Organisation for Economic Co-operation and Development
                    THE MEASUREMENT
                       OF SCIENTIFIC
                   AND TECHNOLOGICAL
                        ACTIVITIES
                   PROPOSED GUIDELINES
                      FOR COLLECTING
                           AND
               INTERPRETING TECHNOLOGICAL
                     INNOVATION DATA
            OSLO MANUAL
                 European Commission                                      Eurostat
                      TABLE OF CONTENTS
      Chapter 1  OBJECTIVES AND SCOPE OF THE MANUAL...................................................................... 5
       1. INTRODUCTION.................................................................................................................................. 5
       2. FACTORS INFLUENCING THE SCOPE OF THE MANUAL........................................................... 5
        2.1 Understanding the innovation process and the implications for innovation policy......................... 6
        2.2 Experience on the supply side.......................................................................................................... 7
       3. SCOPE OF THE MANUAL.................................................................................................................. 7
        3.1 Sectoral coverage ............................................................................................................................. 7
        3.2 Innovation at the level of the firm.................................................................................................... 8
        3.3 Technological product and process innovation................................................................................8
        3.4 Diffusion of innovation.................................................................................................................... 9
       4. PROVIDING DATA ON THE KEY ISSUES..................................................................................... 10
        4.1 Factors influencing TPP innovation............................................................................................... 10
        4.2 TPP innovation activities and expenditures................................................................................... 10
        4.3 The TPP innovating firm and the impact of TPP innovation......................................................... 11
       5. SOME SURVEY ISSUES.................................................................................................................... 11
        5.1 Approach to data collection............................................................................................................ 11
        5.2 Survey methods.............................................................................................................................. 12
       6. THE RELATIONSHIP BETWEEN THE OSLO MANUAL AND OTHER INTERNATIONAL
       STANDARDS AND RELATED CONCEPTS........................................................................................ 12
        6.1 S&T activities:  the Frascati family of manuals.............................................................................12
        6.2 Other economic norms and classifications..................................................................................... 13
        6.3 Other related concepts and surveys................................................................................................ 14
       7. FINAL REMARK................................................................................................................................ 14
      Chapter 2  NEEDS FOR THE MEASUREMENT OF INNOVATION...................................................... 15
       1. INTRODUCTION................................................................................................................................ 15
       2. ECONOMICS OF INNOVATION......................................................................................................16
       3. TOWARDS A CONCEPTUAL FRAMEWORK................................................................................ 18
        3.1 Framework conditions.................................................................................................................... 20
        3.2 Science and engineering base......................................................................................................... 20
        3.3 Transfer factors............................................................................................................................... 21
        3.4 Innovation dynamo......................................................................................................................... 22
       4. DECIDING PRIORITIES.................................................................................................................... 25
        4.1. Six areas for investigation............................................................................................................. 25
         4.1.1 Corporate strategies................................................................................................................. 25
         4.1.2 The role of diffusion................................................................................................................ 25
         4.1.3 Sources of information for innovation and obstacles to innovation ....................................... 26
         4.1.4 Inputs to innovation................................................................................................................. 26
         4.1.5 The role of public policy in industrial innovation................................................................... 27
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         4.1.6 Innovation outputs................................................................................................................... 27
        4.2 How to measure and scope for measurement................................................................................. 28
         4.2.1 “What do we want to measure?”:  Technological product & process – TPP – innovations... 28
         4.2.2 “How should it be measured?”:  Choice of the survey approach............................................ 29
         4.2.3 “Where should it be measured ?”:  Sectoral coverage............................................................ 29
      Chapter 3  BASIC DEFINITIONS..............................................................................................................31
       INTRODUCTION.................................................................................................................................... 31
       1. TPP INNOVATION............................................................................................................................. 31
       2. MAIN COMPONENTS OF TPP INNOVATION............................................................................... 31
        2.1 Technological product innovation.................................................................................................. 31
        2.2 Technological process innovation.................................................................................................. 32
       3. DIFFUSION OF TPP INNOVATIONS:  INSTITUTIONAL NOVELTY.......................................... 34
        3.1 Minimum coverage......................................................................................................................... 34
        3.2 Coverage within the firm................................................................................................................ 35
       4. DISTINGUISHING BETWEEN TPP INNOVATION AND OTHER CHANGES IN THE FIRM OR
       INDUSTRY.............................................................................................................................................. 36
        4.1 Organisational innovation.............................................................................................................. 36
         4.1.1 Coverage.................................................................................................................................. 36
         4.1.2 Borderline cases:  organisational change in manufacturing and service processes................ 37
        4.2 Other changes in products and processes....................................................................................... 37
         4.2.1 Excluding insignificant or non-novel changes........................................................................ 37
          (a) Ceasing to use a process or to market a product..................................................................... 37
          (b) Simple capital replacement or extension................................................................................ 37
          (c) Changes resulting purely from changes in factor prices......................................................... 38
          (d) Custom production.................................................................................................................. 38
          (e) Seasonal and other cyclical changes....................................................................................... 38
