China is rising, the US is falling, and some developing nations in Africa are outperforming according to the 2018 edition of the Global Innovation Index (GII), a joint publication by Cornell University, INSEAD and the World Intellectual Property Organization. The index quantifies factors that promote innovation and uses detailed metrics for 126 countries encompassing 90.8% of the world’s population and 96.3% of world GDP. Global Finance uses similar metrics for The Innovators.
What is clear from the 2018 GII report is that innovation and wealth are components of a self-reinforcing virtuous circle: innovation can lead to higher productivity, higher productivity means that the same input generates a greater output, greater output often translates into more innovation.
However, that does not mean that the nations in the upper echelons of the ranking can rest on their laurels. Just as within companies, sustained investment is far better than stop-and-start splurges and nations that have continually invested in innovation in the face of challenging economic times are now reaping the fruits. Competing head-to-head with the scientific and technological powerhouses of the world remains a dubious proposition for many developing nations, but there is plenty of movement within the index, with some countries leaping upwards in ways that seemed unimaginable not long ago.
The Top 10: The Usual Suspects
For the eighth year in a row, Switzerland is number one in the GII in 2011. How did this country of just 8 million people manage to retain the top slot since 2011? By faring well in most of 80 indicators ranging from knowledge-intensive employment to regulatory environment and collaboration between industry and universities. The same was largely true of the runners-up: Netherlands, Sweden, United Kingdom, Singapore, United States, Finland, Denmark and Germany. Who holds the number 10 spot? Ireland, which beat Hong Kong (China) in 2015. Since then, no country has entered or exited the top 10.
Make American Innovative Again
There is undoubtedly little movement within the top 10, with countries shifting one or two positions at the most from one edition of the GII to the other. This year, however, all eyes were on the US: did the change in presidential administration translate into a change of direction when it comes innovation? Yes, but not in a good way: the US dropped two spots from fourth to sixth place. The US position deteriorated in both the innovation input and output indexes, falling one position in the first category to sixth and two positions in the latter category to seventh. In particular, the US lost ground in human capital and research, infrastructure and creative outputs. Luckily, it still holds the top rank in many important indicators such as R&D company expenditures and quality of universities.
Giants of Asia
Breaking this year for the first time into the mostly Western-dominated top 20 is China. The country's number 17 ranking represents a real milestone and a testament to its government’s policies prioritizing research and path-breaking projects. Meanwhile, India slightly improved its standing, moving from the 60th spot down to 57th. Is up the only way for these giants? Can China and India keep following this dynamic innovation trajectory in the next several years? Will Indonesia, Malaysia, Thailand and Viet Nam—which continue to show improvement—be able to emulate them? The GII report points out a powerful inhibiting factor: protectionism, particularly protectionism that affects technology-intensive sectors, intellectual property and knowledge flows across the board.
Defying the Odds in Africa
For several years, Sub-Saharan Africa has performed relatively well in the ranking. The GII has designated economies that perform at least 10% above their peers for their level of GDP as “innovation achievers.” Since 2012, Africa has had more nations among the innovation achievers than any other part of the world. This year, South Africa, Kenya, Rwanda, Madagascar, Malawi and Mozambique were all innovation achievers. Harnessing science, technology and skilled labor has enhanced the competitiveness of these economies, which were able to attract higher foreign direct investments and further boost revenue streams for their enterprises. And even if the remaining 16 economies in this region can be found at ranks lower than 100, nine of them have showed improvement since 2017.
Two-Speed South America
Latin America’s best-performing countries in the ranking are Chile, Costa Rica, and Mexico. Brazil is in 64th place, having risen five positions since 2017. Other Latin American nations, the reports suggests, need to put greater emphasis on innovations. Insufficient fiscal incentives, lack of skilled workforces and limited government budgets for science and technology are affecting the economy of the whole continent. The study reveals that Latin America and the Caribbean includes only three countries with high-income economies (Chile, Uruguay, Trinidad and Tobago) and warns that the region has not significantly improved its innovation rates compared to other parts of the world.
Eastern Europe's Lights and Shadows
This year the region boasts five innovation achievers. Performing better than their level of development would suggest are Bulgaria, Ukraine, Moldova, Montenegro and Serbia. Among the top gainers, Serbia and Bosnia and Herzegovina climbed 10 places and Albania gained nine places. While almost all Eastern European countries improved their previous positions in the list from last year, there were some exceptions, most notably Macedonia, which fell more than 20 spots from 61st to 84th place, becoming the lowest ranked nation of the group.
Northern Africa and Western Asia: Less for More
Israel is in 11th place (up by six impressive spots) and the United Arab Emirates topped all Arab countries at 38 and is leading the region. Other oil-rich Middle Eastern nations also do relatively well but, the GII notes, compared to the top three countries in the world, the level of outputs of these high-income economies is low in comparison to their inputs. In other words, they tend to get less bang for their buck, noting that policy should come into play when high R&D expenditures are not matched by valuable innovation outputs.
Several countries have accomplished huge feats in a very short amount of time. It is worth mentioning Egypt, which this year climbed 10 spots to 95th, and Iran place, which went from 90th in 2016 to 75th place in 2017 and to 65th place in 2018.