The Innovation Output Indicator 2019

Abstract

This report presents the 2019 update of the Innovation Output Indicator (IOI), which is a composite indicator published every year by the European Commission since 2013 aiming to quantify the extent to which ideas for new products and services carry an economic added value and are capable of reaching the market. A novelty of this report is a special focus on radical innovator companies in Europe, referred to as "global innovation champions" (GICs). The dispersion of a relatively small number of exporter companies that introduced a “world-first” product innovation deserves particular attention. While small- or medium-sized radical innovator enterprises in Europe are embedded in global value chains, they often remain “hidden champions” for innovation policy makers and are typically the object of selected case studies in reason of limitations in the granularity of reliable data sources. The special focus of this report aims to quantify and characterize them for a relatively large number of countries. The report presents the latest figures for the underlying indicators and composite index for 40 countries – European Union Member States and selected EFTA, OECD and emerging economies. In this edition, 2 scores are computed for the European Union, one for a bloc of 28 countries alongside with estimates where the United Kingdom is excluded. The four components of the IOI provide a benchmark for countries and the European Union as an aggregate in terms of patent-based technological innovation, skilled labor force feeding into the economic structure of a country, competitiveness of knowledge-intensive goods and services, as well as employment in fast-growing enterprises in innovative sectors. The methodology is unchanged with respect to the refinements introduced in the 2017 editions. Composite results show that the EU (using both aggregates) is outperformed by the US. There is some evidence of convergence, the gap between the EU with respect to the US as well as Israel and Japan has somewhat declined since 2011. Nevertheless, additional efforts are needed for the EU to catch up with Israel and Japan. When comparing European countries, we notice that Ireland, Sweden, and the UK are among the leaders in terms of innovation output, whereas Lithuania, Croatia and Romania are at the end of the ranking. The analysis shows the importance of benchmarking a country’s performance not only according to its composite scores, but also according to the various components. Most notably, the multivariate analysis on the relationship between the component indicators indicates that the component measuring employment in fast-growing enterprises in innovative sectors (DYN) shows a weak, positive association with the rest of the components and, as a consequence, with the IOI aggregate index. This suggests that innovation performance of countries is constituted by at least two rather distinct dimensions. The first one is related to the performance of the technology- and knowledge-based economy (development of new technology, strength of sectors relying on highly-skilled workers, and exports in sectors close to the innovation frontier). The second one concerns entrepreneurship and business dynamism in innovative sectors. Strong performance in one of these two dimensions does not automatically imply strong performance in the other, suggesting that innovation policy should carefully monitor and foster the development of both in their own merits.JRC.I.1-Monitoring, Indicators & Impact Evaluatio