South Africa has ranked number 30 out of 56 countries in terms of its domestic policies supporting global innovation.

The global technology think tank, Information Technology and Innovation Foundation (ITIF) released the data in its report, Contributors and Detractors: Ranking Countries’ Impact on Global Innovation.

“More innovation will be the determining factor in achieving greater progress,” stated the report, released on 20 January. “Countries’ economic and trade policies can either help or hurt global innovation.

“In contrast, policies such as export subsidies or forced localisation harm global innovation. If nations increased their supportive policies and reduced their harmful policies, the rate of innovation worldwide would significantly accelerate.”

How does South Africa compare?

• South Africa and Kenya were the only African countries to have been featured. Kenya ranked at 51.

• South Africa’s BRICS partners ranked as follows: Brazil came in at 41, Russia 42, India 54 and China 44.

• The top spots were taken by Finland, Sweden, the UK, Singapore, Netherlands, and Denmark, respectively.

The authors of the report looked at various aspects that supported innovation locally, but which had a global effect, such as supportive tax systems, investing in the work force, and research and development.

“Robust innovation is essential for economic growth and progress,” said co-author Stephen Ezell, ITIF’s vice-president for global innovation.

“As countries increasingly vie for leadership in the innovation economy, they can implement policies that try to benefit only themselves but harm the production of innovation in the rest of the world. Or they can implement ‘win-win’ policies that bolster their own innovation capacity while also generating positive spill-overs for the entire global economy. For innovation to flourish around the world, we need a system that is doing much more of the latter.”

According to technology news site IT Web, South Africa’s National Development Plan is the blueprint for “the national system of innovation to function in a coherent and co-ordinated manner, with broad objectives aligned with national priorities.

“It seeks to improve the governance of the innovation system, especially by ensuring the alignment of science and technology innovations activities across government and by co-ordinating public funding.”

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Contributors and Detractors: Ranking Countries’ Impact on Global Innovation

Executive Summary

More innovation will be the determining factor in achieving greater progress. Countries’ economic and trade policies can either help or hurt global innovation. For example, policies such as robust investment in and tax incentives for scientific research and education support global innovation. In contrast, policies such as export subsidies or forced localization harm global innovation. If nations increased their supportive policies and reduced their harmful policies, the rate of innovation worldwide would significantly accelerate. This report assesses countries on the extent to which their economic and trade policies either constructively contribute to or negatively detract from the global innovation system.

Most studies comparing countries on innovation rank them on innovation capabilities and outcomes. But no study has assessed the impact of countries’ innovation policies on the broader global innovation system. This study assesses this by inquiring whether countries are attempting to bolster their innovation capacities through positive-sum policies such as investments in R&D, education, or tax incentives for innovation that contribute positively to the global body of knowledge and stock of innovation; or if they are trying to compete through negative-sum “innovation mercantilist” policies such as localization barriers to trade, export subsidization, or failing to adequately protect foreign intellectual property (IP) rights (e.g., through the issuance of compulsory licenses or even outright IP theft). Those types of policies are more concerned with expropriating existing knowledge, shifting innovative activity to suboptimal locations, or unfairly propping up inefficient companies. Because of the injurious effect of these policies on innovators (both those living in other nations, and even in-country) the result is less, not more, global innovation, and the world as a whole is hurt by such nations’ innovation mercantilist policies.

This issue is of paramount importance, because as countries increasingly vie for leadership in the global innovation economy, they can implement policies that benefit only themselves at the cost of hurting global innovation, or policies that can bolster their own innovation capacity while also generating positive spillovers that benefit the entire global innovation system.

This report assesses the impacts of countries’ economic and trade policies on the broader global innovation system. It examines 27 indicators, including 14 “contributors” that constructively spill over to contribute to global innovation, grouped into three categories – taxes, human capital, and R&D and technology – and 13 “detractors” that inhibit greater levels of global innovation, also grouped into three categories – balkanized production markets, IP protection, and balkanized consumer markets.

The report finds that the nations doing the most to support global innovation while doing the least to detract from it, on a per capita basis, are Finland, Sweden, the United Kingdom, Singapore, and the Netherlands. The report identifies these countries as “Schumpeterians” for fielding policies – such as robust levels of government investment in scientific research and education and innovation-enabling tax policies – that produce significant spillovers to the global innovation system while generally eschewing use of policies that detract from it. In contrast, the countries making the least constructive impact on the global innovation system – Argentina, Indonesia, India, Thailand, and Ukraine – contribute less to global innovation and at the same time use more innovation mercantilist policies that detract from it. The United States ranks just 10th overall, largely because its innovation-supporting policies (such as funding for scientific research) are lower than those of the leaders (on a per capita basis). China ranks 44th, largely because it fields so many policies that harm global innovation.

Some policymakers may say that this it is all well and good to think about the global innovation system, but their job, after all, is to look out for the innovation welfare of their own country, not to be altruistic. However, this report finds a strong correlation between countries’ contributor innovation policies and their levels of domestic innovation success, as evidenced by countries’ contributor scores correlating with their innovation output scores on the World Intellectual Property Organization’s 2015 Global Innovation Index. In other words, doing well on innovation policy can also mean doing good for the world.

If the world is going to maximize global innovation, it will need to develop stronger mechanisms to encourage nations to do more contributing and less detracting. Perhaps the most important step needed to move in this direction is for global policymakers, economists, and pundits to begin to treat innovation as though it is as important as trade in optimizing global economic growth and welfare. Even if some policymakers do not believe it, most know they are supposed to repeat the mantra that free trade boosts global economic welfare. But that same intellectual consensus does not exist when it comes to supporting innovation policies, such as robust intellectual property protections, that are a key to maximizing global innovation (and thus global economic welfare). Importantly, this means pushing back against the false narrative advanced by organizations such as the United Nations Conference on Trade and Development (UNCTAD) that developed nation innovation comes at the expense of developing-nation economies and that an innovation “redistribution” strategy helps, not hurts global innovation.

We also need to develop a better framework for distinguishing between countries’ innovation policies that are good (i.e., that help the adopting nation and the world) as opposed to “ugly” (i.e., that purport to help the adopting nation but that hurt global innovation). For example, the World Trade Organization (WTO) should produce its own version of The Information Technology and Innovation Foundation’s (ITIF’s) The Global Mercantilist Index, which would comprehensively document countries’ WTO violating trade barriers as they relate to innovation, while unabashedly ranking the most egregious nations.

Put simply, the world is not producing as much innovation as is possible – or as is needed. For as Joseph Schumpeter once stated: “technological possibilities are an uncharted sea.” The problem today is that because of the policies of many nations, too many of the boats on this sea are underpowered, and the sea itself is too turbulent. It is time to understand that maximizing global innovation should be the key international trade goal of the 21st century and that, absent new approaches and stricter disciplines, the world will fail to deliver the promise of the future – new technologies, new products and services, new cures or treatments for diseases, and greater social and economic well-being – to the world’s 7 billion inhabitants as quickly as possible.

The Information Technology and Innovation Foundation (ITIF) is a nonprofit, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy. Recognized as one of the world’s leading science and technology think tanks, ITIF’s mission is to formulate and promote policy solutions that accelerate innovation and boost productivity to spur growth, opportunity, and progress.