic research, applied research, and Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 33 / 41 Proxy-measures of innovation R&D: Components The term R&D covers three types of activity: basic research, applied research, and experimental development. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 33 / 41 Proxy-measures of innovation R&D: Components The term R&D covers three types of activity: basic research, applied research, and experimental development. Basic research Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 33 / 41 Proxy-measures of innovation R&D: Components The term R&D covers three types of activity: basic research, applied research, and experimental development. Basic research Experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 33 / 41 Proxy-measures of innovation R&D: Components The term R&D covers three types of activity: basic research, applied research, and experimental development. Basic research Experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application or use in view. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 33 / 41 Proxy-measures of innovation R&D: Components The term R&D covers three types of activity: basic research, applied research, and experimental development. Basic research Experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application or use in view. Applied research Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 33 / 41 Proxy-measures of innovation R&D: Components The term R&D covers three types of activity: basic research, applied research, and experimental development. Basic research Experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application or use in view. Applied research Original investigation undertaken in order to acquire new knowledge. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 33 / 41 Proxy-measures of innovation R&D: Components The term R&D covers three types of activity: basic research, applied research, and experimental development. Basic research Experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application or use in view. Applied research Original investigation undertaken in order to acquire new knowledge. It is, however, directed primarily toward a specific, practical aim or objective. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 33 / 41 Proxy-measures of innovation R&D: Components Experimental development Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 34 / 41 Proxy-measures of innovation R&D: Components Experimental development Systematic work, drawing on knowledge gained from research and prac- tical experience and producing additional knowledge, Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 34 / 41 Proxy-measures of innovation R&D: Components Experimental development Systematic work, drawing on knowledge gained from research and prac- tical experience and producing additional knowledge, which is directed to producing new products or processes or to improv- ing existing products or processes. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 34 / 41 Outline 1 What is innovation? 2 Typologies of innovation 3 How is innovation measured? 4 Why is innovation worth studying? Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 35 / 41 Why is innovation worth studying? Typically, what makes innovation relevant to study are its benefits to the economy. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 36 / 41 Why is innovation worth studying? Typically, what makes innovation relevant to study are its benefits to the economy. These benefits can be observed at both the microeconomic and macroe- conomic levels. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 36 / 41 Why is innovation worth studying? Typically, what makes innovation relevant to study are its benefits to the economy. These benefits can be observed at both the microeconomic and macroe- conomic levels. Let us briefly overview these benefits in the following subsections. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 36 / 41 At the microeconomic level We can cite the following benefits, among others: Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 37 / 41 At the microeconomic level We can cite the following benefits, among others: Helps better resist competition. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 37 / 41 At the microeconomic level We can cite the following benefits, among others: Helps better resist competition. Maintains and/or improves market share. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 37 / 41 At the microeconomic level We can cite the following benefits, among others: Helps better resist competition. Maintains and/or improves market share. Enhances productivity. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 37 / 41 At the microeconomic level We can cite the following benefits, among others: Helps better resist competition. Maintains and/or improves market share. Enhances productivity. Increases profits. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 37 / 41 At the microeconomic level We can cite the following benefits, among others: Helps better resist competition. Maintains and/or improves market share. Enhances productivity. Increases profits. Improves wages and income. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 37 / 41 At the microeconomic level We can cite the following benefits, among others: Helps better resist competition. Maintains and/or improves market share. Enhances productivity. Increases profits. Improves wages and income. Enhances price competitiveness. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 37 / 41 At the microeconomic level We can cite the following benefits, among others: Helps better resist competition. Maintains and/or improves market share. Enhances productivity. Increases profits. Improves wages and income. Enhances price competitiveness. Reduces environmental impact (referred to as "sustainable" innova- tion). Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 37 / 41 At the microeconomic level We can cite the following benefits, among others: Helps better resist competition. Maintains and/or improves market share. Enhances productivity. Increases profits. Improves wages and income. Enhances price competitiveness. Reduces environmental impact (referred to as "sustainable" innova- tion). Improves health and safety (referred to as "responsible" innovation). Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 37 / 41 At the microeconomic level We can cite the following benefits, among others: Helps better resist competition. Maintains and/or improves market share. Enhances productivity. Increases profits. Improves wages and income. Enhances price competitiveness. Reduces environmental impact (referred to as "sustainable" innova- tion). Improves health and safety (referred to as "responsible" innovation). Enhances quality of life. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 37 / 41 At the macroeconomic level We can cite the following benefits, among others: Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 38 / 41 At the macroeconomic level We can cite the following benefits, among others: Improves economic growth. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 38 / 41 At the macroeconomic level We can cite the following benefits, among others: Improves economic growth. Fosters economic development. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 38 / 41 At the macroeconomic level We can cite the following benefits, among others: Improves economic growth. Fosters economic development. May reduce unemployment. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 38 / 41 At the macroeconomic level We can cite the following benefits, among others: Improves economic growth. Fosters economic development. May reduce unemployment. Increases public sector efficiency (e.g., through e-government). Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 38 / 41 At the macroeconomic level We can cite the following benefits, among others: Improves economic growth. Fosters economic development. May reduce unemployment. Increases public sector efficiency (e.g., through e-government). Strengthens infrastructure. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 38 / 41 At the macroeconomic level We can cite the following benefits, among others: Improves economic growth. Fosters economic development. May reduce unemployment. Increases public sector efficiency (e.g., through e-government). Strengthens infrastructure. Boosts economic resilience. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 38 / 41 At the macroeconomic level We can cite the following benefits, among others: Improves economic growth. Fosters economic development. May reduce unemployment. Increases public sector efficiency (e.g., through e-government). Strengthens infrastructure. Boosts economic resilience. Attracts foreign investment. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 38 / 41 At the macroeconomic level We can cite the following benefits, among others: Improves economic growth. Fosters economic development. May reduce unemployment. Increases public sector efficiency (e.g., through e-government). Strengthens infrastructure. Boosts economic resilience. Attracts foreign investment. Promotes domestic credit mobilization. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 38 / 41 At the macroeconomic level We can cite the following benefits, among others: Improves economic growth. Fosters economic development. May reduce unemployment. Increases public sector efficiency (e.g., through e-government). Strengthens infrastructure. Boosts economic resilience. Attracts foreign investment. Promotes domestic credit mobilization. Decreases the size of the informal economy. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 38 / 41 Wrapping up This chapter characterizes innovation by discussing its definitions and typologies. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 39 / 41 Wrapping up This chapter characterizes innovation by discussing its definitions and typologies. The main measures of innovation have been discussed. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 39 / 41 Wrapping up This chapter characterizes innovation by discussing its definitions and typologies. The main measures of innovation have been discussed. The chapter concludes by highlighting the benefits of innovation at both the microeconomic and macroeconomic levels. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 39 / 41 References OECD (2015). Frascati Manual 2015: Guidelines for Collecting and Report- ing Data on Research and Experimental Development, The Measurement of Scientific, Technological and Innovation Activities. Paris: OECD Pub- lishing. OECD and Eurostat (2005). Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data (3rd ed.). Paris: OECD Publishing. Ricardo, D. (1817). Des Principes de l’Economie Politique et de l’Impôt. Paris: Flammarion, Traduction Française. Schumpeter, J. A. (1912). The Theory of Economic Development. Cam- bridge: Harvard University Press. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 40 / 41  End of the chapter. Dorgyles C.M. Kouakou Economics of Innovation Version of September 2024 41 / 41