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TechTank

Why do we fail to measure the most innovative countries?

There is a clear correlation between innovation and economic growth, which is why a number of performance indices measure the overall innovation of a country or state. However, developing innovative solutions and applying them to boost the economy are two completely different things. Academic research focuses on developing new solutions that might be of value, but are not necessarily applicable. Publishing scientific papers boosts the profile of a researcher or university, but innovation is worth very little unless commercialized to provide societal and economic growth.

Author

Existing measures of innovation

There are three main indices used to measure innovation. The most prestigious innovation index is the Global Innovation Index, produced annually by INSEAD and the World Intellectual Property Organization. The second most important is the International Innovation Index, produced jointly by the Boston Consulting Group, the National Association of Manufacturers, and the Manufacturing Institute. Finally, the Bloomberg Innovation Index and the World Economic Forum’s Global Competitiveness Report both look at innovation among other criteria. There are also a myriad of other global, local and national innovation indices, but most of them fail to identify accurately the most innovative countries.

Most of these multi-parameter innovation indices recognize scientific publications and patents. These indices count the overall innovation performance of an organization or a country, including patents or papers that never find a commercial use. Researchers and scientist might be excellent in their respective field of science, but many lack the business skills required to push their inventions further. The lack of business skills prevents commercialization and innovation, as does a lack of funding to start a business.

History shows us a number of examples of extremely successful inventions that stalled as an idea or prototype for years. A great example is Gregor Mendel’s experiments in genetics, work that remained obscure until its rediscovery 16 years after his death.

Start-ups and invention disclosures

Instead of complex, multi-parameter models and indices, I propose an extremely simple yet accurate way to measure innovation: the profitable implementation of ideas. After compiling a number of national innovation and commercialization reports innovation and commercialization reports[i], I calculated the ratio of start-ups or spin-off companies formed to the number of invention disclosures in a specific year. The ratio rewards countries that convert invention disclosures into commercial enterprises.

Certain reports measure innovation performance by comparing a number of patent licenses to a number of spin-off companies. Rather than number of patents licensed, invention disclosures more closely estimate the number of overall ideas produced. However, not all inventions reach the invention disclosure stage, so the real commercialization performance might be much lower than reported.

Used independently, start-ups and invention disclosures depend on a number of other factors, such as the amount of research funding available in a specific year. However, relating these two parameters gives the resulting indication independence from other external factors and annual fluctuations.

Results

Low innovation performance numbers indicate that countries are inefficient in terms of commercialization and product development. Data collected in the last few years show that research commercialization in Switzerland is rapidly increasing at around 0.48 percent annually. A similar trend can be seen in Israel and Europe with a sustainable annual increase of 0.26 percent and 0.09 percent, respectively. Europe is continuing to strengthen its already strong position (8.11 percent). More research commercialization can also be seen in the U.S. and Canada. Based on the statistics, Israel rightfully earns its nickname ‘Startup Nation’. Australia, often listed as one of the leaders in innovation by numerous reports, has steadily decreased for a number of years at a rate of 0.2 percent a year. Considering already low innovation performance in Australia (2.27 percent), this annual decrease rate is worrying.

There are of course several issues with proposed index, i.e. one invention disclosure can result in several companies based on the same intellectual property, or one company can be founded upon more than one invention disclosure. There is also an obvious issue with timing. Many start-ups and spin-offs are established months or even years past invention disclosure. However, based on our own experience from countries listed, derived numbers closely estimate the innovation effect on the economy.

Switzerland is often listed as the most innovative nation, and the numbers confirm it. As someone who has lived and worked in innovation in many of the countries listed above, I believe that the numbers are quite real and closely reflect the real situation. I can especially relate to Australia, which is highly positioned in innovation indices, but in reality lags behind on commercialization and innovation. The current state of innovation in many countries is worrying. Governments and grant funding bodies should rethink their policies and encourage research organizations to focus more on commercialization, innovation, and product development.


[i] Data presented in the article has been derived from AUTM U.S. and Canadian Licensing Activity Surveys, AUTM Statistics Access for Tech Transfer (STATT) Database, UK Higher Education – Business Community Interaction Survey, National Survey of Research Commercialisation in Australia, swiTT – Swiss Technology Transfer Association report, the ProTon Europe Annual Survey Reports, ASTP-Proton Survey Reports, Public Research Commercialization Survey by Danish Agency for Science, Technology and Innovation, Israel Survey of Commercialization Companies by  Israel Central Bureau Statistics, Commercialising Public Research – New Trends and Strategies by OECD.

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