The World Economic Forum that recently concluded in Davos, Switzerland, has long considered innovation one of its 12 "pillars" and ranks nations according to their perceived achievements in innovation. Number one is Finland, followed in order by Switzerland, Israel, Japan, the United States, Germany, Sweden, the Netherlands, Singapore and Taiwan. The WEF's ranking relies heavily on a poll of 15,000 executives who rank nations on factors such as "capacity for innovation" and cooperation between industry and academic researchers.
The purpose of the ranking is to identify the qualities that comprise leadership in innovation, but the power of innovation, like beauty, is in the eyes of the beholder. Bloomberg uses slightly different criteria -- intensity of R&D, research personnel, number of high-tech enterprises, high-value manufacturing, patent activity and post-secondary graduates -- to come up with its own top-10 list: South Korea, Japan, Germany, Finland, Israel, the United States, Sweden, Singapore, France and the United Kingdom.
Yet another approach employed by the Conference Board and some other groups is to assess what is called "total factor productivity," defined as that part of an economy's output that is not explained by the traditional measures of workers and capital equipment. Presumably innovation accounts for part of the difference, though how much is anyone's guess.
The reality is that while innovation is vital to a nation's economic performance, no one can say with certainty what combination of factors fosters the kind of creative genius that brings game-changing products, processes and services into being. One of the factors used by Bloomberg, for example, is the share of the labor force with post-secondary education. Russia is number one in that category, yet it ranks only 14 on the Bloomberg rating. Apparently there is only so much that brilliant minds can achieve in a kleptocracy.
Interestingly, neither the WEF nor Bloomberg lists protection of intellectual property as a factor in a nation's innovative capacity, a conspicuous omission. It is not reasonable to expect people to make the high-risk investments in R&D that is the lifeblood of innovation in the absence of legal guarantees of intellectual property. And in fact, the nations most often cited for leadership in innovation do offer protection for intellectual property.
An even more glaring omission is the vital influence of manufacturing in innovation. Manufacturing accounts for the lion's share of R&D and patents awarded, and all the nations cited for leadership by the WEF and Bloomberg are in fact leaders in manufacturing. The shop floor is the seedbed for invention because that is where new ideas are proved or disproved.
But the most glaring omission of all -- and one factor almost impossible to measure -- is the spirit of entrepreneurship. A disproportionate share of innovation comes from a few lonely souls with big ideas and the courage to see them through. I would argue that the American culture from the universities to the factory floor, from Boston to Silicon Valley, continues to provide the best environment for creating entrepreneurs.
Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years, and later as President of the Manufacturing Institute. Jerry is available for speaking engagements.