The World’s Most Innovative Countries

In the global economy, innovation is a public good. When one country creates and markets new technologies, products, services or ways of doing business, the whole world tends to.

Similarly, when it comes to the kinds of public policies that help shape innovation, no country is an island. The decisions that one makes can affect all the others, for good or ill.

On the positive side of the ledger, when countries make constructive policy choices — such as investing in scientific research and education — they lift the global body of knowledge and capacity for innovation, thereby producing win-win results for themselves and the world.

On the negative side of the ledger, countries sometimes implement zero-sum, mercantilist policies — such as stealing others’ intellectual property or mandating that foreign companies transfer ownership of their technologies as a price of market access.

Such countries, by carrying out such policies, might enrich themselves; however, they do so to the detriment of the global innovation ecosystem.

The study

Many studies, such as The Global Innovation Index 2015, have ranked countries individually according to how well they perform on various indicators of innovation.

In a first-of-its kind study titled Contributors and Detractors: Ranking Countries’ Impact on Global Innovation, the Information Technology and Innovation Foundation (ITIF) has assessed 56 countries — which together account for about 90% of the global economy.

The indicators examined include such factors as research and development, technology, human capital, tax policy, trade barriers and intellectual property protections.

Countries are scored for their contributions, their detractions and their overall impact on global innovation.

Who leads?

Finland, Sweden and the United Kingdom are the countries whose policies do the most on a per-capita basis to support global innovation — and the least to detract from it.

India, Indonesia and Argentina meanwhile score weakest overall, fielding an above-average number of policies that detract from global innovation (e.g., high tariffs, weak IP protections, forced localization policies).

The United States ranks 10th-highest in its overall impact on global innovation. Its policies are sixth-best at not detracting, but only 17th-best in their positive contribution.

This is due to the U.S. government’s relative underinvestment in R&D as a share of the country’s GDP, weak innovation-incenting tax policies, as well as a middling performance in human capital.

In addition, while the United States likely contributes the most to global innovation in absolute terms, it ranks lower on a per-capita basis.

South Korea, one of several countries identified as “Advanced Asian Tigers,” along with Japan and Taiwan, was unique in fielding a combination of strong innovation-supporting policies (e.g., the world’s second-highest investment in R&D as a share of GDP), but also an above-average number of harmful policies.

Importance of innovation

China ranks 44th overall, scoring a respectable 28th for its contributions, but second-to-last for its many detractions. This is indicative of the attitude of some nations who want to “win” in innovation competition so badly that they are more than willing to engage in win-lose policies that hurt the world.

Enlarge Scatterplot of Countries’ Contributions to and Detractions from Global Innovation

Regardless of where individual nations plot on ITIF’s matrix (see above), the world is not producing as much innovation as is possible — or as is needed.

For that reason, global policymakers, economists and pundits should give innovation as much importance as trade in optimizing global economic growth and welfare.

Since the post-war period, there has been a broad consensus that nations’ polices should not distort trade, so as to maximize global welfare. That consensus when it comes to maximizing global innovation is frankly absent.

Development organizations like UNCTAD have advanced the false narrative that developed-nation innovation comes at the expense of developing-nation economies and that an innovation “redistribution” strategy helps, rather than hurts, global innovation.

The global community needs to do much more to push back against this kind of a false narrative.

In conclusion, we need more collaboration and coordination to produce more innovation globally. To this end, governments should also endeavor to increase to 10% the share of public R&D they fund that goes to international research collaborators.

This could considerably increase the global production of innovation, to the benefit of everyone.