Global Innovation Index 2015: Effective Innovation Policies for Development

September 2015

By Catherine Jewell, Communications Division and Sacha Wunsch-Vincent, Economics and Statistics Division, WIPO

Mature economies have long recognized the far-reaching benefits associated with investing in and strengthening their capacity to innovate. This year’s Global Innovation Index, which offers a snapshot of the state of innovation around the world, shows that many middle and lower-income economies are now also actively focusing on strengthening their capacity to promote innovation-driven growth.

The Global Innovation Index (GII), now in its eight year, benchmarks the innovation performance of 141 economies according to a broad range of indicators which measure innovation inputs – what countries are doing to strengthen their innovation ecosystems – and innovation outputs which measure performance and results. While the GII ranks the innovation performance of the countries surveyed, its overriding aim is to generate insights, identify good practices and to provide practical support to policymakers and business executives in their efforts to improve innovation performance.

The GII 2015 focuses on Effective Innovation Policies for Development, and discusses new ways in which policymakers in emerging economies can harness their innovative potential and drive economic growth.

“Innovation holds far-reaching promise for spurring economic growth in countries at all stage of development. However, realizing this promise is not automatic,” said WIPO Director General Francis Gurry. “Each nation must find the right mix of policies to mobilize the innate innovative and creative potential in their economies,” he added.

“Innovation really is a long-term game. It requires perseverance,” Mr. Gurry said pointing to the “perilous” and “complex” process associated with translating an idea into a successful commercial product. “For many developing countries, this is a major challenge,” he said at the launch of the GII 2015 in London, noting that the report offered interesting lessons for policymakers everywhere to improve their innovation performance.

Rankings

GII 2015 indicates that Switzerland, the United Kingdom, Sweden, the Netherlands, and the United States are the world’s most innovative nations. These countries share fully integrated innovation ecosystems in which investment in human capital combined with strong innovation infrastructures contribute to high levels of creativity.

The GII also shows that the group of top 25 performers – all high income economies –remains largely unchanged, with some exceptions, suggesting that it is very hard to break into the league of top performers. The Czech Republic (ranked 24) moved into the top 25 group and Ireland (ranked 8^th) moved into the top 10 countries this year.

Chile, India, Israel, Mauritius and Singapore were also identified as leaders in their respective regions.

**In a perfect world for innovation, who would do what?**

Quality matters

Top innovation performers also share a capacity for quality innovation. By this measure, the UK and the US are ahead of the pack, largely as a result of their world-class universities, followed by Japan, Germany and Switzerland. Among middle-income economies, the top scorers are China, Brazil and India, with China increasingly out-pacing the others.

Universities are powerful magnets for talent. “Universities are key sources of knowledge and expertise for business. They provide us with the highly-skilled work force necessary to drive innovation,” noted by Baroness Neville-Rolfe, UK Parliamentary Under Secretary of State and Minister for Intellectual Property.

“The UK’s progress over the last 5 years reflects the increasing strength of our economy and also the link with an efficient innovation infrastructure and, of course, the universities,” the Minister said. The UK’s GII position rose from tenth in 2011 to second in 2015.

“Innovation is a vital driver of global growth, and economic prosperity,” Baroness Neville-Rolfe said, noting that it was central the UK’s economic recovery. Innovation, she explained, “underpins our competitiveness and it helps capture the new customers and the new markets that we all need for the longer term.”

Technology gaps are narrowing

While an innovation divide persists between developing and developed economies, technology gaps are narrowing, and national innovation programs, especially in emerging economies, are flourishing. The GII 2015 reveals that an expanding group of these economies, including China, Malaysia, Viet Nam, India, Jordan, Kenya and Uganda are outperforming their economic peers in the innovation stakes.

Success factors

In focusing on the theme of Effective Innovation Policies for Development, the GII 2015 explores whether the types of innovation policies prevailing in high income countries can be adapted to emerging and lower income economies.

Effective innovation policies in high income countries place emphasis on improving the conditions for innovation to actually take place by, for example, establishing an enabling business environment and facilitating access to finance. These policies also focus on creating a strong human resource and research base and ensuring that all actors within the innovation ecosystem are strongly interlinked. They also include direct support to businesses, research and development and innovation through grants, subsidies and tax credits.

But simply migrating the innovation policies of high income countries to emerging economies is unlikely to bear fruit. The GII 2015 highlights the importance of developing context-specific policies that reflect the “heterogeneity and varying trajectories” of countries.

Emerging economies face a very different innovation landscape, one frequently characterized by poor infrastructure, weak product, capital and labor markets, underdeveloped educational systems, regulatory gaps, and intense inequalities. That said, a growing number of developing economies are making significant progress in overcoming these challenges and in developing effective national innovation ecosystems. These include China, Malaysia, Viet Nam, India, Jordan, Kenya and Uganda.

Lessons

While the innovation policies of emerging economy innovation achievers vary from country to country, they share some key characteristics and offer useful lessons.

First, these countries give innovation strategic importance. Government has a key role to play in ensuring that innovation is high on the political agenda. Such visibility helps to cultivate a pro-innovation mindset, to support the development of the private sector (by making it easier to set up businesses) and to strengthen linkages between innovation actors, in particular, the private sector and academia.

Second, innovation is a long-term undertaking that requires perseverance. “There is no stop and go in innovation policy,” noted by Bruno Lanvin, Executive Director for Global Indices at INSEAD and co-author of the GII 2015. Without persistent investment in fostering the institutions and the actors that support innovation, and without strengthening the linkages between all those that have a role within the complex innovation ecosystem, performance can and will diminish rapidly.

Third, a well-coordinated national innovation policy with clear targets and a matching institutional set-up are important ingredients for success. An initial thorough evaluation of existing innovation systems to identify strengths and weaknesses offers a useful roadmap for policymakers to move forward. Ensuring that key innovation actors, including successful national innovators, are on board is also critically important.

Establishing cross-cutting innovation agencies and councils – as witnessed in Georgia and Kenya - with a direct link to the highest levels of government is an effective way of ensuring that innovation policy is well coordinated with other policies including for education, skills, foreign investment, and trade policy. Closer coordination between intellectual property and innovation policies is also useful in terms of creating incentives for innovation, securing a competitive advantage and supporting value creation across the economy. Effective policy coordination is of particular important in resource-limited contexts.

Fourth, steering innovation and research towards context-specific solutions that address local needs offers huge potential for economic growth. In certain African countries, such as Kenya, the spontaneous grass-roots development of remarkable technological innovations like the M-Pesa mobile banking service, and the iCow agricultural information service are having a significant impact on the lives of millions of people.

Greater attention to better harnessing spillovers associated with foreign investment activity into the local economy also offers huge scope for fostering local entrepreneurship and innovation which often go hand in hand. In this respect intermediary organizations, such as non-governmental organizations, have a key role to play in facilitating the transfer of know-how and expertise.

Rallying national efforts around challenges common to all developing countries, also offers significant potential for growth. South-south trade in tailored innovative goods and services is increasingly a reality and a goal.

The data captured in the GII 2015 offer a basis for optimism as economies around the world continue to make solid progress in laying the foundations of future innovation-driven growth. The remarkable developments witnessed in an expanding number of emerging economy innovation achievers suggests that we are in store for some interesting developments in the global innovation landscape in the coming years.