Top 10 Most Innovative Countries in 2017

What does it take to be an innovative country?

Bloomberg’s Innovation Index scores economies on the combined factors of*:

• R&D intensity
• Manufacturing added-value
• Productivity
• High-tech density
• Tertiary efficiency
• Researcher concentration
• Patent activity

*See end of article for definitions

The country ranking began with over 200 economies, but was trimmed to a list of 78 – countries had to report data for at least six of the seven categories measured.

Here are the top 10 most innovative economies:

• S. Korea
• Sweden
• Germany
• Switzerland
• Finland
• Singapore
• Japan
• Denmark
• U.S.
• Israel

S. Korea tops the list for the second year in a row, but its lead was narrowed because of little progress in improving its productivity score (32nd overall). It was ranked first in R&D intensity, value-added manufacturing, and patent activity.  It also achieved top-five rankings in high-tech density, higher education and researcher concentration.

Sweden jumped from third to second largely due to improvement in manufacturing value-added.  While the current government is less business-friendly, the Swedes – according to Magnus Henrekson, Director of Sweden’s Institute of Industrial Economics –  – “promote an atmosphere of great personal ambition – unlike some European neighbors that emphasize the collective.”  Sweden also has a lot of focus on R&D.  Sweden, however, has also relied on a weak krona that has helped exports, but is unsustainable.

Japan, still with a struggling yen, dropped the most of any economy in the top 25, moving to No. 7 from number 4.  A major factor in this fall was Japan losing its best-in-world distinction for patent activity.

The U.S. fell one spot to No. 9.  Its scores Manufacturing value-added, Tertiary efficiency, and Researcher Concentration are relatively low. 

Israel moved into the top ten by achieving first place in Researcher Concentration (the number of professionals, including post-graduate PhD students, engaged in R&D per million people in the country. The country also ranked second (behind S. Korea) in the R&D Intensity category (R&D expenditure as a percentage of gross domestic product).

Russia dropped 14 places to No. 26, almost five times bigger than the next-largest drop in the rankings.  This is attributed to the effect of sanctions, and a couple of years of lower energy prices.

China held its place as the strongest-ranked emerging market, at No. 21. 

The UK kept its place at No. 17, just below Ireland, Netherlands and Norway and just above Australia.  With Brexit looming on the horizon, the UK may need to focus on improving its lowest scoring areas – Manufacturing Value-Added, Productivity, and R&D Intensity.

Category Definitions

• R&D intensity: R&D expenditure as % of GDP.
• Manufacturing added-value: MVA as % GDP and per capita ($PPP).
• Productivity: GDP and GNI per employed person age 15+ and 3Y improvement.
• High-tech density: Number of domestically domiciled high-tech companies – such as aerospace and defense, biotechnology, hardware, software, semiconductors, Internet software and services, and renewable energy companies – as % domestic publicly listed companies and as a share of world’s total public high-tech companies.
• Tertiary efficiency: Total enrollment in tertiary education, regardless of age, as % the post-secondary cohort; minimum share of labor force with at least tertiary degrees; annual new science and engineering graduates as % total tertiary graduates and as % the labor force fore.
• Researcher concentration: Professionals, including postgraduate PhD students engaged in R&D per million population.
• Patent activity: Resident patent filings, total patent grants and patent in force, per million population; filings per $100 billion GDP and total grants by country as a share of the world total.

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