A country's innovation criteria can be applied at a microeconomic level, such as a city or a company, where a multitude of factors are also combined. (Getty Images)
How do you measure a country’s innovation?
The European Commission has recently published the 'European Innovation Scoreboard 2023', a comparative analysis of the innovative capacity of the different EU countries. The 'Global Innovation Index' (GII) or the 'Bloomberg Innovation Index' also rank countries according to their innovative capacity. But how do these indices measure a country's innovation?
Posted on
09.01.2023
Carles Rúa is the Chief Innovation Officer at the Port de Barcelona and Director of the Master’s degree in Executive in Supply Chain Management at the UPC.
A country's innovation criteria can be applied at a microeconomic level, such as a city or a company, where a multitude of factors are also combined. (Getty Images)
How is the index compiled?
To compile this index, four main types of activities have been considered:
- Environmental conditions that are not conducive to business innovation
- Public and private investment in innovation
- Innovative activities carried out by companies
- Impact, which measures the economic, social and environmental effects of innovation.
Each of these types is further divided into three dimensions, making a total of 12 elements to be analysed. For each one, two or three indicators have been defined, depending on the case. The resulting index is the integration of 32 independent measures.
Thus, we can understand how a country's innovation is measured by reviewing the indicators that are used and what data they provide.
Environment conditions
They refer to the main drivers of innovation external to the company and differentiate between three dimensions:
- The availability of highly trained human resources
- The attractiveness of the country's research systems
- The degree of national digitisation
1. Human resources training
Three indicators are used:
- The number of PhD graduates in science, technology, engineering and mathematics (STEM)
- The percentage of the population aged 25-34 years with tertiary education
- The number of population aged 25 to 64 involved in lifelong learning activities.
2. The attractiveness of the research system
To measure this indicator, the following are considered:
- The number of scientific publications produced with international collaboration (co-publication).
- The number of excellent publications (those in the top 10% of the most internationally cited publications).
- The number of foreign doctoral students in relation to the total number of doctoral students in the country.
3. Degree of digitisation of the country
Two indicators are used:
- The percentage of enterprises with contracted bandwidth above 100 Mb/s.
- The number of people who are highly digitally literate based on their use of the Internet.
Public and private investments
Three dimensions are analysed:
- Financing and support for innovation through three indicators: private investment in third parties (venture capital investment); public spending on universities and research centres; and direct government subsidies for R&D activities.
- Private business investment in R&D, through three indicators: R&D and innovation (non-R&D) budget and innovation expenditure per employee.
- The use of information technologies, through two indicators.
The private sector and innovation
Innovation activities attempt to determine how the private sector acts on innovation.
To do so, it analyses three dimensions:
- The innovative effort of enterprises, measured by the number of SMEs that have introduced product innovations in the market or process innovations in their own organisations.
- Innovation collaboration, measured by collaboration agreements between SMEs, scientific publications in public-private collaboration and mobility in science and technology jobs.
- Intellectual property intangibles, measured through resources generated by intellectual property rights and the number of patents and trademark registrations made.
Impact analyses the results of the above innovative activities, along three dimensions:
- In employment, measured by the percentage of employment in knowledge-intensive areas and in innovative enterprises;
- In the economy, using three indicators: exports of technology products, knowledge services and sales of innovative products.
- The impact on sustainability, measured through resource productivity, emissions of particles into the environment and the development of environmentally related technologies.
Assessment by regions
As an extension to the EIS, the European Commission has also published the Regional Innovation Scoreboard 2023 (RIS), which provides a comparative assessment of innovation systems in 239 regions in 22 EU countries, Norway, Serbia, Switzerland and the UK, with Cyprus, Estonia, Latvia, Luxembourg and Malta included at country level.
In this case, however, the number of indicators is limited to 21 out of the 32 in the EIS because some of the indicators are not available at regional level.
Other innovation indexes
Based on objective and subjective data from multiple sources, the Global Innovation Index (GII) is an annual ranking of countries that measures their innovation capacity and success. It has been published since 2007 by the World Intellectual Property Organization (WIPO), in partnership with the Portulans Institute, several corporate and academic partners, and the GII Advisory Board.
To establish the ranking, the GII analyses four different criteria for which it establishes various indicators. These criteria are: investment in science and innovation, technological progress, level of adoption of new technologies and socio-economic impact.
