Innovation Performance Indicators and Small Firms in Wales

This research reviews current innovation performance indicators relevant to small firms and presents an approach that can be used to provide rigorous analysis of innovation activity for Wales in comparison with other countries and regions. The extant concepts and research the paper is trying to build on is the recent work into innovation performance indicators, at national and regional levels, which has shown that there is evidence of variability of such indicators to manipulation (Grupp, 2006). The robustness of such innovation scoreboards has been criticised empirically by heuristic types of analysis (Grupp and Mogee, 2004). It is clear that complex and qualitative interrelations within an innovative national environment cannot be measured in a simple sense (Schumpeter, 1934). It is therefore necessary to combine several indicators for innovation to form an aggregate measure (Grupp, 2006). In order to reach a broader audience it is necessary to develop simple measures and this is well established. A more complete compilation of such simple indicators has been undertaken by Freudenberg (2003). A framework for selecting and placing indicators in three performance areas will be explored according to i) basic research and the production of new knowledge; ii) links between public and private research and iii) levels of industrial innovation (OECD, 2001). Results according to the three performance areas outlined above are derived from databases including those of the EC and OECD. The core components include the generation of new knowledge (involving variables such as basic research as a percentage of GDP and non-business researchers in the labour force), industry-science linkages (business-financed R&D performed by government and higher education as a percentage of GDP, patents and publications), and industrial innovation (business enterprise R&D (BERD) as a percentage of GDP, business researchers in the labour force, patents and new products or processes) (Freudenberg, 2003). Through categorisation and weighting, indicators are determined to measure innovation performance. This research identifies those indicators of innovation performance that will be useful to entrepreneurs, policy makers, practitioners, researchers and educators. The approach is original and unique since innovation performance indicators have been refined for larger countries and through this research a new approach is developed for smaller countries.