This week, on July 10, the 2018 Global Innovation Index was released. You may ask, “What is the Global Innovation Index?” The Global Innovation Index (GII) report is a leading indicator of a country’s ability to innovate, and is based on the premise that innovation is a driver of a nation’s economic growth and prosperity. The GII is co-published by Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO, an agency of the United Nations).
As indicated by its title, the GII report ranks the world’s economies in terms of their innovation capabilities and results. Its indicators go beyond the traditional measures of innovation such as levels of investment in research and development. The framework used to rank the countries (126 countries were ranked in the 2018 report; 127 in 2017) is divided into two categories: input and output.
Input represents the elements of a nation’s economy that enable innovative activities: institutions, human capital and research, infrastructure, market sophistication and business sophistication.
Output—the actual evidence of innovation outputs—studies two sub-categories: knowledge and technology outputs, and creative outputs.
Focusing on these two categories helps to better highlight the innovation successes and challenges faced by a nation. The report states that data is gathered from more than thirty sources, covering a wide spectrum of innovation drivers and results, focusing on hard data over qualitative results.
Given that the 2018 report is the GII’s 11th edition, the GII has become a resource for government and businesses seeking to design innovation and economic development policies, and create innovation-friendly environments.
What is the Global Innovation Index used for?
Each annual report has a different theme. The theme of the 2017 report was Innovation Feeding the World, while the focus for the 2018 report is Energizing the World With Innovation. This year’s report dedicates chapters to:
“…analyzing the energy innovation landscape of the next decade, identifying possible breakthroughs in fields such as energy production, storage, distribution, and consumption. It also looks at how breakthrough innovation occurs at the grassroots level and describes how small-scale renewable systems are on the rise.[i]”
Canada’s Ranking in the 2018 Global Innovation Index
And how did Canada do?
The good news is that Canada continues to be ranked among the top twenty nations in terms of innovation. Canada did not drop from its 2017 ranking of 18th among 127 nations. Our overall score dropped only marginally from 53.7 in 2017 to 52.98 in 2018.
Switzerland maintains its number one position, a ranking it has held since 2011. The Netherlands, Sweden, the UK, Singapore, the US, Finland, Denmark, Germany and Ireland round out the top ten. Israel was number eleven, which bears mentioning due to its impressive move up the rankings from number seventeen in 2017. You can see the rankings in detail at https://www.globalinnovationindex.org/analysis-indicator.
What is the Global Innovation Index without some commentary?
The GII report contains so much valuable information, far too much to review here, but I will highlight two interesting results that may be of interest to Canada and Canadians in particular.
Correlation between GII score and GDP per capita
First, the size of the countries that rank in the top twenty. Take a look at the top ten listed above. Of the ten, the majority could be categorized as “small nations” in terms of their population, causing the report to pose the question: Does being small give a country a positive advantage in the innovation rankings?
To answer this question, the report assessed the statistical relationship of the GII score relative to a country’s features. While they found that country size as reflected by population was not a factor in a country having a high GII ranking, they found a correlation between a country’s innovation performance and level of development as measured by GDP per capita.
What’s interesting is that while Canada’s GDP ranks tenth in the world, our GDP per capita (GPD divided by population) has dropped substantially over the past seven years, from $52,577 in 2012 to $45,077. As our population has grown, our GDP has not kept pace, and the amount of revenue (GDP) produced by each worker has dropped. I’m no economist, but this data explains how our GDP can look fairly healthy yet our innovation ability continues to pale. Put into the context of a company, an employee’s decreasing ability to generate revenue or GDP for the business would be cause for concern.
Inputs versus Outputs
Second, the report highlighted the relationship between inputs (institutions, human capital and research, infrastructure, market sophistication, and business sophistication) and outputs (knowledge and technology outputs, and creative outputs). If you’re going to invest in education, researchers and R&D, you’d expect some results! The report found that despite significant investment in innovation inputs, some economies do not generate a corresponding level of innovation outputs—Canada included. Among high-income countries, several—including Canada, Singapore, Japan, Hong Kong, New Zealand and Norway—stood out for under-delivering on innovation outputs, what the report calls getting a “bang for their buck.”
A look at the rankings on input and output shows that Canada ranks 10th for input and 26th on output. An even closer look at just two indicators, show that while Canada scores second in the world for “ease of business registration” (input), we rank 104th out of 120 for “new business density” (output)—the number of businesses registered!
Business investment in R&D
At the threat of boring you with more statistics, there’s one more that correlates with the concern expressed by the Conference Board in our previous blog post: business investment in R&D. Canada’s GERD financed by business enterprise (gross expenditure on R&D financed by business enterprise as a percentage of total gross expenditure on R&D) ranks 39th. Not awful, but not great.
What the GII report tells us
Both reports show that, in Canada, we consistently underperform relative to other countries in how we leverage innovation to achieve economic benefit. I believe that as a country we don’t have a strong enough innovation strategy or understanding of the value of innovation to our economic viability. This is something that government and business leaders equally need to understand. Fortunately, innovation is something that business leaders can have direct impact on in our economy by building innovation literacy and skill in managers and staff across their own organizations. More innovation in our businesses means more economic benefit for our country.
The nice thing about being ranked 16th or 18th depending on which report you read, is that there is much room for improvement. Maybe the weakness in our innovation ecosystem is that we keep focusing on what’s not right rather than what is right. As the GII study of Canada’s inputs show, we place a lot of emphasis on research and development in our innovation ecosystem, particularly government investment. A lot of good things are coming from this research. Where we have an opportunity is to get better at commercializing this research—to increase our innovation “output” by implementing the innovations made possible because of the research. Canada might do well to study what top-ten countries such as Switzerland and Ireland, along with up-and-coming Israel, are doing right in this regard.
BridgePoint Effect is an innovation strategy and organizational development firm. We help leaders and their teams solve the mystery of what it means to be innovative. Through consulting, learning and facilitation we help your organization build innovation strategy, become better innovators, achieve outcome-driven innovation, and change to meet the demand for innovation.
If you’d like to understand how your organization can drive more value through innovation, book a free consult with Janice Francisco. Here’s a link to reserve a 30-minute private consultation in her calendar.