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Sydney, September 7, 2020
The innovation landscape is moving towards Asia from the high-income economies of North America and Europe while funding for innovation is drying up globally, according to the Global Innovation Index 2020 (GII).
While the annual rankings, co-published by Cornell University, INSEAD and the World Intellectual Property Organization (WIPO), a specialised agency of the UN, continue to be dominated by developed countries led by Switzerland and followed by Sweden, the US, UK and the Netherlands, innovation is becoming more prominent and important in Asia.
There are 131 economies included in the 2020 GII with nine Asian countries in the top 50, up from seven last year. Included this year are Singapore (8th), the Republic of Korea (10th), China (14th), Japan (16th), Malaysia (33rd), Vietnam (42nd), Thailand (44th), India (48th) and the Philippines (50th).
The report particularly cited the Philippines which made the dramatic jump from 100th in 2014 to 50th this year, and Vietnam which was ranked 71st six years ago.
In the Latin America and the Caribbean region, the top performing are Chile (54th) and Mexico (55th) while for the Sub-Saharan region, the best performs were South Africa (60th) and Kenya (86th). The top ranked for Northern Africa and Middle East is Israel (13th) and United Arab Emirates (34th).
“An impermeable innovation glass ceiling exists that divides middle and high-income economies. But for the past decade, innovation activity has moved towards Asia. This trend is undeniable and in full force,” Sacha Wunsch-Vincent, Co-Editor of the Global Innovation Index and Head of the Department for Economics and Data Analytics at WIPO, tells SciDev.Net.
In GII’s list of 100 global hotbeds of innovative activities, Tokyo-Yokohama is once again the top performing science and technology cluster. On second spot is Shenzhen- Hong Kong-Guangzhou followed by Seoul, Beijing and San Jose-San Francisco.
The COVID-19 pandemic has hit innovation at a time when it had been flourishing. In 2018, global Research and Development (R&D) expenditure rose by 5.2 percent, significantly faster than growth in gross domestic product (GDP) worldwide.
Wunsch-Vincent says, “Innovation will be of critical importance in both finding the medical solutions to prevent and treat COVID-19 and to jumpstart economic growth in the aftermath of the pandemic.”
Sacha Wunsch-Vincent, World Intellectual Property Organization
The Philippines Department of Science and Technology Secretary Fortunato de la Peña tells SciDev.Net that the rankings “give hope to Filipinos despite the pandemic and it gives confidence to our investors that we are serious in our plans and strategies, and which could attract more future investments”.
GII findings show that funding and financing for innovative ventures is drying up. Venture capital (VC) deals are in sharp decline across Asia, North America and Europe. The adverse effects of this shortage in innovation finance will be uneven, impacting developing countries, early-stage VCs and R&D-intensive start-ups.
“Finance is crucial, and good ideas for innovation can be supported by a range of sources from governments, financial institutions, and venture capitalists, on the one hand, to the unpaid labour of ‘sweat capital’ and crowd funding on the other. What matters most is investment that factors in the risks of innovation, and is long-term in orientation,” Mark Dodgson, professor of Innovation Studies at the University of Queensland Business School, Australia, tells SciDev.Net.
A central challenge facing innovators worldwide, particularly in developing countries, is the mobilisation of stable and accessible financing mechanisms.
“In developing countries, governments largely shoulder innovation and R&D expenditures, to invest in innovation. The private sector investment in innovation is largely untapped. Firms are closer to the marketplace and are in a better position to decide the direction of innovation and to find ways of successful commercialisation – they would benefit from more incentives to invest in innovation,” Wunsch-Vincent tells SciDev.Net.
Liang Chen, an expert on international business and innovation at the University of Melbourne, Australia, tells SciDev.Net: “You don’t always have to invest in cutting-edge technologies to reap financial gains. Investment in e-commerce, for example, has helped address market failures in offline businesses and filled, what we call, institutional voids in Asian markets.”
“In some sense, venture capital also plays a crucial role in not only bringing capital to where needed, but also showcasing to the governments the power of innovation for societal benefits,” Chen adds.
The GII is considered a yardstick for measuring innovation, since the 2019 UN General Assembly resolution, for achieving Sustainable Development Goals. It aims to provide metrics for innovation performance, which in turn assists economies in evaluating their performance and in making informed innovation policy considerations.
“The effort of ranking nations on the innovation index helps us look within and see how we can become better facilitator for our innovators and for our development activities. It almost acts like a mirror or guidepost to nations such as us on which we can benchmark our performance and our capabilities,” said Piyush Goyal, Indian Union Minister for Commerce, Industry and Railways, speaking via video link at the GII virtual launch.
“Developing countries harbour much informal or grassroots innovations, which are not perfectly captured by hard innovation data. More work is needed to capture and quantify such innovation more fully,” Wunsch-Vincent tells SciDev.Net.