Table of ContentsForeword: The World Needs Open Innovation v Chapter 2: Innovation in Latin America: 65By Ben Verwaayen, Chief Executive Officer, Alcatel-Lucent Recent Insights By Lourdes Casanova, INSEAD Strategy Department; Jeff Dayton-Johnson,Foreword: Innovation: Increasingly Global, vii Organisation for Economic Co-operation and Development; Nils OlayaIncreasingly Vital Fonstad, INSEAD; and Anna Pietikäinen, Organisation for EconomicBy Shumeet Banerji, Chief Executive Officer, Booz & Company Co-operation and DevelopmentForeword: Innovation, Developing Markets, ix Chapter 3: Innovation in India: 77and the Role of the Global Innovation Index Affordable InnovationsBy Chandrajit Banerjee, Director General, Confederation of By Manisha G. Singh, Council of Scientific and Industrial Research; AnurajIndian Industry Gambhir, Xpert Media; and Jibak Dasgupta, Confederation of Indian IndustryForeword: Why Innovation Is Important xiBy Francis Gurry, Director General, World Intellectual Chapter 4: Making Cities Smart and Sustainable 87Property Organization By Kurt W. Steinert, Revital Marom, Philippe Richard, Baspar Veiga, and Louis Witters, Alcatel-LucentPreface: The Global Innovation Index Is a xiiiCollaborative Effort Chapter 5: The Global Footprint of Innovation 97Soumitra Dutta, INSEAD By Barry Jaruzelski, Chadi Moujaes, and Hatem Samman, Booz & CompanyAdvisory Board to the Global Innovation Index xv Chapter 6: Accounting for Creativity in 107 Innovation: What We Should Be Measuring and Related Difficulties Rankings By Sacha Wunsch-Vincent, World Intellectual Property OrganizationGlobal Innovation Index 2011 Rankings xviii Appendices Chapters Appendix I: Country/Economy Profiles 117Chapter 1: Measuring Innovation Potential 3and Results: The Best Performing Economies Appendix II: Data Tables 247By Soumitra Dutta and Daniela Benavente, INSEAD Appendix III: Sources and Definitions 333 Appendix: Statistical tests on the 57 Global Innovation Index Appendix IV: Technical Notes 347 By Michaela Saisana, European Commission Joint Research Centre Appendix V: About the Authors 353
FOREWORD vThe World Needs Open Innovation ForewordsInnovation has always been an important element in the There are initiatives underway that are applying thisrelative success of societies—economically, intellectually, model of open innovation to specific global challenges.and socially. And as we move from a world of indepen- One example I like to highlight is the GreenTouch™dent, lightly linked societies to one of inclusion with a Consortium, a group that is drawing on the expertise oflarger, more deeply interconnected global community, companies and organizations from all sectors of the infor-innovation is more critical than ever. mation and communication technologies (ICT) industry What is the role of innovation in transforming a and academia to dramatically reduce energy consump-society? How does this transformation happen? It is one tion in ICT networks, a significant contributor to globalthing to have a great idea—it is another to bring it to life. climate change. Together, these varied and often compet-For innovation to thrive you need an ecosystem that can ing organizations are working together to pioneer thetransform an idea into something truly meaningful. new technologies on which energy efficient networks of This important work that you have in your hands, the future will depend. These are not merely incremen-the Global Innovation Index, explores the transformative tal improvements, but disruptive technologies that willpower of innovation. Significantly, it identifies the con- change the nature of networks forever.ditions and qualities that allow innovation to thrive, and I am convinced that this same model, where com-highlights the role innovation can play in a nation’s eco- mercial concerns and self-interest are set aside for thenomic and social development. greater good, can and must be applied to the great chal- But there is another, even deeper question we need lenges of our time, from the management of rapid urban-to ask ourselves:What is the role of innovation in address- ization (which we address in this report) to connectinging the great challenges that confront humanity? the underserved populations of the world and to the We are at a very exciting time in history, a pivot- establishment of a more sustainable way of life across theal time, and the global community faces some daunt- board.ing challenges. The planet is getting hotter. Cities are The Global Innovation Index is laying the foundationexpanding at an astounding rate, creating a difficult envi- for a global conversation of the role of innovation inronment for the delivery of basic services such as health addressing these challenges. By bringing together diversecare, public safety, and education. At the same time, while parties to explore how innovation is being applied aroundthe world becomes more connected—there are more cell the world, and what conditions make for successful inno-phones today than there are people—large segments of vation, it is making an essential contribution to the pro-the global community remain completely cut off from motion of open innovation as a basic operating principalthe world of commerce, communication, and informa- for the global community.tion that has become so critical to the establishment ofhealthy economies and prosperous people. Ben Verwaayen Chief Executive Officer As importantly, these changes cannot be incremen- THE GLOBAL INNOVATION INDEX 2011 Alcatel-Lucenttal—the solutions to our most daunting challenges willrequire bold, creative leaps. These challenges require newthinking, new technology, and new ways of collaborat-ing—an open innovation approach to solving problemsthat is based on partnerships among industries, compa-nies, national and regional governments, and researchorganizations and academia.
