Global Scorecard. Innovation Barometer

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1 Innovation Barometer Global Scorecard As part of this year s Global Innovation Barometer, GE s Global Market Intelligence team created a scoring model to rank 50 countries on certain factors inherent to their specific government, business and educational environments that impact the level of innovation within each country. We named it GE s Global Innovation Scorecard. The Innovation Scorecard has five pillars, and five factors within each pillar. Each country is ranked by each factor and an average score is created for each pillar. Countries are then placed into one of an upper, lower, or two middle quartiles for each pillar and for an overall score. The countries that fall into the top quartile are considered leaders in laying out the kind of environment necessary to promote innovation. Top Quartile Countries Innovation Scorecard United Kingdom United States The first two pillars are government related. The first based on how strict of a regulatory environment is in place, the second on how the government promotes and invests in programs that could foster innovation. The next two pillars are focused on businesses within each country. One pillar measures factors outside of a firms control what types of capital funding are available and how accessible are loans, among other factors. The other pillar looks at whether or not firms promote an innovative environment within their own walls. The fifth and final pillar looks at the level and quality of training and education within each country. Key Findings A heavy tax burden does not always impede innovation. Six countries that fell in the top quartile in the overall scorecard were outside of the top 20 countries for the effect and extent of tax burden category. Those countries are,,,, the United States and United Kingdom. Top countries do not depend on their governments to supply the latest technological advances. Looking at government procurement of advanced technology and availability of latest technology, several countries that rank highly in the overall scorecard rank higher in availability of tech than they do in ranking the government procurement of tech. Places like, the United Kingdom, the and achieve innovation by having their businesses do more than the governments in bringing in the latest technology. 1 Innovation Barometer: Global Scorecard 1

2 Foreign Direct Investment as a percent of GDP is highest in many countries that do not perform well overall on GE s Innovation Scorecard.,,,, all fall into the top quartile for this factor but overall are in the bottom half of the rankings. Obviously a major reason for this is that countries with large overall economies would require a greater amount of FDI to impact the percentage of GDP. Also, larger economies have a higher percentage of domestic investment supporting their growth. But investors should do a better job of identifying countries that do more to promote innovation for their capital plays. Marketing is a key factor in successful innovation. Having the capacity to innovate within a country is just part of the equation. Once a new product is created it needs effective messaging, branding and strategic planning to bring it to market. Top scorecard countries like the US, and also rank in the top quartile for extent of marketing. Having a top math and science education is not essential to fostering an innovative environment. This plays into the Innovation Barometer finding that process innovation is taking precedence over costly and time consuming new product innovation. Managing business and operational change could be factors playing a larger role than engineering in the current economic environment. Top scorecard countries like the United States, United Kingdom, and fall outside of the top 20 for quality of math and science education. 2 Innovation Barometer: Global Scorecard 2

3 Factor Definitions and Rankings Pillar 1 Government Regulatory Intellectual Property Protection World Economic Forum Global Competitiveness Report, Weighted Average Ranking. How would you rate intellectual property protection, including anti-counterfeiting measures, in your country? Without sufficient regulation in place to protect intellectual property, domestic businesses and thinkers will look over borders to innovate. Foreign firms are more likely to invest capital or position staff within countries where their intellectual property is safe. Top Quartile - IP Protection Bottom Quartile - IP Protection Mexico Burden of Government Regulation - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. How burdensome is it for businesses in your country to comply with governmental administrative requirements (e.g., permits, regulations, reporting)? An overabundance of regulations could hinder innovation domestically by creating the appearance of too much government involvement. For foreign firms, burdensome regulation means additional costs of doing business when they consider expansion into new markets. Burden of Govt. Regs. Top Quartile Burden of Govt. Regs. Bottom Qtl Brazil Czech Republic 3 Innovation Barometer: Global Scorecard 3

