URGENT: Managing Innovation Assignment No.2buriza
European Innovation Scoreboard (European Commission, 2003)
This case has been written as a basis for class discussion rather than to illustrate effective or ineffective
managerial or administrative behaviour. It has been prepared from a variety of published sources, as indicated,
and from observations.
In a response to increased competition and globalisation the European Council argued for increased and
enhanced efforts to improve the Union's performance in innovation. In March 2000 in the picturesque city of
Lisbon the Union set itself the goal of becoming the most competitive and dynamic, knowledge-based economy
in the world within the next decade. Fine words one may say, but precisely how does one set about achieving
this laudable goal? A strategy was developed and presented in Stockholm in March 2001. The strategy was to
build on the economic convergence that had been developed over the past 10 years within the EU single market
and to coordinate an open method' of developing policies for creating new skills, knowledge and innovation. To
support this approach the European Commission stated that there was a need for an assessment of how member
countries were performing in the area of innovation. The idea of a 'Scoreboard' was launched to indicate the
performance of member states. This would be conducted every year as a way of assessing the performance of
member countries. It is essentially a benchmarking exercise where the European Union can assess its
performance against other countries, most notably Japan and the United States.
This is an extremely ambitious project to try to assess innovative ability. There have been many studies over the
past two decades that have tried to identify the factors necessary for innovation to occur (see Table I.6). and
while many factors have been identified many of these are necessary but not sufficient in themselves. Moreover,
some governments have attempted to develop `innovation tool-kits and scorecards' to try to help firms in their
own countries to become more innovative (UK Department of Trade and Industry). Most of these have not been
successful. This ambitious project by the European Union is full of limitations and is generally regarded as
over-simplistic. This is largely because the economic conditions of the member countries are so very different
and all have a wide variety of strengths and weaknesses. None the less, in order to assess where the European
Union should target help and the precise type of help required by each member it is necessary to analyse the
innovative performance of countries. The scoreboard is an initial attempt at a very challenging exercise.
The Innovation Scoreboard
The Innovation Scoreboard is designed to complement the structural indicators. These are things like education
systems, financial systems for raising capital, levels of employment. etc., which the EU Commission currently
assesses through other mechanisms and statistical analysis. To minimise the additional statistical burden, the
Innovation Scoreboard mainly uses official Eurostat data, if official data is not available. It analyses statistical
data on 17 indicators in four areas, depicts achievements and trends, highlights strengths and weaknesses and
examines the extent of convergence in innovation. The four key areas are as follows:
1 Knowledge creation.
The three indicators used for the creation of new knowledge are public R&D expenditure, business R&D
expenditure and patenting activity.
2 Human resources.
The scale and quality of human resources are major determinants of both the creation of new knowledge and its
use throughout the economy. The indicators used are the education of scientists and engineers, the skill level of
the working-age population and a measure of life-long learning. In addition employment indicators are used
such as the share of the workforce in technology-intensive industries.
3 Transmission and application of new knowledge.
This area covers the activities outside formal innovation. It is more concerned with the extent of adoption and
use of new technology and knowledge. The indicators on in-house innovation and cooperative innovation are
limited to small and medium-sized enterprises (SMEs). These, however, provide a better picture of innovation
within small and medium-sized firms than R&D expenditure which is more prevalent among large firms.
Moreover, SMEs form the majority of firms in most countries and play a vital role in innovation: linking public
and large-firm research to practical applications within industrial settings.
4 Innovation finance, output and markets.
This group includes indicators that cover the supply of finance to industry. For the European Union as a whole
analysis of changes over the past four years shows improvements in many areas and importantly in some areas
countries within the Union lead the world, indicating that there is potential for member states to learn and
replicate best practice. It is this idea of learning from other member countries that lies at the heart of the unique
policy approach being applied to the coordination of improving innovative performance within the Union. The
so-called 'open-method' approach to coordination is different from the usual EU policies which are based on
establishing targets that all EU countries have to achieve over a period of time. For example, the European
Union has a policy on clean bathing water within the Union, and all countries have been given targets to bring
their bathing waters to the required standard. Depending on the initial state of cleanliness, countries have been
given time-scales within which they must achieve these targets or face the risk of fines. The innovation policy,
however, required a different approach and the 'open method of coordination' was developed. This is based on
the premise that countries will progressively develop their own policies by spreading best practice.
