New index offers better measurement of rural innovation

The latent innovation index. Map by Pennsylvania State University; click the image to enlarge it.

"Conventional measures of innovation suggest that only big cities foster new ideas, but a more comprehensive measure developed at Penn State shows that innovation is widespread even in rural places not typically thought of as innovative," Kristen Devlin reports for The Daily Yonder. "The 'hidden' innovation of rural areas brings economic benefits to businesses and communities, according to researchers, whose findings will help decision makers think in new ways about innovation and how they can support it."

The study on rural innovation, recently published in Research Policy, notes that innovation is typically measured by focusing on narrow parameters such as new products or processes that result in a patent or involve research and development spending. But that "overlooks another kind of innovation—the incremental improvements that businesses make to their products and processes as a result of information they obtain from outside their firm," said study co-author Stephan Goetz, an agricultural economics professor and director of the Northeast Regional Center for Rural Development at Penn State. "Our measure shows that this latent, or hidden, innovation is at least as important to local income and employment growth as patent-level innovation."

You can read a longer description of their methodology in the Yonder, but essentially the study centers on the well-established fact that businesses commonly acquire information that prompts innovation through interactions with businesses in other industries. Goetz and co-author Yicheol Han wanted to examine those interactions to better understand where innovation opportunities are greatest, while accounting for geography and controlling for extraneous factors, Devlin reports. The "latent innovation index" they created assigns a score to each U.S. county based on the availability of latent innovation opportunities.

"They found that counties with higher innovation scores also had greater employment and income growth, even when they controlled for the number of patents held within a county. They also found that this type of innovation activity is present in both densely populated counties and sparsely populated, more rural counties," Devlin reports. "Goetz says that by understanding where and how this type of innovation is already happening, community leaders can foster it by providing venues to support the exchange of ideas among a variety of businesses. For example, they can host trade shows that encourage business interactions. They also can think more strategically about targeting industries for recruitment that complement local innovation spillovers based on existing industries."