From 'Rates of Innovation' to Measures for 'Innovation Quality and Culture'

Abstract

This study provides formal theoretical evidence that the concept of 'rates of innovation' is not amenable to imposition of any preference structure, as such is misleading and non-robust. Dearth of robustness derives from the finding that a decreasing rate of innovation can be shown to be strictly preferred to either of an increasing or constant rate of innovation. This finding rules out either of patent counts, citation-weighted patent counts, or the term, 'innovation rates' as robust parameters for comparative studies of cross-sections of innovation activity. The formal theoretical model endogenously generates two parameters for comparative studies of cross-sections of innovation activity that, respectively are constructs for 'quality of innovation', and 'frequency', equivalently, 'culture of innovation'. Given the parameter for culture of innovation is derived, in entirety, from the quality of innovation parameter, it is obtained in context of a strict preference for higher quality innovations that is formally and theoretically established. A strict preference for higher quality innovations is shown, under regular conditions, to imply an intertemporal 'decreasing cascade' for each of quality of innovation, and frequency of innovation, a cascade that, simultaneously is susceptible to stochastic arrival of innovation events that induce upward 'jumps' to the intertemporal decreasing cascade process. Preliminary empirical tests show the quality of innovation parameter outperforms GDP Per Capita as measure of quality of innovation within cross-sections of countries. Given the terminology, 'studies of rates of innovation' embeds a misnomer, study findings recommend substitution of the terminology, 'studies of Innovation Quality and Culture (IQC)'.