Sunday, 1 September 2013

WIPO (and others) Release Global Innovation Index—A Wealth of Interesting Information

The World Intellectual Property Organization, Cornell University and INSEAD released the 417 page Global Innovation Index (Report) recently (here).  The Report attempts to measure and evaluate innovation by country and includes discussions concerning regional hubs, innovation clusters and enterprise champions.  The Report also includes specific country data reports on innovation as well as various data rankings such as YouTube video uploads, National Feature Films Produced, Royalties and License Fee Receipts, Daily Newspaper Circulation, Venture Capital Deals, Expenditure on Education, Press Freedom, Scientific and Technical Publications and Wikipedia edits by country (and so much more).  The press release for the Report states: “Despite the economic crisis, innovation is alive and well. Research and development spending levels are surpassing 2008 levels in most countries and successful local hubs are thriving. A group of dynamic middle- and low-income countries – including China, Costa Rica, India, and Senegal - are outpacing their peers, but haven’t broken into the top of the GII 2013 leader board.”  The top ten countries are:

  1. Switzerland (Number 1 in 2012)
  2. Sweden (2)
  3. United Kingdom (5)
  4. Netherlands (6)
  5. United States of America (10)
  6. Finland (4)
  7. Hong Kong (China) (8)
  8. Singapore (3)
  9. Denmark (7)
  10. Ireland (9)

While the United States of America moved up from 10 to 5 this year compared to 2012 and Singapore dropped from 3 to 8, the Report notes that the criteria for ranking changed this year and that:

Singapore and the United States of America (USA) would have kept their 2012 rankings (3rd and 10th, respectively) had we kept the 2012 framework unchanged while updating the database; Singapore drops five spots and the USA gains five as a result of adjustments to the framework in 2013.

The changes are noted in Table 1 on page 50 with discussion on following pages. 

In discussing research and development expenditures, the press release paints an upbeat picture:

“On the research and development (R&D) front, GII 2013 brings a dose of cautious optimism: despite adversity and tightened budget policies, R&D expenditures have grown since 2010. On the business front, the R&D expenditures of top 1,000 R&D spending companies have grown between 9 and 10 % in 2010 and 2011. A similar pattern has been observed in 2012.

A most remarkable characteristic of that trend is that emerging markets have increased their R&D faster than high-income countries. Over the last five years, China, Argentina, Brazil, Poland, India, Russia, Turkey and South Africa (in that order) have been at the forefront of this phenomenon. Emerging markets, and notably China, are also largely driving the growth in patent filings worldwide.

“Growing research and development investments and the rising number of intellectual property patents filed are tangible examples of a growing commitment to innovation,” said Mr. Li Yingtao, Head of Huawei’s 2012 R&D laboratories. “In the global economy, innovation from anywhere can drive change and create new opportunities everywhere. Everyone concerned with innovation as a catalyst for economic and social development needs to remain focused on how the value of innovation is to transform industries, businesses and people’s lives, not just locally but across the world.”

In examining the BRIC countries compared to the rise of other “emerging middle-income nations”, the Report states that:

The BRICs have experienced a relative stagnation or mostly a drop in innovation ranks in 2013 as compared to 2012, repeating the experience of last year (2011 to 2012): China (35th; a decrease of one spot from 2012 and six from 2011), the Russian Federation (62nd; a decrease of 11 positions from 2012 and six from 2011), Brazil (64th; a decrease of six spots from 2012 and 17 from 2011), and India (66th; a decrease of two positions from 2012 and four from 2011). In this context, other emerging middle-income nations are increasing their innovation ranks rapidly: Mexico (63rd; an increase of 16 positions from 2012 and 18 from 2011), Indonesia (85th; an increase of 15 from 2012 and 14 from 2011), and others (the Plurinational State of Bolivia, Cambodia, Costa Rica, Ecuador, Uganda, and Uruguay) all increased their rankings by more than 15 positions this year . . . .

As a big fan of “The Land of Enchantment” (a truly special place), I was pleased to find that:

Top world R&D investing countries host top world R&D investing regions. The top region for R&D in the OECD is New Mexico (United States of America, or USA). This state devotes more than 7% of its GDP to R&D, followed by Massachusetts (USA), which invests slightly less than 7% of its GDP in R&D.