The compilation of the global index is quite complex. First of all, it considers two subindexes, the average of which generates the overall index.
These two subindexes relate respectively to Inputs (elements of the country's economy that facilitate innovation) and Outputs (results of innovation activities). The subindexes linked to the Inputs is further subdivided into five pillars, while the sub-index linked to the Outputs is subdivided into two pillars:
For the inputs:
- Institutions
- Human capital and research
- Infrastructures
- Degree of market sophistication
- Degree of business sophistication
For the outputs or results:
- Knowledge and Technology Outcomes
- Results in creativity
To measure these seven pillars, 81 different indicators are used, of which 65 are direct numerical values, 13 are composite indicators and 3 are survey results from the World Economic Forum Executive Opinion Survey. These indicators come from a wide variety of internationally recognised sources. For example:
- the Government Effectiveness Index produced by the World Bank
- severance pay costs
- the country's spending on education as a percentage of GDP, according to UNESCO
- the results of the OECD's PISA study of reading, mathematics and science skills
- the number of science and engineering graduates
- the number of (full time) researchers per million inhabitants
- the level of access to and use of information and telecommunications technologies
- electricity consumed per million inhabitants
- the logistics performance index, according to the World Bank
- the number of ISO 14000 environmental certifications
- investment in venture capital
- average import tariffs
- percentage of knowledge-intensive jobs
- imports of high-tech products; or the resources generated by patents
According to the latest Global Innovation Index 2022,, which analyses 132 economies, the world's top 10 is headed by Switzerland, followed, in that order, by the United States, Sweden, the United Kingdom, the Netherlands, the Republic of Korea, Singapore, Germany, Finland and Denmark.
UNCTAD (United Nations Conference on Trade and Development) publishes the Technology and Innovation Report, the latest version of which came out in March 2023. This report includes the Readiness for Frontier Technologies Index which, as its name suggests, shows how prepared the 166 countries it analyses are to take on new technologies.
In this case, the index is made up of five categories of indicators:
- The deployment of information and communication technologies (ICT), which includes the percentage of the population using the internet along with the average download speed of the internet.
- Skills and knowledge of the population, which includes the percentage of the population working in high-tech jobs and years of schooling.
- Research and development activity, including the number of scientific publications and the number of patents.
- Industrial activity, including the share of exports of high-tech products in total goods and the share of exports of digital services in total services.
- Access to finance, which includes the share of private credit in GDP.
According to this ranking, the world top 10 is led by the United States and followed by Sweden, Singapore, Switzerland, the Netherlands, the Republic of Korea, Germany, Finland, China (Hong Kong, SAR) and Belgium.
Since 2017, Bloomberg has published the Bloomberg Innovation Index of the most innovative countries. They use more than 200 sources of information grouped into seven broad categories:
- Research and development intensity (ratio of R&D expenditure to GDP)
- The added value of their production
- Productivity: GDP per hour worked
- High-tech density: number of high-tech firms domiciled in the country
- Research concentration: professionals and scientists per million inhabitants
- Tertiary efficiency: human capital available for innovation through degrees and student enrolment
- Patents: patents applied for and granted per GDP
With data based on 2021, the top 10 of the 60 countries analysed is led by South Korea, followed by Singapore, Switzerland, Germany, Sweden, the United States, Finland, Denmark, Israel and France.
Conclusions: a process that transcends numbers
Measuring a country's innovation capacity is a complex process that involves analysing multiple dimensions and establishing, in general, dozens of indicators and metrics that evaluate its ability to generate, adopt and apply new ideas, technologies, products and processes. In general, all these dimensions end up being synthesised into a single numerical value that establishes the country's position with respect to others.
However, more important than this single numerical value are the partial values of the different indicators, which will provide us with information on which aspects of the States' policies need to be changed in order to climb up the rankings.
We believe that this scheme can also be transferred to microeconomic spheres. Thus, innovation in a city, a company or a department is also a multi-criteria problem where a multitude of factors are combined: whether a company is innovative does not depend solely on how much it invests in R&D&I, but is an aspect linked to its culture and affects areas as diverse as, in addition to budgetary issues, its internationalisation, collaboration with other companies, the training of its employees, the technology it uses or the patents it generates, among many other elements.
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