Global Innovation Index 2017 International Forum

GII 2017: Innovation Feeding the World Soumitra Dutta, Dean of the Cornell SC Johnson College of Business, Cornell University Maria Beatriz Amorim-Borher, Regional Director for Latin America and the Caribbean of the World Intellectual Property Organization (WIPO)

Collaboration among GII Partners Co-published by Cornell University, INSEAD and WIPO Three Knowledge Partners: Confederation of Indian Industry, PricewaterhouseCoopers and Strategy&, National Confederation of Industry (CNI) and Serviço Brasileiro de Apoio às Micro e Pequenas Empresas (SEBRAE) Independent statistical audit by the Joint Research Centre of the European Commission International Advisory Board Collaboration among GII Partners

The Global Innovation Index 2017 Innovation Feeding the World 1 Introduction to the Global Innovation Index Main quantitative results of GII 2017 2 3 Brazil in the GII 2017 Conclusions and key messages 4

Introduction to the Global Innovation Index 1

Introduction to the Global Innovation Index 2017 Measures innovation across some 127 economies Leading reference on innovation A ‘tool for action’ for decision makers with the goal of improving countries’ innovation performances Recognizes innovation as key driver of economic growth Offers a holistic analysis of innovation, applicable to both developed and emerging economies alike Helps monitor innovation progress on a yearly basis

81 Metrics Create a Tool for Action

Main quantitative results of GII 2017

GII Main quantitative results of GII 2017 2 GII Rankings – Top 10 Switzerland Sweden Netherlands USA United Kingdom Denmark Singapore Finland Germany Ireland Input Sub-Index Output Sub-Index Singapore Sweden Switzerland Finland USA Denmark United Kingdom Hong Kong (China) Netherlands Canada Switzerland Netherlands Sweden Luxembourg USA United Kingdom Germany Ireland Korea, Rep. Iceland

Innovation leaders Innovation achievers Mature innovation systems, Brazil Innovation leaders Mature innovation systems, Solid institutions, High levels of market and business sophistication Quality innovation outputs In the group of innovation leaders we find the same top 25 economies as in 2016. Two exceptions: the Czech Republic is moving back into this group, while Belgium is moving out. A stronger performance in innovation outputs allows the Czech Republic to become an innovation leader this year. All of these are high-income economies, with the sole exception of China, which belongs to the upper-middle-income group. All of the economies in this group have a GII score above 50. Innovation achievers Continuous improvement of their innovation systems More structured institutional frameworks Better knowledge absorption, Higher integration with international markets 17 economies compose the group of innovation achievers. Two new economies join the group of innovation achievers: Burundi and the United Republic of Tanzania from Sub-Saharan Africa. Armenia and Bulgaria appear in this group for the second year in a row. Kenya, Rwanda, Senegal, Uganda, Mozambique and Malawi stand out for being innovation achievers at least five times in the previous six years. These economies perform above their peers in Innovation linkages, particularly in GERD financed by abroad and FDI net inflows.

Regional Rankings – Top 3 Islamic Republic of Iran India Switzerland Chile Israel Costa Rica Cyprus 1 Sweden 1 1 1 2 Kazakhstan 2 2 Mexico 2 UAE Netherlands 3 3 3 3 Central and Southern Asia Latin America and the Caribbean Europe Northern Africa and Western Asia South Africa Singapore Republic of Korea USA 1 Mauritius 1 Canada 1 2 Japan 2 Kenya 2 3 3 South East Asia, East Asia, and Oceania Sub-Saharan Africa Northern America

Income Group Rankings – Top 3 Switzerland China Sweden Bulgaria Netherlands Malaysia High Income Upper-middle Income Viet Nam United Rep. Tanzania Ukraine Rwanda Mongolia Senegal Lower-middle Income Low Income

Brazil in the GII 2017 3

Brazil’s ranking over time Brazil in the GII 2017 Brazil’s ranking over time GII Input Output Efficiency 2017 69 60 80 99 2016 58 79 100 2015 70 65 74 Stable at 69 in the 2017 rankings 18th in upper-middle-income countries, 7th in region Slowly emerging from economic recession, high degree of uncertainty remains Persistence is needed Brazil is 18th among middle-income countries out of 35. Region: Latin America and the Caribbean. Brazil was also 7th in region in 2016.

