The world ranking of innovative competitiveness and Russia's place in it

Russia is lagging behind in innovationThe Information Technology and Innovation Foundation (ITIF) has published a rating of 40 countries and regions of the world for the development of innovations.

Russia took the 35th place in the ITIF final table.

Today, the idea that the development of advanced transport systems and communication technologies provides companies with much greater geographical freedom in doing business is completely unoriginal. It is not new that the market is becoming international for an increasing share of goods and services. Due to these and other factors, States are forced to increase their competitiveness, and the global economic recession only reinforces this need.

Moreover, for many countries, cost competition is losing its relevance, and they are increasingly relying on innovation and science, trying to create, develop and attract companies with high potential for generating added value. The ITIF review assesses the innovative competitiveness of 40 states and economic regions.

When compiling the rating, ITIF took into account 16 indicators assigned to six categories and weighted with significance.
1. Human capital: higher education among citizens of the age group 25-34 years; the number of employees of scientific and research institutions per 1000 employed.
2. Innovation potential: corporate investment in research and development (R&D); public investment in research and development; share in the global volume of scientific publications.
3. Entrepreneurship: investments in venture capital; new companies.
4. Information technology (IT) infrastructure: modern technologies of state and municipal management (e-government); broadband communications; corporate investments in IT.
5. Economic policy: effective corporate tax rate; ease of organizing and doing business.
6. Economic results: trade balance; inflow of foreign direct investment; real GDP per capita of working age; labor productivity.

Unlike a number of recently published studies, according to which the United States occupies a leading position in terms of innovation and competitiveness, in the ITIF report among 40 countries and regions, the United States ranks only sixth with a final score of 63.9, which is 15% lower than the result of the leader of the rating – Singapore (73.4). The EU-15 group*, which includes 15 leading European states, ranks 18th in the final list with a total score of 52.5 points, 40% behind Singapore. According to the ITIF analysis, contrary to popular belief, the United States is not the undisputed and unattainable leader in terms of competitiveness in the world, but nevertheless, it is significantly ahead of Europe.

*EU-15 Group: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, United Kingdom.Moreover, according to the ITIF report, over the past decade, progress in the United States towards the development of an innovative knowledge-based economy has been the smallest in the sample under consideration.

There was some improvement in the EU-15 group, but its pace is below the average in the sample and the final place is 29.

If the EU-15 maintains the same separation from the United States in terms of development rates, then by 2020 the region will be ahead of the United States in terms of innovative competitiveness," ITIF concludes.

The following areas of work are fundamentally important for the successful development and improvement of innovative competitiveness.

1. Stimulating innovation in companies. Including tax incentives for research and development (R&D), as well as other types of incentives, for example, accelerated depreciation, in order to increase investment in new equipment, in particular IT, other regulations are also important that encourage investment in the main economic blocks that determine economic growth, for example, the development of human resources potential.

2. Openness to immigration of highly qualified personnel who can be sources of new ideas and innovations. Countries that pursue such a policy will be able to achieve greater success.

3. Development of the "digital" economy. It is necessary not only to increase public investment in IT in such areas as healthcare, energy systems, transport, public administration, education, but also to create an effective regulatory framework to stimulate, rather than limit, the development of the "digital" economy. It is also necessary to consider the possibilities of restructuring the existing regulatory system and public procurement policy in order to promote "digitalization".

4. Support of all institutions necessary for innovation. It is important to increase funding not only for university research, but also in the field of institutions that promote the commercialization of scientific developments. In addition, it is necessary to support such areas as local economic development, entrepreneurship development and personnel training.

5. Effective state policy in the field of innovation. It is necessary to ensure that public policy stimulates, not hinders, innovation. Often influential lobbying groups fight against changes and innovations, hiding behind public interests, but very, very often this leads to a slowdown in progressive and positive innovations. All States should ensure that regulatory regulations, procurement policies and other relevant government programs are conducive to innovation.

With the right approach, the pressure of competition between countries can lead to a general and widespread increase in competitiveness and productivity, which will ultimately benefit not only individual states, but also the global economy as a whole. But if, as a result of competition, states begin to practice variants of the "zero-sum game" and the "make your neighbor poor" strategy, especially those economies that focus on export-led growth and protectionist and mercantilist policies, then the global economy will only lose.

All States should create the necessary base through which international competition will stimulate the movement of all subjects of the world economy to innovative and maximally rapid development, but in such a way that it supports, not limits, global growth. The United States and Europe, which led in the 20th century, have the responsibility to lead this movement in the 21st century.

In the final table of the ITIF, the EU-15 group is ahead of the United States in only three of the 16 indicators: the effective corporate tax rate, the trade balance, and the inflow of foreign direct investment.

At the same time, there are significant differences within the European group. Sweden ranks second among all the countries and regions considered and is 11% ahead of the United States in terms of total points. Denmark is fourth on the list. All other countries from the EU-15 lag behind the USA, Spain's figure is only 68% of the US amount. Italy, Greece and Portugal are inferior to some developing countries (Greece is even lower than Russia in the final list).

Within the EU-10* group, the indicators also fluctuate noticeably: Poland scores 45% less than the United States in total points, and Estonia is ahead of Spain.

*The EU-10 Group includes 10 new States that joined the EU in 2004: Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia.It is important to note when comparing that the indicators also vary significantly between the US states: in the leading Massachusetts, the share of R&D spending in the structure of the economy is eight times higher than in Mississippi, which closes the rating.

In fact, the states with the highest scores, such as Massachusetts, Washington, Maryland, would probably be significantly ahead of Sweden and other European countries if they were included in the ranking as independent states.

Although the United States is still located above Europe, the situation is reversed in terms of dynamics. In the last few years, the EU-15 countries have made more progress on all 16 indicators overall than the US (although the rate of change in the European group is still below the sample average).

