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U.S. Improves in Latest Global Innovation Index, Amid Warning Signs

The U.S. returns to the top in quality of innovation, while East Asia climbs the rankings, but countries face global economic uncertainties and lagging public investments in R&D.

Last week the World Intellectual Property Organization, Cornell University, and INSEAD released their annual report, Global Innovation Index (GII) 2019, which provides metrics on the innovation performance of 129 countries. The U.S. ranks 3rd overall, moving up from its 6th place position last year, behind front-runners Switzerland and Sweden (see table at right). Other European nations such as the UK and Germany retain spots in the top 10, along with the sole East Asian representative, Singapore. Notably, Israel enters the top 10 for the first time in 2019. As in previous years, the top 10 is composed exclusively of economies classified as high-income.

Despite sluggish economic growth globally, the report finds that innovation is “blossoming” around the world and increasingly part of policy ambitions among governments. As shown in the chart below, global R&D spending increased by 5.2 percent in 2017 – reaching its highest level since 2011 – driven largely by the private sector. Asian R&D powerhouses including China, Japan, Korea and India contributed as much as 40 percent of the world’s R&D in 2017, up from 22 percent in 1996, per the report. A major question posed by the authors is whether this growth will continue, given increased protectionism that impacts technology-intensive sectors and knowledge flows: “If left uncontained, these new obstacles to international trade, investment, and workforce mobility will lead to a slowdown of growth in innovation productivity and diffusion across the globe.”

Image source: Global Innovation Index 2019

Moreover, the report warns that public R&D expenditures are growing slowly or not at all. “Public expenditures focus more on blue sky and basic research, which is critical to progress in the next decades, while private sector R&D is closer to product development,” notes the report. Most R&D budgets of governments in high-investing R&D countries remain below pre-crisis levels, while China’s public R&D growth is at its lowest since 1997. The issue of lagging U.S. public research investments is also addressed in a major recent report – Second Place America? Increasing Challenges to U.S. Scientific Leadership – published by the Task Force on American Innovation, a coalition of business and university associations, and scientific societies (AAAS is a member of the Task Force and contributed to the report).

US, Europe Maintain Lead

The U.S. continues to rank 1st in several key GII metrics including quality of universities and quality of research publications, as measured by citations. When also factoring in patented inventions, the U.S. regains the top rank in overall quality of innovation, moving ahead of Japan (see chart below). The U.S. also reaches 1st in university-industry research collaboration this year, as measured by survey responses to businesses and academic institutions. U.S. leadership is maintained in venture capital deals, global R&D companies, and the state of cluster development within the country; the U.S. continues to host the largest number of clusters (26) followed by China (18). A major area of weakness for the U.S. is in higher education, with its percentage of postsecondary graduates in science and engineering ranked 73rd globally.

Image source: Global Innovation Index 2019

In Europe, Switzerland takes the lead, ranking 1st overall in the GII for the ninth consecutive year. Sweden maintains its performance as a leader in patenting, keeping its 1st position in Patent Cooperation Treaty (PCT) or international patent applications – a spot it shares with Switzerland and Finland – and gaining the 1st position on patent families (patents filed in two or more countries). The UK maintains its lead in quality of scientific publications and is second only to the U.S. in university rankings. Meanwhile, Germany remains highly innovation-oriented, ranking 2nd in global R&D companies and cluster development, and 3rd in quality of scientific publications.

East Asia Makes Upward Strides

China continues to see dramatic improvements in its innovation performance, reaching 14th place this year after edging into the top 25 in 2016. China is currently the only middle-income economy among the top 25 innovators (see chart below). Notably, China's quality of scientific publications is now above-average compared to high-income economies, as China turns its attention to the impact of innovation. China ranks 1st in several key metrics including high-tech net exports, trademarks and industrial designs, and creative goods exports. Private sector R&D investments in China comprised 27 percent of the world’s total in 2017, nearly on par with U.S. firms, and up from a mere 2 percent in 1996, according to the report. China ranks 3rd in quality of universities.

Image source: Global Innovation Index 2019

Korea has also made significant progress, ranking 11th overall and boasting the second-highest R&D intensity – defined as R&D as a share of GDP – behind only Israel. Korea’s ICT sector is ranked number one in the Index. Meanwhile, Singapore holds the top spot in high- and medium-high-tech manufacturing and surpasses Luxembourg as the number one in knowledge-intensive employment. Singapore’s PISA scores in reading, math, and science are ranked highest in the world. Hong Kong gains one spot to 13th place overall, with plans to develop into a global innovation hub alongside neighboring Shenzhen.

Medical Innovation Requires Sustained Public Investment

This year’s edition of the GII focuses on the theme Creating Healthy Lives—The Future of Medical Innovation. The report stresses that government R&D spending is still the primary source of scientific health research worldwide. “It is thus vital to prioritize public funding – in particular, basic R&D. This holds true in middle- and low-income economies where health R&D expenditures are still relatively low, but also in high-income economies that have faced declining public R&D budgets – notably in health-related public research institutions – in recent years,” state the authors. This comes amid a slowdown in major medical advances, drug approvals, and research productivity, warns the report.

While pharmaceutical research productivity may have slowed over the past decades, the report predicts there is significant potential for new medical technologies to re-shape health innovation. While medical breakthroughs are difficult to predict, the report identifies a number of promising fields including precision medicine, gene editing, and regenerative medicine. As shown in the chart below, the U.S. has taken a commanding lead in medical technology-related patent publications. However, China is now dominant in pharmaceutical patent output, and is also bolstering its biotechnology patent numbers.

Image source: Global Innovation Index 2019

To learn more, download the full report here.