Lord Kelvin was wrong: About the effectiveness of innovation indexes

Innovation is a fashionable concept, as many economic (and elec-tion),1 international 2 and state 3 programmes show. Fashion might not be the essential part of the scientific discourse, however, even judging by the politicians’ declarations, innovation is certainly a popular topic and a point of interest for many scholars. One would even dare to claim that innovation policy attracts more positive attention than defence policy. In the times of economic crisis and austerity that are both affecting the Eurozone, it seems that authorizing expenses on innovation is easier than defending even limited military budgets. The economists themselves are also more inclined to claim it is innovation not war that stimulates the economy.4 Since the states are usually considered as the most active in that field, the term innovation policy was quickly coined. It encompasses all state actions directed at innovation. Some of these actions form so-called innovation indices (also known as innovation indicators), whose main aim is to measure innovation performance of the country. Other entities, private companies or individuals being the example, often engage in innovation process as well and are, to some extent, included in innovation measures. By large though these indices show the role of the state. Since they attempt to measure innovative performance, when we ask about their effectiveness, we ask about the effectiveness of innovation policies, and ultimately, the impact innovation (and innovation policies) has on economy. We will argue that the effectiveness of these innovation indicators in achieving the goal that is set before them can be questioned. Nonetheless they are still taken into account when innovation policies are shaped. In order to prove our thesis we decided to divide the paper into smaller sections. First, we will describe innovation as a theoretical concept and show its place in economic models. Then we will try answer the question why innovation is measured. Since the main goal of this paper is critique of current innovation measures, we will present two traditional (and most popular at the same time) innovation indicators and most important arguments against them. We will also include indices that are considered alternative to the traditional measures. The most important and conclusive part of this paper will be devoted to the critique of both old and new indices, and any innovation indicators in general.