FOREWORD viiInnovation: Increasingly Global, Increasingly Vital ForewordsBooz & Company is honoured to contribute to The by developing their talent base, introducing or enforc-Global Innovation Index 2011 and to continue to sup- ing laws that protect intellectual property, and improvingport businesses and governments throughout the world corporate governance.in their pursuit of innovation. In the six years that our At Booz & Company, we believe in the transfor-firm has published the annual Global Innovation 1000 mative nature of innovation. We believe that new ideasstudy, which tracks the companies that spend the most can be a catalyst for change at all levels of society. Andon research and development worldwide, we have gained we believe that institutions—public and private—have asignificant insight into the nature of innovation in terms mandate to create environments in which innovation willof the relationship between innovation and performance, flourish. In doing so, they are incubating the next stage ofthe effect of the recession on innovation spending, and the world’s economic advancement.ways that innovative companies are consistently able tooutperform their peers. Shumeet Banerji Chief Executive Officer We have also seen that innovation will be one of the Booz & Companymost crucial elements in the continuing advancement ofbusinesses and governments worldwide. The world hasreached an inflection point in the evolution of innova-tion: Whereas economic advantage during the IndustrialRevolution relied largely on natural resources, nationaldevelopment in the Digital Age depends on smart, ambi-tious individuals—who can be found anywhere. No sin-gle person, society, company, or nation has a monopolyon innovation, information, and knowledge. That fact is reflected in the increasingly global natureof innovation. Multinational corporations are makinglarge investments in research and development (R&D)outside of their headquarter countries, setting up R&Dsites in low-cost emerging countries such as China andIndia to access global talent and take advantage of theirproximity to target markets. As a result, developing coun-tries are benefiting from new products and services thatbetter fit their needs, more job opportunities, new man-agement practices, and access to technology. Governments and companies alike must continueto push forward in building their capabilities in innova-tion if they are to capture and sustain competitive advan- THE GLOBAL INNOVATION INDEX 2011 tage in the coming years. Developed economies—manystill reeling from the impact of the world’s financial crisisthat began in 2008—must push forward with innova-tion strategies in order to stay ahead in critical indus-tries. At the same time, developing economies—manyof which managed to weather the storm of the financialcrisis—must actively develop an innovation environment
FOREWORD ixInnovation, Developing Markets, Forewordsand the Role of the Global Innovation IndexIt gives me great pleasure to see the flourishing part- good efforts have been made to capture these evolvingnership between the Confederation of Indian Industry economic conditions by various studies at a global level.(CII) and INSEAD on the Global Innovation Index(GII). This is the third consecutive year of the report, andthe inclusion of three other partners—Alcatel-Lucent, The GII and its importanceBooz & Company, and the World Intellectual PropertyOrganization (WIPO)—has strengthened and diversi- The Global Innovation Index (GII) is one such study,fied the team. I welcome all the partners to this initiative conducted by experts from INSEAD and its Knowledgeand hope that together we will be able to enhance our Partners to put into perspective the new trends andcontributions to the GII. practices in innovation across the world. The indexing of countries on innovation parameters will not only showcase the excellence of lead countries but also helpInnovation and developing markets in finding the gaps for the laggards. The outreach of this study, which attempts to includePeople have always attempted to fathom the unknown developing regions such as India—a country that is fastand discover new paths to knowledge. This perpetual transforming itself into an innovation-driven economy—journey has recently gained unprecedented momentum. has made it comprehensive. Because CII is the premierIn the last two or three decades the world has seen rapid industry body of India, it is associated with various inno-changes in operational efficiency, thanks to the advent of vation activities within industry and society at large; itsthe computer, the Internet, and mobile devices. To use knowledge of this region complements the GII well. Thea cliché, the world has become a global village where GII provides insight into the innovation gaps that needdistances have ceased to affect human interaction and be filled, which makes it a readily available guide forinformation exchange. national policy makers. From big metropolitan areas to remote ones, people On behalf of CII, I express my satisfaction at beingare well connected to the global market. This rapid con- associated with the GII, congratulate