Contributors and Detractors: Ranking Countries’ Impact on Global Innovation

By: Innovation Management

If nations increased their supportive policies and reduced their harmful policies, the rate of innovation
worldwide would significantly accelerate. This 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.

This issue is of paramount importance, because as countries increasingly vie for leadership in the global innovation economy, they can implement policies that benefit only themselves at the cost of hurting global innovation, or policies that can bolster their own innovation capacity while also generating positive spillovers that benefit the entire global innovation system.

This report assesses the impacts of countries’ economic and trade policies on the broader global innovation system. It examines 27 indicators, including 14 “contributors” that constructively spill over to contribute to global innovation, grouped into three categories—taxes, human capital, and R&D and technology—and 13 “detractors” that inhibit greater levels of global innovation, also grouped into three categories—balkanized production markets, IP protection, and balkanized consumer markets.

The nations doing the most to support global innovation while doing the least to detract from it, on a per capita basis, are Finland, Sweden, the United Kingdom, Singapore, and the Netherlands.

The report finds that the nations doing the most to support global innovation while doing the least to detract from it, on a per capita basis, are Finland, Sweden, the United Kingdom, Singapore, and the Netherlands. The report identifies these countries as “Schumpeterians” for fielding policies—such as robust levels of government investment in scientific research and education and innovation-enabling tax policies—that produce significant spillovers to the global innovation system while generally eschewing use of policies that detract from it.

In contrast, the countries making the least constructive impact on the global innovation system—Argentina, Indonesia, India, Thailand, and Ukraine—contribute less to global innovation and at the same time use more innovation mercantilist policies that detract from it. The United States ranks just 10th overall, largely because its innovation-supporting policies (such as funding for scientific research) are lower than those of the leaders (on a per capita basis). China ranks 44th, largely because it fields so many policies that harm global innovation.

Assessing countries’ scores on just the contributions indicator, Singapore, Korea, Finland, Sweden, and the United Kingdom lead the world. Relative to the size of their economies, these nations invest more in science and human capital, and have stronger innovation-incentivizing tax policies. In contrast, Costa Rica, Mexico, Indonesia, Argentina, and Colombia field policies that contribute the least to the global innovation system. These countries tend to underinvest in research, produce fewer science researchers, and have relatively less-developed toolsets to support innovation policies.

In terms of detractions, Finland, the Netherlands, Belgium, Ireland, and Sweden field policies that do the least to detract from the global innovation system. In general, these countries play by the rules of the international system, implement few trade barriers, ensure strong protections for intellectual property, and do not overtly favor domestic enterprises at the expense of foreign competitors. In contrast, Thailand, China, India, Argentina, and Russia field policies that detract the most from the global innovation system. These countries make the most extensive use of trade barriers and other distortions while providing weaker environments for intellectual property protection.

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