Department of Commerce Notice on Innovation Measurement

Content

ACTION:

Notice and request for comments.

SUMMARY:

The Department of Commerce is seeking public comment on issues related to the measurement of innovation. This request supports
efforts of the Measuring Innovation in the 21st Century Economy Advisory Committee to collect seek advice from the public
as it prepares recommendations for the Secretary of Commerce on new or improved measures of business innovation.

DATES:

Written comments on this notice must be submitted on or before May 11, 2007. Please note that all comments will be made public
and published on the Committee's Web site at: www.innovationmetrics.gov.

ADDRESSES:

You may submit comments by any of the following methods:

E-mail: innovationmetrics@doc.gov.

Fax: (202) 482-2889 (Attn.: Elizabeth “E.R.” Anderson).

Mail or Hand Delivery/Courier: Elizabeth “E.R.” Anderson, Room 4836 U.S. Department of Commerce, Economics and Statistics
Administration, 14th Street & Pennsylvania Avenue, NW., Washington, DC 20230. Because we continue to experience delays in
receiving mail, respondents are encouraged to submit comments by mail early, or to transmit them electronically.

FOR FURTHER INFORMATION CONTACT:

For questions on the submission of comments, contact Elizabeth “E.R.” Anderson.

SUPPLEMENTARY INFORMATION:

The charter establishing the Measuring Innovation in the 21st Century Advisory Committee (the Committee) calls for the Committee
to make recommendations to the Secretary of Commerce on ways that will permit better measurement of innovation and its impact
on the U.S. economy.

The Committee is charged with developing innovation metrics that inform policy decisions and enable policymakers and the business
community to better monitor innovation. Among other things, the Committee's work should build on the way firms assess the
effectiveness of their own innovative activities. The recommendations should not only focus on measuring innovation activities
and inputs, but should also focus on the results and output of innovation. Furthermore, the recommendations should allow for
analysis at industry, sector, national, and international levels.

The type of innovation for which measurement improvement is sought is defined as:

The design, invention, development and/or implementation of new or altered products, services, processes, systems, organizational
structures, or business models for the purpose of creating new value for customers and financial returns for the firm.”

The recommendations will cover the following four major categories identified by the participants during the initial meeting
of the Advisory Committee:

1. Improvement of the underlying architecture of the U.S. System of National Accounts to facilitate development of improved
   and more granular measures of innovation and productivity;

2. Identification of appropriate economy-wide and sector-specific statistical series or other indicators that could be used
   to quantify innovation and/or its impacts;

3. Identification of firm-specific data items that could enable comparisons and aggregation; and

4. Identification of specific “holes” in the current data collection system that limit our ability to measure innovation.

Comments are solicited to address new and/or improved innovation measures in each of the above categories. Following are some
specific issues and suggestions raised by Advisory Committee members, grouped according to the measurement categories listed
above, on which the Committee specifically invites comment. Comments need not be limited to these issues and suggestions,
but should address the specific data categories.

1. Improvement of the underlying architecture of the U.S. System of National Accounts to facilitate development of improved and
   more granular measures of innovation and productivity. Our national accounts are the main source of information about the growth of our national output, usually measured by the
   gross domestic product or GDP. Total Factor Productivity (TFP) which measures growth of output per unit of input for the economy
   as a whole and for individual industries is not included in the national accounts. Is the concept of TFP sufficiently related
   to innovation to warrant the inclusion of economy-wide and industry level TFP in the system of national accounts? If so, what
   is the most effective way to incorporate the concept into the national accounts? Are there ways to disaggregate the innovation
   component of TFP to differentiate innovation from other productivity drivers?

2. Identification of appropriate economy-wide and sector-specific indicators that could be used to quantify innovation and/or
   its impacts. Are there measures that accommodate economy-wide (or macro-economic) and sector-specific notions of innovation? What elements
   of innovation could serve as a foundation for statistical series? To what extent would the collection of better data on service
   sector outputs and services inputs used by all firms improve innovation measurement? Is market share growth a good indicator
   of innovation? If so, would estimates in the change in U.S. firms' shares of regional, national, and global markets be useful
   innovation measures? Could/should collaborative connections between entities be captured? Since a characteristic of markets
   is that the

   benefits of innovations flow, at least in part, to buyers, are there ways to identify the flow of innovations across firms
   and sectors?