4 Transparency of Government Policymaking - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. How easy is it for businesses in your country to obtain information about changes in government policies and regulations affecting their activities? Critically important for foreign firms looking to do business across borders. Without a strong history of transparency, the potential for foreign firms to innovate and grow becomes more risky and less likely. Top Quartile - Transparency Bottom Quartile - Transparency Czech Ethical Behavior of Firms - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. How would you compare the corporate ethics (ethical behavior in interactions with public officials, politicians, and other enterprises) of firms in your country with those of other countries in the world? Corporate ethics plays greatly into partnerships, a key finding in this year s Innovation Barometer. With firms looking to fill their talent and capability gaps by teaming with other firms, the knowledge that partners conduct business ethically allow for greater collaboration. Top Quartile - Ethical Behavior Australia Bottom Quartile - Ethical Behavior Czech 4 Innovation Barometer: Global Scorecard 4

5 Extent and Effect of Taxation - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. What impact does the level of taxes in your country have on incentives to work or invest? Favorable taxation includes policies that provide incentives for research and development and for training and development of the existing labor force while also keeping the total corporate tax rate competitive with other industrial nations. Top Quartile - Tax Burden Bottom Quartile - Tax Burden Brazil Pillar 2 Government Environment Quality of Overall Infrastructure - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. How would you assess general infrastructure (e.g., transport, telephony, and energy) in your country? A strong infrastructure allows products to get to market, both for domestic consumption and to ports for exporting. Technology infrastructure is essential for global connectivity and to succeed in bringing in foreign investment. Top Quartile - Infrastructure Bottom Quartile - Infrastructure Algeria Brazil 5 Innovation Barometer: Global Scorecard 5

6 Government Procurement of Advanced Technology - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. Do government procurement decisions foster technological innovation in your country? The government needs to take an active role in supplying innovators with technology. Without a healthy process for providing innovators with products they need, they will take their ideas across borders. Top Quartile - Govt. Tech Pcmnt Bottom Quartile - Govt. Tech Pcmnt Czech Availability of Latest Technologies - World Economic Forum Global Competitiveness Report, To what extent are the latest technologies available in your country? It is not only important for governments to procure technology, but to drive innovation, they need to bring in the latest technologies and ensure that these technologies are available to the innovators within their borders. Top Quartile - Tech Availability Bottom Quartile - Tech Availability 6 Innovation Barometer: Global Scorecard 6

7 Resident Patents per 1000 Working Age Population World Development Indicators, UN Population Statistics, Haver Analytics, GE Global Market Intelligence While governments need to ensure that the patent process is accessible and not cumbersome, business and individual innovators need to prove to the global marketplace that ideas are flowing. This will promote direct investment. Top Quartile - Patents Bottom Quartile - Patents Brazil India Mexico High Tech Exports as a % of Total Manufacturing Exports World Development Indicators Ranking, Haver Analytics, GE Global Market Intelligence While exporting is key to current account balances and commodities, agricultural, and natural resource exports drive certain economies, exporting technology is proof of innovation within a country. Top Quartile - High Tech Exports Bottom Quartile - High Tech Exports Spain 7 Innovation Barometer: Global Scorecard 7

8 Pillar 3 Business External Factors Venture Capital Availability - World Economic Forum Global Competitiveness Report, In your country, how easy is it for entrepreneurs with innovative but risky projects to find venture capital? Capital funding can come from banks or from private investors. The availability of capital within a country is a key factor in determining whether or not innovations make it to market. Ease of Access to Loans - World Economic Forum Global Competitiveness Report, How easy is it to obtain a bank loan in your country with only a good business plan and no collateral? Capital funding is key to innovation, and if credit markets are tight or bank regulations prevent innovators from accessing capital, those innovators will look outside their borders for funding. Top Quartile - Access to Loans Bottom Quartile - Access to Loans Spain FDI and Technology Transfer - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. To what extent does foreign direct investment (FDI) bring new technology into your country? Though governments and firms can bring technology into a country and share it with other firms and innovators, another key factor is seeing what technology is brought in and able to be shared through foreign investment. Top Quartile - FDI Tech Transfer Czech Mexico Bottom Quartile - FDI Tech Transfer 8 Innovation Barometer: Global Scorecard 8