its wonderful team,nectivity and information flow has had a great influence and wish it all success.on developing regions, where it is reshaping the mindsetof people in remote villages and towns. People are not Chandrajit Banerjee Director Generalonly more educated today than they were a short time Confederation of Indian Industryago, but also more informed and increasingly connect-ed to the mainstream market. This phenomenon createshuge challenges and as well as opportunities for exist-ing businesses if they are to survive this massive change.It is here that the importance of ‘innovation’ becomesevident, and it is why innovation is becoming more and THE GLOBAL INNOVATION INDEX 2011 more widely discussed as a way to counter this rapidchange in the global order. As we look around and observe the whole worldembracing innovation in a time of economic downturns,shrinking markets, and shortening product lifecycles, wesee a clear shift towards the developing regions, which arethe new hotbeds of innovation and future markets. Some
FOREWORD xiWhy Innovation Is Important Forewords Dhillon PhotographicsInnovation is a central driver of economic growth, devel- To enable countries to benchmark their policies, theopment, and better jobs. It is the key that enables firms Global Innovation Index (GII) provides an integratedto successfully compete in the global marketplace, and metric based on carefully selected and weighted variables.the process by which solutions are found to social and It is the result of several years of improvement, a willing-economic challenges, from climate change to the fight ness to use official data where possible, and a desire toagainst deadly diseases. It is the source of improvements weight sub-variables in order not to penalize smaller orto the quality of our everyday life. lower-income economies. The innovation landscape has evolved significantly This undertaking is not without challenges.in recent years. First, shifts are occurring in the geog- Developing an innovation index is constrained by dataraphy of innovation. Trends in economic growth and limitations, and there is no clear understanding of whichpatterns of investment in education and research and factors interact in specific country settings and how todevelopment foster a multi-polar innovation landscape. influence innovation. Many factors—say, the number ofFirms in lower-income countries are no longer only pas- science PhDs—may not operate in an identical mannersive adopters of technologies, as enterprises from middle- across different countries.income economies have emerged on the international Nonetheless, I believe that having the GII makes aninnovation scene. The technological gap between middle- important difference in several ways: It seeks to sharpenand high-income countries has narrowed. the eye of policy makers about the importance of inno- Second, there has been increased recognition of the vation and related policies and puts a spotlight on a topiccomplexity of the journey from idea to commercial real- that is otherwise hard to grasp. It helps to create an envi-ity, leading to a broadening of our understanding of inno- ronment where innovation factors are under constantvation. Non-technological innovations—such as new re-evaluation, thus becoming a tool to assess relative posi-organizational forms, new marketing approaches, suc- tions and to refine national innovation policies. And thecessful design, and other innovations—are now acknowl- demands created by the GII are meant to foster the avail-edged as vital. Innovation capability is also the ability to ability of statistical data.exploit new and incremental technological combinations. WIPO, through developing a balanced and effectiveThird, the innovation process today is more open, collab- international intellectual property system, contributesorative, and internationalized than ever. to stimulating innovation and economic development. Importantly, in this setting, innovation-driven growth Better understanding the innovation process is thusis no longer the prerogative of high-income countries closely linked to our mission. We are therefore glad toalone. Opportunities to innovate can be tapped by all. have supported the development of the 2011 GII and I thank INSEAD, GII’s Knowledge Partners, and its emi- nent Advisory Board Members for a fruitful partnership.Why an innovation index? I hope readers find the present publication enlight- ening. Measuring innovation, identifying its main drivers,Innovation is still a blurry concept, despite the policy and fostering adequate policies is a multi-year journey. THE GLOBAL INNOVATION INDEX 2011 interest it now garners. It evades clear measurement by We at WIPO look forward to taking part in this journey.national statistical offices, especially as our understandinghas broadened and as a wider spectrum of actors—the Francis Gurry Director Generalservice sector, public entities, and philanthropies—is rec- World Intellectual Property Organization (WIPO)ognized. Even less is known about how new productsand processes come about in developing countries, howinnovation diffuses, and what its impacts are.
