By Catherine Jewell, Communications Division and Sacha Wunsch-Vincent, Economics and Statistics Division, WIPO
As the global economic recovery gathers pace and becomes more broad-based, policy-makers are focusing on the search for sources of future growth and employment. But despite growing optimism about the global economic outlook, governments continue to face a basic dilemma: limited scope for fiscal stimulus and public investment but a strong need for investment and future-oriented pro-growth policies to sustain growth and employment.
In this context innovation and entrepreneurship are becoming ever-more important. But what needs to be done to stimulate these key drivers of economic growth? How can policymakers track global innovation trends, assess progress and identify priorities? The Global Innovation Index (GII), now in its 7th year, offers decision-makers a practical “tool for action”. It provides a rich series of metrics that benchmark the innovation capabilities and performance of 143 countries. As firms and governments show growing interest in identifying and energizing creative individuals and teams to harness future growth, this year’s GII explores the critical role of the human factor in innovation.
GII 2014 was launched in Sydney on July 18, 2014, at the Business 20 (B20) meeting, a forum through which the private sector produces policy recommendations for the annual meeting of the Group of 20 (G20) leaders, to be hosted by Australia in November 2014.
“This world leading report tells us about the progress we have made with our innovation policies and systems worldwide. Knowing how we are faring on the innovation front is important because innovation is a key driver of economic growth and wellbeing in this 21st Century”, said Australia’s Minister for Industry, Mr. Ian Macfarlane at the GII launch. “This is increasingly a central part of the trade and economic agenda which is the focus of much of the B20 and G20 discussions,” he added. “Reports like the GII provide direction on how we can boost our innovative outcomes giving us a deeper understanding of the many factors that drive innovation.”
The GII is “a comprehensive map of the capacity of countries to innovate and thus compete on the world stage,” said WIPO Director General Francis Gurry. Noting that some US$1.6 trillion are invested in knowledge creation each year, he said, “innovation is the desired outcome of that investment and is the key to competitiveness in the knowledge and technology-intensive industries.”
“Innovation is increasingly the basis of competition in the global economy,” he added, underlining its central role in improving productivity, new product development, new market opportunities, job creation and as the source of competitive advantage. “Beyond economics, innovation is also the means by which we achieve improvements in our quality of life and address the major challenges facing society,” he said, highlighting issues such as food security, public health and climate change. “If we do things in exactly the same way as we do them now then we will make no impact on any of these challenges,” he added.
Rankings
For the fourth consecutive year, Switzerland topped the GII’s rankings, followed by the United Kingdom and Sweden. For the first time, Luxembourg entered the top 10, ranking ninth. Among the top 20 rankings, “there is a very high degree of stability” noted Bruno Lanvin, Executive Director of INSEAD and co-author of the report.
The top 25 countries consistently score high across most the Index’s 81 indicators, have well-linked innovation ecosystems and demonstrate strong capabilities in areas such as innovation infrastructure (including information and communications technologies), business sophistication (including innovation linkages, knowledge workers, and knowledge absorption); and innovation outputs (such as creative goods and services and online creativity).
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who would do what?
Punching above its weight
Persistent innovation divide
The GII 2014, however, confirms the continued existence of global innovation divides both between and within income groups. “We see a divide that is not reducing as fast as we were hoping,” noted Mr. Lanvin.
All top 25 countries are high-income economies but upper-middle income countries China (ranked 29th) and Malaysia (ranked 33rd) are showing signs of breaking into the top tier in the coming years.
In terms of quality of innovation, the report shows that top performing middle-income economies are closing the gap on high-income economies. “China significantly outperforms the average score of high-income economies across the combined quality indicators,” noted Cornell University’s Soumitra Dutta, co-author of the report. “To close the gap even further, middle-income countries must continue to invest in strengthening their innovation ecosystems and closely monitor the quality of their innovation indicators,” he said.
Grounds for optimism
While the report indicates that many developing countries are still lagging behind in terms of their innovation performance, there are grounds for optimism. Countries in Sub-Saharan Africa showed the most significant overall improvement in GII 2014 rankings. Of the 33 sub-Saharan countries featured in this year’s index, 17 have climbed in ranking, with Côte d’Ivoire showing the biggest improvement. In fact, this region boasts the highest number of “innovation learners” - economies that perform at least 10 percent higher than their peers in terms of gross domestic product. This, Mr. Lanvin noted, shows “that something is happening even in the poorest parts of the globe regarding innovation. Governments are taking notice, efforts are being made and people are given more opportunities to translate innovation into success,” he said.
