The Most Innovative Economies in the World
This article is published in collaboration with visual Capitalist
by Iman Ghosh
Ranked: The Most Innovative Economies in the World
Innovation was again a front-of-mind theme in Davos at the World Economic Forum’s annual assembly of political and business leaders in 2020.
The global conversation centered around the ability of countries to innovate in the face of changing times. An economy’s response to megatrends, such as tech breakthroughs and the risks of climate change, can dictate its long-term success.
Today’s chart identifies the world’s top 20 most innovative economies, based on the annual index created by Bloomberg. We also delve into how the top 10 spots have evolved over time.
How Are Innovative Economies Measured?
Each year, the index assesses over 200 economies across seven weighted metrics.
1. R&D Intensity Annual research and development spending, as a % of an economy’s gross domestic product (GDP).
2. Patent Activity The number of annual patent and grant filings, and the 3-year average growth of filings abroad and filings growth, as a share of the world’s total patent growth.
3. Tertiary Efficiency The total enrollment in higher education, the share of labor force with advanced education levels, and the share of STEM graduates and in the labor force.
4. Manufacturing Value-added Manufacturing output levels—contributing to exports—as a % of GDP, and per capita.
5. Productivity GDP and gross national income (GNI) in the working age population, and the 3-year improvement.
6. High-tech Density The volume of domestic, high-tech public companies as a share of the world’s total companies. Examples of high-tech companies include: aerospace and defense, biotech, internet services, and renewable energy.
7. Researcher Concentration Professionals (including postgraduate PhD students) engaged in R&D across the population.
Based on available data of these measures, only 105 countries made the final cut for this year’s edition of the index—below are the 60 most innovative economies scored out of 100 points, and the highlights from that list.
The 10 Most Innovative Economies
For the first time in years, Germany clinched the top spot for the most innovative economy, ending South Korea’s winning streak. The European nation scores in the top five for its manufacturing value-added, high-tech density, and patent activity metrics.
However, even winners have some room for improvement. As the global economy sways ever more in the direction of services over manufacturing, Germany could improve its rate of higher education to achieve an even better score on the index.
Ranking third overall, Singapore leads the charge for tertiary efficiency, with almost 85% gross enrollment in higher education as of 2017. In contrast, Germany’s enrollment stood at around 70% in the same year.
Which other countries sit in the top 10?
A global hub for innovation, South Korea is still not to be ignored. With one of the most complex economies around, it leads in exports of communications technology and cars. It’s also at the forefront of 5G, being the first country to roll it out—so it’s no surprise that South Korea spends big on research, relative to its GDP.
R&D spending determines life or death for South Korean companies… It’s about widening whatever lead South Korea has—or else China will catch up.
—Chang Suk-Gwon, University professor in Seoul
The United States ranks in first place for both patent activity, and high-tech density—with the highest share of domestic high-tech public companies in the world. With the “Big Five” tech giants all headquartered here, it’s easy to see their impact on a global scale.
Over the past five years, the top 10 players in this index have shuffled around, but remained quite consistent. But one particular economy may well upend the future leaderboard.
The Most Innovative Economies (#11-20)
In 2020, the #11-#20 ranked innovative countries show an interesting mix.
China’s steady rise (up from 21st place in 2017) could be because it scores second worldwide for patent activity. This comes from the aggressive 6,000 patents filed since 2015 by the nation’s own tech giants. The patents cover breakthrough technologies from AI and blockchain, to autonomous driving and even regenerative medicine.
Ireland comes in first place on both manufacturing value-added and productivity metrics. In fact, for every hour worked, employed Irish people add $99.50 to national GDP.
The Full List
Below is the full list of all 60 innovative economies highlighted in the 2020 index.
Highlights from the rest of the list include:
• Slovenia improved the most by 10 places (to the #21 spot) thanks to its stronger patent activity.
• New Zealand slid by 10 places to the 29th spot, falling for the third consecutive year.
• Last but not least, four countries or jurisdictions made their debut onto the index in 2020: Algeria, Egypt, Kazakhstan, and Macao.
It’s clear that many countries are continuously pushing the envelope in order to maintain their competitiveness within the global economy—and constant innovation can provide a better life for their present and future populations.
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