The Definition and Measurement of Innovation
Melbourne Institute Working Paper No. 10/98
Date: May 1998
This paper discusses the definition and measurement of innovation at the firm-level. Innovation is the process of introducing new ideas to the firm which result in increased firm performance. Various measures of innovative activity are discussed and evaluated. All the individual measures discussed can only act as partial indicators of the extent of innovation. This is because innovation covers an extremely broad range of activities which varies between firms. To create better measures of innovation it is necessary to aggregate the various individual measures. Methods to achieve this are discussed. The paper also provides a short review of previous Australia firm-level studies on innovation.