Constructing a Local Innovation Index: Methodological Challenges Versus Statistical Data Availability

Abstract

The measurement of territorial innovation performance has gained an increased importance in the era of differentiated innovation policy. However, practical measurement attempts hardly go beyond the regional level, in spite of the arguments on the local nature of the innovation process. In present paper we attempt to construct a local innovation index that is based on the systems of innovation theory and by which a large number of localities can be compared. We use a data set on the 174 Hungarian LAU-1 micro-regions to demonstrate the usefulness of such an index. We reflect the “systemic nature” of the innovation systems by applying the “penalty for bottleneck” method. We conclude that local innovation indexes might be useful sources of information for policy-makers, but one has to be fully aware of the limitations of such indexes and use them only for purposes they really serve.