The last decade has seen an increasing realization among economists and policymakers that innovation has become the central economic growth driver and a key to improved standards of living. This awakening to the importance of innovation-based economic growth has spawned a fierce race for global innovation advantage among countries. To advance their competitiveness in this race, many countries are implementing thoughtful and constructive innovation policies aimed at boosting their use of information and communications technologies, helping their companies become more productive and innovative, and facilitating the creation of new companies that produce high-value-added products and services.
However, some countries have put in place policies that try to win the race by distorting the global innovation system at the expense of other nations. Hence, a framework is required to identify and promote the deployment of effective innovation policies that drive domestic economic growth while ensuring a sustainable innovation ecosystem that benefits all countries throughout the world. Effective innovation policy relies on more than just science policy and the promotion of high-tech product development. It also must focus on improving productivity across the board in all economic sectors. Countries with the best innovation strategies coordinate their policies toward skills, scientific research, information and communications technologies (ICTs), tax, trade, intellectual property, government procurement, standards, and regulations in an integrated approach designed to drive economic growth through innovation. Nations are unlikely to achieve sustainably high rates of innovation if their governments have not put in place a broad range of innovation-enabling policies that create the conditions in which organizations throughout a country—whether private enterprises, government agencies, or nonprofit entities—can successfully innovate. To help them do so, this report provides a structured assessment of policies informing the innovation capacity of 55 countries. Moreover, it highlights the most effective policies countries are using to build their innovation capacity, and describes how countries can learn from one another in deploying the best policies.
The 55 countries analyzed in this report include all members of the Organisation for Economic Co-operation and Development (OECD), all European Union (EU) member states, and nineteen of the twenty-one Asia-Pacific Economic Cooperation (APEC) member economies, as well as the large developing nations of Argentina, Brazil, India, and South Africa. According to the income classification system of the World Bank, thirty-six of the fifty-five countries are “high income,” fifteen are “upper-middle income,” and four—India, Indonesia, the Philippines, and Vietnam—are “lower-middle income.” Due to a lack of available data, no “low-income” countries are included in the analysis.
The report assesses these countries on their strength in seven core policy areas:
- Open and non-discriminatory market access and foreign direct investment policies;
- Science and R&D policies that spur innovation;
- Openness to domestic competition and new firm entry;
- Effective intellectual property rights protection policies;
- Digital policies enabling the robust deployment of ICT platforms;
- Open and transparent government procurement policies; and
- Openness to high-skill immigration.
Countries are ranked as upper tier, upper-mid tier, lower-mid tier, or lower tier on each of these seven indices, with those ranks calculated by countries’ performance on an array of key sub-indicators relevant to each core policy area. In total, the study assesses eighty-four sub-indicators across the seven core innovation policy areas. The seven areas then are weighted as follows: trade, science and R&D, and digital policies at 17.5 percent of the overall weight each; intellectual property protection and domestic competition at 15 percent each; government procurement at 10 percent; and high-skill immigration at 7.5 percent. Countries’ ranks on the seven weighted core innovation policy areas then are aggregated to produce an overall ranking reflecting the strength of their innovation policy capacity.
To maximize global innovation, countries need to implement their policies with regard to trade, science and R&D, ICT, intellectual property rights, domestic market competition, government procurement, and high-skill immigration in ways that maximize their innovation capacity but without distorting global trade. To accomplish this, countries’ policies will have to be predicated on transparent, non-discriminatory, market-based principles that embrace both global standards and the free flow of talent, capital, information, products, services, and technologies. The following provides a brief summary of the key points in each of the seven core innovation policy areas.