Errors in the interpretation of 'innovation': preliminary results from a 2007 innovation survey in Australia

Over the past decade, the quality of the European Community Innovation Survey (CIS) data has gradually improved due to several factors. One is the implementation of good practice by many National Statistical Offices (NSOs) in the survey methodology, such as better followup of non-respondents and routines to contact enterprises to clarify unexpected responses, particularly for interval level data. In addition, cognitive testing has been implemented by Eurostat as standard practice whenever a question is altered or added to the standard CIS questionnaire. These practices have improved the quality of the results for many of the CIS questions. However, there has arguably been insufficient research into how respondents interpret the concept of innovation itself, as measured in the key questions on product, process, organisational and marketing innovation. We know that the percentage of self-reported innovative firms varies across countries in sometimes unexpected ways. For instance, between 2005 and 2007 the percentage of innovative firms was almost twice as high in Germany (78.9%) compared to the Netherlands (44.9%) and the UK (45.6%). The recent 2009 NSF survey for the United States reports a lower percentage of product innovative firms compared to many European countries Europe.3 Although there are several possible causes for these differences, such as different industrial structures, an alternative possibility is national and firm size differences in how respondents interpret the concept of 'innovation'. This brief report looks into the issue of how innovation survey respondents interpret questions on innovation by using a unique dataset from Australia. The data do not provide information on differences across countries, but they do provide some clues as to how innovation can be interpreted differently by respondents from different sectors and firm sizes. The data were obtained from the 2007 Tasmanian Innovation Census (TIC) in the state of Tasmania, which has a population of 500,000 and a per capita GSP of approximately 24,000 Euros in 2006. The economy is more dependent on natural resources than other areas of Australia, but it also has several advanced manufacturing sectors. The 2007 TIC included an open question that asked respondents to briefly describe the most important innovation (MII) introduced by their firm between 2004 and 2006. The question was asked of both firms that replied elsewhere in the questionnaire that they had introduced an innovation and of firms that did not report any innovations.