WIPO Looks At Measuring Innovation; ITIF Sees Need For Policy Shift

The innovative capacities of countries cannot be measured with a simplistic matrix, taking only into account the number of patents or the research and development expenditures, said a World Intellectual Property Organization official. Meanwhile, WIPO’s views were buttressed by an expert from the Information Technology and Innovation Foundation.

Measuring innovation and capacities of countries to innovate needs a more holistic exercise than taking stock of the number of patents or research and development expenditures, Sacha Wunsch-Vincent, senior economic officer at WIPO, said at a session of the 1-3 October World Trade Organization Public Forum.

At the session, WIPO presented the main findings of its Global Innovation Index 2013, which was released earlier this year. This was followed by Robert Atkinson of the Information Technology and Innovation Foundation (ITIF), a Washington, DC think-tank, who focussed on the policy implications of those findings.

Initially, explained Wunsch-Vincent, a lot of work on R&D indicators was undertaken at the level of the Organisation for Economic Co-operation (OECD) or at the European level, so indicators were done for rich countries. But in the new innovation context, which means a big global innovation network, it is important to have a global measurement tool.

“Measuring innovation is a journey, not an endgame,” said Wunsch-Vincent. “At the end of the day, we have rankings which are pertinent for 2013, which we analysed,” but with “the best of our efforts … we still struggled to appropriately capture many elements of innovation,” he said.

Released in July (IPW, WIPO, 1 July 2013), the Global Innovation Index (GII) is a global tool measuring performance on innovation environment and outputs on 142 countries, based on 84 indicators, on an annual basis, he said.

The statistical community is doing “extremely well” on measuring the innovation inputs, he said, adding that good progress had been made on the output side. But good output indicators at the international level are lacking.

“What you really want to know is the number of new commercially successfully products launched with a certain value added that drive economic growth,” he said. “This is really our definition of innovation and on that front,” he said, and, as explained in Chapter 1 of the GII, “we are still only approximating innovation outputs.”

Among the main findings of the GII is the fact that innovation is a global game, according to Wunsch-Vincent. Worth noticing, he said, is that in the top 25 countries, all regions are represented, and that some countries perform particularly well on certain sub-indicators.

Companies, he said, choose certain destinations based on a few key strengths that a country might harbour. Three or four core strengths could have an impact on the choice of international companies, he said.

Persistence of Innovation Divide

As previously reported, top of the list were Switzerland, Sweden, the United Kingdom, the Netherlands, and the United States and rankings remain strongly correlated with income levels, Wunsch-Vincent said.

However, a proper benchmark should be chosen to compare countries, such as income levels, he said. A low income country should not be compared to Switzerland, for example. Some countries outperform their peer group, such as China, India, Uganda, Kenya and Vietnam.

New in this year’s version of the GII is the inclusion of variables assessing the quality of innovation outputs, he said. For example, he said, instead of counting just the number of patents filed at relevant offices, other elements were taken into account such as the extent to which the country is filing exactly the same patent abroad, implying more quality checks. It also indicates whether it is worthwhile to file the patent abroad and if that patent has actually been granted by other offices, he said.

The GII is a tool for action, he said. It is important to move beyond rankings and go into the countries’ profiles, indicating performance levels and including the countries’ strengths and weaknesses relative to other economies.

Definition of Innovation Not “Self-Obvious”

According to Atkinson, innovation is not “self-obvious”. “We have experienced frustration” at how policymakers define innovation, he said, and they do so in a loose way.

Innovation is not productivity, not competitiveness, although related to those, but really is about development of new business models, new processes and new products, he said.

Matrices are important, he said. “Not because some country was number seven and moved to number four. This is more or less meaningless. We should not use these studies as scorecards but as analytical tools” for countries to reflect on their strengths or weaknesses, he suggested.

In a study undertaken by ITIF titled, “Localization Barriers to Trade: Threat to the Global Innovation Economy, the foundation looked at trends from 2000 to 2011, Atkinson said. The most striking finding, he said, was not that China made the most progress and Singapore made the second most progress, but that the country that made the second least amount of progress was the United States. “The US is like a giant oil tanker,” he said, adding that “compared to other countries, the US has been somewhat lagging.”

Driving Growth and Innovation In Countries

There are two ways to drive growth and innovation in a country, he said. One is called the “across the board” strategy, in which a country focuses on innovation and productivity in all sectors of its economy. The other one is the “shift” strategy, which implies growing by getting more high innovation and productivity sectors in the country.

According to Atkinson, “most countries have embedded in their mind that the shift strategy is the way to get ahead,” but in fact a number of studies “have shown conclusively that the across the board strategy leads to success,” he said, referring in particular to a McKinsey Global Institute study: “How to compete and grow: A sector guide to policy

A number of measures can be taken by countries to support innovation, he said. Many nations are developing broad-based support policies for their enterprises such as: innovation vouchers, applied research institutes, collaborative R&D tax credit, apprenticeships, performance-based university funding, web-based new firm registration, universal school vouchers, and research parks. This represents an “enormous toolbox” for countries, he said, but it is a lot easier to write a law than to apply those policies, because they require building a complex innovation eco-system.

It is hard to succeed in innovation but it is not complicated, it is not a mystery, Atkinson said. A country needs firms that have incentives to take risks to innovate and to invest in the long term. Firms need to get adequate reward for that, he concluded.

Separately, Atkinson has co-authored a book with Stephen Ezell, who leads ITIF’s work on trade, manufacturing, and measuring international innovation and information technology competitiveness. The book is titled: Innovation Economics: the Race for Global Advantage and published by Yale University Press.

The book explores in particular the new forces that are shaping the global economy and how the US is losing its edge in the innovation race. The authors underline the need to enact policies more suited to this new environment. Self-defined as a “critical wake-up call,” the book seeks to trace a roadmap for a renewal of US global innovation advantage.