Articles / Rubric: Rating

Innovation: A New Generation of Leaders Steps onto the Stage
October 2013 | Rating

It’s no secret that innovation is the key to successful economic development that allows for the standard of living to improve along with the attractiveness of a country for investors. That’s why developing new technologies is a priority for governments in all developed and developing countries. And yet even a poor economic climate can’t stop the rapid innovative development of emerging tech centers around the world. The authors of the Global Innovation Index analyzed what fruit government efforts in 2013 bore. And this time it was not without some surprises.

For the sixth year in a row, the World Intellectual Property Organization (WIPO), Cornell University, and INSEAD Business School have teamed up to publish the Global Innovation Index (GII). The GII is a ranking of 142 countries based on their potential for innovation and results of innovations. The countries’ place in the ranking is determined by a sum of two indicators: its ability to implement innovation (resources, personnel, and infrastructure) and the results achieved. The resulting index takes into account the cost and effect, allowing it to estimate the effectiveness of efforts to develop innovation in a country.

U.S. Once Again Near the Top

The unchanged index leader for 2013 was once again Switzerland, with second place once again belonging to Sweden. A surprise for 2013 was the return of the United States to the leading innovative nations. In 2012, the U.S. claimed a modest tenth place in the ranking, but this year rose to fifth place, which once again gives proof that the American economy is out of the crisis. The last time the U.S. was in the top five of the GII was in 2009, and now three years later it has made a triumphant return.

Traditionally, the U.S. strength has been its strong educational base: Of the top ten universities in the world, seven are in the U.S. according to the Times Higher Education. The formula for American success, according to INSEAD’s Executive Director Bruno Lanvin, is that “The U.S. is one of the countries which, in spite of the crisis, has maintained its level of investment in research and development and in innovation-related sectors. We see, for instance, a remarkable increase in spending on computer software which is directly applied to research and innovation.”

If you look at the top ten countries in the ranking, all of them demonstrate remarkable stability, falling into the higher group of innovative nations for several years in a row. The rankings change only within the established group: Switzerland, Sweden, the UK, the Netherlands, the U.S., Finland, Hong Kong, Singapore, Denmark, and Ireland.* This continuity is mainly due to the fact that success in innovation doesn’t come immediately and it is easier for countries that started becoming high-tech decades ago to remain in the leading positions. In this case, time and history work in their favor, as earlier innovations give rise to a new generation.

On the other hand, many developing countries have to start from scratch, which is why it makes no sense to talk about equality of initial opportunities. It is this inequality that preserves the innovation gap between developed and developing players in the international arena. However, if you look at the dynamics of the changing positions of the countries in the 2013 Index compared with their position in the rating in years past, it becomes clear that developing countries as a whole are increasing the innovative component of their economy at a much quicker rate than countries with high revenues.

In the opinion of the rating’s authors, 18 of the developing countries, according to current dynamics, have the potential to become leaders of innovation in the future. Among the prospective countries were: Moldova, China, India, Uganda, Armenia, Vietnam, Malaysia, Jordan, Mongolia, Mali, Kenya, Senegal, Hungary, Georgia, Montenegro, Costa Rica, Tajikistan, and Latvia. Explaining these trends, Lanvin says, “The reason why these countries have emerged as the upcoming future champions of innovation is basically they are focused on three main pillars of innovation: They have generally fostered education, thereby attracting talents and creating talents for innovation; second they have nurtured the climate of investment around innovation, they have created a culture of venture and risk capital which has helped local investors; and last but not least they have also built strong and dynamic structures of innovation.”

However, according to experts, there is no universal recipe that leads to a successful, innovative economy. It would be a mistake to blindly follow the example of successful projects like Silicon Valley. Instead, countries need to take into account the local context and develop their own local advantages.

*Countries are listed from first to tenth place according to the 2013 Index.

New Regional Leaders

The most significant improvements in the rankings were from the Latin American countries, where Costa Rica has emerged as a new regional leader. In 2012, it ranked in 60th place, behind Brazil (58th) and Chile (39th). But this year, Brazil didn’t even place among the top three innovative leaders in Latin America, yielding its place to Barbados (47th), with Costa Rica rising by leaps and bounds to 39th in a single year. The country’s rise is due to successful improvements in infrastructure, increased exports and imports of high-tech goods thanks to a significant amount of production technology, knowledge, and the ease of doing business.

Costa Rica’s Minister of Economy, Industry, and Commerce Mayi Antillon noted that “the business climate indicator for the country rose 10 positions from the previous year, reflecting efforts that have been made by the Government to simplify procedures for doing business and updating regulatory controls. These achievements are also reflected in other ratings, like the World Bank’s Doing Business annual index, where Costa Rica jumped 12 places.”

Other indicators played an important role, like “ecological sustainability,” which was considered for the first time in the rating. Costa Rica was able to achieve high scores in this indicator thanks to near 40% of all of the country’s energy needs being produced by hydropower, which doesn’t harm the environment.

There was also a change in the leading Southeastern Asia country, with Hong Kong (moving from 8th place in 2012 to 7th in 2013) replacing Singapore (3rd place in 2012 and 8th in 2013). Hong Kong’s right to priority in this race is confirmed by other indicators as well in 2013. According to Bloomberg, it became the best place to conduct business and took first place in the Heritage Foundation’s Index of Economic Freedom.

Engines of progress in other regions remained the same: India in Central and Southern Asia (66th in the total ranking); Mauritius in Sub-Saharan Africa (53rd); Israel in North Africa and West Asia (14th); Switzerland in Europe (1st); and the U.S. in North America (5th).

Text: Olga Irisova

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