Measuring regional innovation
A friend recently posed a question: How do we integrate views of traditional regional economists and the new thinking on open innovation.
My reply:
There's no secret beyond continuously pushing toward sensible integration.
We can start with quant screens. That's fine. But they only show some clusters (based largely on co-location and some inferences about innovation). The problem here is that none of the quantifiable output indicators (patents, etc) are very helpful in isolation -- which is why you need to construct innoation indexes. And when you construct indexes, we defeat some of the critical dimensions of a metric for practitioners: they must be both understandable and actionable.
If we could figure out some sensible quantitative indicators around value added per employee or exports per employee or new product revenue as a percent of total, we might get a bit closer. We used this approach in an analysis we did of the competitiveness of the Rhode Island economy, but it is relatively hard to do. (I like some of the work being done in New Zealand, and I'd like to explore it more, and, as we mentioned, folks in the EU have been working on these issues for some time.)
At the end of the day, innovation is more than geographic co-location. We need measures of information flows and contacts (links and nodes). We need innovation indicators that are based on structured, dynamic data sets that help us understand, for example, the structure of these networks and their performance in terms of the pattern of investment in a regional economy. We want higher levels of investment in higher value activities.
This orientation pushes the economists away from their data sets, and many are not comfortable. But so be it. If we really want to accelerate innovation in this country, we need to move toward a different level of measurement, replication and scale. The university collaboration we are building is a critical platform to move us in this direction.
Open innovation is about four factors: 1) compelling, shared opportunities arising from linking and leveraging assets; 2) the discipline to guide strategic conversations in open networks to translate ideas into action (strategic doing); 3) fast cycle experiments on the edge of these networks to figure out what works; and 4) heuristics for identifying initiatives that are scalable, replicable and sustainable, so we can quickly push investment in that direction. (As one of my venture capitalist friends puts it, "If you find you have started a fire, throw gasoline on it.")
We showed in Indiana that this approach of "linking and leveraging" assets can generate huge productivity gains when it comes to federal workforce programs (exceeding already ambitious goals by 2.5X). The same is true elsewhere. It's the power of open networks. Regions with stronger open networks will spot opportunities faster, align their assets faster, make decisions faster, and learn faster.
Innovation clusters are really open innovation networks, and we are at the early stage of understanding how to form them, guide them strategically, and measure their strength and performance.
None of this is easily captured by the massive, static datasets and the regressions tools that traditional economists use to understand the world.
Measuring the soft stuff is the hard stuff.
Ed
