More innovation will be the determining factor in achieving greater progress. Countries’ economic and trade policies can either help or hurt global innovation. For example, policies such as robust investment in and tax incentives for research and education support global innovation. In contrast, policies such as export subsidies or forced localization harm global innovation.
If nations increased their supportive policies and reduced their harmful policies, the rate of innovation worldwide would significantly accelerate.
In a new report, European countries captured eight of the top 10 slots in a new global ranking of how countries’ domestic policies support worldwide innovation. The Information Technology and Innovation Foundation (ITIF), a global technology policy think tank, assessed 56 countries that together comprise close to 90 percent of the world’s economy on the extent to which their economic and trade policies contribute to and detract from global innovation.
ITIF reported that on a per-capita basis Finland, Sweden, and the United Kingdom were the three countries that did the most to support global innovation and the least to detract from it. Singapore and the Netherlands take the number 4 and 5 positions. Interestingly, the USA ranks number 10, Germany 12, Japan 14, Israel 23, Brazil 41, Russia 42, China 44 and India is way down at 54. . Meanwhile, Greece was the 14th-worst per capita, in its net impact on global innovation and Ukraine was fifth-worst.
The report assesses countries on the extent to which their economic and trade policies either constructively contribute to or negatively detract from the global innovation system. Most studies comparing countries on innovation rank them on innovation capabilities and outcomes. But no study has assessed the impact of countries’ innovation policies on the broader global innovation system.
This study assesses this by inquiring whether countries are attempting to bolster their innovation capacities through positive-sum policies such as investments in R&D, education, or tax incentives for innovation that contribute positively to the global body of knowledge and stock of innovation; or if they are trying to compete through negative-sum ‘innovation mercantilist’ policies such as localization barriers to trade, export subsidization, or failing to adequately protect foreign intellectual property (IP) rights (e.g., through the issuance of compulsory licenses or even outright IP theft).
Those types of policies are more concerned with expropriating existing knowledge, shifting innovative activity to suboptimal locations, or unfairly propping up inefficient companies. Because of the injurious effect of these policies on innovators (both those living in other nations, and even in-country) the result is less, not more, global innovation, and the world as a whole is hurt by such nations’ innovation mercantilist policies.
“Robust innovation is essential for economic growth and progress,” said co-author Stephen Ezell, ITIF’s vice president for global innovation. “As countries increasingly vie for leadership in the innovation economy, they can implement policies that try to benefit only themselves but harm the production of innovation in the rest of the world. Or they can implement ‘win-win’ policies that bolster their own innovation capacity while also generating positive spillovers for the entire global economy. For innovation to flourish around the world, we need a system that is doing much more of the latter.”
While six European countries were in the top 10 for their positive contributions to the global innovation ecosystem, the continent’s prominence on the list was driven in particular by holding nine of the top 10 spots for being the least damaging.
The report also found a strong correlation between countries’ contributions to global innovation and their levels of domestic innovation success, meaning that doing well domestically on innovation policy can also mean doing well for the world.
“While policymakers are primarily focused on the interests of their own citizens, they usually overlook the fact that adopting policies that also happen to be good for the global innovation ecosystem will compound the benefits for their citizens,” said Robert D. Atkinson, ITIF’s president and a co-author of the report. “’Innovation altruism’ really does pay.”
The report argues for a series of policies nations can undertake to improve their impacts on worldwide innovation:
- First, ITIF urges policymakers, economists, and pundits to treat innovation as important as trade for optimizing global growth.
- Second, the report calls on the global development and trade community to establish a framework that better distinguishes between policies that are beneficial for the world’s innovation ecosystem and those that are detrimental. Moreover, policymakers need to push back more strongly against the misguided, but popular, perspective that developed nation innovation comes at the expense of developing nation economies and that because of that, the world needs a strategy for redistributing innovation, rather than growing it.
- Finally, ITIF argues leading nations should establish a Global Science and Innovation Foundation to fund scientific and engineering research on key global challenges, particularly through collaborative international research.
“The world is significantly under-producing innovation that is needed to tackle global challenges, including boosting productivity, improving health, and protecting the environment,” Atkinson said. “Policymakers need to better understand and more aggressively push back when countries try to advance their own interests at the expense of global innovation. The world’s leaders need to articulate a more robust vision of commonly shared prosperity based on substantial increases in worldwide productivity and more innovative products and services.”
Click here for the executive summary, or click here for the full report.