What's making Scandinavia more innovative than the US?

The US may have an abundance of start-ups, patents and world-class universities, but when it comes to innovation, the Old World is showing it can make comparatively little go a long, long way
Written by Liam Tung, Contributing Writer

This week saw the United Nations publish its annual snapshot of the world's most innovative countries - and it's all change at the top.

While the 2012 list spelled bad news for North America - the US slid down the top 10 list of global innovators and Canada dropped out altogether, the Scandinavian nations pretty much retained their enviable positions at the head of the table.

While Switzerland still leads the UN World Intellectual Property Office's (WIPO) Global Innovation Index, Sweden hung on to second spot, Finland moved up from fifth to fourth, and Denmark slipped from sixth to seventh. All three Scandinavian nations are commended by WIPO in its report on the index for their high levels of patenting and healthy royalty fees.

Other nations ahead of the US by in this year's index  are Singapore (third) the UK (fifth), the Netherlands (sixth), Hong Kong (eighth) and as of this year, Ireland (ninth). Norway (14th) and Iceland (18th) are also in the top 20 of 141 nations ranked. 

The US is far from being on the innovator's endangered list - it's still 10th in the world - but the slippage down from seven to 10 over the past year was enough for the report's authors to explain why it's now being outpaced by seven European nations.

So the UN considers a few Nordic nations more innovative than the US. Should we care? As the report itself acknowledges "innovation cannot cure the most immediate financial difficulties".

That said, it is a "crucial element of sustainable growth", suggesting the US's slide in 2012 could have longer-term implications.  

The three small Scandinavian nations, which are not in themselves Euro-powerhouses, are facing their own economic woes -- Finland's Nokia and Sweden's Saab are cases in point. And for every super start-up there -- Rovio for Finland, Spotify for Sweden -- the US can name a dozen homegrown tech successes.

But apparently the Scandinavian countries are punching above their weight in innovation due to the right "linkages" between education, infrastructure, human capital and market/business 'sophistication'. Consequently, their "outputs" -- knowledge, technology and creativity -- are far larger relative to their inputs, which include each nation's political, business, and ICT underpinnings, R&D and so on.  

The report's authors heap praise on "world class" US universities, research institutions and "innovation clusters" (inputs), and highlight the critical role the country plays in global innovation, but attribute the US's slide in an otherwise steady top 10 to the country's declining outputs, including "creative intangibles" such as trademark registrations and ICT in organisation models.

But the US's major area of concern, according to the report, are key inputs -- its human capital and research ranking, which dropped from 13th to 22nd in the past year. More people are entering tertiary education, but lower numbers are graduating in science and engineering. The report ranks the US at 74th globally. 

The US is also not so good at the "tapping of global talent" and experienced weakened research, patenting, and scientific publications as a result, according to the index. 

So what makes northern European economies more innovative than the US, in the authors' view?

Despite the US's fertile setting for start-ups, its impressive private sector R&D and its multinationals, a comparison between it and the leaders Switzerland and Sweden across 23 points shows the US is "performing less well or seeing its competitive advantage decrease".

Among the indicators were:

  • current expenditure on education as a percentage of gross national income
  • percentage of graduates in science and engineering
  • researchers headcount per million people
  • gross expenditure on R&D as a percentage of GDP
  • percentage of R&D performed by business
  • resident patent application at the national office (over GDP in PPP$), and;
  • scientific and technical publications (over GDP in PPP$).  

It's just an index, but the authors are concerned enough to warn that Northern America may loses its place as "innovation leader" unless it addresses what "could become chronic weaknesses."

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