Reframing innovation: A case of split personality

The meaning and definition of innovation are vague and multi-faceted, measured by a combination of 81 variables by the Global Innovation Index—GII, challenging policy makers in the conception of appropriate economic development strategies. Based on extensive research on the relationships between the variables, this study presents and tests a simple analytical model that considers innovation as two separate and not necessarily connected themes: the creation of knowledge and the concrete implementation of innovation activities (endogenous variables), each influenced by separate ecosystem factors: “innovation initiators” and enabling factors (exogenous variables). This model facilitates the analysis of the question to which extent an innovation process requires policy measures oriented to knowledge creation. The relationships were tested by conducting regression analysis with data on 81 variables across 132 economies based on the GII for 2021. The results supported the viability of the model. An important finding was the relatively low impact of knowledge creation on innovative outputs within the country (such as the production of new products), whereas the focus was mostly on the export of knowledge (as measured by intellectual property receipts). Another finding was the importance of the technology absorption capacity and availability of local skills for a country's innovative business activity, independent of pure knowledge creation activity. The model has implications for the development of innovation policies under specific conditions in an economy. Prevailing ecosystem exogenous conditions and the potential for changes within them may lead to the optimization of innovation activity by focusing on technological advancement, which need not be conducive to new production (contrary to prevailing beliefs). Conditions in other economies or regions may justify policies focused on the development of innovative products or creation of new organizational models rather than on support for technological startups.