Brazil: Strengths and Weaknesses Pillar 2: Human capital & research (50th) Pillar 5: Business sophistication (43rd) Brazil’s strongest pillar ranking is in Business sophistication (43rd), where it sees one of its highest rankings in IP payments (8th). Brazil’s biggest improvements are in Human capital and research (50th, up by 10) and Creative outputs (83rd, up by 7). In Human capital and research, Brazil improved its rank in all sub-pillars, in particular in expenditure on education and QS university ranking. In Creative Outputs, gains are seen in Intangible assets and Online creativity, primarily in ICTs and business model creation, Wikipedia edits, and video uploads on YouTube. Business environment and Tertiary education still have some room for improvement. Brazil is also relatively weak in Credit and Knowledge impact. Some indicators where the economy could improve further include PISA results, graduates in science and engineering, tertiary inbound mobility, gross capital formation, JV-strategic alliance deals, and grwoth rate of GDP per worker. Pillar 6: Knowledge & technology outputs (85th)

Innovation Quality matters for impact Brazil 4th among middle- income countries Slight reductions in scores for all three quality indicators Is there something specific to say for BRICS?

Conclusions and key messages 4

Leveraging innovation-driven growth New growth momentum, but investment and productivity growth at historic lows Lackluster growth rates for R&D activities, both at the government and corporate levels. China aside, investment growth in middle-income countries has now fallen to levels similar to that of rich countries. R&D growth is still lower today than it was in 2011-13, and much lower than in 2005-08. Tighter government R&D budgets in selected high-income countries and slower spending growth in emerging countries explain part of this slowdown. R&D investments need to be intensified

More innovation convergence is needed GII remains stable at the top Continued gap between developed and developing nations Low-income economies closing the gap Switzerland tops for 7th consecutive year. In the top 25, some economies –such as the Netherlands, Denmark, Germany, Japan, France, Israel and China, move up. Middle-income countries growing more distant to the top 25, rather than closing the gap China continues to move up by three spots: 22nd in 2017 vs. 25th in 2016 With the exceptions of Bulgaria and Malaysia, the gap between the 11-25 ranked economies and middle-income economies remains large, especially in Institutions, Human capital and research, Infrastructure, and Creative outputs. Only a few upper-middle-income countries –such as Turkey, the Russian Federation, and Viet Nam- are among the top 50. Particularly notable is the consistent progress of Sub-Saharan Africa. Asia: potential for intra-regional innovation networks not yet utilized Asia: important engine of innovation Japan has continued to be a driving force of global innovation since the late 1970s. Singapore still number 1 among emerging Asian economies New Asian Tigers (Indonesia, the Philippines, and Viet Nam) are emerging too, and they increasingly join not only Asian high-tech value chains but also other activities such as ICT offshoring. Viet Nam, the Philippines and Thailand rapidly catching up. India: emerging innovation center

Latin America and the Caribbean Sub-Saharan Africa and Latin America: Preserve the momentum and leverage the innovation potential Sub-Saharan Africa High innovation performance in Sub-Saharan Africa relative to development It has had more innovation achiever countries than any other region Noted improvements in: Institutions, Market sophistication, Infrastructure and Human Capital Drivers of growth in the region have seen a slowdown Latin America and the Caribbean Opportunity to improve innovation capacity No economy in the region has been identified as an innovation achiever Sustained efforts in improved innovation investments and more coordinated innovation systems are required Broader regional R&D and innovation cooperation also needed Sub-Saharan Africa Innovation momentum in Sub-Saharan Africa must be preserved. The achievers are: Kenya, Rwanda, Senegal, Uganda, Mozambique and Malawi. These countries stand out for being innovation achievers at least five times in the past six years. Latin America and the Caribbean More must be done to reach the region’s full innovation potential. Chile, Mexico and Brazil are undoubtedly important innovation actors. Mexico is also an active contributor to global value chains, including in high tech sectors.

