Oslo Manual

Why “Oslo”, and four editions

The first edition appeared in 1992 and covered innovation in manufacturing. The name refers to the city where, in 1991 (Foreword), the guidelines were first approved by the OECD's Working Party of National Experts on Science and Technology Indicators (NESTI). Surveys built on that first edition included the European Community Innovation Survey (CIS) and comparable surveys in Australia and Canada (§1.3).

The second edition (1997) added several service industries (§1.4). The third (2005) is remembered for its four types of innovation: product, process, organisational and marketing (§1.31). The fourth edition of 2018 replaced them with two main types (§1.31) and, for the first time, provided a common framework for measuring innovation across the whole economy, including government, non-profit institutions and households (Foreword; §1.10).

The general definition of innovation

“An innovation is a new or improved product or process (or combination thereof) that differs significantly from the unit's previous products or processes and that has been made available to potential users (product) or brought into use by the unit (process).”

Oslo Manual 2018, §2.99

The word “unit” is deliberately generic. It means any institutional unit in any sector, including households and individual people (§1.26). So the same definition can describe a new hospital procedure, a new public online service or a tool built by a hobbyist. The manual itself, however, gives detailed measurement guidance only for the business sector; guidance for the other sectors is left for future work (§1.10).

Business innovation: what the definition requires

“A business innovation is a new or improved product or business process (or combination thereof) that differs significantly from the firm's previous products or business processes and that has been introduced on the market or brought into use by the firm.”

Oslo Manual 2018, §3.9

Each part of this sentence does work. Taken together, the manual's explanations give these rules:

• It must be implemented. A product counts once it is available to its intended users; a business process once it is actually used in the firm's operations (§3.11). An idea, a plan or a prototype is not yet an innovation.
• It must differ significantly from what the firm had before. The comparison is with the firm's own previous products or processes, not with the market (§3.12). Where the line falls is admittedly subjective: the same improvement to an online service may be minor for a large firm in an R&D-intensive industry and significant for a small firm elsewhere (§3.16).
• Small steps can add up. A series of minor improvements during the observation period counts if together they make a significant difference (§3.13).
• It does not have to be the firm's own invention. Adopting something developed by others, with little or no change, also counts, so the definition covers the spread of innovations, not only their first appearance (§3.14). A subsidiary that adopts a process from its parent company innovates; a department that copies a process already used elsewhere in the same firm does not (§3.15).
• It does not have to succeed. A product that flops commercially is still an innovation (§3.17), and an innovation need not be good for society or even for the firm (§3.18).

Product and business process innovation

The 2018 edition recognises two main types:

Product innovation

“A new or improved good or service that differs significantly from the firm's previous goods or services and that has been introduced on the market” (§3.24). Products include both goods and services, following the System of National Accounts.

Business process innovation

“A new or improved business process for one or more business functions that differs significantly from the firm's previous business processes and that has been brought into use by the firm” (§3.34).

Business process innovations are classified by the function they change (Table 3.1). According to §1.32, two functions relate to the core activity of producing and delivering products and the rest support it; §3.40 treats only production as the core function:

1. Production of goods or services
2. Distribution and logistics
3. Marketing and sales
4. Information and communication systems
5. Administration and management
6. Product and business process development

These categories are not mutually exclusive. One innovation can combine several types, and a firm can introduce many in one period, so the manual recommends asking about each type separately (§3.23). The six functions roughly correspond to the third edition's process, marketing and organisational innovations, which is useful when comparing old and new data (§1.32). The change was based on cognitive testing and aimed to reduce the complexity of the old four-type list (§1.31).

What is not an innovation

Section 3.4 of the manual discusses borderline cases. Among them:

• Routine changes and updates, such as a software patch that only fixes bugs or seasonal changes in clothing collections (§3.65).
• Replacing equipment with identical models or making minor extensions to existing equipment or software (§3.66).
• Purely aesthetic tweaks, such as a new colour or a slightly different shape (§3.67).
• One-off custom products, such as a building or a consulting report, unless the item is significantly different from what the firm made before (§3.68).
• Advertised concepts and prototypes not yet available are in general not product innovations, even if customers can pre-order them or have funded them through crowdfunding (§3.69).
• Adding new items to a shop's or wholesaler's range, unless that requires significant changes to the firm's processes, such as a new supply chain (§3.72).
• Mergers and acquisitions in themselves (§3.74), and stopping a process or withdrawing a product (§3.75).
• A lower price that results only from cheaper inputs is unlikely to be an innovation (§3.76), and a new strategy that has not been implemented is not one (§3.77).

Start-ups are a special case: with no previous products to compare against, their products and processes are compared with what is available in their market (§3.73).

Innovation activities

The manual separates innovation as a result from innovation as a process:

“Innovation activities include all developmental, financial and commercial activities undertaken by a firm that are intended to result in an innovation for the firm.”

