Global Innovation

The report used a number of indicators including 14 contributors that constructively spill over to contribute to global innovation and 13 detractors that inhibit greater levels of global innovation. It went on to find a strong correlation between countries’ contributions to global innovation and their levels of innovation success showing that those who have successful domestic innovation policies will also do well for the rest of the world. Quite simply, more innovation is the determining factor in achieving greater progress.

Innovation is defined as the improvement of existing or creation of entirely new products, processes, services and business or organisational models. Essentially, innovation is the creation of new value for the world.

There are three market conditions highlighted by the report that combine to play a key role in helping to maximise innovation. They are:

Having large markets - firms with high fixed costs of design and development but relatively low marginal costs of production can use large markets to help cover those fixed costs. For each unit, costs can be lower and therefore revenues for reinvestment in innovation higher.

No excess competition – though large markets provide a greater pool of consumers, they also bring an excess of competitors who can erode potential market share. The report references previous studies that show innovation and competition can be modelled on an inverted ‘U’ basis when both too little and too much competition leads to less innovation. Too much competition and firms are unable to put resources into innovating. Too little competition and firms can have little incentive to innovate. There is a sweet spot in the middle where competition is just right.

Finally there is strong intellectual property protection. Firms that operate in innovation based industries will always place a great deal of emphasis upon their intangible capital or their intellectual property rights. Having in place strong intellectual property rights helps to spur innovative activity by increasing the appropriability of the returns to innovation. This enables innovators to capture more of the benefits of their own innovative activity.

What’s interesting is that looking at these three key market conditions, firms are unable to have much influence upon the first two which are largely dependent upon wider economic factors. The final condition, strong intellectual property rights is a factor that any firm can directly influence by obtaining the rights for its innovations. The general benefits of intellectual property are numerous and well documented yet this report also now shows that having in place strong intellectual property rights is a key factor in determining continual successful innovation.

There’s a lot of other interesting data and studies within the report. For example, a section looking at human capital defines four key indicators that contribute to a country’s success in its human capital. They are expenditure on education per student; graduates in scientific fields; number of top ranking universities and number of researchers per capita. For anyone wondering, a snapshot of the data is provided below.

Education Expenditure per Student

Science Graduates per 1,000 Citizens

Percentage of Graduates in Science Fields

Number of Top Ranking Universities

The report concludes that the world is not producing as much innovation as is possible, or even as is needed. Despite the almost daily advances in technology such as smart phones, driverless vehicles, drugs and disruptor businesses such as UBER and Airbnb, there is still much innovation that isn’t being undertaken and countries and firms are perhaps slow to achieve the next level of technological advances.

The report recommends that world governments collaborate on a global innovation system which would include increasing public investment and creating innovation-supporting tax policies. Though such ‘closer union’ certainly would appear to make sense, given recent global events, it’s difficult to see just how feasible this is. It’s a report well worth checking out and can be found here.

Swindell & Pearson has been helping businesses and individuals protect and defend their ideas, innovations and brands for over 130 years. With its head office in Derby, the firm also has offices in Stoke, Wolverhampton, Stafford, Sheffield and Burton. To find out how Swindell & Pearson can help you with any intellectual property requirements please get in touch via [email protected] or by telephone on 01332 367 051.