PREFACE xiiiThe Global Innovation Index Is a Collaborative Effort PrefaceSoumitra Dutta, INSEADAs this fourth edition of The Global Innovation Index (GII) a thorough robustness and sensitivity analysis of the GII.2011 goes to the press in the second quarter of 2011, The JRC has researched extensively on the complexitythe global economic recovery is strengthening in most of composite indicators ranking countries’ performancesparts of the world. With the global economy forecasted along policy lines. The recommendations from the JRCto grow at a rate of more than 4% in 2011, innovation is auditing report are presented in the Report and werecoming into its own as an essential element of resilience taken into account in the computation of the rankings.as economies aim to sustain their growth while creating Last but certainly not least, an Advisory Board wasnew jobs for their citizens. set up, comprising a select group of international practi- Since 2007, INSEAD eLab has been producing the tioners and experts in the realm of innovation (details onGII, recognizing the key role of innovation as a driver the following page). We are grateful for the time and sup-of economic growth and prosperity and acknowledging port provided by the Advisory Board members.the need for a broad horizontal vision of innovation that The GII, like any innovation project, is a collab-is applicable to both developed and emerging econo- orative effort. There are many others who have mademies. A key goal of the GII has been to find metrics and valuable contributions to the success of the project thisapproaches to better capture the richness of innovation in year—in particular, the support of Sacha Wunsch-Vincentsociety and go beyond the traditional measures of inno- of WIPO; Bruno Lanvin of INSEAD eLab; Anjan Das,vation such as the number of PhDs, research articles pro- Jibak Dasgupta, and Seema Gupta of CII; Chadi Moujaesduced, research centers created, patents issued, and R&D and Hatem Samman of Booz and Company; and Revitalexpenditures. Marom and Kurt Steinert of Alcatel-Lucent is gratefully In 2011, the GII Report underwent major devel- acknowledged. The excellent research and overall projectopments. It gathered key players around the project and management of Daniela Benavente for this fourth edi-strengthened the GII as a valuable benchmarking tool to tion of the GII is also gratefully acknowledged. We lookfacilitate public-private dialogue, whereby policy mak- forward to the continued input of the broader commu-ers, business leaders, and other stakeholders can evaluate nity of innovation professionals and experts to furtherprogress on a continual basis. improve the GII and to make it more useful for policy As part of this evolution, Alcatel-Lucent, Booz & making and decision makers in the public and privateCompany, the Confederation of Indian Industry (CII), sectors.and the World Intellectual Property Organization(WIPO, a specialized agency of the United Nations)joined INSEAD as Knowledge Partners in the elabora-tion of the GII. These Knowledge Partners share a com-mon belief in the growing importance of innovationfor enabling economic growth in both developed and THE GLOBAL INNOVATION INDEX 2011 emerging nations. They have provided valuable input tothe research underlying the GII, contributed analyticalchapters to the GII Report, and will participate activelyin the dissemination of results. In addition, for the 2011 edition, the Joint ResearchCentre (JRC) of the European Commission performed
ADVISORY BOARD xvAdvisory Board to the Global Innovation Index Advisory BoardIn 2011, an Advisory Board was set up to advise on the ADVISORY BOARD MEMBERSresearch underlying the Global Innovation Index (GII), Khalid S. Al-Sultangenerate synergies at its development stages, and assist Rector of King Fahad University for Petroleum & Minerals ofwith the dissemination of its messages and results. Saudi Arabia The Advisory Board is a select group of lead- Daniele Archibugiing international practitioners and experts with unique Technology Director at the Italian National Research Councilknowledge and skills in the realm of innovation. Its (CNR) and Professor of Innovation at the University of Londonmembers, while coming from diverse geographical and Irina Bokovainstitutional backgrounds (international organizations, Director General of the United Nations Educational, Scientificthe public sector, non-governmental organizations, busi- and Cultural Organization (UNESCO)ness, and academia), participate in their personal capacity. We are grateful for the time and support provided by Leonid Gokhbergthe Advisory Board members. First Vice-Rector of the Higher School of Economics of Russia and Director of the Institute for Statistical Studies and Economics of Knowledge Rolf-Dieter Heuer Director General of the European Organization for Nuclear Research (CERN) Rolf Lehming Director, Science & Engineering Indicators, US National Science Foundation R. A. Mashelkar CSIR Bhatnagar Fellow & President, Global Research Alliance, National Chemical Laboratory Lynn St Amour President and CEO of the Internet Society Hamadoun Touré Secretary General of the United Nations International Telecommunication Union (ITU) THE GLOBAL INNOVATION INDEX 2011
