|
Executive Summary
click image to download full pdf version of the
executive summary
|
The
first chapter, “The Innovation Capacity Index: Factors, Policies, and
Institutions Driving Country Innovation,” by authors Augusto
López-Claros and Yasmina N. Mata, begins with a glimpse at some of the
little-known history of innovation, long before the industrial
revolution. We learn that the invention of eyeglasses not only extended
productive working life, but spawned the invention of precision
instruments, laying the foundation for later articulated machines with
fitted parts. The clock permitted the ordering of life in cities, but
gave rise to the very notion of productivity, leading to Adam Smith’s
insight that wealth and prosperity depend directly on the “productive
powers of labor.” As the authors show, the varied paths followed by
different nations in their approach to innovation and scientific
discovery determined their ability to capitalize on their innovations
and buttress their development and technological potential. They
explain how, despite the priceless inventions they bequeathed to the
world—printing, paper, the compass, gunpowder, porcelain, silk, the use
of coal and coke for smelting iron, and the numerous inroads into
scientific research which far surpassed what was known in Europe in
their day—the totalitarian nature of the regimes in the Arab world and
China stifled the possibilities for further development. With the
coming of the Renaissance and the establishment of scientific societies
and formal programs of scientific enquiry, Europe imposed fewer
constraints on innovators, leading inexorably to the industrial
revolution and the culture of innovation and research which we now see
as powerful engines of economic and social development.
There is no doubt that, in recent
years, progress in the dissemination of knowledge and the use of
information and communications technologies (ICT) has become
increasingly widespread and has resulted in improved productivity. As
the authors make clear, the traditional sources of power and influence,
such as territory, resources, raw manpower, and military might—for
centuries the chief determinants of nations’ prosperity—are far less
important today, and have given way to a world in which successful
development is not only increasingly linked to sound policies, good
governance, and effective management of scarce financial resources,
but, most important, to the ability of societies to release and harness
the latent creative capacities of their populations. Successful
Executive Summary countries today are not necessarily large
geographically, neither are they richly endowed with natural resources,
or able to project military power beyond their borders. More and more,
the countries to look to are those which have managed to expand
opportunities for their populations through the full exploitation of
the opportunities afforded by the world economy through international
trade, foreign investment, the adoption of new technologies,
macroeconomic stability, and high rates of saving.
In building the Innovation Capacity
Index (ICI), the authors draw on a sound theoretical framework and the
best available data to correlate the wide-ranging set of relevant
factors, policies, and institutional characteristics which play a
central role in boosting a nation’s capacity for innovation. In its
2009 edition, the ICI covers 131 countries and identifies over 60
factors that are seen to have a bearing on a country’s ability to
create an environment that encourages innovation, such as a nation’s
institutional environment, human capital endowment, the presence of
social inclusion, the regulatory and legal framework, the
infrastructure for research and development, and the adoption and use
of information and communication technologies, among others. Fully 90
percent of the variables used in the construction of the Index are
“hard”—i.e., measuring directly some underlying factor, such as the
budget deficit, expenditure in education, or cumbersome regulations,
etc.—and, therefore, not dependent on a survey instrument.
The authors explain in detail the
construction of the Index, which explicitly incorporates the notion
that, while there are many factors which influence countries’
innovation capacity, their relative importance varies, depending on the
stage of a country’s development and the particular political regime in
which policies are being implemented. These differing stages of
development are closely correlated with rising economic prosperity and
per capita income. But, the authors also take the view, anchored in
empirical observation, that democracies tend to do better than
authoritarian regimes at encouraging the creation of friendly
environments for innovation. These notions are reflected in the weight
distribution assigned to the different pillars of the Index according
to countries’ per capital income and political regime classification.
Those pillars which have more to do with people, institutions, and
social networks are shown to be foundations for the pillars dealing
with means and other enabling factors. The weight distribution
encourages achievements in the last set of pillars in countries where
the institutional and human resource foundations are well laid, whereas
the reverse obtains for achievements in these same areas, in countries
where these foundations are lacking.
| The
ICI is offered as a policy tool
to promote dialogue for examining more closely the broad range of
policies and institutions which foster an environment conducive to
innovation. The methodologies developed offer country-specific policy
prescriptions, based on nations’ stages of development, and the nature
of their political regimes. The authors have constructed the Index on
the foundation of the large body of work which sees indexes—with all
their limitations—as working tools to generate debate on key policy
issues, and to track progress over time in the evolution of those
factors which help explain national performance. The Innovation
Capacity Index rankings 2009–2010 may be accessed in pdf format by
clicking on the thumbnail image to the right (it is also available in the downloadable full paper by the authors at
the top of the page).
