Governments, academia, and business all contribute to the activities that comprise the innovation process. Through intellectual property protection measures, successful business research and development (R&D) incorporates new knowledge into new products and processes while attempting to prevent useful new knowledge from spreading to rivals (Arora, Belenzon, and Sheer 2017). In contrast, many government, academic, and nonprofit institutions create new knowledge with the intention of sharing it widely to support innovation—for example, through publications, data sets, and technology transfer agreements. New knowledge created by R&D activities across all sectors takes different forms, including scientific literature meant to be published and private knowledge meant to be kept secret. Both forms may contribute to inventions or innovations.

The distinction between invention and innovation is an important one; implementation of new ideas as products or processes with real-world applications is what separates inventions from innovations. In this report, an invention is defined as any new and useful process, machine, manufacture, or composition of matter, including any new and useful improvement thereof (USPTO 2020). By contrast, 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)” (OECD/Eurostat 2018). The activities along the way constitute innovation activities.

This report starts with invention, ends with innovation, and situates knowledge transfer activities in between. Where applicable, this report also addresses critical and emerging technologies using current and relevant typologies. For example, the National Science and Technology Council (NSTC 2022) includes advanced manufacturing, biotechnologies, and artificial intelligence (AI) as current examples of critical and emerging technologies, among other priorities. This report provides tabulations of international AI patents and of Patent and Trademark Office (USPTO) patents granted based on two different typographies: environmental sustainability technology areas, and technology areas named in the CHIPS and Science Act of 2022.

The geography of innovation is addressed in this report through county-level data on patenting and trademarking for the United States, as well as regional breakdowns where possible, such as with venture capital data. These units of geography are imperfect: for economic processes, metropolitan areas may be preferred; for political processes, congressional districts may be preferred. While resource and space limitations have guided this choice in this thematic report, machine-readable patent and trademark data sets provided with this report allow users to combine county-level data for their own purposes.

Similarly, the central role of the business sector in innovation activity has shaped the available data, and most indicators of innovation address the private sector. Notwithstanding the availability of data, however, a diverse set of actors who span the economic sectors of the economy contributes to the creation of innovative output, including universities, government agencies, and individuals. Not every topic that matters has relevant high-quality data available for this report.

The innovation indicators in this report include both direct, survey-based measures of innovation output from the businesses and also indirect innovation indicators connected to venture investment and trademarks. Self-reported company data on the introduction of new or significantly improved products are reported based on a joint National Center for Science and Engineering Statistics (NCSES) and Census Bureau survey that now contains three consecutive years of data.

Access to financing is an essential component of the translation of new knowledge into innovations. Venture capital is a particularly important indicator of innovation because venture investors tend to invest in companies whose products, they believe, have a significant likelihood of achieving market success. Venture capital–backed firms that become publicly traded are more likely to have recorded R&D expenditures compared to publicly traded firms that were not originally venture backed (Lerner and Nanda 2020). In this regard, data on U.S. and global venture capital investment trends, provided by PitchBook, can be viewed as leading indicators of the innovative output expected from startups and from early investments to create innovations. The data sources for the indicators used in this report are shown in Table INV-1 and rely on both administrative data and survey data and on public as well as private data sources.