Chapter 1 3Measuring Innovation Potential and Results: The Best Performing Economies 1: Measuring Innovation Potential and ResultsSoumitra Dutta and Daniela Benavente, INSEADThe Global Innovation Index (GII) for innovation over the last several in size, population, and stage of eco-project was launched by INSEAD years. The GII builds on these prior nomic development.in 2007 with the simple goal of approaches and attempts to incor- As a sign of the increasingdetermining how to find metrics porate new perspectives on both validation and importance of theand approaches to better capture traditional and emerging views of GII project, four key Knowledgethe richness of innovation in soci- innovation. Many aspects of inno- Partners have contributed toety and go beyond such traditional vation, such as those in the informal the project this year: Alcatel-measures of innovation as the num- economy, remain hard to identify Lucent, Booz & Company, theber of PhDs, the number of research and harder to measure with objec- Confederation of Indian Industryarticles produced, the research cen- tive metrics. The GII innovation (CII),2 and the World Intellectualtres created, the patents issued, and model, described in further detail Property Organization (WIPO, aresearch and development (R&D) in this chapter, takes several impor- specialized agency of the Unitedexpenditures. tant steps in this direction, but feed- Nations). Each of these partners There were several motiva- back from experts and practitioners shares a common vision of thetions for setting this goal. First, allows the model to continue to importance of a broader notion ofinnovation is important for driv- evolve. innovation in our world today. Theing economic progress and com- An ambition of the GII has GII project has benefited from thepetitiveness—both for developed been to maximize the number of knowledge and input of these part-and developing economies. Many economies evaluated in the study. ners, and contributions from othergovernments are putting innova- This continues to be a challenge public- and private-sector leaderstion at the centre of their growth because obtaining timely and rel- who are interested in understandingstrategies. Second, there is aware- evant metrics on a global basis and improving innovation in theirness that the definition of innova- is often not possible. All avail- economies will continue to providetion has broadened—it is no longer able off icial data from interna- valuable input.restricted to R&D laboratories tional organizations such as the This chapter presents selectedand to published scientific papers. World Bank, the United Nations findings from a review of innova-Innovation could be and is more Educational, Scientific and Cultural tion literature that has allowed usgeneral and horizontal in nature, Organization (UNESCO), and the to refine the theoretical underpin-and includes social innovations and International Telecommunications nings of the GII model and guidebusiness model innovations as well. Union (ITU) were considered, the revision of pillars and sub-pillarsLast but not least, recognizing and although many critical measures and the selection of indicators. Thecelebrating innovation in emerg- of innovation are not covered in chapter also includes details on theing markets is seen as critical for the efforts of these organizations. innovation rankings emerging from THE GLOBAL INNOVATION INDEX 2011 inspiring people—especially the Finally, combining various metrics the GII project in 2011.next generation of entrepreneurs into a simple measure of innova-and innovators. tion for an economy is fraught with However, reaching this goal statistical and other complexities,1has not been simple. A serious body especially when considering econo-of literature (see the next section) mies that are often vastly differenthas attempted to outline metrics
41: Measuring Innovation Potential and Results and covered only products and Box 1: Low-tech innovations processes. The breakthrough made after 1997 was to expand the sec- Although innovations with low technolog- sector in the European Union at 15 coun- toral coverage from manufactur- ical content have always existed, the fact tries (1979–2003) and the United States of ing industries to services. The 2005 that innovations do not necessarily entail America, respectively (1979–2004). edition incorporated three crucial a technological component emerges as an Innovation in low-tech industries has developments. First, the ‘techno- important theme in the recent literature particular characteristics: logical’ qualifier was eliminated on innovation, in sharp contrast with the 1. It is more ‘market pulled’ than ‘technol- (see Box 1). Second, innovations past (OECD/EC, 2005, p. 17). ogy pushed’; demand factors, niche in methods were added to the list. According to the OECD classification markets, product differentiation, and Third, for the first time, innova- of innovativeness based on R&D intensity, mature brands are crucial to innovation tion in the public sector was men- low-tech industries are those that have an in low-tech industries. tioned as an area deserving further R&D intensity that ranges between 0 and 2. Product innovations are not intensive attention.5 In 2010, the Ministerial 0.9% (this intensity is greater than 5% for in research and development (R&D), Report on the Organisation for high-tech industries). Since this classifica- although process innovations have Econom ic Co-operation and tion applies exclusively to manufactures more technological content (cf. invest- Development (OECD) Innovation ment in equipment and machinery). (textiles, wood, pulp, etc.), a different tax- Strategy added that ‘consideration onomy was proposed by Pavitt in 1984, 3. New technologies often spill over [was] being given to extending the which