          (f) Product differentiation............................................................................................................. 38
         4.2.2 TPP innovation and other creative product improvements..................................................... 39
       5. TPP INNOVATION ACTIVITIES...................................................................................................... 39
        5.1 Relation with implementation of TPP innovations........................................................................ 39
        5.2 The components and coverage of TPP innovation activities......................................................... 40
         5.2.1 Acquisition and generation of relevant knowledge new to the firm....................................... 40
          (a) Research and experimental development ............................................................................... 40
          (b) Acquisition of disembodied technology and know-how........................................................ 40
          (c) Acquisition of embodied technology...................................................................................... 40
         5.2.2 Other preparations for production........................................................................................... 41
          (a) Tooling up and industrial engineering.................................................................................... 41
          (b) Industrial design n.e.c............................................................................................................. 41
          (c) Other capital acquisition......................................................................................................... 41
          (d) Production start-up.................................................................................................................. 41
         5.2.3 Marketing for new or improved products................................................................................ 41
        5.3 Borderline cases ............................................................................................................................. 41
         5.3.1 Design...................................................................................................................................... 41
         5.3.2 Training ................................................................................................................................... 42
         5.3.3 Marketing ................................................................................................................................ 42
         5.3.4 Software................................................................................................................................... 42
       6. THE TPP INNOVATING FIRM.......................................................................................................... 42
       7. THEORY AND PRACTICE................................................................................................................ 43
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      Chapter 4  INSTITUTIONAL CLASSIFICATIONS.................................................................................. 44
       1. THE APPROACH................................................................................................................................ 44
       2. THE UNITS.......................................................................................................................................... 44
       3. CLASSIFICATION BY MAIN ECONOMIC ACTIVITY.................................................................. 45
       4. CLASSIFICATION BY SIZE.............................................................................................................. 45
       5. OTHER CLASSIFICATIONS............................................................................................................. 47
        5.1 Type of institution.......................................................................................................................... 47
        5.2 Other............................................................................................................................................... 47
      Chapter 5  MEASURING ASPECTS OF THE INNOVATION PROCESS............................................... 49
       1. OBJECTIVES OF INNOVATION...................................................................................................... 49
       2. FACTORS ASSISTING OR HAMPERING INNOVATION............................................................. 50
        2.1 Sources of information for innovation........................................................................................... 51
        2.2 Factors hampering innovation activities ........................................................................................ 52
       3. IDENTIFYING TPP INNOVATING FIRMS...................................................................................... 53
       4. THE IMPACT OF INNOVATIONS ON THE PERFORMANCE OF THE ENTERPRISE..............53
        4.1 Proportion of sales due to technologically new or improved products.......................................... 53
        4.2 Results of innovation effort............................................................................................................ 55
        4.3 Impact of TPP innovation on the use of factors of production...................................................... 55
         4.3.1 Average cost reductions due to technological process innovations........................................ 55
       5. DIFFUSION OF INNOVATION......................................................................................................... 56
        5.1 User sectors .................................................................................................................................... 56
        5.2 Surveys of use of advanced technologies in the manufacturing process....................................... 56
       6. SPECIAL QUESTIONS....................................................................................................................... 57
        6.1 Special questions on R&D ............................................................................................................. 57
        6.2 Questions on patents and the appropriability of innovations......................................................... 58
        6.3 Questions on the acquisition/diffusion of technology.................................................................... 58
      Chapter 6  MEASURING THE EXPENDITURE ON INNOVATION...................................................... 60
       1. THE METHOD OF MEASUREMENT............................................................................................... 60
       2. SUGGESTED BREAKDOWNS.......................................................................................................... 62
        2.1 Bottom-up or top-down method..................................................................................................... 62
        2.2 Breakdown by type of expenditure ................................................................................................ 62
         2.2.1 The relation between intangible investment and TPP innovation expenditure....................... 64
        2.3 Breakdown by type of innovation activity..................................................................................... 64
         2.3.1 R&D expenditure..................................................................................................................... 65
         2.3.2 Expenditure for the acquisition of disembodied technology and know-how.......................... 65
         2.3.3 Expenditure for the acquisition of embodied technology....................................................... 65
         2.3.4 Expenditure for tooling up, industrial engineering, industrial design and production start-up
         (including other expenditure for pilot plants and prototypes not already included in R&D).......... 65
         2.3.5 Expenditure for training linked to TPP innovation activities.................................................. 66
         2.3.6 Marketing for technologically new or improved products...................................................... 66
        2.4 Measurement problems.................................................................................................................. 66
         2.4.1 The borderline between R&D and non-R&D innovation expenditure.................................... 66
         2.4.2 Other difficulties...................................................................................................................... 67
        2.5 Breakdown by source of funds....................................................................................................... 68
      Chapter 7  SURVEY PROCEDURES......................................................................................................... 69
       1. POPULATIONS................................................................................................................................... 69
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