And, as a resident of California, it was nice to hear that inventors in the state are collaborative folks with strong networks:

The regions that invest the most in R&D and account for most of the world’s patent applications adopt different innovation modes. In fact, some rely more on networks than others. For instance, the propensity to carry out research with multiple inventors located in different regions varies across sectors and countries. The possibility that inventors located in one region may collaborate with others located elsewhere is shaped by several factors, including the institutional environment of the countries involved. In general, however, collaborations are increasingly important for innovation. In the telecommunication sector, the share of patents with at least two co-inventors located in two different regions increased from 7.9% in the late1970s to 16.2% in 2005–07. In this sector, California performs like a star; the share of patents applied for by residents of California with at least one co-inventor located in another region, in the USA or abroad, is around 24%, but the region has the world’s widest network in terms of the geographic location of partners.

For the patent focused folks, there are PCT patent application rankings by region within specific countries on page 95.  The top five are Southern Kanto in Japan, California in the United States, Capitol Region in South Korea, Kinki in Japan, and Guangdong in China.

The Report also notes the relationship between public policy and the growth of a technology hub by examining Huawaei’s development in depth:

 In 1980, Shenzhen was a small fishing village on the Chinese mainland close to Hong Kong (China). To fuel the growth of the city, public policies were enacted to ease the movement of talent, expertise, and investment into the area, both from across China and from over seas. International corporations were encouraged to invest and create operations in Shenzhen. Policies supported the construction of public and private infra- structure, from business parks and transportation and communication links to hotels and residential developments. The city’s population has grown from 20,000 to 15.5 mil- lion people in just over 30 years; Shenzhen is thriving as a high-technology innovation cluster and sup- porting markets around the world.3 Huawei was established in Shenzhen in 1987 as a sales company, reselling technology developed by a third party.

The Report discusses the importance of intellectual property rights to Huawei:

The idea that innovation is a fundamental input to socioeconomic development is a strong belief held within the corporate culture of any successful innovative company. Commercial companies that invest significantly in R&D do so on the basis that their innovation will have the opportunity to earn a return on those investments. Without a return on innovation, the ability to continually innovate diminishes. This ability requires that IPRs be both respected and protected. This is a key factor in establishing a culture of innovation and achieving scale.8 As an example, Huawei has entered into numerous cross-licensing agreements with industry peers since 2002 and has paid a large amount in patent licensing fees to use third-party intellectual property. In 2012 alone, Huawei paid some US$300 million in patent licensing fees. Huawei also licenses its own intel- lectual property. In fact, Huawei is one of the leading IPR holders in the ICT industry. By December 2012, Huawei had filed 41,948 patent applications in China, 12,453 inter- national Patent Cooperation Treaty patent applications, and 14,494 patent applications outside China.

Huawei attaches greater importance to the commercial value and quality of its IPRs than to their actual quantity, however. Huawei takes the lead in holding patents in such technical fields as long-term evolution, next-generation wireless communications technology, fibre- to-the-home networks, optical transport networks, and the G.711.1 audio standard on fixed broadband networks worldwide. Huawei strategically maintains its patent application level at 3,000 to 4,000 applications annually.

The Report includes other specific case studies concerning Uruguay, India, Tunisia, and Morocco.  On page 327 on the Report, there is a ranking of University and Industry Collaboration by country.  The top ten include: Switzerland, United Kingdom, United States, Finland, Singapore, Belgium, Sweden, Israel, Qatar, and the Netherlands (with Germany at 11) (in response to a survey question).  Enjoy!


Neil said...

Nice summary, Mike, but I am not sure what is the "take away" from these data. For instance, what do we do with the fact that Israel probably has more listed companies on NASDAQ as a function of the size of the country? Might not such a data point be just as relevant as those examined in the study?

Mike Mireles said...

Great points, Neil! I take the report as painting a pretty good picture of innovation across countries and the take away depends on your perspective. A policy maker in Israel may be concerned by their relative ranking and use the report to ascertain the specific "weak" spot supposedly measured by the report--which she may ultimately discount. The report also provides some decent information for business development and perhaps investment. Generally, I think, the information collected and digested is helpful, particularly if you have an interest in building innovation capabilities. Best, Mike

Suleman Ali said...

The Rankings are of course only a small part of the report. I think what must be realised is that we are in the process of understanding innovation and how to promote it at a national level. The report essentially brings together data and ideas of what nations are doing right to improve innovation in their context, which should provide lessons for everyone.