BY VICTORIA ATKINSON
The innovation race has winners and losers. China and South Korea have been fast growing their technological capabilities, while Switzerland has held the top spot for 14 years. Victoria Atkinson asks – what are these innovation leaders doing right?
Innovation is the basis of a strong economy. And yet, a recent report suggests that only 10% of the 193 countries surveyed are fulfilling their technological potential. The World Intellectual Property Organisation’s annual Innovation Capabilities Outlook report, developed in partnership with Harvard University’s Growth Lab, analyses billions of data points to show how countries can better leverage their scientific and technological capabilities to promote the kinds of innovations that improve the world. By using their existing innovation capabilities more efficiently, the report authors suggest that countries could generate up to 26% more technologies, 15% more entrepreneurial innovations and 12% more scientific discoveries every year.
What’s also clear is that some countries are playing the innovation game better than others. Every year, WIPO publishes its Global Innovation Index, ranking countries across 80 factors contributing towards innovation. Consistent chart-topper Switzerland has held the top spot for 14 consecutive years. Economies that have shown the most movement in recent years include China, climbing to 10th in the latest report, up from 29th in 2015 (see Box, p29). Meanwhile, South Korea – home to tech giants such as Samsung, Hyundai, and LG – has ranked fourth for the second year running, two places above the UK, which dropped out of the top five for the first time in the last 10 years.
State priority
Professor Yongwook Paik of South Korea’s KAIST College of Business, points to consistently high R&D investment and an emphasis on applied and commercially relevant innovation as among the main drivers of Korea’s success. ‘Since the 1960s, the government has treated technological capability as a cornerstone of national survival and economic growth,’ says Paik, who is also a steering committee member of the Korean Innovation Research Center. ‘South Korea’s approach to science and technology is best understood as state-led but market-oriented.’
Electronics giant Samsung, for example, started out as a grocery trader in 1938. Encouraged by the government, the company later expanded into emerging global industries, releasing its first electronic product, a black and white television, in 1969. Since the first five-year economic plan back in the 1960s, the government has actively incentivised research and commercialisation in strategically important sectors, most notably electronics, robotics, and AI.
The bulk of this innovation activity has been through the country’s established industrial conglomerates, but SMEs and startups are becoming increasingly central to this ecosystem and policy support for small businesses is likewise growing.
‘Public R&D funding is substantial, but equally important is the infrastructure that connects universities, government research institutes, and industry,’ says Paik. ‘Technology transfer offices, government-funded incubators, and programmes such as Tech Incubator Program for Startups (TIPS) are designed to accelerate commercialisation.’
Crucially, these initiatives promote SMEs’ access to early-stage funding through public investment and derisking of venture capital (VC) deals. As part of the TIPS program, the government matches funds invested by VC firms, exploiting the private sector’s expertise in selecting and mentoring startups while reducing their upfront financial commitment. Similarly, the Korea Venture Investment Corporation (known as the ‘mother fund’ or ‘MoTae fund’) invests in venture capital firms themselves rather than the innovative businesses, stabilising the market and attracting private capital. ‘Compared with the US, Korea’s system is more centralised, strategic and policy driven. This reflects the country’s smaller domestic market and relatively more constrained resource base,’ says Paik.
Despite this integrated innovation ecosystem, however, South Korea still struggles to scale its small businesses to global enterprises. The latest policy strategies continue the public-private investment approach, increasing the availability of growth-stage financing through state banks, fund-of-fund structures (when the government funds the venture capital funds), and via targeted programmes to facilitate overseas expansion.
Paik says these efforts are beginning to fix the ‘middle-stage bottleneck’ where companies run out of funding before they fully scale up, with SMEs such as online platform Naver and Celltrion (biopharmaceuticals), demonstrating how companies can successfully scale up within this ecosystem. ‘The rise of large venture-backed firms like [e-commerce company] Coupang and the increasingly global orientation of startups suggest that Korea is gradually strengthening its scale-up capabilities, particularly through international expansion,’ he says.
In contrast to Korea’s heavily state-driven ecosystem, Switzerland – which consistently ranks 1st on global tables – has a much more open and spontaneous innovation environment. Startups and SMEs are viewed as key stakeholders to translate raw academic research into social impact and economic value. Something the government seeks to promote through supporting organisations such as innovation agency Innosuisse and the Switzerland Innovation Foundation. ‘The transfer of research into the market is a cornerstone of Innosuisse’s activities,’ says Innosuisse spokesperson Ottavia Masserini. ‘Our role is to build bridges between science and industry: we support market-oriented research and, through our funding instruments, connect research institutions with SMEs, startups and other organisations.’
Innosuisse provides coaching on business and legal aspects, while Switzerland’s business-friendly environment – notably, the relatively low 19.6% corporation tax for 2026 – smooths the path for new entrepreneurs.
