Europe’s mixed performance on the Global Innovation Index

The Global Innovation Index (GII) project was launched by INSEAD business school in 2007 with the goal of determining metrics and approaches to better capture the richness of innovation in society and go beyond traditional measures of innovation such as the number of PhDs, the number of research articles produced, research centres created, patents issued, and research and development expenditures.

The GII relies on two sub-indices, the Innovation Input Sub-Index and the Innovation Output Sub-Index, each built around pillars. Five input pillars capture elements of the national economy that enable innovative activities: (1) Institutions, (2) Human capital and research, (3) Infrastructure, (4) Market sophistication, and (5) Business sophistication. Two output pillars capture actual evidence of innovation outputs: (6) Scientific outputs and (7) Creative outputs. Each pillar is divided into sub-pillars and each sub-pillar is composed of individual indicators.

The 2011 edition of the GII Report covers 125 economies that represent 93.2% of the world’s population and 98.0% of the world’s GDP (in current US dollars). The top 10 economies in the overall GII 2011 rankings are dominated by Europe, with six economies, and include two Asian economies and two North American economies: Switzerland leads the ranking followed by Sweden, Singapore, Hong Kong (SAR, China), Finland, Denmark, the United States of America (US), Canada, the Netherlands, and the United Kingdom (UK).

The five Nordic countries Sweden (2nd), Finland (5th), Denmark (6th), Iceland (11th), and Norway (18th) have very strong performances globally as well as regionally. Within the European Union (EU), among the 15 original EU countries (EU15), Sweden, Finland, Denmark, the Netherlands and the UK are in the top 10, followed by Germany (12th), Ireland (13th), Luxembourg (17th), Austria (19th), and France (22nd). The rest of the EU15 countries—Belgium (24th) and the four Mediterranean countries, Spain (32nd), Portugal (33rd), Italy (35th), and Greece (63rd)—have lost key positions to some of the 12 countries that recently acceded to the EU (the EU12 group).

The EU12 group is led by high-income countries Estonia (23rd), Hungary (25th), the Czech Republic (27th), Cyprus (28th), and Slovenia (30th); in the same high-income group, Latvia (36th), the Slovak Republic (37th), and Poland (43rd) have relatively low scores. Upper-middle-income countries are all in the second quintile: Lithuania (40th), Bulgaria (42nd), and Romania (50th). Malta is not included in the GII.

In general, regions show performances that are in accordance with their income levels, and Europe and Central Asia (ECS) is no exception. The GII includes 44 economies from Europe and Central Asia (ECS), 19 of which are within the top 30, and only one-Tajikistan-among the bottom 25. The region shows a good performance both in terms of its innovation potential and results. North America has the best regional performance, but the region includes only two high-income countries, the United States (7th) and Canada (8th), which are surpassed by four European countries in the ranking (refer to the table below).

In this overall picture however, East Asia and the Pacific (EAS) is catching-up really fast, exhibiting extraordinary results. Both regions show similar overall average performances (average pillar scores add up to 320 in both cases), although the breakdown by income levels shows that East Asia and the Pacific is still dominated by emerging economies (53.3%), while Europe and Central Asia includes an ample majority of mature, high-income markets (61.4%).

	North America	Europe and Central Asia	East Asia and the Pacific	Middle East and Northern Africa	Latin America and the Caribbean	South Asia	Sub-Saharan Africa	World
High-income	100.0%	61.4%	46.7%	43.8%	5.0%			35.2%
Upper-middle income		25.0%	6.7%	18.8%	55.0%		16.7%	24.0%
Lower-middle income		9.1%	40.0%	37.5%	40.0%	75.0%	25.0%	26.4%
Low-income		4.5%	6.7%			25.0%	58.3%	14.4%
Number of countries	2	44	15	16	1	4	24	125
Sum of average scores	416.7	320.2	319.8	262.5	236.7	214.1	207.2	275.9

The Global Innovation Index 2011: Breakdown by region and income groups and sum of average scores

On average, the relative weaknesses of Europe and Central Asia countries are on Infrastructure, Market sophistication and Business sophistication. In these three pillars East Asia and the Pacific takes the lead. These pillars include dimensions such as access and use of information and communication technologies (ICT); access to, sustainability and efficiency in energy use; credit, investment and trade conditions and flows; employment of knowledge workers, with indicators such as R&D performed and financed by business; innovation linkages, through university/industry partnerships, the development of clusters, joint venture and strategic alliance deals; and the capacity to absorb innovations performed elsewhere through royalty payments, imports of high-tech goods and ICT services, and foreign direct investment (FDI) net inflows.

The GII adopts a holistic approach to innovation in which all sectors have a role in fostering innovation, and in surmounting these weaknesses. Governments have a primary role regarding the development of sound institutions and regulatory frameworks, elementary and tertiary education, online service to its citizens, investments in infrastructure, and ensuring optimal conditions for credit, investment and trade. Businesses must then take the lead through entrepreneurship, ensuring that tertiary education and R&D respond to the development needs of the country, facilitating credit and investment through the banking system, the stock market, and venture capital deals; dynamic trade flows; the employment of knowledge workers, linkages and partnerships with academia.

The output dimensions, Scientific and Creative outputs are also developed primarily by businesses, and chief among them, larger companies, with indicators such as patent applications, the registration of trademarks, knowledge diffusion such as high-tech exports, FDI net outflows, computer and communication services exports, creative goods and services output and exports.

Europe presents a mixed bag of performance on the Global Innovation Index – some countries are leading while others are lagging. The leaders defy the common perception that Europe is not innovative. The laggards can benefit from the experiences of the leaders and become more innovative. The challenge then for Europe is to increase intra-regional learning and raise the innovation capacities of nations across the region.

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