Thursday, May 16, 2013

The Innovation Capabilities of Nations: Five Key Performance Measures

MAHROUM Sami, ALSALEH Yasser, KANHERE Meera
Read the report in English here
Read the report in Arabic here
INSEAD Innovation Policy Report commissioned by the Emirates Competitiveness Council (ECC) and the Competitiveness Office of Abu Dhabi (COAD) in the Department of Economic Development Abu Dhabi.


Innovation is rarely pursued for its own sake; rather it has the ultimate objective of creating new socioeconomic value. The ability to innovate can thus be observed in systemic activities pursued to create new socio-economic value. In this report, we adopt a framework that measures innovation capability via a set of five key indicators: the abilities to access, anchor, diffuse, create and exploit knowledge. Economies can draw on any combination of these to create new socio-economic value. The report finds that the UAE has a mixed record on these five innovation capability pillars . On the one hand, it shows a significant ability to access knowledge from around the world. This can be attributed to its adoption of advanced information and communication technologies (ICT), and the presence of a strong cosmopolitan talent pool and a host of international enterprises. Likewise, the UAE appears to enjoy a strong knowledge anchoring ability assisted by a relatively investment-friendly environment and ease of doing business. With the rapid development of its human capital, it also attains an excellent level in the diffusion of new knowledge, skills and techniques in the economy. On the other, where the UAE still has room for improvement is in its ability to create new knowledge and, to a lesser extent, in its ability to commercially exploit innovations. Aware of the need for further improvement along these two dimensions, the government has launched several initiatives to support entrepreneurs and build the environment required to encourage start-ups, such as the Khalifa Fund for Enterprise Development in Abu Dhabi, the Mohammed Bin Rashid Establishment For Young Business Leaders in Dubai as well as numerous initiatives to foster R&D and innovation. This report compares eight select GFCC member countries along the five innovation capability pillars in terms of their capacity, performance and efficacy. This is important because an economy can boast strong innovation capabilities but may not be fully exploiting them. The countries concerned, namely Australia, Brazil, Egypt, Russia, Saudi Arabia, South Korea, the UAE and the USA, offer a variety of models that perform differently due to multiple factors, some of which are not limited to their innovation capacity such as location, the nature and availability of resources, size of population and global integration. The UAE, along with Australia, South Korea and the USA, leads the other featured GFCC countries in terms of its capacity to access new knowledge from around the world. Despite this high access capacity, the performance of resource-rich economies such as the UAE and Australia remains somewhat modest due to the high share of natural resource commodities in their international trade. In terms of the capability to anchor knowledge, the USA, Australia and the UAE emerge as the most attractive destinations for foreign talent and foreign investments, both in terms of their potential capacity and actual performance. It is worth mentioning that the UAE is particularly efficacious in this respect. While industrial economies such as those of the USA, South Korea and Australia lead the rest of the pack in their ability to diffuse knowledge to different parts of their economies, the resource-rich countries, with the exception of the UAE and Saudi Arabia, still have room for improvement in this regard. In terms of the capability to create new knowledge domestically, the USA remains the leader in output, with other industrialised countries such as Australia and South Korea close behind. The USA is also clearly ahead in terms of exploiting knowledge, with the UAE, Australia and South Korea catching up.