9 University Industry Collaboration in R&D - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. To what extent do business and universities collaborate on research and development (R&D) in your country? Often the best thinkers and innovators are found on campuses. Further, in the fast paced corporate world, it often is beneficial to get a more academic view of innovations within in company. Top Quartile - Univ-Biz Colab Australia Bottom Quartile - Univ-Biz Colab Foreign Direct Investment, Net Inflows as % of GDP Ranking. World Development Indicators, Haver Analytics, GE Global Market Intelligence Investment within a country of foreign capital signifies a strong government regulatory environment and tax structure, the availability of trustworthy firms to partner with and the availability of a qualified labor force. Top Quartile for FDI Bottom Quartile for FDI India 9 Innovation Barometer: Global Scorecard 9

10 Pillar 4 Business- Internal Factors Firm Level Technology Absorption - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. To what extent do businesses in your country absorb new technology? Governments can assist in providing access to technology and foreign investors can insure technologies make their way into new markets, but firms need to be active in adopting available technology and utilizing these advancements for further innovation Top Quartile - Tech Absorption Bottom Quartile - Tech Absorption Capacity for Innovation - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. In your country, how do companies obtain technology? [Low Ranking: exclusively from licensing or imitating foreign companies; High Ranking: by conducting formal research and pioneering their own new products and processes] Pioneering new products and processes versus licensing or copying them from foreign firms indicates a higher level of innovators and a willingness of firms and governments to promote innovation. Top Quartile - Innovation Cap. Bottom Quartile - Innovation Cap. Mexico 10 Innovation Barometer: Global Scorecard 10

11 Production Process Sophistication - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. In your country, how sophisticated are production processes? While sophisticated production processes in themselves are evidence of innovation, they also provide a platform for process innovations, a trend that was exemplified in the results of this year s Innovation Barometer Top Quartile Prod. Process Bottom Quartile Prod. Process Extent of Marketing - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. In your country, to what extent do companies use sophisticated marketing tools and techniques? Once innovations are borne, it is essential for these products or processes to be promoted in order to find a viable marketplace. Top Quartile - Marketing Bottom Quartile - Marketing 11 Innovation Barometer: Global Scorecard 11

12 Company Spending on R&D - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. To what extent do companies in your country spend on R&D? Governments can do their part to promote innovation, and individual innovators can access capital and investment to push their ideas forward, but companies will be challenged to successfully innovate without dedication to invest in research and development. Top Quartile - R&D Spend Bottom Quartile - R&D Spend Pillar 5 Education & Training Quality of Math & Science Education - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. How would you assess the quality of math and science education in your country s schools? The quality of math and science education throughout schooling is essential to foster the growth of innovators. Top Quartile - Math & Science Australia Bottom Quartile - Math & Science Brazil Mexico Spain 12 Innovation Barometer: Global Scorecard 12

13 Quality of Management School - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. How would you assess the quality of management or business schools in your country? Having a strong stable of domestic management schools not only helps future business leaders with real world business skills needed to promote ideas, but prevents skilled students from seeking education elsewhere and potentially not returning to their home turf. Top Quartile - Mgmt School Spain Bottom Quartile - Mgmt Schools Czech Quality of Scientific Research Institutions - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. How would you assess the quality of scientific research institutions in your country? Once education is completed, it is essential that the dedication to new ideas, technology and innovation continue. Nations with public and/or private research institutions have an advantage over those that don t have the ability to incubate new thinking. Top Quartile - Research Inst. Australia Bottom Quartile - Research Inst. 13 Innovation Barometer: Global Scorecard 13

14 Availability of Scientists and Engineers - World Economic Forum Global Competitiveness Report, Weighted Average Ranking. To what extent are scientists and engineers available in your country? Primary and management schooling, job opportunities and rule of law are all essential factors in growing, and more importantly, keeping talented scientists and engineers. Top Quartile - Scientists/Engrs India Bottom Quartile -Scientists/Engrs Brazil Mexico Fixed Broadband Internet Subscriptions - World Economic Forum Global Competitiveness Report, Ranking, 2011 or most recent year available. Fixed broadband Internet subscriptions per 100 population The ability to access the latest technology quickly, to market new innovations globally, and the access to innovators, thinkers and ideacreators across the globe are essential for a country to succeed as innovative. Top Quartile - Broadband Bottom Quartile - Broadband India 14 Innovation Barometer: Global Scorecard 14

15 List of Countries Measured: Algeria Australia Brazil Czech India Mexico Pakistan Spain Venezuela 15 Innovation Barometer: Global Scorecard 15