Measuring Innovation: Patents

The ability to generate new ideas and move them into the market as products and services is the foundation of an innovation-based economy. For people focused on economic development, this is a two-part equation: idea generation and commercialization. Ideas without the market can be inherently valuable for improving our understanding of the world, but you need both parts of the equation to drive economic outcomes: new companies, more sales, and higher incomes.

Tracking registered patents is one way to measure your region's capacity for generating new ideas that could potentially move into the marketplace. Economic developers can use patents to accomplish several goals:

1. Identify competitive advantage - understand which industries in your region are driving the generation of new ideas. It should come as little surprise that the vast majority of patents in Austin-Round Rock are in the field of information technology:

(Click on images for larger versions)

2. Benchmarking - track your region's performance against other regions. Benchmarking is an easy way to quickly identify what makes your region unique, which can be helpful for marketing, strategic planning, and a variety of other purposes. You can also use benchmarking to identify learning opportunities--i.e. which regions are getting this right, and what can we learn from their approaches to economic development? Staying with our example of information technology, here's how Austin-Round Rock measures up to a few peer regions. Remember to normalize this data--patents per 10,000 employees is popular--if you want a level scale for comparison.

Source: Decision Data Resources

3. Identify key assets - the first rule of economic development is to know the companies doing business in your region. Figure out who is driving innovation in your region and get their take on the opportunities and challenges facing local companies. For example, is your region providing the human capital needed to generate new ideas and drive innovation? In Austin-Round Rock, more than 200 companies registered a total of approximately 2,700 information technology patents in 2006. Five companies accounted for nearly 60% of those patents: IBM, Freescale, AMD, Dell, and National Instruments. IBM led the way with more than 900.

Next up in our measuring innovation series: federal funding.

Brian Kelsey