included four groups: (1) supplier- (through acquisition) from other indus- methodology to public sector inno- tries, so that low-tech firms provide a dominated firms, (2) scale-intensive firms, vation and social innovation so as to demand pull for high-tech firms. (3) specialized suppliers, and (4) science- correspond to the reality of innova- based firms. Low-tech sectors mainly fall 4. For this absorption of innovation to be tion today’.6 effective, a skilled workforce and learn- into the first group. An innovation can be new to ing capabilities are required. This distinction is crucial, as high-tech the world, or new to a sector or industries represent a small proportion of market, or new to an agent. It can Source total manufacturing industries, including also be a disruptive innovation, Based on Joint Research Centre of the in developed economies. High-tech indus- European Commission, 2009. where the focus is on impact, rather tries have represented around 6% and 10% than on novelty.7 Most studies agree of the value-added of the manufacturing that the commercial introduction of innovations developed elsewhere constitutes an innovation: Innovation also occurs when a firm process, a new marketing method, introduces a product or process to Prior research in innovation: Selected or a new organizational method in a country for the first time. It occurs perspectives business practices, workplace orga- when other firms imitate this pio- nization, or external relations.3 neering firm. Moreover, it occurs Different definitions of innovation when the initial or follower firms have been proposed in the literature. make minor improvements and In this report, we embrace a broad The modern evolution of definition that has the advantage of the concept of innovation can be adaptations to improve a product THE GLOBAL INNOVATION INDEX 2011 being both short and well suited to sketched by referring to the dif- or production process, leading to capture global innovation: ferent versions of the Oslo Manual, productivity improvements. In short, which guides statisticians in their innovation occurs through ‘creative recent attempts to measure inno- imitation’.8 An innovation is the implementation vation.4 In its first editions in 1992 of a new or significantly improved and 1997, the Manual focused exclu- product (good or service), a new sively on technological innovations
5 1: Measuring Innovation Potential and Results Innovations are not restricted Box 2: Innovation in emerging marketsto the firm, they originate in allagents of society: at the level ofthe firm, or of an industry; in gov- Terms such as ‘reverse innovation’, 1 In a recent publication, the Worldernmental services or in the public ‘Gandhian innovation’,2 ‘frugal innovation’, Bank notes the technological divide insector; in academia; and in society ‘inclusive innovation’, 3 ‘constraint-based developing countries: ‘Slow diffusion with-in general.9 Innovation activities innovation’, or even ‘poor people’s knowl- in countries reflects a nonlinear process. . .by these agents are usually com- edge’4 have all been recently coined to .The surprisingly low level of overall tech-plementary: Prototypes might be describe the type of innovation by which nological achievement in countries suchdeveloped in a university research technological products are customized at as China and India contrasts with popularlab and the final product introduced low prices and high volumes in and for perceptions, which are based on the rela-in the market by a firm, for instance. emerging markets. Examples abound: tive technological sophistication of some A distinction made by Gibbons Tata’s Nano car, solar-powered cellular of the two countries’ major cities and trad-et al. (1994) has been highly inf lu- phones, micro-spinning in the textiles ing centers. . . . [t]he same kind of techno-ential in the literature on innova- industry, and the hand-held electrocardio- logical diversity observed across countriestion. These authors label traditional gram Mac 400 are just a few. is visible within countries as well.’519th and early 20th century research Chapter 3, ‘Innovation in India: How to account ‘fairly’ for theseas ‘mode 1’: Characterized by a Affordable Innovations’ analyses this and islands of progress is a real conundrum.cleavage between academia and other phenomena in India today. Big mul- The same report gives one clue: ‘The rise insociety, this type of research is aca- tinational corporations such as Microsoft, China’s index of diffusion of new technolo-demic, autonomous, self-sustained, PepsiCo, IBM, Cisco, Nokia, GE, and Xerox gies is almost double that of India, in parti nve st ig ator -i n it i ated , peer - as well as Indian major players such as because the more technologically back-reviewed, and discipline-based in Tata, Godrej, and Mahindras are shifting ward regions in China have made progressnature. By contrast, ‘mode 2’ refers their focus towards the rapidly expand- in closing the gap with the more techno-to more recent forms of knowledge ing middle-income group of customers by logically advanced regions on the coast’.6production, which is centred mostly coming up with frugal innovations, keep-around the firm where research is ing in mind the price sensitivity of Indian Notesincreasingly context-driven, prob- consumers. A trend of ‘reverse innovation’ 1 http://www.vijaygovindarajan.com/2009/10/ what_is_reverse_innovation.htm.lem-focused, application-oriented, has set in, where an innovation is devel- 2 Mashelkar and Prahalad, 2010.and interdisciplinary—task-force oped and/or adopted first in the develop- 3 Mashelkar and Prahalad, 2010.teams and tailored processes are cre- ing world and then deployed in mature 4 Finger, 2004.ated to work on specific projects.10 markets. 