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Compiled by: Rajnish Tiwari Feb. 2008 Hamburg University of Technology (TUHH)
Defining Innovation
一.
(Based on “Oslo Manual”, 3rd edition, 2005)
An innovation is the implementation of a new or significantly improved product (good or
service), or process, a new marketing method, or a new organizational method in business
practices, workplace organization or external relations.
The minimum requirement for an innovation is that the product, process, marketing
method or organizational method must be new (or significantly improved) to the firm.
Innovation activities are all scientific, technological, organizational, financial and
commercial steps which actually, or are intended to, lead to the implementation of
innovations. Innovation activities also include R&D that is not directly related to the
development of a specific innovation.
An innovative firm is one that has implemented an innovation during the period under
review.
Main types of innovation
1) A product innovation is the introduction of a good or service that is new or
significantly improved with respect to its characteristics or intended uses. This includes
significant improvements in technical specifications, components and materials,
incorporated software, user friendliness or other functional characteristics. Product
innovations can utilize new knowledge or technologies, or can be based on new uses or
combinations of existing knowledge or technologies.
2) A process innovation is the implementation of a new or significantly improved
production or delivery method. This includes significant changes in techniques,
equipment and/or software. Process innovations can be intended to decrease unit costs of
production or delivery, to increase quality, or to produce or deliver new or significantly
improved products.
3) A marketing innovation is the implementation of a new marketing method involving
significant changes in product design or packaging, product placement, product
promotion or pricing. Marketing innovations are aimed at better addressing customer
needs, opening up new markets, or newly positioning a firm’s product on the market, with
the objective of increasing the firm’s sales.
4) An organizational innovation is the implementation of a new organizational method
in the firm’s business practices, workplace organization or external relations.
Organizational innovations can be intended to increase a firm’s performance by reducing
administrative costs or transaction costs, improving workplace satisfaction (and thus labor
productivity), gaining access to non-tradable assets (such as non-codified external
knowledge) or reducing costs of supplies.
Box 2: Defining research and development
Defining Research and Development (R&D)
(Based on OECD’s “Frascati Manual”, 2002 edition)
In accordance with the approach advocated by the Frascati Manual, this study defines
R&D as “creative work undertaken on a systematic basis in order to increase the stock of
knowledge, including knowledge of man, culture and society, and the use of this stock of
knowledge to devise new applications”.
The term “research and experimental development” is used as synonymous to the term
“research and development” and both are abbreviated by the expression “R&D”.
The term R&D covers three activities: basic research, applied research and experimental
development:
Basic research is experimental or theoretical work undertaken primarily to acquire new
knowledge of the underlying foundation of phenomena and observable facts, without any
particular application or use in view.
Applied research is also original investigation undertaken in order to acquire new
knowledge. It is, however, directed primarily towards a specific practical aim or
objective.
Experimental development is systematic work, drawing on existing knowledge gained
from research and/or practical experience, which is directed to producing new materials,
products or devices, to installing new processes, systems and services, or to improving
substantially those already produced or installed. R&D covers both formal R&D in R&D
units and informal or occasional R&D in other units.
Box 3: Boundaries of research and development
The boundaries of R&D: Clarification of specific cases
(Based on OECD’s “Frascati Manual”)
The basic criterion for distinguishing R&D from related activities is the presence in R&D of
an appreciable element of novelty and the resolution of scientific and/or technological
uncertainty.
A prototype is an original model constructed to include all the technical characteristics and
performances of the new product. The design, construction and testing of prototypes
normally falls within the scope of R&D.
The construction and operation of a pilot plant is a part of R&D as long as the principal
purposes are to obtain experience and to compile engineering and other data.
Those elements of industrial design work, which include plans and drawings aimed at
defining procedures, technical specifications and operational features necessary to the
conception, development and manufacturing of new products and processes.
Clinical trials are divided into four standard phases, three of which take place before
permission to manufacture is accorded. By convention, clinical trial phases 1, 2 and 3 can
be treated as R&D. Phase 4 clinical trials, which continue testing the drug or treatment after
approval and manufacture, are treated as R&D only if they bring about a further scientific
or technological advance.
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