South Korea retained the global crown in this year’s Bloomberg Innovation Index, though improvements by Germany in research and education brought Europe’s largest economy to near-parity in the annual ranking.
The US moved up to eighth place, a year after cracks in education scores pushed it out of the top 10 for the first time.
The annual Bloomberg Innovation Index, in its seventh year, analyzes dozens of criteria using seven metrics, including research and development spending, manufacturing capability and concentration of high-tech public companies.
In the index, Germany almost caught six-time champion South Korea on the strength of added-value from manufacturing and research intensity, much of it built around industrial giants such as Volkswagen AG, Robert Bosch GmbH and Daimler AG.
Although South Korea extended its winning streak, its lead narrowed in part because of lower scores in patent activity.
Sweden, the runner-up last year, fell to the seventh spot.
Patent activity boosted the scores for China and Israel, which was a big winner by jumping five spots to fifth overall, surpassing Singapore, Sweden and Japan in the process.
South Korea’s staying power at No. 1 should receive a boost from fresh investments in strategic technologies and a regulatory program that encourages startups, according to Khoon Goh (吳昆), head of research at Australia & New Zealand Banking Group Ltd in Singapore. He sees the challenge, though, in moving innovation beyond the “highly concentrated large chaebols.”
“Innovation is becoming increasingly important to drive economic performance, particularly in the higher-income Asian economies where there is no longer a demographic dividend and higher value-added manufacturing assembly is being shifted to lower-cost countries in the region,” Goh said.
Germany’s rise also seems tentative, as Europe’s largest exporter struggles with a shortage of skilled workers and changing immigration policies, Bayerische Landesbank chief economist Juergen Michels said, adding that it must hone its strategy in high-tech sectors, including industries such as diesel, digital communications and artificial intelligence.
The UK fell one spot to 18th and lost out to China for the first time.
China’s score reflects a dichotomy in the world’s second-largest economy: It ranked No. 2 in patent activity on the strength of R&D from Huawei Technologies Co (華為) and Technology Group Co (京東方科技), but still lags behind most innovative alums in overall productivity.
The US rose three spots to eighth. Faster product cycles and intensifying competition are changing the ways managers have to work, according to a presentation by New York City-based Pfizer Inc at a recent conference on health care.
Among this year’s ranked economies, the biggest losers were Tunisia and Ukraine, which both fell out of the top 50.
Ten economies joined the ranking as more reliable data became available.
The United Arab Emirates made the highest debut in 46th place. Brazil rejoined the index in the 45th spot after not being ranked last year. Also among the new entrants are some of the world’s largest emerging economies: India, Mexico, Vietnam and Saudi Arabia.
South Africa remains the only Sub-Saharan nation to be ranked.
This year’s ranking process began with more than 200 economies. Each was scored on a 0-100 scale based on seven equally weighted categories.
Nations that did not report data for at least six categories were eliminated, trimming the total list to 95.
Bloomberg publishes the top 60 economies.
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