Innovation via industry

In the U.S., about 66% of the R&D is performed by industrial organizations, 27% is performed by the federal government and the remaining 7% is performed by academia and non-profit organizations. In Mexico, those ratios are about 51% by industry, 19% by government and 27% by academia. In Sweden it’s 74% by industry, 13% by government and 13% by academia. And in Switzerland, it’s 74% by industry, 2% by government and 22% by academia. The remaining R&D is performed by non-profits and other government organizations. The global average for industry-performed  R&D performance is 67.2%, which equates to $1.636 trillion of the global total of $2.434 trillion.

R&D efforts are often related to the innovative capabilities of an organization or country. As such, there are a number of organizations that have developed global innovation indices for countries. These indices are employed to rank the countries according to their levels of innovation. The ranking organizations utilize a complex (and often proprietary) system of indicators to create their indices and then publish them on an annual basis.

Organizations publishing these annual competitive ranking systems include:

IMD World Competitiveness Rankings (formerly the International Institute for Management Development) is in Lausanne, Switzerland, and has published an annual World Competitive Yearbook since 1989. These rankings take into account unemployment, GDP, and government spending on health, along with social cohesion and globalization. The data fall into four categories: economic performance, government efficiency and business efficiency. 

The Global Competitiveness Report 2019 is published annually by the World Economic Forum, which is headquartered in Cologny, Switzerland. These reports have been published since 1979. This index maps the competitiveness of 141 economies through 103 indicators, which are organized into 12 themes. These themes include an enabling environment, human capital, markets, an innovation system and R&D.

The Center for Global Innovation Studies at Toyo University in Japan, publishes a Global Innovation Index, which ranks the innovation performance for 60 countries. The rankings are based on the integration of 58 indexes from five fields: international cooperation, market trends, technological innovation, resourcefulness and relevant policies. 

The Bloomberg International Labour Organization, headquartered in Geneva, Switzerland, has published its Bloomberg Innovation Index for the past seven years. Individual country innovation rankings are calculated from scores of criteria using seven metrics, including R&D spending, manufacturing capabilities, concentration of high-tech companies, researcher concentration, patent activity and productivity.

The Global Innovation Index 2019 (GII) is co-published annually by Cornell University, INSEAD (Institut Europeen d’Adminstration des Affaires, headquartered near Paris), and the World Intellectual Property Organization (WIPO, an agency of the United Nations). GII country data are collected on institutions, human capital and research, infrastructure, market sophistication, business sophistication, knowledge and technology inputs and creative inputs. 

The top 15 countries from these indices (based on WII as a starting point) are shown in the attached table. The average top five innovation rankings include Switzerland, Singapore, the U.S., Sweden and the Netherlands. Looking at these rankings and competitive scores, it is clear that Asia-Pacific is the most competitive region in the world, Nordic countries are among the world’s most technologically advanced, innovative and dynamic while also providing better living conditions and social protection.

U.S. innovation rankings have rebounded in 2019 after falling slightly for several years over the past decade. Faster product cycles and intensifying competition are changing the ways managers have to work, according to a Pfizer presentation at a recent conference on health care. “Mediocre or incremental innovation is not going to be rewarded the way they used to be,” said Albert Bourla, Pfizer CEO. “We need to make sure that we change the way that we operate so that we can remove bureaucratic processes. Innovation and bureaucracy, like water and oil, don’t mix well together.”

China’s innovation scores are also improving as of late. China has strong patent activity based on the strength of R&D at Huawei Technologies Co., but as seen in these innovation rankings, that country still lags behind most other innovative countries in its overall productivity levels.

According to R&D World magazine’s reader survey, more than half of survey respondents say their organizations have increased their innovation levels over the past three years (2017 to 2019). Less than 14% of respondents say their organization’s innovations declined over the same period. When asked what their innovation goals were in this reader survey, nearly 60% said the creation of more cost-effective products and processes was their biggest goal. Another 44% put the creation of new capabilities and more efficient products and processes at the top of their innovation goals. 

This article is part of R&D World's annual Global Funding Forecast (Executive Edition). This report has be published annually for more than six decades. To purchase the full, comprehensive report, which is 58 pages in length, please visit the 2020 Global Funding Forecast homepage.