The Global Innovation Index: Insights and trends

In June, INSEAD and its knowledge partners, including the World Intellectual Property Organization (WIPO), released jointly The Global Innovation Index 2011. In this interview, Professor Soumitra Dutta1, the Roland Berger Chaired Professor in Business and Technology at INSEAD, explains how The Global Innovation Index (GII) 2011 seeks to generate deeper and more sophisticated insights into the innovation process and emerging innovation trends in different countries around the world. He explains that the GII is “a tool for action” enabling policymakers to overcome innovation bottlenecks by identifying and adopting best national innovation practices.

What is the motivation for the GII project?

The GII project was launched by INSEAD in 2007 with the simple goal of determining metrics and approaches for better capturing the richness of innovation in society, and going beyond such traditional measures of innovation as the number of PhDs, the number of research articles produced, the research centers created, patents issued and research and development (R&D) expenditure.

Several factors motivated the setting of this goal. First, innovation is important for driving economic progress and competitiveness – both for developed and developing economies. Many governments are putting innovation at the center of their growth strategies. Second, there is increasing awareness that the definition of innovation has broadened – it is no longer restricted to R&D laboratories and published scientific papers. Innovation can be, and is, more general and horizontal in nature, and also includes social innovation and business model innovation. Finally, recognizing and celebrating innovation in emerging markets is seen as critical for inspiring people, especially the next generation of entrepreneurs and innovators.

What role do knowledge partners play?

In the 2011 edition of the GII, Alcatel-Lucent, Booz & Company, the Confederation of Indian Industry (CII) and WIPO joined INSEAD as knowledge partners in elaborating the GII. These knowledge partners share a common belief in the growing importance of innovation in enabling economic growth in both developed and emerging nations. They have provided valuable input to the research underlying the GII, contributing analytical chapters to the GII Report and participating actively in the dissemination of results. For example, WIPO’s input has been useful in refining the choice of variables, in providing data related to intellectual property and in discussing the role of creativity in innovation ; Booz & Company have provided knowledge from their corporate surveys of global innovation leaders; and the CII has contributed useful perspectives on innovation in India and other emerging markets.

In addition, for the 2011 edition, the Joint Research Centre (JRC) of the European Commission performed a thorough robustness and sensitivity analysis of the GII. Last but certainly not least, an Advisory Board was set up comprising a select group of international practitioners and experts with unique knowledge and skills in the realm of innovation. The GII project has benefited from the knowledge of these partners, and contributions from other public- and private-sector leaders interested in understanding and improving the innovation process will continue to provide valuable input.

Can you tell us more about the framework of innovation used for the GII?

The GII relies on two sub-indices, the Innovation Input Sub-Index and the Innovation Output Sub-Index, each built on several pillars. Five input pillars capture elements of the national economy that enable innovative activities: (1) institutions, (2) human capital and research, (3) infrastructure, (4) market sophistication and (5) business sophistication. Two output pillars capture actual evidence of innovation output: (6) scientific output and (7) creative output. The pillars are divided into sub-pillars, each of which is composed of individual indicators.

Sub-pillar scores are calculated as the weighted average of individual indicators, and pillar scores as the simple average of the sub-pillar scores. Four measures are then determined (see Figure):

• The Innovation Input Sub-Index is the simple average of the first five pillar scores.
• The Innovation Output Sub-Index is the simple average of the last two pillar scores.
• The overall GII is the simple average of the Input and Output Sub-Indices.
• The Innovation Efficiency Index is the ratio of the Output Sub-Index to the Input Sub-Index.

Figure: Framework of the Global Innovation Index 2011

Can you describe some of the top ranked economies in this year’s edition of the GII?

The 2011 edition of the GII Report covers 125 economies representing 93.2% of the world’s population and 98.0% of the world’s gross domestic product (GDP) (in current US dollars). Before I talk about specific economy rankings, it is important to note that the report also includes five chapters contributed by the knowledge partners on specific aspects of global innovation. These include regionally-focused contributions on Latin America and India, and in-depth treatment of specific issues such as the measurement of creativity, innovation in smart cities and the emerging global footprint of R&D.

The top 10 economies in the overall GII 2011 rankings are dominated by Europe with six economies, and include two Asian economies and two North American economies: Switzerland, Sweden, Singapore, Hong Kong (SAR, China), Finland, Denmark, the United States, Canada, the Netherlands, and the United Kingdom. Leaders in their respective regions are Switzerland (1st), Singapore (3rd), the U.S. (7th), Israel (14th), Chile (38th), Mauritius (53rd) and India (62nd). By income group, from high to low-income economies, the leaders are Switzerland (1st), Malaysia (31st), China (29th) and Ghana (70th). China, at position 29, is the only developing economy to be among the top 30; Malaysia (31st), Chile (38th), the Republic of Moldova (39th) and Lithuania (49th) are among the top 40. Among the high-income economies, three economies lag behind: Greece reached the median score (63rd), followed by Trinidad and Tobago (72nd) and Brunei Darussalam (75th).