Oslo Manual 2018, §1.30 and chapter 4

It distinguishes eight kinds of activity that firms may undertake on the way to an innovation (§1.36):

1. Research and experimental development (R&D)
2. Engineering, design and other creative work
3. Marketing and brand equity
4. Intellectual property (IP) related activities
5. Employee training
6. Software development and database activities
7. Acquisition or lease of tangible assets
8. Innovation management

This is where the Oslo Manual meets the Frascati Manual. R&D is defined exactly as in the Frascati Manual, with the same five criteria, and for practical reasons all R&D performed or paid for by a firm is counted as an innovation activity (§4.10, §4.11). Engineering, design and other creative work cover experimental work that is close to R&D but does not meet all five criteria (§4.12). The upshot: every firm that performs or pays for R&D during the observation period is innovation-active, but innovation often does not require R&D (§1.2).

Many of these activities also serve other purposes. A firm trains staff or buys machines for all sorts of reasons. The manual therefore recommends first asking about each activity in general and only then, for innovation-active firms, about the part spent on innovation (§1.37).

Innovative and innovation-active firms

Two definitions that are easy to confuse:

“An innovative firm reports one or more innovations within the observation period.”

“An innovation-active firm is engaged at some time during the observation period in one or more activities to develop or implement new or improved products or business processes for an intended use.”

Oslo Manual 2018, §1.33 and §3.81

A firm can be innovation-active without being innovative, for example when a project is still running or has been abandoned (§1.35). The manual also restricts “innovative” to this one meaning, having an innovation in the period, and asks translators and the authors of indicators to keep to it (§1.34). It says nothing about how creative or forward-looking a firm is.

Novelty and the observation period

Because the threshold of “significantly different” depends on the firm, the manual recommends collecting extra information on how novel an innovation is. The most widely used measure asks whether it is new only to the firm, new to the firm's market, or new to the world (§3.56, §3.57). This helps distinguish the adoption of existing solutions from innovations that are new to a market or to the world, although “new to the market” depends on the market the firm serves and can include imitating what exists elsewhere (§3.58).

All of this is counted over a fixed window. The recommended observation period is between one and three years (§3.78) and should not exceed three years (§9.42). The choice matters: the length of the period affects the share of firms reported as innovative, and industries with short product life cycles introduce product innovations more often (§9.43). When the manual was published, countries used periods of one to three years, which the manual itself names as a limit on international comparability (§9.48).

Asking about the firm or about one innovation

A survey can focus on the actor or on the phenomenon. The subject approach asks about the firm's innovation activities and results as a whole, and is the usual approach in innovation surveys; it can draw on business registers for industry and size. The object approach collects data on specific innovations, for example the firm's most important innovation, or innovations reported in trade journals. The two can be combined in one questionnaire (§§2.79–2.81).

What is in the manual

The 2018 edition has three parts (§1.22):

• Part I sets out the general concepts of innovation measurement, including the general definition (chapter 2). Chapter 1 introduces the manual as a whole.
• Part II is the framework for business innovation: definitions (chapter 3), innovation activities (4), business capabilities (5), knowledge flows and collaboration (6), external factors such as markets and public policy (7), and objectives and outcomes (8). Chapters 5, 7, 10 and 11 are new to this edition (§1.39, §1.43, §1.48, §1.49).
• Part III covers methods: survey design and data collection (9), object-based approaches (10) and the use of innovation data in indicators and analysis (11).

The manual describes itself as a freely accessible open standard (§1.13). It is free to read and download from the OECD and Eurostat.

How Statistics Poland applies it

In Poland, innovation data are collected by Statistics Poland (GUS) on form PNT-02 (“Sprawozdanie o innowacjach”, the innovation report). The GUS methodology booklet for R&D statistics (2022) names the earlier forms, PNT-02 for industry and PNT-02/u for services, and states that from the survey covering 2019–2021 all innovation data are collected on a single form and that later they were to be collected only for even reference years, in line with the rounds of the European Community Innovation Survey (CIS). The latest GUS release covers 2022–2024, with expenditure data for 2020, 2021, 2022 and 2024.

The figures below come from that release. GUS uses the manual's definitions: an innovation-active firm introduced at least one innovation, or had innovation projects that were abandoned, still ongoing or completed but not yet implemented; an innovative firm introduced at least one innovation.

Two things stand out for anyone who reads these figures alongside R&D statistics. R&D was the largest part of innovation expenditure in both groups, 52.7% in industry and 63.2% in services. And product innovation was far more common among large firms: in industry it was introduced by 10.4% of firms with 10–49 persons employed and by 47.0% of those with 250 or more.

The 2022 booklet also shows the link between the two manuals in practice: firms that declared in the innovation report a year earlier that they had R&D expenditure, or that they used incentives or tax relief for R&D or other innovation activities, are included in the frame for the annual R&D survey (form PNT-01).

A reminder: the Oslo Manual's definitions are statistical. Polish tax reliefs for R&D and innovation use their own statutory definitions; see the note on the Frascati Manual and Polish tax relief.

Polish edition

A Polish version, Podręcznik Oslo 2018. Zalecenia dotyczące pozyskiwania, prezentowania i wykorzystywania danych z zakresu innowacji (ISBN 978-83-66466-20-3), was published by Statistics Poland (Warsaw and Szczecin, 2020) and made available online in January 2021. Statistics Poland notes that it is not an official OECD or European Union translation and that the original text prevails in case of any discrepancy.