most frequently used measures of innovation including their main advantages and drawbacks. For better clarity I divide them into three categories. Product/technology measures, financial measures, and subjective measures.

http://www.innovationmanagement.se/2013/02/15/measuring-innovation-part-1-frequently-used-indicators/

http://balancedscorecard.org/portals/0/pdf/Howtomeasureinnovation.pdf.

I would say market share. Whilst R&D measures the firms' ability to develop new and improved products and services, I don't believe it's the main indicator of how innovative a firm is. The reason for this is that unless the innovation meets consumers needs or solves a problem and can be translated to create economic rents, it is not effective nor efficient. Successful innovation is one that results in profit, growth and increased market share for the firm. 

An article by CC Hang et al 2011 "" An assessment framework for disruptive innovation"" measures innovation on market positioning, technology and other drivers, which I believe drives market growth

Minna Saunila Juhani Ukko, (2012),"A conceptual framework for the measurement of innovation capability and its effects", Baltic Journal of Management, Vol. 7 Iss 4 pp. 355 - 375

Producing intangible and intangible product,

I would suggest the following two indicators:

1. What percentage of loyal (or current or existing) customers purchase the product when the company introduces brand new (innovative) products.

2. What percentage of new customers bought brand new (innovative) products when the company introduced the product.

What do you mean by "measuring innovation": the amount of innovations or the "quality" ? Do you focus only on technological innovations ?

Innovation is an output, it could be measured by the number of registred patents, and the amount of citations to measure the "quality".

R&D expenditures is an input, and you must hypothesise that there is a growing relationship between R&D expenditures and innovation outputs.

Actually, both indocators may depend of the sector: some of them don't use patents, and prefer to protect innovation by secrecy for example, others don't innovate with R&D expenditures as source of innovation. The literature on the technological regimes (Pavitt (1984) to Peneder (2010)) could be very useful to understand the differences in innovation processes, and could be helpful to indicate which indicators you may measure in your case.

Dear Gbemi Akojenu,

Thanks. I wrote that most studies use the R&D indicator as proxy of the firm innovation, but I did not write that R&D is "the main indicator of how innovative a firm is". 

Also, what you mean by "market share"?

Best,

Fabrizio

Samuel,

Thanks. All comments are very interesting. However, in this case I refer to innovation as an investment project. My question is aimed at better managing the relationship between innovation and agency theory (entrenchment or alignment effects).

Best,

Fabrizio

Dear Mohammed R Ahmed,

Thanks. Your comments are interesting. However, the problem is with the data retrieval.

Best,

Fabrizio

Dear Dato''Dr. Mohamad Nasir Nasir Saludin, ·

What do you mean specifically?

Best,

Fabrizio

Dear Fabrizio Rossi,

Depend on what you want to measure, to measure products Tangible) or services (intangible).

Product innovation or process innovation

Regards

MNasir

in this case I refer to innovation as an investment project. My question is aimed at better managing the relationship between innovation and agency theory (entrenchment or alignment effects).

Hello. I think is important because innovation can be divide in diferents categories like Product/technology measures, financial measures, and subjective measures. for example patents or patent applications indicate some kind of technological progress. Nevertheless  patents are seldom transformed into tangible products.

Thanks Magda Gabriela,

I am interested to know the highest number of indicators that can be used.

 most frequently used measures of innovation including their main advantages and drawbacks. For better clarity I divide them into three categories. Product/technology measures, financial measures, and subjective measures.

http://www.innovationmanagement.se/2013/02/15/measuring-innovation-part-1-frequently-used-indicators/

http://balancedscorecard.org/portals/0/pdf/Howtomeasureinnovation.pdf.

The effectiveness of the measures actually depends on the available data. Usually one should consider at least an input variable (R&D expenditure) and an Output of the innovation process (patent, industrial design etc.). 

Concerning your link between innovation and corporate governance you could consider measures of human capital existing in the firm.

Anyway, Prof. Hussein Elasrag poited the most relevant but  everything depends on what kind of data you can use.

Dear Marco,

Many thanks for your helpful comment.

Best,

Fabrizio

There are various good metrics and indexes created around portion of new revenue and R&D expenses, and projects in R&D pipeline etc

https://hbr.org/2015/05/what-big-companies-get-wrong-about-innovation-metrics

One of my personal favorite is the payback curve, (and time to create positive cash). Sum of multiple R&D payback curves should ideally represent the "innovation" part of the free cash flow. once you have the "innovation" part of the free  cash flow, you could do magic!

http://www.amazon.co.uk/gp/product/1422103137

Dear Farzan Sajahan, 

Many thanks. I'm interested in indicators of R&D that can also be a good proxy of the risk-taking.

Dear Fabrizio,

A rather indirect method to measure innovation in the firm would be the firm's expenditure into training and employee development programmes. Professional training and development may lead to innovation at a later stage. Nowadays many companies disclose these figures, for example those from the UK construction industry like Kier Group Plc or Balfour Beatty Plc.

Paul  

Dear Paul,

Many thanks for your answer. Your comment is interesting but I think it can fit more in the context of intellectual capital and less in the problems of agency theory.

Best Regards,

Fabrizio

Dear Fabrizio,

In terms of corporate governance, do you have in mind issues like a CEO who does not want to innovate in order to avoid risks of failed projects or a board that struggles to provide the right incentives to encourage innovation?

Paul  

In terms of corporate governance, I have in mind the under/over investment problems and involves CEO and ownership.

Best,

Fabrizio

Dear Fabrizio,

Recently I came across the paper attached. The authors comment on the problems which arise when applying agency theory to innovative CEOs and entrepreneurial companies. They address these problems under the heading "Strategic entrepreneurship", pp. 182-184. Perhaps it is of relevance for your question.

Paul  

Article Agency theory: the times, they are a-changin’

innovation can be measured in terms of product innovation, process innovation, marketing innovation, number of patents, r&d, and competitiveness.

you can find my paper attached which I have used product innovation, process innovation and competitiveness as a proxy for innovation. I have used the combination of the three as a single index of innovation.

Conference Paper The Effect of Innovation on Growth Aspirations and Internati...