Billionaire venture capitalist Jim Breyer is heading to the Swiss Alps this year with an upbeat message. "This is a magical time," says Breyer, founder and CEO of Breyer Capital and a partner at Accel Partners. "Innovation is happening in centers of excellence around the world faster than ever before." His optimism contrasts with the trouble-ahead warnings that business and government leaders will hear this week at the annual meeting of the World Economic Forum in Davos, Switzerland. Japan and Europe are expected to grow only about 1 percent this year, and one-time dynamos like Brazil, China, and Russia are losing speed.
The best antidote to stagnation is innovation, the creation of products and services that make life better—whether it's air conditioning, vaccines, or text messaging. Every country wants to foster a culture of innovation, but it's not easy to do. "I've had dozens of meetings over the years with leaders from around the world who asked how they can build their own Silicon Valley," says Breyer. "It never works." He has his own theory about what does work, though it's not exactly scientific: There's a magic. There's a love for entrepreneurship and experimentation that must be there.
Bloomberg's 2015 ranking of the world's 50 most innovative countries takes a more prosaic approach to the question, focusing on six tangible activities that contribute to innovation. South Korea tops this year's overall ranking. The U.S. places sixth, and China 22nd. Morocco finishes last. You can click here to go straight to the full results, but don't do that just yet. The point of this list isn't to award bragging rights to one country over another—it's to see whether a broad formula for innovation can in fact be identified, and what companies, and governments, need to do to reproduce it.
#1In postsecondary education as a percentage of college-age population
#1In the percentage of the labor force with a postsecondary degree
#1In annual new science and engineering graduates per thousand people in the labor force
#1In annual science and engineering graduates per thousand postsecondary graduates
This attempt to measure innovation leaves out one important but hard-to-quantify influence: government regulation, which can either accelerate or impede the adoption of new ideas. Politicians and regulators are often wary of change.
Audi CEO Rupert Stadler says that because of strict driving rules in Germany, his company has conducted all of its work on new automated systems in the U.S., where "there is more freedom and liberty to do it."
Uber, the mobile app that connects drivers and riders, is another example of how governments approach innovations that threaten the existing order. Taxi drivers all over the world hate Uber. In the U.S., customer demand has mostly overwhelmed attempts by cities and states to stop the company from operating. But France has banned one of its services. "In Paris it’s impossible to get a taxi," says economics professor Hall. "It’s illustrative of the resistance to innovation." Sometimes, Hall says, the best thing a government can do to promote innovation is get out of the way.
The Bloomberg Innovation Index
By Peter Coy
Research by Wei Lu
Produced by Keith Collins, Jeremy Scott Diamond, Braulio Amado, Cindy Hoffman and Adam Pearce
Bloomberg ranked countries and sovereigns based on their overall ability to innovate and identified the top 50. Six equally weighted metrics were considered and their scores combined to provide an overall score for each country from zero to 100.
1. Research & Development: Research and development expenditure as a percentage of GDP
2. Manufacturing: Manufacturing value-added per capita
3. High-tech companies: Number of domestically domiciled high-tech public companies—such as aerospace and defense, biotechnology, hardware, software, semiconductors, Internet software and services, and renewable energy companies -- as a share of world's total high-tech public companies
4. Postsecondary education: Number of secondary graduates enrolled in postsecondary institutions as a percentage of cohort; percentage of labor force with tertiary degrees; annual science and engineering graduates as a percentage of the labor force and as a percentage of total tertiary graduates
5. Research personnel: Professionals, including Ph.D. students, engaged in R&D per 1 million population
6. Patents: Resident utility patent filings per 1 million population and per $1 million of R&D spent; utility patents granted as a percentage of world total
Of the more than 200 countries and sovereigns evaluated, 69 had data for all six metrics. Postsecondary education and patent activity consisted of multiple factors that were weighted equally. Weights were rescaled for countries with some but not all of the factors in those two metrics. The ranking shows only those countries included in the top 50. Most recent data available were used.
Ranking sources: Bloomberg, International Monetary Fund, World Bank, Organisation for Economic Co-operation and Development, World Intellectual Property Organization, United Nations Educational, Scientific and Cultural Organization
Other sources: Samsung, Swiss Federal Statistical Office and Unified Patents