How Firm Managers Understand Innovation: Implications for the Design of Innovation Surveys

In this chapter we provide the coded results of an open question on the respondent firm’s most important innovation from a subject- based innovation survey in Australia. We first use the results to examine the importance of different types of innovations to the firm, and the relationship between creative effort and the firm’s most important innovation. Second, we use the data to examine errors in the interpretation of the concept of innovation. The data do not provide information on differences across countries, but they do provide some clues as to how innovation can be interpreted differently across sectors and firm sizes. The results shed light on possible sources of respondent and measurement error that should help to improve innovation measurement, data quality, indicator development and related research and analysis.