Innovation can be instrumental to the success of economies, at macro and micro scales. While investment provides powerful fuel for innovationthe relationship isnt always straightforward.
The 2020 ranking from the World Intellectual Property Organization (WIPO) reveals just that.
The above map breaks down the most innovative countries in each World Bank income group, based on data from WIPOs Global Innovation Index (GII), which evaluates nations across 80 innovation indicators like research and development (R&D), venture capital, and high-tech production.
While wealthier nations continue to lead global innovation, the GII also shows that middle-income countriesparticularly in Asiaare making impressive strides.
The economic and regulatory spheres within countries can have an enormous impact on their level of innovationand vice versa, as innovation in turn becomes an economic driver, stimulating further investment.
The positive feedback loop between investment and innovation results in the success of some of the top countries in the table below, which shows the three most innovative countries in each income group.
Switzerland, Sweden, and the U.S. are the top three in the high-income group. Considering that Switzerland has the second-highest GDP per capita globally, it is not a surprise leader on this list.
Upper middle-income countries are led by China, Malaysia, and Bulgaria. Note that China far surpasses other nations in the upper-middle-income group ranking, reaching 14th spot overall in 2020. Others in the income group only appear in the overall ranking after 30th place.
Below are several income group leaders, and some of their key areas of output:
Since 2011, Switzerland has led the world in innovation according to this index, and the top five countries have seen few changes in recent years.
Sweden regained second place in 2019 and the U.S. moved into thirdpositions they maintain in 2020. The Netherlands entered the top two in 2018 and now sits at fifth.
Heres how the overall ranking shakes out:
Nordic countries like Sweden, Denmark, and Finland continue their strong showing across innovation factorslike Knowledge Creation, Global Brand Value, Environmental Performance, and Intellectual Property Receiptsleading to their continued presence atop global innovators.
But the nations making the biggest moves in GII ranking are found in Asia.
China, Vietnam, India, and the Philippines have risen the most of all countries, with all four now in the top 50. China broke into the top 15 in 2019 and remains the only middle-income economy in the top 30.
In 2020, South Korea became the second Asian economy to enter the top 10, after Singapore. As the first Asian country to move into the global top five, Singapore joined the leaders in 2018, and now sits at 8th place.
In another first for 2020, India has now broken into the top 50.
While annual rankings like these confirm the importance of a robust economy and innovation investment, variations in the relationship between input and output are not uncommon.
The correlation between wealth and innovation isnt always straightforward, and neither is the connection between innovation input and output.
Below is an overview of the GII inputs and outputs, as well as several of the worlds overall leaders in each pillar.
Input variables can be characterized as factors that foster innovationeverything from the quality of a countrys university institutions to its levels of ecological sustainability.
Output factors include innovation indicators like the creation of new businesses, and even the number of Wikipedia edits made per million people.
Countries with impressive innovation outputs compared to input levels include:
Although financial markets have ignited, the economy as a whole has not fared well since lockdowns began. This begs the question of whether a steep decline in innovation capital will follow.
In response to the 2020 pandemic, will spending on R&D echo the 2009 recession and aftermath of 9/11? Will venture capital flows continue to decline more than they have since 2018?
Because innovation is so entwined with the economic growth strategies of companies and nations alike, the WIPO notes that the potential decline may not be as severe as historical trends might suggest.
Thankfully, innovation opportunities are not solely contingent on the level of capital infused during any given year. Instead, the cumulative results of continuous innovation stimuli may be enough to maintain growth, while strategic cash reserves are put to use.
What the GII ranking shows is that inputs dont always equal outputsand that innovative strides can be made with even modest levels of capital flow.
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