5 World Bank, 2008, p. 90.Other theorists, such as those of the 6 World Bank, 2008, p. 91.‘Triple Helix of Innovation’, havestressed the historical continuitiesand linkages in the relationshipamong academia, industry, andgovernment.11 The different legal, institution- With technological catch-up can inf luence the innovative per-al, organizational, and governance and market and business sophistica- formance of regions.12regimes surrounding innovative tion, innovation acquires a strong International market linkagesactivities are of special relevance regional or sectoral component. foster the development of tech-to their success. These include the Sub-national systems of innovation nological capabilities in develop- THE GLOBAL INNOVATION INDEX 2011 political environment, openness to might develop, for example, around ing and least-developed countriescredit, the treatment of investment local public research institutions, because they integrate global valueand trade, the presence of competi- large dynamic firms, or industry chains through exports, the importtion laws, the protection of intellec- clusters. In addition, good infra- of machinery and equipment, trans-tual property rights, tax laws, and structure, venture capital, and a fers of technology, the spill-overthe transportation and telecommu- strong entrepreneurial environment effects of foreign direct investmentnications infrastructure. (FDI), and licensing. A recent study
61: Measuring Innovation Potential and Results overhaul. Some aspects, however, Box 3: Innovation surveys needed to be strengthened. A key inspiration behind the The Organisation for Economic Co- regarding their innovation characteristics. GII comes from the literature on operation and Development (OECD) and Firms are also being asked about fac- total quality management (TQM), the European Commission have been tors that hamper their ability to innovate. which has a long history in bench- guiding the collection and interpretation Finally, these surveys aim to assess the marking and data analysis. The first of data on innovation since the first edition effect of innovation on sales, productivity, TQM award, the Deming Award, of the Oslo Manual in 1992, which is now in employment, and other factors. was given in Japan in 1951—this its third edition (2005). These innovation surveys are a rich award initially focused on product Innovation surveys started with the data source for analytical work on innova- and process quality. Subsequent ver- European Community Innovation Survey tion. However, a number of problems exist: sions have evolved into a broader in the early 1990s and are now being con- (1) the questionnaires are given only to notion of business excellence that ducted in about 50–60 countries world- firms, so that innovation outside the busi- looks at the whole business, includ- wide (mostly the European countries but ness sector is not captured; (2) the quality ing enablers and results. also a number of Latin American, Asian, of responses varies greatly, as one cannot The focus in TQM expanded African, and other countries). control who is replying to the question- from a narrow technical on to a Firm-level innovation surveys seek naire and as respondents have a tendency much broader concept. Innovation to identify the characteristics of innova- to overrate their innovative activity; (3) today is expanding its focus in a tive enterprise activities. After asking firms the country coverage is still very limited, similar way. The same distinction to answer certain basic questions (indus- because most developing countries—but between enablers and results has try affiliation, turnover, R&D spending), also some large developed countries—do been incorporated into the GII, firms are asked to identify whether they not conduct these surveys; and (4) sur- providing the theoretical under- are an ‘innovator’ and, if yes, they are vey results across studies are not always pinnings of the conceptual frame- asked to respond to a number of questions comparable. work. The GII also draws on other composite indicators in its design, although it differs in many respects from a host of other indices on innovation. Some key pieces from on the readiness, by 2020, of a traditional sectors of innovation and prior research are mentioned below. set of countries to apply recently enabling environments. developed technologies in bio- and nano-technology, materials, infor- The Boston Consulting Group/National mation, and so on shows that a lim- Composite indicators for innovation Association of Manufacturers Index ited technological adaptive capacity The BCG/NAM International may reduce the diffusion of future The previous section surveyed Innovation Index was built in 2009 technologies.13 important developments in the con- to establish a ranking among US The type of innovation taking ceptualization of innovation and a states and among countries. The place in emerging markets presents series of recent issues and trends in BCG/NAM Index is built on a its own peculiarities, which are dif- the realm of innovation. The lit- model comprising two major blocks: ficult to capture with traditional erature review allowed us to refine Innovation Inputs and Innovation metrics (see Box 2). The challenge the theoretical underpinnings of the