The top 10 economies in the Innovation Output Sub-Index2 are Sweden, Switzerland, the Netherlands, Germany, the U.S., Finland, Denmark, Israel, the U.K. and Canada. The Output Sub-Index, like the overall GII, is dominated by Europe (seven economies) and includes two North American economies and Israel, which has a remarkable showing (8th on Output, 14th on the GII and 1st at the regional level). The best-ranked economies within each region are Sweden (1st), the U.S. (5th), Israel (8th), the Republic of Korea (11th), Brazil (32nd), India (44th) and Nigeria (62nd). The top 10 economies on the Innovation Input Sub-Index are Singapore, Hong Kong (SAR, China), Switzerland, Ireland, Sweden, Finland, Denmark, Canada, Luxembourg and the U.K. Regional leaders are Singapore (1st), Switzerland (3rd), Canada (8th), Israel (20th), Chile (36th), South Africa (40th) and India (87th).

The top 10 economies in the Innovation Efficiency Index are Côte d'Ivoire, Nigeria, China, Pakistan, the Republic of Moldova, Sweden, Brazil, Argentina, India and Bangladesh. This list includes some of the most densely inhabited economies in the world: China, India, Brazil, Bangladesh and Nigeria. These countries are among the 10 most populous economies in this year’s sample, and (except for Bangladesh) place 1st on Efficiency in their respective regions.

What lessons can be inferred?

The GII project offers a number of insights. First, innovation is a global phenomenon. It is not only OECD3 economies that innovate – innovation leaders are found across the world, as is evident from the presence of European, Asian and North American economies in the GII’s top 10. All regions are represented in the upper half of this year’s rankings. BRIC4 economies and emerging markets in general are significantly improving their innovation capacity: China, Brazil and, to a lesser extent, India have achieved encouraging results, especially in the Output Index. The worldwide relevance of the capacity, consequences and necessity for innovation highlights the need for a global perspective in understanding the process and underlying premises of innovation.

Second, innovation requires a multi-stakeholder effort. Governments must help build institutions, develop human capital and adopt policies that are friendlier towards markets and technological catch-up. In turn, firms in the private sector must do their part by participating more fully in financing and executing R&D projects; making venture capital available; and through increased investment in knowledge-intensive sectors. It is useful to note that the largest gaps between the high and low-income economies occur in the institutions, market sophistication and human capital and research pillars.

Third, it is important – and feasible – to take action that will help accelerate innovation in a particular area or economy. This has been demonstrated by multiple success stories and best practices worldwide. The GII Report offers important avenues for action in this regard. Some “weak pillars” need strengthening: in more than one economy, a relatively poor performance on pillar 2 (human capital and research), goes hand in hand with low levels of scientific output. Economies around the world can use the results of the GlI to identify their own strengths and weaknesses, compare themselves against similar economies and build consensus around desired areas of action.

What challenges did you face in measuring innovation?

Over the last several years, a serious body of literature has attempted to outline metrics for innovation. The GII builds on these approaches and attempts to incorporate new perspectives on both traditional and emerging views of innovation. However, thinking about innovation in a broad, holistic manner, such as that captured by the GII, is relatively recent and many aspects of innovation, such as those in the informal economy, remain hard to identify and harder still to measure with objective metrics.

One of the GII’s ambitions is to maximize the number of economies evaluated in the study. This continues to be a challenge, because obtaining timely and relevant metrics on a global basis is often not possible. All available official data from international organizations such as the World Bank, the United Nations Educational, Scientific and Cultural Organization (UNESCO) and the International Telecommunication Union (ITU) were considered, although many critical measures of innovation are not covered in the activities of these organizations. Finally, combining various metrics into a simple measure of an economy’s innovation is fraught with statistical and other complexities, especially when considering economies that are often vastly different in size, population and stage of economic development.

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1  Professor Dutta is editor of the Global Innovation Index 2011 and co-founder and academic director of INSEAD’s e-lab, a center of excellence in teaching and research on the digital economy.
2  While the GII is calculated as the average of the Input and Output Sub-Indices, the Innovation Efficiency Index is calculated as the ratio of the Output over the Input Sub-Indices.
3  The Organisation for Economic Co-operation and Development
4  Brazil, Russian Federation, India and China