Last autumn INSEAD teamed up with Wipro and Cornell to release the latest installment of their latest innovation index.  The report, which looked at various factors involved in the innovative capability of a nation, revealed that the UK was the 2nd best place in the world for innovation.

We scored particularly strongly on things such as a strong research base, a culture of knowledge sharing and good support for entrepreneurs.  To show that this strong showing was no fluke, the UK continues to show off its innovative credentials in a second report published earlier this year.

The catchily titled Contributors and Detractors: Ranking Countries’ Impact on Global Innovation by the Information Technology & Innovation Foundation (ITIF) placed the UK third in the global league table, just behind Finland and Sweden.

Whereas the earlier INSEAD paper looked at the innovative capability of individual nations, this ITIF paper explores the impact a nation has on the global innovation ecosystem, with 27 different metrics used to assess each country’s impact.

Pros and cons

These metrics were split broadly between those that contribute to the global innovation system and detract from it, with the positve factors grouped into:

  • taxation
  • human capital
  • R&D and technology

whilst the negative factors were grouped around:

  • balkanised production markets
  • IP protection policies
  • balkanised consumer markets

Each of the leading nations in the league table adopted what the authors call Schumpeterian policies, which are named after Austrian economist Joseph Schumpeter.  This affirms that the state has an active role to play in supporting innovation in a country and do a lot to provide such an infrastructure.

Despite this relatively high level of state involvement in innovation however, each of the leading economies also strongly support globalisation and market-based economies, so score highly on areas such as IP protection and low barriers to trade.

This contrasts with America, which sits in another category that the authors label the ‘Adam Smith’ians’, alongside Australia and Canada.  Whilst these countries share the Schumpeterian’s love of free markets and global economies, their governments play a much smaller role in the innovation process.

The importance of human capital

The UK scores particularly highly in the ‘human capital’ category, which looks at things such as the expenditure on education, the quality and quantity of universities, the number of STEM graduates and the number of researchers.

“While having the best and brightest minds has always been important, human capital is increasingly vital to innovation. In many cases, today’s innovators and entrepreneurs can disrupt whole industries with nothing more than an education and a laptop,” the authors say.

The UK, for instance, is second behind New Zealand in terms of the number of STEM graduates per 1,000 citizens, with this having a signifcant impact on the innovative output of the nation. We also came first in terms of the percentage of graduates in STEM fields.

Couple this with the 2nd best performance in the university rankings, which the authors compiled using the Times Higher Education World University Rankings, and it’s easy to see why the UK scores so well for human capital.

An area most nations could improve upon is in the government support afforded to early stage research.  As a recent MIT report highlighted, basic research often provides crucial stepping stones upon which commercial innovation can be built, so it’s important that the government supports this vital endeavour.

Greasing the wheels

The report goes on to echo what the NCUB’s Changing State of Knowledge Exchange report said recently about the challenges in taking this initial research to market.  It highlights particular American strength in knowledge transfer as a result of their Bayh-Dole act, which ensures universities retain the IP for their research rather than the government agency that paid for the work.  This has been hailed as the finest piece of legislation in recent American history, and a number of countries around the world have implemented identical or similar policies.

Central to this flow of knowledge are the National Innovation Foundations that have sprung up in dozens of countries around the world, and represented by NESTA here in the UK.

Overall the report is a valuable addition to the innovation literature as it considers innovation in a global context, in much the same way that trade discussions are discussed in a similar way, which is an important mental hurdle to overcome.

“the global framing of innovation policy is actually significantly worse than the framing of trade. There is a consensus that trade benefits all nations; however, for innovation, there is a growing perspective—especially pronounced in international organizations—that innovation is zero-sum, with innovation success in advanced countries coming at the expense of developing nations,” the authors say.

With innovation increasingly appreciated as a key driver of growth, the report provides a valuable addition to further out understanding of what contributes, and indeed detracts from, good innovation.