Performance. Innovation Inputs are for the research team behind the GII and guided the revision of pil- measured by three aspects: fiscal THE GLOBAL INNOVATION INDEX 2011 Global Innovation Index was to find lars, sub-pillars, and indicators. One policies, other policies, and inno- statistics that would gauge the devel- general preliminary conclusion in vation environment. Innovation opments and trends of innovation in light of this survey was that the GII Performance is measured by R&D low-tech industries, in emerging conceptual framework developed results, business performance, and markets, and in business models, in previous versions was well suited public impact of innovation. The while at the same time covering the to uncover innovation as it occurs focus of the BCG/NAM Index is on today—it did not require a major business performance specifically in
7 1: Measuring Innovation Potential and Resultsthe manufacturing sector, and most measured by a single indicator: and they still do not provide aof the data used were generated the sum of patents granted by the good count on innovation outputsthrough surveys and interviews. European, Japanese, and US Patent per country. Moreover, they targetOnly one edition (2009) of the Offices (EPO, JPO, and USPTO, only innovations at the firm level—BCG/NAM Innovation Index has respectively).16 broader public-sector and socialbeen published thus far.14 innovations are not included. Science and technology indi- The Global Competitiveness Index (GCI) of cators are not all available interna-The European Innovation Scoreboard/ the World Economic Forum tionally, so they provide, at best,Innovation Union Scoreboard The Global Competitiveness Index information on innovation inputs /The European Innovation Score- (GCI) of the World Economic throughputs (such as R&D expen-board, renamed the Innovation Forum (WEF), while dealing with ditures and the number of scientistsUnion Scoreboard in 2010, has been the theme of competitiveness, in a country), intermediate inno-in existence for nearly a decade. includes 12 pillars that overlap on vation outputs (such as numbers ofUntil 2007, it lacked an underlying some enabling factors for inno- scientific publications or patents),model of innovation and focused vation in the GII. Innovation is or certain forms of technology-primarily on the technological sec- a separate pillar within the GCI related commercial activity (such astor. Since 2008, it has been modi- that includes metrics traditionally data on high-technology exports).fied to include an underlying model attributed to innovation related to Rarely do they provide data on thecomprising three blocks: Enablers R&D, intellectual property protec- aforementioned innovation itself,(human resources, research systems, tion, and patenting.17 and they are often specific to tech-and finance/support); Firm Activi- nological and product innovationsties (firm investments, linkages/ of research organizations and firms.entrepreneurship, and intellectual Statistics on innovation A trade-off between precisionassets); and Outputs (innovators and and country coverage was ofteneconomic effects) and has included a All efforts at capturing innova- made in selecting the indicatorsbroader set of 25 indicators to mea- tion confront the same challenge: to be included in the GII model.sure the above blocks. The focus of Direct official measures that would The balance was struck in favourthe Innovation Union Scoreboard quantify innovation outputs are of selecting a combination of threeis on the European Union (EU) frequently not available across many to six indicators that would capturemember states with selective com- countries. This is particularly true the latent dimension within eachparisons to a few international refer- if one considers our broadening sub-pillar in the best possible way,ence countries such as the United notion of innovation, which encap- with an overall coherence withinStates of America (US), China, and sulates non-technological, softer or pillars. The Joint Research Centre,India.15 local types of innovation (including which assisted in the assessment of those in developing countries). Most the conceptual and statistical coher- existing measures also struggle to ence of the overall structure of theThe Global Innovation Index of the appropriately capture innovation GII, confirmed the soundness ofEconomist Intelligence Unit outputs of a wider spectrum of this approach (details in the appen-The Economist Intelligence Unit innovation actors, as mentioned dix to this chapter).index ranks 41 countries along a above (e.g., the services sector, pub- A development particularly rel-model consisting of Innovation lic entities, etc.). evant to the fine-tuning of thisInputs and Innovation Outputs. In recent years, the generation year’s GII was the release of the THE GLOBAL INNOVATION INDEX 2011 Innovation Inputs are measured of data from firm-level innovation OECD Innovation Strategy Reportby direct innovation inputs (six surveys (see Box 3) has improved the in 2010 along with its accompanyingmeasures, such as education of the data situation somewhat. However, compendium of close to 100 indica-workforce) and innovation envi- there are several unresolved issues tors on innovation (see Box 4).ronment (nine indicators, such as with these data. They are gener- T he OECD I n novat ionforeign trade and exchange con- ally not available and comparable Strategy metrics conf irmed thetrols). Innovation Outputs are for more than about 50 countries, continued relevance of traditional