Chapter 8 | Invention, Knowledge Transfer, and Innovation

Introduction

Invention brings something new into being and has a practical bent—the production of a new process or product that is potentially useful, previously unknown, and nonobvious. Invention contrasts with the focus of scientific research that leads to discovery—knowledge about existing phenomena that previously were unknown. In practice, inventions and scientific discovery often interact with each other: solving a practical problem may require the application of basic science not yet discovered, whereas scientific discovery may yield unanticipated applications that lead to potentially useful products and processes. In this chapter, we present data on inventions as represented by patents, along with information about their sources. See sidebar Key Terminology for descriptions of key terms used in this chapter.

The transition from potential to realized usefulness for discoveries and inventions generally involves other actors besides scientists, engineers, and inventors. The discoveries and inventions must somehow be envisioned as useful and then adapted and adopted into practice and into circulation in the economy. This process frequently involves the transfer of science and technology (S&T) to businesses, government entities, universities, other organizations, and individuals for further development and eventual commercial and otherwise useful applications. Indicators for these activities include licensed inventions, citations, cooperative agreements, and collaborations. Other aspects of this transfer take place directly between individuals as they interact at work and less formally. Although harder to identify, this less formal or tacit transfer of technical knowledge is also an important dimension.

The creation of new products and processes through innovation is a key goal for many nations. According to the Organisation for Economic Co-operation and Development (OECD), common policy objectives for innovation include sustainable economic growth; good-quality jobs; an increased standard of living, and addressing key health, environmental, and social challenges (OECD 2014, 2016). Many countries envision enhancing firm-based innovation and entrepreneurship as key paths toward those goals. These paths intersect as entrepreneurs start new firms that create new products and introduce new processes. Although different stakeholders emphasize different aspects of innovation, there has been broad consensus that S&T policy and economic policy at the national level should encourage and support innovation, with economic growth and advancements in knowledge as important justifications for increased investment in S&T.

The longer-term impacts of the innovation process are often the ultimate targets of interest. These impacts emerge as knowledge, inventions, and innovations diffuse through society. They include those that are desired, such as sustainable economic growth, good-quality jobs, an increased standard of living, environmental quality, and addressing broader societal challenges. The innovation process has the potential for other, and less desirable, outcomes as well. The latter may include rapid obsolescence of some job skills, increased inequality across regions and groups of people, the vulnerability of systems to attacks, and ethical issues raised by new technologies.

Identifying when innovation has taken place and its impacts presents measurement challenges; these challenges are present in other hard-to-measure outputs, such as those that result from public and private spending on health care or education.^​ While business surveys provide indicators of product and process innovation for many firms, the data as yet present an incomplete picture of innovation output and its economic impact. The result is frequent use of innovation-related inputs, such as employment of scientists and engineers, or innovation-related activities, such as R&D and patenting, as indicators of innovation.

A quantifiable and comparable economic impact metric for innovation is multifactor productivity (MFP). MFP is an economic efficiency measure calculated as the output growth that cannot be attributed to labor and capital inputs, after accounting for changes in workforce skill and the quality of capital. Estimated from national economic accounts data, it is an indicator of overall technological change in a sector or economy. However, MFP is also affected by the timing between innovation and its widespread adoption, complicating inferences about the pace of innovation.

This measurement challenge, along with the breadth of policy interest in innovation and the factors that influence it, shapes the choice of indicators presented in this chapter. For each of the three topics covered in this chapter, invention, knowledge transfer, and innovation, the section includes a brief discussion of the gap between the data available and the indicator desired.

The innovation-related data in this chapter complement the data on human capital and market activity presented in previous chapters in this report. The chapters of Science and Engineering Indicators 2018 touch on many topics that feed into this system, such as the S&E workforce, the role of universities, and R&D activity. In this system human, physical, and intangible capital interact through activities that include R&D, invention, and production.

The outputs from these activities can be knowledge capital, inventions, publications, or research tools, or new products, services, or ways of doing business. The systems framework for studying innovation recognizes that there may be significant feedback mechanisms, often complex and numerous, and such mechanisms magnify the ultimate impact of innovation activities. Scientific discoveries and inventions can be used repeatedly, and scientists and engineers add to their human capital through their discoveries. As knowledge and human capital accumulate and are widely used, many new discoveries and innovations build on those that came before.

These activities take place in a complex environment that includes the availability of financing for innovation, public infrastructure, the tax and regulatory environment, intellectual property protection, social attitudes toward risk, and relationships across institutions.

This chapter is organized into three principal sections on the following discussion topics. Invention is discussed in the first section, and patenting data are shown for the U.S. Patent and Trademark Office (USPTO) by sector and by technology area. The knowledge transfer section of the chapter provides data on technology transfer activities of academic institutions and the federal government, invention disclosures, patenting, licensing, and collaborative R&D agreements. Data are presented on citations within patent documents to peer-reviewed literature and to coauthorships between businesses and authors from other sectors. For greater detail on bibliometric indicators, see Chapter 5 section Outputs of S&E Research: Publications. The final section, on innovation, provides data on venture capital funding, government policies and programs to encourage early-stage development, survey-based indicators of innovation incidence in business, and measures of the economic impact of innovation—productivity and trends in the number and employment effects of small and fast-growing firms.