The table on the following page presents, for every indicator, the overall mean, the three leading member states
with the best results for each indicator, and the results for the United States and Japan where available.
Since the first Innovation Scoreboard most countries have been improving their performance. Among the three
largest EU economies (France, Germany and the United Kingdom) the United Kingdom has improved the
fastest. Some countries have been improving much quicker than others. Most notably Denmark and Finland
have been moving ahead of other countries.
See also: http://www.proinno-europe.eu/inno-metrics/page/33-innovation-dimenstions
The ranking of countries by their innovative performance was never the intention behind the Innovation
Scoreboard, but this is precisely what many people have been doing with the results produced by the survey.
Indeed, many newspapers have presented the findings accompanied with dramatic headlines to support or
defend their arguments. The EU Commission recognised that this was how many analysts and commentators
liked to see the findings; hence it produced a tentative summary innovation index (SIT). This helps to address
the need for a comparison of countries and performance. Several cautions are necessary when studying the SIT.
First, the SIT is a relative rather than absolute index. An index of zero means there is no meaningful difference
from the EU average. Second, the SII is not fully comparable between countries because of missing indicators
for seven countries. The SII is based on only eight indicators for Japan and nine for the United States. Third,
minor differences in the SII between countries are unlikely to be meaningful due to limitations with some of the
indicators. With these irritations in mind Figure summarises the conditions in each country by giving the SII
and the average percentage change.
Innovation varies greatly from industry to industry and from firm to firm. For example, some industries are far
more competitive than others; hence it is context dependent. Innovation is also complex and not fully
understood, but we know that it is important to have certain things in place. All the things in the scoreboard are
necessary but not sufficient in themselves to ensure innovation occurs. For example, the next chapter in this
book looks at a late-industrialising country on the edge of Europe. A country with a population of 60 million,
already a member of the North Atlantic Treaty Organisation (NATO) and a prospective member of the
European Union. Turkey is that country and it is a good example of a late-industrialising economy. Sitting on
the edge of Europe and bestriding two continents, Turkey should be in a position to develop a successful
economy. However, in Turkey, there seems to be a missing link in terms of the innovative intention and
capabilities of enterprises. Turkey needs to put in place many of the things detailed in the Scoreboard. This
would surely help to develop enterprise in the country, but it will not convert Turkey into a Finland overnight.
By identifying, comparing and disseminating best practices in financing and technology transfer, Europe can
improve its innovation performance. One area that needs particular attention is the overall perception of the
entrepreneur. The image of the entrepreneur needs to have greater value, as in the United States where the drive
to try to market new products, with the in-built risk of failure, is seen much more positively than in Europe.
The Scoreboard may be helpful to governmental policy makers in deciding where to invest substantial sums of
money. However, firms behave differently given similar circumstances and some firms appeared to be more
successful than others. Given this, the Scoreboard's practical help is likely to be extremely limited. Innovation is
extremely complex and involves the effective management of a variety of different activities within the
organisation. Indeed, it is precisely how the process of innovation is managed that needs to be examined.
This case has been written as a basis or class discussion rather than to illustrate effective or ineffective
managerial or administrative behaviour. It has been prepared from a variety of published sources and from
Questions - based on this case study
1 What are the limitations of such types of `league tables'?
2 Why are the factors listed on the Scoreboard necessary but not sufficient?
3 Four key areas are assessed. What other areas do you think should be included?
4 What do the findings from tables show?
5 Why is the Scoreboard likely to be of little practical help?
Support each answer with at least one academic reference from UCW's library (EBSCOhost) using a proper
APA citation format.