This is not surprising if we take into account the work of the European Commission and each of the national states of Europe towards the development of an economic model based on innovation and knowledge. In particular, a lot has been done in the field of research and development financing. In contrast, American officials were less active, partly due to the widespread view that the United States does not fundamentally compete with other countries, or holds an indisputable leadership and that this will continue to be the case.

Partly due to lower starting positions, but also as a result of measures taken at the state level, the EU-10 countries also progressed more rapidly, with a rate higher than the average for the sample. In particular, the Baltic states have shown good results, ahead of many European countries with more developed economies.

According to the dynamics of development in the group of leading European countries, Germany and Italy occupy the fifth and sixth place from the end, in turn, Denmark, Ireland and Sweden are rapidly moving in the direction of innovation.

Russia ranks 35th in the final innovation rating (the sum of points is 35.1). A higher result – the 8th position (15.2 points) – on the dynamics of innovative changes.

Meanwhile, according to some of the 16 criteria considered, Russia is in the top ten. Thus, Russia has the highest percentage of the population with higher education in the age group of 25-34 years (1st place). Russia is the eighth in terms of the effective corporate tax rate, and the third in terms of the trade balance indicator. Not a bad result (13th place) also achieved in terms of public investment in research and development (R&D). But in terms of investments in IT (34th place), broadband communications development (34th place), GDP per capita of the working population (36th place) and business climate (38th place) Russia was in the top ten laggards.

The leaders of the global list are in Asia. Singapore occupies the first line of the table, ahead of the United States by 15% and the EU-15 by 40%.

Despite lower per capita incomes, South Korea is one line above the United States in the table. Like Singapore, South Korea focuses on technological innovation, in addition, assigns a priority role to international competition. An Information Agency and an Industrial Technology Fund have been established in the country. It is also worth noting the favorable tax regime for corporations. As a result, South Korea has made a significant step towards prosperity and high-tech growth.

Even Japan, which many economists mistakenly write off (largely due to slow GDP growth, which is associated not so much with poor economic indicators as with a decline in the working-age population), ranks 9th and is only 7% behind the United States and 14% higher than the EU-15 in total points.

Many countries that attract a lot of attention as competitors in the field of innovative economy, including the developing BRIC countries, actually find themselves at the bottom of the table. This does not mean that they and other "laggards" in the list do not have innovative potential – they do. But in their economic structure, the weight of these factors is still minimal. The main factor of attractiveness of these countries is still associated with low costs, and not with the infrastructure of innovation. And this situation is likely to persist for many more years, at least if productivity does not grow in a wide range of industries.

As for progress, the situation is much better here. The countries of South Asia are moving forward by leaps and bounds. Perhaps it is not surprising that China ranks first in terms of progress. This is due to the active promotion of modernization and technology development. Singapore is not only the leader in total points at the moment, but ranks second in terms of the pace of change in the field of innovation.

Meanwhile, South Korea and Japan, two states that experienced periods of rapid growth a decade or two ago, continue to develop success rapidly, far ahead of the US and the EU-15.

In general, the central problem for the countries of South Asia in the next decade will be the transition from a predominantly export growth model, largely built on mercantilist measures, in particular currency manipulation, towards a policy of stimulating innovation, the use of information technology, increasing productivity in all sectors of the economy – not only in certain export industries.

And other Asian countries, including Russia (part of Russia is in Asia, part is in Europe, which is why ITIF classifies it as Asia) and India are also showing great progress, albeit from low starting positions.

Like China, these countries have a long way to go before becoming real actors in the global economy of knowledge and innovation. Their strong point is low costs, but if they can effectively overcome the shortcomings, in particular with regard to the business climate, personnel qualifications, infrastructure, they have all the conditions to continue rapid development and increase productivity.

In general, the observed trends indicate that without coordinated government measures in the United States and Europe in the direction of innovation and competitiveness, the coming century will become the century not of the Atlantic, but of the Pacific region, more precisely, of Southeast Asia.

Although both Mexico and Brazil have eliminated the lag behind the United States in terms of development rates over the past decade, they are losing positions to the EU-15 and EU-10. This reflects the challenges faced by Latin American countries as a whole. Surrounded by the rich and knowledge-intensive economies of Europe, Japan, the United States and rapidly improving Asian countries, in particular, India and China, Latin America, with the exception of a few countries, in particular Chile, failed to develop and implement programs that would allow the region to embark on a path of rapid knowledge-intensive growth.

Similarly, the states of the British Commonwealth – Australia, Canada, Great Britain – progressed faster than the USA, but lagged behind the EU-15.

Someone may associate these trends, in particular, the low results of the United States, with the convergence process, in which the laggards catch up with the leaders. For sure, a greater convergence is possible for certain factors than for others. According to indicators for which the increase potential is limited (for example, the proportion of the adult population with higher education cannot be more than 100%), it is more likely. But for many other factors, the potential for changes of which is not limited (for example, GDP per capita of the working population) or for which the levels are relatively low (for example, venture capital), it is hardly possible to expect convergence.

Thus, by many factors, the United States is likely to be able to continue to progress, at least keeping up with less developed countries.

Indeed, economists have noted that there is generally no convergence between high- and low-income countries. Moreover, if this is the case, why are highly developed countries such as Austria, Denmark, Japan and Sweden developing much faster than the United States?

And the fact that the United States is no longer a leader, and that their development is slower than in all other countries, shows that resting on laurels is a dangerous tactic. As for the USA, as for any other state.

*North American Free Trade Agreement (NAFTA)**The EU-25 group includes all EU States, with the exception of Bulgaria and Romania, which joined the EU in 2007 and for which there is not yet sufficient data for analysis.

Changes in the innovation status for the period 1999-2009

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02.03.2009