The World Intellectual Property Organization (WIPO) has released its 15th edition of the Global Innovation Index, which tracks over 130 economies across the globe to identify investment into R&D and the impact of innovation through detailed and robust metrices. This not only helps identify and benchmark innovation performance, but also the associated economic impact of innovation.
The economic slowdown that resulted from the COVID-19 pandemic created a greater need to measure innovation, and to identify how economies are performing through the post-pandemic recovery phase.
Our award-winning Orbis entity data was used in the computation of some of the 80+ indicators WIPO used in ranking the economies based on the innovation measure. Some of the key Orbis variables used in the analysis for GII rankings include R&D expenditure data collated through the R&D Scoreboard project for the European Commission JRC. These are derived from local financial accounts and statements, and then fine-tuned using Global Standard Format for firm-level financial statements.
The report provides investment insights based on innovation trends using historical R&D spend data and associated analysis. The recently launched innovation tracker focuses specifically on science and technology investments, technological progress and socioeconomic impact. Such insights and trends are relevant for businesses, government, investors, and academics globally.
GII 2022 maps the world’s most innovative economies, and reveals a number of interesting moves with new power houses emerging. Here are the results of the Global Innovation Index:
- Switzerland topped the rankings for the 12th consecutive year, followed by the United States of America, Sweden, the United Kingdom and the Netherlands
- Japan, China, the Republic of Korea and Hong Kong (China) represent the top Asian economies that are innovation intensive, all ranking within the top 15 GII rankings
- China (rank 11) is making its way up to the top ten, with consistently strong performance from India (rank 40) and Türkiye (rank 37), which entered the top 40 for the first time
- Several developing economies are performing above expectation on innovation relative to their level of economic development. These include newcomers Indonesia (75), Uzbekistan (82) and Pakistan (87). Eight so-called “innovation over performers” are from Sub-Saharan Africa, with Kenya (88), Rwanda 105) and Mozambique (123) in the lead. In Latin America and the Caribbean, innovation over performers include Brazil (54), Peru (65) and Jamaica (76)
The state of global innovation
GII 2022 shows that research and development (R&D) and other investments, which drive innovation, continued to surge in 2021 despite the COVID-19 pandemic.
Technology firms are at the core of GDP contributions for most developed and developing nations. They are now – and will continue to be – essential to the global economy. As a result, governments will continue to rely on innovation by technology firms, for future economic growth, and venture firms will continue to invest in technology firms with high growth potential, contributing capital to those jurisdictions that best support such innovation.
Based on the data from the award-winning Orbis database, the authors of the GII determine that the world’s most innovative companies increased investments in R&D by 10% to over USD 900 billion invested in 2021, higher than pre-pandemic levels.
For these firms, revenues decreased by 0.5% in 2020, and then rebounded by 17.7% in 2021.
However, these figures mask large differences at the industry level. Figure 1 presents annual R&D expenditures, revenues and R&D intensities for the seven industries with the greatest cumulative R&D investment in 2021. Similar to last year, the increase in R&D expenditures between 2018 and 2021 is primarily driven by four industries, ICT hardware and electrical equipment; pharmaceuticals and biotechnology; software and ICT services; and construction and industrial metals.
Figure 1: R&D expenditure and revenue totals of top global corporate R&D spenders, by industry and year 2018-2021
With respect to the share of firms experiencing R&D expenditure increases, all industries rebounded to near pre-pandemic levels, as shown in Figure 2.
Figure 2: Share of top corporate R&D spenders reporting R&D expenditure increases, 2019-2021
What determines the rankings?
GII rankings are based on the following seven pillars, split into the following Innovation Input and Output Indexes. The economies are then scored based on the overall aggregated associated scores on each of them:
- Institutions/ Filmographic details
- Human and Capital Research
- Market Sophistication
- Business Sophistication
- Knowledge and Technology Outputs
- Creative Outputs
- Technology Clusters
What Orbis data was used and how?
The R&D Scoreboard project provides the necessary variables through publicly listed and unlisted privately held companies, and their firmographic data through Global Standard Format financials. For long-term innovation trends and R&D output measure, the details on a firm’s R&D expenditure year-on-year is a good indicator.
Specifically, Orbis data is used for indicator 2.3.3. defined below:
2.3.3. Global corporate R&D investors, top 3, mn USD
Average expenditure of a country’s top three global companies on R&D, million USD | 2021 Average expenditure on R&D of the top three global companies. If a country has fewer than three global companies listed, the figure is either the average of the sum of the two companies listed or the total for a single listed company. A score of 0 is given to countries with no listed companies. The data include economies outside the European Union (EU).
In addition, Orbis data is used to compute the year-on-year R&D spending as depicted in the GII Global Innovation Tracker. Data for the top global R&D spenders are derived using the top spenders compiled in the European Commission’s 2021 EU Industrial R&D Investment Scoreboard as a starting point and WIPO calculations facilitated by the Orbis database, with all figures in current US dollars. With more than 2,500 public companies included, it is the most comprehensive global R&D study that uses JRC methodology.
The 2022 edition of the report also explores the future of innovation driven growth at a time when the socio-economic impact of innovation is at an historic low, despite a surge in R&D investment.
You can also read the full report on the index, published by WIPO.