Innovation trends from 10 years of the GII Innovation activities confronted with low investment and resource constraints Evolving innovation landscape. Emerging economies increasingly playing a role in innovation Good quality of innovation remains a distinct characteristic of innovation leaders The innovation divide remains Sub-Saharan Africa: region that sees the most significant improvements in the GII rankings Great importance of the role of government, and of public and coordinated private investments in creating sound innovation systems The recent financial crisis has hit innovation activities hard, and the rebound has remained weak. Insufficient growth in developed and emerging economies, as well as competing policy priorities and agendas, have limited the financial resources available for innovation. Financial conditions for innovation and entrepreneurship remain difficult. The proportion of public spending that goes to R&D has been decreasing and the forecasts (OECD, 2016) show that it is unlikely to increase in the coming years. Long-term economic growth depends on the creation and fostering of an environment that encourages innovation and countries that innovate in the creation of technologies and encourage their adoption grow faster The fast pace of economic development in emerging economies, together with the cross-border activities of multinationals and the fragmentation of global value chains, has favored and will continue to favor the broader distribution of innovation activities across the world The global research system is expanding. Research and innovation are on the rise in Asia. China as a major driver of global R&D. The emergence of new players has changed the structure of global collaboration networks. Emerging countries such as India continue making innovation a major engine of economic growth, and focus in upgrading their capacity to innovate. Continued gap in innovative capacity between developed and developing nations. The GII rankings have shown a remarkable level of global diversity among innovation leaders over the years. China is the first middle-income economy to join the top 25 of the GII. India is a good example of how policy is improving the innovation environment. Low-income economies successfully continue to close the innovation divide that separates them from middle-income economies.

Brazil: Future Perspectives Important to continue closing the technological gap with developed economies Growth has stagnated – boost Brazil’s economic performance and increase productivity through innovation National Strategy for Science, Technology and Innovation (ENCTI) 2016-19: GERD to reach 2% of GDP in 2019 Tertiary education as a major weakness and bottleneck, although marked improvements in the OECD PISA scores over 2003-12 More attention needed to the quality of innovation Quantity and quality of innovation outputs still below other BRICs Innovation outputs still of higher quality in other BRICS. Brazil’s performance on non-technological innovation, as measured by trademark registration, is still weak.

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Annexes

Smart digital agricultural innovation for overcoming food challenges Innovation is required to confront slow growth in agricultural productivity: Adequate information to farmers, skills, adoption of new products and processes Farmers empowerment by providing access to digital technologies and new service platforms Boost entrepreneurship and venture capital approaches Adopt excellence and innovation attitudes into the agricultural sector Improve national legal and regulatory frameworks in agriculture Lagging agricultural productivity growth in low- and middle-income economies and lagging agricultural R&D spending across all economies both need to be reversed. Innovation need to disperse more effectively throughout the agricultural and food sector, especially in developing countries. A wave of new agricultural technologies and innovations is taking place that could help overcome lagging productivity. The agriculture and food sector should be part and parcel of any national innovation strategy. Grassroots innovations are happening in farming that can often be scaled up.

Innovation Feeding the World Smart agricultural innovation and a better uptake of innovation in developing countries can help overcome serious food challenges A wave of new agricultural innovations is taking place. But, rolling out rather slowly in many parts of the world Many developing countries have yet to benefit from earlier waves of agricultural innovations Policy makers have a responsibility to provide funding mechanisms to stimulate innovation in agriculture and food production Efforts to enhance the efficiency of agricultural innovation systems should focus on reducing lags between R&D efforts and widespread adoption of innovations Advances in areas such as genetics and nano- and biotechnologies have proven their ability to be a source of higher yields and better nutrient content. Digital agriculture has started to spread worldwide, helped by the development of sensors, drones and robotics – as well as data generation and analytics enabled by remote sensing, and geographic information systems. The chapters in the GII 2017 covering countries such as India, Japan, the Russian Federation, Uganda and the US show some successful approaches in the field, which exemplify that entrepreneurship and innovation are part and parcel of ensuring that agriculture will continue feeding the world.

Basic GII Structure (1/2) Global Innovation Index Innovation Efficiency Ratio Innovation Input Sub-Index Innovation Output Sub-Index

Basic GII Structure (2/2) Innovation Input Sub-Index Innovation Output Sub-Index Institutions Knowledge and technology outputs Human capital and research Creative outputs Infrastructure The two sub-indices have the same weight Market sophistication Business sophistication