Measuring Innovativeness: A ranking of the ordinal utility from consumption is more robust than either of ‘outcomes of commercialization’ or patent counts

Abstract

This study provides formal theoretical evidence that patent counts are not robust measures of the innovativeness of economic agents. Study inferences are rationalized by two complementary insights, the first quantitative, the second qualitative. Whereas, feasibly the assumption that the distribution of patent counts is quasiconcave surmounts the quantitative rationale, the qualitative rationale – Net Present Values (NPVs) of patents dominate patent counts as measures of the innovativeness of agents – is binding. The robustness of the qualitative rationale is evident in the finding that it rules out the feasibility, to wit, all other tools for the appropriation of innovations, such as secrecy, lead time, learning curve, etc. are robust proxies for the innovativeness of agents. The realization that a higher NPV can be the outcome of high demand that is induced by consumers’ budget constraints, equivalently can be the ‘outcome of commercialization’, vis-a-vis the ‘technological dominance’ of new products results in the insight that the NPV rule also is, itself not a robust measure of the innovativeness of agents. In aggregate, ‘a ranking of the ordinal utility’ that rational consumers derive from products, a ranking that, feasibly is violated by their budget constraints, is shown to be a more robust measure of the innovativeness of agents than a ranking of innovations’ NPVs. Since technological complexity has, as objective the satisficing of consumers’ utility, a ranking of utility also is a more robust measure of the innovativeness of agents than a ranking of technological complexity.