Canada in the Global Innovation Index (GII), 2011-2021

We all understand what innovation is. Or at least we think that we understand it. Intuitively, it is something new and useful that improves our standards of living. How would you measure innovation? Unfortunately, there is no single indicator that can reflect the full spectrum of innovation performance from idea inception to impact.

A key challenge is to find metrics that capture innovation as it actually happens in the world today. Direct official measures that quantify innovation outputs remain extremely scarce. For example, there are no official statistics on the amount of innovative activity—defined as the number of new products, processes, or other innovations—for any given innovation actor, let alone for any given country.

It can take a long time for transforming an idea into a new good or service, from months to years. It takes even longer for technological advances to be widely adopted, create new jobs, enhance economic productivity and improve people’s prosperity, health and well-being. Today’s progress is the result of past innovations; today’s innovations, in turn, sow the seeds for progress in the years to come. Our current state of living is a product of our past decisions and actions, what we did and what we didn’t do, all rights and wrongs. In essence, it is our past that determines our presence. When we look at a star, we can only see the light that was emanated from the star some time ago. Some stars may not be alive, but we don’t know it yet.

The Global Innovation Index (GII) classification has been adopted by the World Intellectual Property Organization (WIPO) to capture innovation ecosystem performance of 130+ world economies and highlight global innovation trends. The GII ranks world economies according to their innovation capabilities. Consisting of roughly 80 indicators, grouped into innovation inputs and outputs, the GII aims to capture the multi-dimensional facets of innovation. GII relies on two sub-indices: the Innovation Input Sub-index and the Innovation Outputs Sub-Index. The Innovation Input Sub-index is built on five pillars that capture elements of the national economy that enable innovation activities: Institutions, Human capital and research, Infrastructure, Market sophistication, and Business sophistication. The Innovation output Sub-Index includes two pillars: Knowledge and technology outputs and Creative outputs.?

Hence, WIPO uses a broad notion of innovation:

“An innovation is a new or improved product or process (or combination thereof) that differs significantly from the unit’s previous products or processes and that has been made available to potential users (product) or brought into use by the unit (process).”

According to 2021 GII ranking Canada occupies a modest 16th place among 132 economies. Top ten most innovative countries for 2021 are: 1) Switzerland, 2) Sweden, 3) US, 4) UK, 5) Republic of Korea, 6) Netherlands, 7) Finland, 8) Singapore, 9) Denmark and 10) Germany.

It’s instructive to look at historical trends in Canadian performance in innovation. Canadian position in GII ranking has been steadily declining since 2011 by dropping from 8th to 16th position in 2021. During the same 10-year span, Canada has been always among the top 10 economies (8th place in 2021) ranked high in Innovation Inputs and innovation investments. This is good news meaning that Canada invests a lot in the innovation process.

However, Innovation Outputs metrics put Canada on the 23d place meaning that Canada produces much less innovation outputs relative to its level of innovation investments/inputs.

Canada’s 16th place in the global innovation index list comes at a very high price related to disproportionally high input investments. Some economies can achieve more with less. For example, due to more efficient conversion several countries like Cyprus (innovation input 31), Estonia (innovation input 24) and Malta (innovation input 27) achieve the same level of innovation outputs as Canada with significantly lower input resources. Czech Republic outperforms Canada in innovation outputs while being ranked 30 in innovation inputs. The historic trend demonstrates a declining performance of Canada in producing Innovation Outputs by dropping from 8th place in 2011 to 23 in 2021. High efficiency in transforming innovation inputs into outputs has been eluding Canada for nearly 10 years with the estimated efficiency being nearly constant around 0.6.

The essential part of Innovation Outputs is Knowledge & Technology Outputs Sub-pillar. It has been insignificantly fluctuating between 19th and 23d ranks for Canada. Comparing with other dynamic economies, Canada demonstrated no visible improvement. Creation of knowledge can be quantified by two forms or outputs: scientific/technical articles of a certain quality and patents. From 2011 to 2021 the quality of articles generated by Canadians has remained very high resulting in the high citation index and ranking Canada in 4th place in this knowledge output. However, a chronic weak performance in patent generation has been haunting Canada for nearly a decade. By the number of patents generated domestically by residents, Canada ranks 32d among 132 world economies. By the number of patents generated in international offices, Canada ranks 23 (both numbers refer to 2021). Historical trends indicate a nearly consistent underperformance when normalized by GDP. In the group of top 25 world economies, Canada holds the last place in patent generation. But even these patents don’t make a full impact on Canadian economy. While being generated by Canadian inventors, 50% of the total number of patents have been assigned to other world economies indicating a steady drain of Canadian IP.

Why so? Nearly half of innovation and knowledge outputs bypass Canadian economy due to… ineffective commercialization environment and lack of incentives for keeping patents in the country??

Given a complexity and intricate nature of innovation, no metrics can be perfect. The word of caution from WIPO: “The GII is not meant to be the ultimate and definitive ranking of economies with respect to innovation. Measuring innovation outputs and its impact remains difficult, hence great emphasis is placed on measuring the climate and infrastructure for innovation and on assessing related outcomes. Although the end results take the shape of several rankings, the GII is more concerned with improving the “journey” to better measurement, understanding innovation, and in identifying targeted policies, good practices, and other levers that foster innovation. The rich data metrics, at index, sub-index, or indicator level, can be used to monitor performance over time and to benchmark developments against economies within the same region or income group classification.” (WIPO 2020 report)

Having this in mind, what story do the numbers tell for Canada? Are we doing right things now? Have we done right things a year...two years…three years ago?.. Judge by yourself.?