This year’s printed
edition of the Innovation for
Development Report
includes the individual innovation profiles of 68 countries, accounting
for the lion’s share of world output. The remaining 63 can be found on
our country
profiles page. |
Innovation Capacity Index rankings
|
Following a detailed description of
the constituent elements of the Index and its construction, the authors
highlight the uses to which the ICI can be deployed, and examine in
some depth the innovation capacity of five countries: Sweden, Chile,
India, Russia, and Taiwan, brief descriptions of which follow:
Sweden (ICI rank 1) is the ICI’s top
performing country in 2009, serving as a benchmark for other countries.
The authors point to Sweden’s important presence in the global economy
and to elements in its approach to innovation, which are of particular
relevance not only to other industrialized countries, but to many
middle-income countries with aspirations to join the league of top
innovators. Sweden is impressive not only in combining open and
transparent government, universal social protections, and high levels
of competitiveness and productivity—making it one of the most
innovative economies in the world—but equally so in the extent to which
the country’s excellent policy framework has turned the private sector
into the main engine of innovation.
Chile is presented as an interesting
case, proving that sound policies and good institutions are not the
result, but rather the engines for, the creation of wealth and
prosperity. Chile’s performance (ICI rank 29) is far ahead of any other
country in Latin America, and in many critical areas it is already
ahead of the European Union average. A mix of sound macroeconomic
management—including one of the most virtuous fiscal policies in the
world—institutional reforms, and the opening of its economy to the
benefits of free trade, foreign investment, and international
competition, have combined to create a reliable engine of high growth
and poverty reduction. The authorities have also sought to implement
micro-policies aimed at enhancing the efficiency of public services
through various electronic platforms, and facilitating the use of ICTs
more generally. Chile is well poised to catch up with the richer
members of the EU.
India is acknowledged as one of the
world’s fastest-growing economies and has aspirations to be a global
player in the field of technological innovation. Its economic
performance over the past two decades has been impressive, and has
turned it into the world’s fourth largest economy. India has not only a
long political tradition of democracy and rule of law, but also
favorable demographics, with a growing working age population which, if
properly educated, could spur rising productivity and growth. But the
authors deal also with India’s disadvantages, including high
illiteracy, a poorly developed infrastructure, a festering fiscal
deficit problem, and a highly bureaucratic regulatory framework, all of
which seriously discourage entrepreneurship and innovation. While its
ranking in the ICI (85) is not high, they indicate that there is wide
scope for the implementation of better policies, including
institutional reforms, which might allow India to scale up in the
rankings.
Russia (ICI rank 49), despite its
well-established tradition of solid contributions to basic science, is
shown to be lagging far behind its true potential for innovation
performance. In previous decades a leader in space exploration, nuclear
technology, and aviation, it has had a difficult transition from the
inefficiencies of bureaucratic central planning to the challenges of a
market economy. The authors describe how the commodity boom of the past
five years has increased Russia’s economic dependence on energy and
other raw materials exports, and how the country’s unfriendly business
environment hinders entrepreneurship and the incubation of new ideas
and approaches to new products or process creation. They point also to
corruption, the lack of independence of judges and courts, and the
gradual return to authoritarian forms of governance as factors which do
not bode well for the creation of an environment conducive to various
forms of innovation. However, they conclude that there is no intrinsic
reason why a country with such rich human and natural resources and
distinguished history of scientific innovation should not be able to
catch up with the best of the world’s innovators.
Taiwan (ICI rank 13) is offered as
the most impressive example in the post-World War II period of the
consequences of high growth and the policies that underpin it. That a
country should be able to increase its income per capita from under
US$200 in 1952 to close to US$17,000 in 2007 is nothing short of
astounding. Taiwan’s success is attributed to two factors: first, its
success in achieving high growth, while taking full advantage of the
benefits of international trade and investment and the acquisition of
new technologies, and second, in avoiding the errors that have
inhibited development in so many other countries. While acknowledging
Taiwan’s rapid transformation in less than a half century from a simple
agrarian society in the earliest stage of development into a global
technology powerhouse and world leader in the production of ICT
equipment, the authors suggest that Taiwan’s challenge in coming years
will be to find creative ways to cooperate with China—an emerging
technology power in her own right, with a much lower cost structure—and
to move closer to the best performers in the ICI.
|
