Report: Switzerland Again World’s Most Innovative; North-South Innovation Divide Remains

Is Europe the most innovative region in the world? In a well-regarded annual report, Switzerland has again been deemed the world’s most innovative nation, followed by the United Kingdom, Sweden, Finland and the Netherlands. But the annual Global Innovation Index also shows a persistent innovation divide between developed and developing countries, and this year focuses on the human factor in innovation.

The Global Innovation Index (GII) 2014, was launched today in Sydney alongside a meeting of international business leaders, part of Australia’s preparations to host the annual Group of 20 (G20) summit on 15-16 November.

The index is co-published by the UN World Intellectual Property Organization, Cornell University, and INSEAD, a global business school. The publication indicates that the index was developed “under the general direction of the World Intellectual Property Organization Director General Francis Gurry.”

“We like to think of the GII as a ‘tool for action’ for decision-makers,” Gurry said in remarks forwarded to Intellectual Property Watch. “On the ground, the GII is now being used to help improve countries’ innovation performance.”

“We hope that this trend will further intensify through the launch of the GII 2014 in the G20 context and in the Asia-Pacific region this year,” he added.

Top 20 Countries Largely Unchanged

The top 20 innovative countries according to the index are: Switzerland, UK, Sweden, Finland, the Netherlands, United States, Singapore, Denmark, Luxembourg, Hong Kong, Ireland, Canada, Germany, Norway, Israel, South Korea, Australia, New Zealand, Iceland, and Austria.

The 2014 top 20 list is largely the same as in the 2013 index. France fell out of the top 20 to 22 this year, while Austria got in from its former 22nd rank.

While Switzerland holds the pole position for the 4th year in a row, the United Kingdom has inched toward the top: 10th in 2011, 5th in 2012, 3rd in 2013, and 2nd in 2014.

Criteria for Analysis

Originally launched by INSEAD in 2007, the index uses some 81 indicators against which data from 143 countries are analysed to provide global innovation trends. It is based on innovation input, and innovation output.

The innovation input index looks at the political, regulatory and business environments. It also considers the human capital and resources, such as the level of education and research activity. Infrastructure and market and business sophistication are also considered.

The innovation output index examines the creation of knowledge, such as patent applications, scientific and technical published articles in peer-reviewed journals, and knowledge diffusion. It also looks at creative outputs, such as trademark applications by residents, and cultural and creative services exports.

According to Sacha Wunsch-Vincent, senior economist at WIPO and one of the co-editors of the GII 2014, what makes Switzerland such a high achiever is “the consistently high and balanced scores on both the input and output side, and notably the excellent collaboration between public and private innovation actors in bringing innovations to market building on high institutional trust, a culture of collaboration and an excellent human capital base.”

But he added that Switzerland also faces challenges, in particular in the area of the business environment, such as the ease of starting a business, or innovation in the public sector.

Innovation Divide Persists, BRICS Fare Unevenly

The large emerging economies are faring unevenly, China ranks 29 and has been fairly stable (35 in 2013, 34 in 2012, and 29 in 2011), South Africa ranks 53, an increase over 2013 (58 in 2013, 54 in 2012, and 59 in 2011). India’s ranking of 76 shows lost ground (66 in 2013, 64 in 2012, and 62 in 2011) but still puts it first in the region, according to the index. And Brazil ranks 61 (compared with 64 in 2013, 58 in 2012, and 47 in 2011).

According to Wunsch-Vincent, “the distance between China and the other BRICS countries is growing.” China has more consistently spent on achieving improvements on the side of innovation inputs, such as expenditures on research and development, and on ensuring tangible outcomes, such as increased productivity, high-tech production and trade, patents, and other knowledge or technology outputs, he told Intellectual Property Watch.

Brazil for the first time this year is among the top five economies in Latin America, he said, but Brazil’s innovation inputs and the innovation environment are not efficiently transformed into innovation outputs, “leading to a more modest innovation efficiency ratio.” The innovation efficiency ratio is the ratio of the output index and the input index, according to the GII.

Brazil could improve the business environment, he said, adding that the country “is among the top middle-income economies in terms of innovation quality, notably also due to the quality of its leading universities and its scientific publications.” Brazil is also “highly active in absorbing knowledge from abroad via royalties and licence fees, imports and other forms of importing innovation and technology,” he said.

Even if India’s ranking in the GII has gone down for some time, it is “doing better on innovation than expected from its overall state of economic development, which is remarkable given the size and the diversity of the country,” he said.

“Interestingly, similar to China, India scores consistently better on the output than the input side,” he said, adding that some of India’s strengths are in the quality of universities, the quality of its publications, the state of innovation clusters development, communication, and computer and information services exports.

The bottom of the list includes a number of least-developed countries: Bangladesh (129), Niger (131), Benin (132), Burundi (138), Yemen (141), Togo (142), and Sudan (143).

However, the index found that five Sub-Saharan Africa countries belong to a group defined as “innovation learners,” which refer to economies that perform at least 10 percent higher than expected for their level of GDP. Those are: Burkina Faso (109), Gambia (104), Malawi (113), Mozambique (107), and Rwanda (102).

Human Factor in Innovation

A particular focus of this year’s edition of the index is the importance of the human factor in innovation. According to the index one of the key conditions to innovation is “the presence of large, well-educated stock of human capital, which helps countries accelerate technological catch-up.”

The index notes that research and development is “generally unprofitable for firms with low levels of human capital.” It further underlines that “internationally mobile students overwhelmingly move to North America and Western Europe.” The United States remains the most popular destination for students and highly skilled professionals, according to the index, which says that “an important part” of the US “innovative prowess can be ascribed to these very talented foreigners.”

However, chapter 8 of the index illustrates a trend in which countries “are busily at work reversing the so-called brain drain” and in some cases involving their skilled diaspora abroad. Chapter 8 presents the case of the Moroccan diaspora’s contribution to the development of innovation in Morocco, and a set of programmes that have been initiated to that purpose.

“There is a strong evidence of the positive impact of diasporas on portfolio investments and foreign direct investment,” the index found.

Involvement of the Private Sector

According to Wunsch-Vincent, the involvement of the private sector in innovation output is “critically important,” and that “hardly any innovation takes place without a strong private sector, be it domestic firms or subsidiaries from multinationals.”

Most of the top innovating countries “have one thing in common: a strong collaboration and linkages between the private sector and the public sector such as universities to translate research into tangible innovations on the marketplace.”