3. Identification of firm-specific data items that could enable comparisons and aggregation. Current corporate innovation measurement appears to be done primarily on either a project or a portfolio basis. Are these
   measurement practices sufficiently widespread and uniform to make data collection on either of these bases practical? Is it
   possible or necessary to collect information on company culture, incentive structures, and organizational change? If customer
   satisfaction is an important measure of an innovative firm, how can that be captured? How important is it to distinguish between
   types of innovation (i.e. radical versus incremental)?

What data would be needed to differentiate the characteristics of innovative firms within industry sectors from non-innovative
firms? What are the most important measures of the underlying process of how innovation and productivity advances are initiated
or stimulated? Could/should an understanding of innovation from the consumer perspective be developed?

Could data items from SEC filings be used to enhance understanding of innovation in public companies? Are there proxies for
relative innovative success (e.g. percent of total revenue attributable to new—or significantly improved to the point where
they could be considered new—products, services, or processes introduced within the last two years into markets where a firm
has a growing market share) that would provide insight into relative innovative strength? Is two years long enough?

1. Identification of specific “holes” in the current data collection system that limit our ability to measure innovation. Some specific types of data holes were identified during the meeting, including lack of data on firm formation, intellectual property licensing costs as a type of purchased input, and insufficient product detail. What should be the prioritized list of specific data items needed to fill the holes?

Limitations on our ability to link and coordinate across various data sets were also mentioned as a hole or deficiency of
our current data collection system. Are there cost-effective ways of building on existing data sets to develop more information
on innovation drivers and their link to success? How could data sharing and cooperation among federal agencies be improved
insofar as such agencies maintain data series related to the measurement of innovation? Could existing private and/or foreign
data be combined with existing official statistical series in order to better measure innovation? Are there changes that could
be made to make such combinations possible or easier?

To assist the Advisory Committee in evaluating and comparing specific ideas for new or improved innovation measurement, comments
on proposals for new or improved innovation measurement should provide the following information:

1. Description of proposal. Proposals for new or improved innovation measurement should include the following:

• Specific description of the proposed change.
• Identification of the specific Committee category to which the proposal applies.
• Rationale for the proposed change.
• Data description, sources and method of collection.
• Approximate cost and burden estimate.

• Impact of proposal on innovation measurement. Proposals should include:

• Description of how proposal improves measurement of innovation as defined by the Advisory Committee.

• Description of the particular elements of innovation measurement that are improved by the proposal.

• Description of how the proposal addresses the issues and questions raised by the Committee.

• Description of how the new or improved measure would provide appropriate signals of changes in business behavior for the
  purpose of informing policy debates.
  Page Limit—Submissions should be limited to a maximum length of 10 pages. Identification and Cover Sheet—Each page of the
  submission should be clearly marked with the submitter's name (and organization, if applicable), date of submission, and contact
  information (if the submitter chooses to provide it). Each submission should be clearly marked as originating from one of
  the following categories of submitters: Individuals, Businesses, Government, Academia, or Organizations and Associations.

All comments must be submitted to the address indicated in this notice. The Department requires that all comments be submitted
in written form.

The Department encourages interested persons who wish to comment to do so at the earliest possible time. The period for submission
of comments will close on May 11, 2007. The Department will consider all comments received before the close of the comment
period. Comments received after the end of the comment period will be considered if possible, but their consideration cannot
be assured. The Department will not accept comments accompanied by a request that part or all of the material be treated confidentially
because of its business proprietary nature or for any other reason. All comments submitted in response to this notice will
be a matter of public record. They will be available for public inspection and copying and posted on the Advisory Committee's
Web site at http://www.innovationmetrics.gov.

Dated: April 9, 2007. Elizabeth (E.R.) Anderson, Deputy Under Secretary for Economic Affairs. [FR Doc. 07-1827 Filed 4-12-07; 8:45 am] BILLING CODE 3510-06-P

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