Sweden getting the most out of innovation according to Commission’s new indicator

Sweden, Germany, Ireland and Luxembourg are top performers in delivering innovation, according to a new indicator proposed by the European Commission on 13 September. While Japan and Switzerland are the world leaders, the EU holds steady with the US in innovation output.

The new "Indicator of Innovation Output" measures the extent to which ideas stemming from innovative sectors are able to reach the market, provide better jobs and make Europe more competitive. The highest scores went to economies with a high share of knowledge-intensive sectors, fast-growing innovative firms, high levels of patenting and competitive exports.

The indicator was developed at the request of EU leaders to benchmark national innovation policies, and shows that significant differences remain between EU countries.

Commissioner Máire Geoghegan-Quinn, responsible for Research, Innovation and Science, said: "The European Union must turn more great ideas into successful products and services in order to lead in the global economy. We also have to close a worrying 'innovation divide'. The proposed indicator will help us measure how we are doing and pinpoint areas where countries need to take action."

A new measurement

The European Commission already publishes an annual Innovation Union Scoreboard, which assesses the research and innovation performance of the EU member states and the relative strengths and weaknesses of their R&I systems.

While Sweden and Germany also topped the 2013 Innovation Scoreboard, the overall results are slightly different – with Denmark and Finland also making the top four.

The novelty of the proposed indicator is that it focuses on innovation output, whereas the Innovation Scoreboard assess performance against a broad set of 24 innovation indicators including, inputs, throughputs and outputs. The top performers in the new “Indicator of Innovation Output” owe their ranking to high scores in several or all of the following categories:

• Technological innovation as measured by the number of patents per billion GDP. This shows the ability of an economy to transform knowledge generated by investing in R&D into marketable innovations.
• Employment in knowledge-intensive activities as a percentage of total employment. This is important because education and training provide workers with the skills to generate innovations.
• Competitiveness of knowledge-intensive goods and services based on both the contribution of the trade balance of high-tech and medium-tech products to the total trade balance, and knowledge-intensive services as a share of the total services exports. It reflects the capacity of a country to reach global markets with its innovations.
• Employment in fast-growing firms of innovative sectors. This captures the capacity of a country to transform rapidly its economy to respond to new needs and to take advantage of emerging demand.

From 2014, results for the new indicator are planned to be published simultaneously with the Innovation Scoreboard results, supported by analyses of the performance of each Member State.

Need for more information

The new indicator was developed at the request of Europe’s national governments, who wanted to be able to better benchmark national innovation policies and to monitor the EU's performance against its main trading partners.

According to the Commission, “The rigorous measurement of the impact of innovation policies is key for evidence-based policymaking. Moreover, it bolsters the legitimacy of public action and the use of public funds.”It is hoped that the proposed indicator will support policy-makers in establishing new or reinforced actions to remove bottlenecks that prevent innovators from translating ideas into products and services that can be successful on the market.

First set of results

The proposed new instrument’s first set of results confirm the scoreboard’s conclusion of an ever widening innovation divide in Europe. Overall, in 2011 six categories of performers are identified according to the country scores. Sweden, Germany, Ireland and Luxembourg are “top performers”, with scores of over 120 and high values in all four components. These are followed by Denmark, Finland, and the UK, which appear as “very good performers”, with scores of between 110 and 120. France, Belgium and the Netherlands are “good performers” with indicator values of between 100 and 110, followed closely by a group of “medium-level performers”, including Austria, Hungary, Slovenia, Italy, and Cyprus, in the score range of 90 to 100. “Medium-low performers”, with values of between 80 and 90, include the Czech Republic, Spain, Estonia, Greece, Malta, Romania, and Slovakia. Finally, the countries with scores of less than 80 are considered “low performers”. These include Poland, Croatia, Portugal and Latvia, and Lithuania and Bulgaria, both of which have particularly low scores close to 65, equal to around half of the top score.

A comparison with some non-EU countries shows that the EU as a whole does well. Japan is outperforming all EU countries and is the number one performer in the new innovation indicator. Japan performs well in all components of the indicator, with particularly high scores for the contribution of medium and high tech products to trade balance and in patent applications.

The EU increased its performance in 2011 by 4.4 score points compared with 2010, with strong progress made in the knowledge intensive service exports category.