The latest edition of the Global Innovation Index (GII) has been published. It is again time for comparisons with the region, the world, similar economies, and our own performance from the previous year. How do we stand? There's no simple answer, but here's a teaser: it's not bad at all.
Since it was launched by WIPO (the World Intellectual Property Organization) in Geneva seventeen years ago, The Global Innovation Index (GII) has grown into an important tool through which economies worldwide assess their standing, innovation progress, strengths, and opportunities for improvement. This year’s report covers 133 countries, covering 92.8% of the world’s population and 97.5% of global GDP. Compared to 2022, 20% more countries now use the GII to establish their national strategies and develop their innovation ecosystems.
This year as well, the report includes some methodological innovations, but the foundation stays the same - progress is evaluated in terms of institutions, infrastructure, human capital, research and development, business and market sophistication, technological outputs, and creative outputs. These are the seven "pillars," each with its many sub-pillars and indicators.
A good position on this ranking means that you have a strong knowledge-based economy, greater competitiveness, higher-value products, better conditions for innovation and business, improved jobs and salaries, and even happier people—not to mention benefits like attracting tourists who come to spend money.
Let’s reflect on the past years..
Two years ago, it seemed that with a 5% improvement over the next 4 years, we could make a significant leap, advancing by ten or more positions. We were ranked 55th out of 132 countries. In last year’s report, we had more pillars where we had improved than those where we had declined. We also saw the risk of creating imbalances among domains, a mismatch between inputs and outputs, which could drag down the entire ecosystem. We concluded that, If we look at it positively, our time is yet to come, and that this time should be sought in areas that the GII refers to as "creative outputs" and "business sophistication".
Global Context: Things aren’t all rosy
The position on the table alone doesn’t say much if we don’t understand the conditions of the competition, and these are problematic to say the least. When it’s said that innovation development requires a certain tolerance for uncertainty, it refers to a mindset that fosters it, not to trade wars between major powers, the approach toward a new global economic crisis, or the threat of a third world war.
Ever since the COVID-19 pandemic, the world has been encumbered by debt and supply chain issues. Monetary policies remain restrictive, as does the regulation of financial markets. Geopolitical rivalries are intensifying, and regional conflicts are escalating, with new ones emerging.
A significant decline in VC investments
VC investments saw a steep 40% decline, which is not a really good sign. The number of closed deals has dropped by 10%. The number of patent filings has also decreased for the first time since 2009, and scientific output has fallen by 5%. Growth in R&D spending has slowed, primarily due to reduced activity from multinational corporations.
To paint a less bleak picture, there has been notable technological progress, particularly in healthcare applications, increased computing power, and the development of electric batteries. It's also promising that both the public sector and businesses are increasingly adopting new technologies, especially in telecommunications and robotics—though this was to be expected. Investments in artificial intelligence, as anyone not living under a rock would know, have grown by 30%. Renewable energy continues to get cheaper, although the rate of price decline has slowed somewhat.
Switzerland is leading, China is on the rise, but what about us?
The rivalry between the giants continues. The U.S. is in third place, while China keeps improving its infrastructure and has climbed to 11th. It’s a bit boring at the top—Switzerland is still in first. And us, where do we stand?
We’ve moved up one position and are now ranked 52nd. For a country at our level of economic, technological, and social development, given the conditions we’re all facing, we really can’t complain. The result looks even better when you consider that only nine out of 39 countries in Europe have managed to make any progress.
For comparison, Romania is ranked 48th, Croatia 43rd, Bulgaria 38th, and Hungary 36th—all EU member states. We're right on their heels. Of these countries, only Croatia has made progress. Apart from Hungary, no other country in the region has an institutional framework as supportive of innovation development.
We’re collaborating more internally
We’re making great progress in “creative outputs” – we’ve climbed seven spots. We’ve been much better at turning inputs into technological and innovative results. In this area, we stand out even on a global scale. We’ve also made strides in business sophistication – more people are working on tasks that require advanced skills, and companies are focusing more on knowledge and employee development. The participation of women is also on the rise. The index that measures cluster development has also increased, by as much as 28%. In terms of infrastructure, we’ve entered the top 30. The number of tech startups has increased by 30%. We’re doing well in areas like industry diversification, the number of scientific and technical articles, and the export of cultural, ICT, and creative services. It’s become clear that we’re working together more. Maybe that’s the key to our progress – something that drives us forward even in tough times, when everyone is expecting a crisis.
Education, education, education...
If we dive into the details, we’re still investing too little in education. Domestic companies are still underinvesting in software, and we’re not doing enough in terms of research and development. We’re inefficient in terms of energy use, and the economy still doesn’t leverage modern technology enough. The impact of innovation spilling over from the tech ecosystem to traditional industries is minimal. Unfortunately, innovation remains largely confined to the IT and tech sectors.
While the number of tech companies is growing, most are still in the early stages of development. There’s significant potential for progress in the coming years, especially in areas like the commercialization of scientific discoveries and research.
We’re lacking, or rather, we are facing challenges in the rule of law and the stability of public policies that should foster entrepreneurship and business growth. There’s also plenty of room for improvement in human capital and research (we’re making progress, but there’s still much more to be done). We need to improve the quality of higher education and encourage lifelong learning and development. The student-to-teacher ratio is too high (7.5 students per teacher), and unfortunately, we're at the top globally—though for all the wrong reasons.
We seem to know what needs to be done
Considering where we are and the competition we're facing, any progress is a sign that we're doing something important right. It reminds us of how, last year, we decided we needed to improve our creative outputs and business sophistication. We’ve managed to accomplish both. It’s like we were reading the analysis, reflecting on ourselves, asking what we needed, and then deciding to take action. It feels like we’ve been strategic. Maybe we have, at least to some extent. One thing’s for sure – we know what we need to do. And that’s half the battle, right?
