Global Innovation: U.S. Is Middle of the Pack

Written by Jillian Friesen, GEI Associate and John Lounsbury

Econintersect: The 2012 Global Innovation Index recently hit the news, announced on 03 July 2012. The report highlighted several topics ranging from the roles certain types of business partnerships play to new Russian policies governing innovation.

An innovation is described in the report as

“the implementation of a new or significantly improved product (good or service), a new process, a new marketing method, or a new organizationsal method in business practices, workplace organization, or external relations.”¹

As for the official ratings, the U.S. ranked 10th in global innovation, trailing leaders such as Hong Kong, Ireland and Finland.  Switzerland was at the top.  Surprisingly (perhaps), even with the European euro and policy crisis, seven out of the top ten countries in the index were European.

Background information: INSEAD launched the GII project in 2007 with the main objective of

“determining how to find metrics and approaches to better capture the richness of innovation in society and go beyond such traditional measures of innovations as the number of research articles and the level of R&D expenditures.”²

Interesting facts and bullets:

• Switzerland preserved its #1 spot from last year
• Sweden protected its #2 position from last year and is 1st amoung the EU countries
• Singapore preserved its #3 spot from 2011 and is ranked 1st when ranked according to its innovation capability potential
• Finland is on top when it comes to political environment rankings
• The UK advanced in many of its rankings from last year. However it ranked 57th in trade and competition
• The Netherlands advanced three spots to 6th place, up from 9th a year ago
• Hong Kong dropped to 8th, four places down from its #4 position in 2011
• Ireland advanced in its ratings up four places in 2011 to 9th this year
• The US descended from its #7 perch in 2010 to 10th place in 2011

What Was Measured?

There were two subsets of measurements/evaluations; one was foinnovation inputs and the other group for outputs.  Besides ratings and rankings for for (1) the innovation index, (2) innovation inputs and (3) innovation outputs, a fourth value and ranking was calculated from the ratio of outputs to inputs producing (4) the innovation efficiency index.

The following two graphics show what went into the input evaluations and then the outputs.

Editor’s comment: It seems that there could be a lot if subjectivity in some of these evaluations.

A Closer Look at Some of the Results

Econintersect has chosen to look at the relationship between innovation efficiency and innivation index.  WIPO provided the following graph in their report, which as been annotated by Econintersect:

Click on graphic for larger image.

The annotations show:

1.  The nearest neighbors to the U.S. on the graph (in red).

2.  The other countries, besides some nearest neighbors and Switzerland, that exceeded the U.S. index value for innovation (in black).

3.  The five countries that equaled or exceeded 1.0 on the innovation efficiency index (in green).

Finally, some general observations:

The report does not provide correlation data for the regression line with the graph, but Econintersect estimates that the correlation coefficient is likely to be in the weak to fair range ( R = 0.4 to 0.8).  This is an “experienced eyeball” estimate and is not absolutely reliable.

Editorial note: After decades of working with thousands, if not tens of thousands, of graphs of data sets and regression lines, our editorial opinion is that the correlation to the data points to the regression line is quite acceptable considering the uncounted variables that can influence each data point in many different ways.

Another eyeball estimate is that the correlation for each of the four data subsets, had those four regression lines been determined, would each be better than for the overall regression fit shown.

A final item which gives confidence in the quality of the data determined here is the good correlation (again estimated by “experienced eyeball”) for a graph of input index values plotted against output index values (graph not shown here).   This is estimated to show significantly higher correlation than the effeiciency vs. index graph we have displayed and discussed.

Deep in the 464 page report is a chapter on statistical analysis of the data.  That was skimmed by Econintersect but not critically analyzed.

Click here for the full report from the WIPO website

Citations:

1. Global Innovation Index, Chapter 1, pg. 5

2. Global Innovation Index, Chapter 1, pg. 4

Sources:

• IPWatchdog

• WIPO

• INSEAD