Out-Law / Your Daily Need-To-Know

‘Innovators and entrepreneurs are key to economic growth’, says report

Out-Law News | 23 Jul 2014 | 5:26 pm | 2 min. read

Companies’ investments in research and development (R&D) “dropped significantly” in 2009 in the wake of the global financial crisis, but were “efficiently mitigated” by public R&D investments in world economies over the following three years, according to a new report.

The latest edition of the annual Global Innovation Index (GII), said economic growth is now “more balanced across emerging markets and high-income countries and the confidence of the private sector and investors, although still fragile, is generally on the rise”.

The report, released jointly by the World Intellectual Property Organization, Cornell University, and INSEAD, said that while “risks remain, the possibility of a major setback to the recovery is diminished... but the importance of innovation and entrepreneurship cannot be over-emphasised”.

“GII shows that better educated citizens are more successful in higher-income economies in leveraging the favourable contexts for driving innovation,” the report said. “As countries move up the scale of innovation sophistication, the quality of (their) talents in science, engineering, but also in business and management become even more critical.”

GII is an annual ranking of countries according to their potential for R&D. European countries maintained their position at the top of the rankings list, but the report noted that sub-Saharan Africa is also “showing signs” of emerging as a focus of innovation.

GII 2014 surveyed 143 world economies using 81 indicators to gauge both their “innovation capabilities and measurable results”. Switzerland remained in first place for the fourth consecutive year. The UK moved up one to second place with Sweden third.

The report said that the top 25 GII countries “consistently score high in most indicators and have strengths in areas such as innovation infrastructure”, including information and communication technologies and business sophistication.

According to the report: “The recovery of business R&D spending in 2010 was quick, reaching 3% growth at the global level and, although data is still incomplete, 4.5% in 2011. In high-income countries of the Organisation for Economic Co-operation and Development business R&D grew by 0.6% in 2010 and 4.8% in 2011, but it slowed again in 2012, reaching only 3.6% in that year.”

However, the report said an overall fall in the growth of public R&D support coupled with the “continued hesitancy of company R&D expenditures “seems to be leading to slower overall growth of total R&D expenditures worldwide”. The report said this is the case especially in high-income countries. “In many advanced countries, fiscal consolidation also seems to have negatively affected public spending on education since 2010.”

The report said that while governments “effectively included a significant number of future innovation-related growth projects in stimulus packages in 2009, support for such efforts seems to have lost momentum in some countries”.

The majority of countries for which data is available “continue to show positive R&D expenditure growth in 2013 and 2014”, the report said. However, “strong R&D spending growth in 2013 and 2014 is expected to take place mostly in Asia, in particular in China, South Korea, and India”.

INSEAD’s executive director for global indices Bruno Lanvin, a co-author of the report, said: “As innovation becomes a global game, a growing number of emerging economies are confronted with complex issues whereby ‘brain gain’ can only be generated through a delicate balance between talents outflows, such as citizens seeking an education abroad, and inflows, whereby high performers return home to innovate and create local jobs, and diasporas contribute to national competitiveness. Around the world, we see encouraging signs that this is happening.”