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Wednesday, 30 September 2015

The Global Innovation Index 2015

WIPO, along with researchers at Cornell and INSEAD, recently published the Global Innovation Index. The index ranks countries by their innovativeness and usually grabs a few headlines, particularly in countries who've fared well. Even the Economist, using this Kat's favourite policy phrase, "punching above its weight" covered the index in an almost gushing manner (i.e. they didn't insult patents.)

"Namibie Etosha Leopard 01edit" by Patrick Giraud (edited to fix white balance) - Own work. Licensed under CC BY 2.5 via Commons - https://commons.wikimedia.org/wiki/File:Namibie_Etosha_Leopard_01edit.jpg#/media/File:Namibie_Etosha_Leopard_01edit.jpg
"Namibie Etosha Leopard" 
by Patrick Giraud 
Report
The report, which looks like it was a lot of work (over 450 pages and 79 variables), is a comprehensive indexing exercise. The UK ranks second, having risen from tenth in 2011; Switzerland again is number one.

The 2015 theme was Innovation for Development, which picks up on broader implications of innovation, and IP.  The report highlights an innovation divide between developing and developed countries.  Education, business sophistication and institutional support are singled as important factors benefitting developed countries. 

The BRIC countries are performing well and China is now number 29. Using patent analysis, China, Jordan, Kenya and Vietnam, Malaysia, India and others are outperforming similar economies. Africa is starting to move up the index. Burkina Faso, Malawi and Senegal, among others, are noted as improving. This should provide good fodder for debate at the upcoming African Ministerial Conference 2015 in Dakar in November.

The Index
"The model includes 79 indicators, which fall within the following three categories: 1. quantitative/objective/hard data (55 indicators), 2. composite indicators/index data (19 indicators), and 3. survey/qualitative/subjective/ soft data (5 indicators)."

These indicators are grouped into seven main areas.  These measurements are then adjusted to account for the differences in country size (typically GPD and population.)
1.     Institutions - measures things like political stability and the business environment, generally considered conducive to growth and innovation.
2.     Human capital and research - (hello academia) important for the generation of knowledge; academic research doesn't necessarily translate into innovation, hence a policy focus on tech transfer and knowledge exchange.
3.     Infrastructure - general measurement of things like ICT and other resources which enable manufacturing, health, logistics etc.
4.     Market sophistication - includes credit markets, financing and capital, facilitates the financial backing of markets for innovation.
5.     Business sophistication - a mix of the skills of business people and knowledge absorption, the intangible infrastructure which facilitates the spread of knowledge.
6.     Knowledge and technology output - where IP comes in, measurements of patents, publications, spending on computers, exports etc provide an idea of of innovative activity.
7.     Creative outputs - more IP with trade marks and measurements of the outputs of the creative industries.
By (From a painting by W. Luker, Jun.) ("The Book of the Cat" by Frances Simpson) [Public domain], via Wikimedia Commons
 W. Luker, Jun.
There are some highly innovative measurements in the index itself.  For example, the number of monthly Wikipedia edits gives an idea of a country's online engagement and general level of education. "Tertiary inbound mobility" measures the number of university students from abroad, which suggests an attractive education system. The UK ranks eighth on this measure, just above Switzerland and significantly above the United States (49th).

You get some interesting results.  Barbados, for example, is the top country for patent families filed in at least three countries. A number of Eastern European countries are in the top ten for females with advanced degrees in employment. Germany ranks top for logistics.

Readers keen to find their own insights may enjoy the website's cool interactive tool

Comments on the index
Innovation, like a lot of IP-related concepts, is notoriously difficult to measure. The strength of this index is that it provides a stable, well established means to assess the performance of countries. While there is room for measurement flaws, it is important to focus on the relative indexing of countries over time. This allows for evaluation of innovation policies, comparative analysis and tracking of trends.

"Manekineko1003". Licensed under Public Domain via Commons - https://commons.wikimedia.org/wiki/File:Manekineko1003.jpg#/media/File:Manekineko1003.jpg
"Manekineko" by Fg2
That said, the use of patent and trade mark data is often problematic.  IPKat readers will know that registrations are less a measurement of innovation, and more a measurement of business strategy (and perhaps an even better measurement of firms' legal budgets.) There are also challenges associated with using so many variables. Capturing a system as complex as innovation is difficult, and many of the indicators measure similar concepts, which could skew results.  

Another consideration is that the index introduces the political equivalent of a Key Performance Indicator (KPI) for innovation. Great if you're on top or moving up. But in countries not doing so well, governments may be reconsidering policy.  

Exclusive analysis
However, the report misses a crucial analysis. Policy makers pay attention, because this Kat has figured out how to improve your innovation.  The answer is, as is often the case, chocolate.

Using an extensive analysis of globally developed databases and matching techniques,  your Katonomist has established an important link between chocolate and innovation. Here are the facts:

Flickr: Clever Cupcakes 
·      70% of the top 20 most innovative countries in the world are also in the top 20 countries with the highest per capita chocolate consumption.
·      63% of the top top eight emerging markets with the highest per capita chocolate consumption are also listed in WIPO's top ten middle-income countries with the highest quality of innovation

Based on this analysis, it should come as no surprise that Switzerland is the most innovative country in the world. The inhabitants of Switzerland consume nearly 12 kilos of chocolate per capita, which is a two-kilo lead over Ireland, in the number two chocolate position. It turns out the secret ingredient of innovation is creamy and sweet, with a hint of bitter. 

Overall thoughts
The WIPO index is a useful analytical tool.  The analysis accompanying the index is in-depth and presents a comprehensive look at innovation worldwide.  Indices and measurements can never fully capture the complexity of innovation, but the index is a very useful thermometer. 

However, as fellow Kat Neil wrote recently, there are debates on the appropriateness of the steadily increasing intertwining, sometimes conflation, of innovation and IP.  This Kat thinks we should continue to explore this relationship, but maintain a healthy sense of skepticism.  She also thinks that more economists should be trained in the legal and policy aspects of IP, and vice-versa.


In the meantime, consider chocolate.

2 comments:

Meldrew said...

It is interesting how many of the variables represent inputs that provide the potential for innovation rather than outputs that represent actual innovation. It doesn't matter how educated out are if you won't get off your backside. It doesn't matter how many tools you have if you don't know how to use them.

It is comforting to say that "IPKat readers will know that registrations are less a measurement of innovation, and more a measurement of business strategy (and perhaps an even better measurement of firms' legal budgets.)" if you are trying to explain why the UK punches so far below its weight in patent filings.

The U.K. has admirable assets, not least an excellent Intellectual Property Office. If the UK is innovative either it is cavalier with protecting innovation, or it is innovative in areas that are not protectable, or it has incompetent management, or it suffers from attention deficit disorder, or a blend of these factors and more.

In short, it is not much use being innovative if you don't make money from it.

Nicola said...

Meldrew, indeed, although we don't really have a better option. The use of inputs, rather than outputs, is due to the fact that measuring innovation is extraordinarily difficult. A classic economics definition of an innovation is that it is an applied invention. Even then, it is the impact of innovation that is important and not just a blunt measurement of innovation.

Also, wanted to flag up this post by Jonathan Haskel - http://haskelecon.blogspot.co.uk/2015/09/index-numbers.html He points out that without having further insights to the weighting of the index, it's difficult to critique and interperet it as whole.

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