These results “indicate important trends for the future,” noted Mr. Dutta, “they show which economies are learning faster and where probably a lot of future growth in the economy and other interesting innovative ideas will emerge in the future.”
BRICS economies, however, are performing unevenly. Four improved their positions: Brazil by 3 places to reach 61st rank, the Russian Federation by 13 places to reach 49th, China by 6 places to reach 29th and South Africa by 5 places to reach 53rd position. The progress of China and the Russian Federation in the rankings is among the most notable of all countries. In fact, China’s ranking is now comparable to that of many high-income countries. India, however, slipped back 10 places to 76th position this year.
A valuable benchmarking tool
The GII makes it possible to analyze the innovation performance of different income groups and by region. In this way, it can illustrate important relative competitive advantages and help decision-makers glean important practical lessons for improved performance. As underscored by Mr. Dutta, it offers business leaders valuable insights in terms of where to invest R&D resources and set-up manufacturing plants. It also offers policymakers useful examples of best practices that can be leveraged and integrated into national policy environments for countries to become more competitive.
Co-published by Cornell University, INSEAD and WIPO, in collaboration with the Confederation of Indian Industry, du and Huawei, the core of the GII consists of a ranking of the innovation capabilities of world economies. Recognizing the critical role of innovation in driving economic growth in all economies, the GII goes beyond traditional measures of innovation and includes a total of 81 indicators.
It is a valuable benchmarking tool for the continual evaluation of strengths and weaknesses in innovation performance. The GII 2014 rankings are calculated as an average of innovation inputs which embody national innovation activities (including institutions, human capital and research, infrastructure, market sophistication and business sophistication) and innovation outputs (including knowledge and technology outputs and creative outputs) which capture actual innovation results.
The human factor in innovation
The GII 2014 explores the central role that human capital plays in the inception, implementation and diffusion of innovation and helps to explain why innovation champions remain top performers while some of the larger emerging economies are showing uneven innovation performances. Countries that have made visible efforts to maintain or enhance the quality of their human resources through education and life-long learning include the Republic of Korea, Finland and the UK (among high income countries) and China, Argentina and Hungary (among middle-income countries).
The report includes a series of chapters that focus on the importance of improving skills as a key means of boosting innovation, increasing productivity, stimulating economic growth and improving social welfare and equality. It discusses how a country’s stock of human capital drives economic growth and affects its ability to innovate or catch up with more advanced and innovation-efficient economies. It also offers a detailed discussion of the far-reaching impact of the human factor which goes well beyond the supply-side of innovation, playing an important role in how innovation is received, accepted and diffused. It further discusses how globalization has eased mobility of people across geographic and cultural boundaries.
Today, countries, like corporations, need to compete for talent. Recent studies show that around 75 percent of migrant inventors from low- and middle-income countries reside in the US with China and India standing out as the two largest middle-income countries of origin, followed by Russia, Turkey, Iran, Romania and Mexico. Against this backdrop, countries are keen to reverse so-called brain drain and to retain and attract the talent required to fuel innovation, sometimes by simply involving their skilled diaspora. Although only a handful of countries, such as Morocco, have successfully brought about dynamic reverse migration, when supported by government policies and economic liberalization, it can be a means of attracting inward flows of talent.
GII: an evolving model
The GII has grown over the years to become a unique means of tracking innovation capabilities and performance around the world. The GII model is revised every year to improve the way innovation is measured; for this reason, the scores and rankings from one year to the next are not directly comparable. The GII, however, is focused on improving the ways in which innovation is measured and understood and providing decision-makers with the means to identify effective pro-innovation policies and practices.
While high-income economies continue to dominate the rankings, the GII 2014 shows that innovation divides continue to exist both across and within income groups and regions. The persistence of these can be traced to the challenges of making progress in all indicators covered in the GII model. In addition to interesting regional trends – uneven performance among BRICS and significant improvements across Sub-Saharan Africa – the GII underlines the crucial importance for lower-income economies to continue to explore ways to create policy environments in which new sources of innovation-based growth can flourish.
