Is newest always best? Firm-level evidence to challenge a focus on high-capability technological (product or process) innovation

This paper sets out to address a gap in the empirical literature on the importance of ‘low-capability’ innovation for firms. The study is framed around discussion of the conceptual bias that remains in policy and academic literature towards a narrow subset of technological (product or process) innovation labelled ‘high-capability’ innovation in this paper. The paper argues that this bias influences the public and business community's understanding of the term ‘innovation’ and has implications for innovation measurement, research, policy and strategy. The study uses data from an economy-wide, regional innovation survey based on the Oslo manual, and includes 648 innovative firms covering all industry sectors. The paper combines elements of both subject and object approaches to innovation measurement, using data from an open-ended survey question to explore the alignment between what firms report as their ‘most important innovation’ (MII) and firm capabilities for introducing ‘high-capability’ technological innovation. Results show that a substantial share of firms report an MII that is a ‘low-capability’ innovation, including those firms with high R&D intensity, those with novel technological innovation, and firms in more innovative sectors of manufacturing and knowledge intensive business services. The paper discusses the implications of this result for future innovation measurement and research.