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|Wednesday, 25 April 2012 22:25|
Asia has been the most dynamic part of the world economy for some time. And while it has long been considered a region of copycats, Asia is now becoming a more important player in global innovation.
Singapore and Hong Kong are among the world's leaders in innovation. Korea has now forged ahead of Japan to be the Asia's third most innovative country. India is carving out a role in "frugal innovation". And both China and India are leading in attracting foreign investment in R&D facilities.
But first of all, what is innovation?
The essence of innovation is the "new". An innovation can be new to the world, or new to a sector or market, or new to an agent. Importantly, non-technological innovations are increasingly vital, such as new organizational forms, new marketing approaches, successful design, social innovation etc.
And it is not only the business sector that innovates. The public sector and civil society organizations are also increasingly innovative. But, for innovation to thrive, you need an ecosystem that can transform an idea into something truly meaningful.
Nevertheless, innovation remains a somewhat blurry concept. In its Global Innovation Index publication, the French business school INSEAD defines innovation as "the implementation of a new or significantly improved product (good or service), a new process, a new marketing method, or a new organizational method in business practices, workplace organization, or external relations ... Innovation also occurs when a firm introduces a product or process to a country for the first time. It occurs when other firms imitate this pioneering firm. Moreover, it occurs when the initial or follower firms make minor improvements and adaptations to improve a product or production process, leading to productivity improvements".
Innovation can be in the form of major breakthrough or disruptive innovation, or incremental innovation, or creative innovation. Today an "open innovation" approach is increasingly common, based on partnerships among industries, companies, national and regional governments, and research organizations and academia. But what is most important about innovation is that it is the key to improving productivity, to solving global challenges like climate change or infectious diseases, and to improving the well-being of our citizens.
Innovation has always been more important as a source of growth for advanced countries, because less advanced countries can absorb and assimilate knowledge and technology from other countries (a benefit of backwardness). But even less advanced countries need to be innovative in assimilating knowledge and adapting it to their local conditions. And some enterprises from middle income countries are emerging on the global innovation scene, even if they may be based in "islands of progress" in the large cities of their countries -- in sharp contrast to the poverty that may prevail in the rest of their country.
To explore innovation issues in depth, INSEAD has developed a "Global Innovation Index" which comprises an innovation input sub-index (based on institutions, human capital and research, infrastructure, and market and business sophistication) and an innovation output sub-index (made up of scientific and creative outputs). While innovation evades clear measurement, this index lays the foundation for a global conversation on innovation issues.
Switzerland tops the Global Innovation Index league table of 125 countries, followed by Sweden, Singapore, Hong Kong, Finland, Denmark, US, Canada, Netherlands and the UK. Korea comes in at 16th, ahead of Japan at 20th.
Interestingly, China is ranked 29th, ahead of countries with higher levels of GDP per capita like Malaysia (31st), and Thailand (48th). China is the only developing country in the top 30. Vietnam (51st), like China, has a high ranking relative to its GDP per capita. Despite its success in frugal innovation, India is only ranked at 62nd. Asia's weaker performers are Mongolia (68th), Brunei (75th), Philippines (91st), Bangladesh (97th), Indonesia (99th), Pakistan (105th) and Cambodia (111th).
INSEAD also calculates an Innovation Efficiency Index, which compares innovation output with input. On this score, Korea is way ahead of its Asian neighbors at 8th in the world, implying it gets more bang out of its innovation bucks. Japan only makes it to 25th, while Hong Kong is 27th and Singapore 36th. These countries have relatively less output to show for their innovation investments.
Drilling down into the different index components for Korea, Japan and China highlights some interesting results. When it comes to innovation outputs, both Korea and China are a little ahead of Japan for scientific outputs, and a long way ahead for creative outputs.
Asia is also home to some of the most exciting developments in innovation.
Multinational corporations are making large investments in research and development outside of their headquarter countries, setting up R&D sites in low-cost emerging countries such as China and India to access global talent and take advantage of their proximity to target markets, and lower costs.
As a result, developing countries are benefiting from new products and services that better fit their needs, more job opportunities, new management practices, and access to technology. This is also reshaping the mindset of people who are now more informed and increasingly connected to the mainstream market. These same countries must actively foster their innovation ecosystems by developing their talent base, introducing or enforcing laws that protect intellectual property, and improving corporate governance.
Despite its overall low ranking, India is an emerging hub for conceiving and delivering innovative products and services in a profitable or value-generating manner to the emerging middle class, the underserved and poor (sometimes called "frugal innovation") -- products like Tata's Nano car, solar powered cellular phones, micro-spinning in the textiles industry, hand-held electrocardiogram, affordable medicines, and so on.
Overall, Asia is overcoming its copycat reputation, and becoming an important player in global innovation. However, a survey of business executives on the world's most innovative companies shows the continuing dominance of large US companies. While Toyota comes in 5th and Samsung 9th, all of the other top 10 companies are American, namely, Apple, Google, 3M, GE, Microsoft, P&G, IBM, and Intel.
INSEAD. The Global Innovation Index 2011: Accelerating Growth and Development. Soumitra Dutta, Editor.