Many of the country’s innovative ventures are spun out of university research and based in neighbouring innovation parks managed by these government bodies.
Founded in 2018 by ETH Zurich graduates Samuel Hess and Elia Schneider, for example, UniSieve uses crystalline molecular sieves to provide precise gas separation membranes for purification, carbon capture and industrial emissions control.
Close physical proximity to his former university was invaluable during the early stages of commercialising this work, Hess says – providing access to both expensive specialist equipment and the scientific expertise of his research colleagues.
‘Setting up a company is straightforward, so there is no big bureaucratic process associated with that. It’s fairly well-organised, which allows you to incorporate the business relatively quickly and focus.’
In 2018, UniSieve joined an accelerator programme and scaled production facilities to begin demonstration projects with clients across the chemical industry. Since then, the company has secured more than $25m in funding and now serves more than 20 industrial customers across Europe and the US.
For Hess, the training schemes and access to networks provided by the university, Innosuisse and similar organisations were instrumental to this success. ‘The exchange with other companies was key,’ he says. ‘The ecosystem within Switzerland, and also later in the EU, was invaluable, both in terms of the networks of other founders, and the support programmes like the Innosuisse coaching programme, Venture Kick, the Gebert Rüf Foundation and the EIT Climate KIC.’
Overseas expansion is a crucial step for many companies and global scale-up is another central strand of Switzerland’s innovation policy. ‘Internationally, we provide bridges to the global markets and players, allowing small companies to collaborate with international partners on market-oriented projects,’ says Masserini. ‘These networks offer introductions but also the credibility and support that a small firm needs to enter complex foreign markets.’
Entrepreneurial spirit
As a much larger economy, the US has many inbuilt advantages and ranked third in the 2025 index. As in Switzerland, scientific SMEs and startups often grow spontaneously out of academic research, with government training and funding initiatives, such as the Small Business Innovation Research programme, providing the crucial initial support for commercialisation.
The US currently has more than 20 of the world’s top 100 innovation clusters scattered across 18 different states, with an abundance of funding and incentives designed to attract the next generation of innovators.
‘Because we are a big country split into different states, there are pools of funding other countries don’t have access to,’ says Anne Schauer-Gimenez, co-founder of Mango Materials. The company uses methanotrophic bacteria to convert waste methane produced as a byproduct of wastewater treatment into a biopolymer called PHA. ‘For example, if there’s no federal funding, you can go to the state, all the way down to the local level of counties and cities that will provide some funding or tax incentives to locate there.’
The flip side is navigating the complex legal and regulatory landscape that creates.
While federal regulations apply across all states, state laws can vary wildly, meaning businesses must evaluate the regulations carefully to remain compliant. ‘Regulations as a whole can get tricky, especially for small companies who can’t pay a lawyer to understand the legal framework,’ says Schauer-Gimenez.
Choosing the best location is crucial. Mango Materials spun out of research at Stanford University in California and the company was initially based a short distance away in Silicon Valley.
‘We were introduced to a wastewater treatment plant now called Silicon Valley Clean Water,’ says Schauer-Gimenez.’ They embraced that Silicon Valley entrepreneurial spirit and, by the time we moved, there were multiple startup companies integrating their technology into the wastewater treatment plant.’
While in Silicon Valley, Mango Materials validated the process feasibility and conducted pilot stage tests, attracting substantial private investment. However, shortly after pre-commercial launch, it became clear the operation was beginning to outgrow the available facilities and in 2023, the company moved to Vacaville, California. ‘It’s a great place to be because Vacaville is really looking to be a biotechnology hub,’ says Schauer-Gimenez. ‘There’s a lot of talent because there is already a lot of other biotech – Johnson & Johnson and Lonza have facilities there, so the community colleges and universities in that area are developing talent as well.’
Across the world more broadly, there is no single correct approach to promote innovation.
Political strategy is intimately tied to a nation’s culture. But the organised cohesion of South Korean strategy, the value of professional networks in Switzerland, the significance of innovation clusters in the US, and the responsiveness of Chinese policy are a clear indicator of what’s working well.
Innovation in China
Like the US, China is another innovation cluster leader – boasting 24 of the world’s top 100 hubs. ‘It’s simultaneously one of the most centralised systems in the world, but also one of the most decentralised,’ explains Abigail Coplin, a professor of sociology at Vassar College, New York, US.
‘Central-level policy is basically an articulation of an idealised desirable future, and then all the different localities come up with their own approach.’
As a result, science and technology policy – a major focus of the Chinese government since the political reform of the late 70s – varies hugely between different regions of the country, with correspondingly variable success.
Competition between localities is fierce; people are routinely judged on the economic performance of their region, which can make or break political careers.
This intense domestic ecosystem gives rise to local policy experiments, designed to promote innovation clusters in the region’s key industrial sectors. ‘Some work and some don’t but there is immense interest in trying different approaches,’ says Coplin. ‘All the governments are fairly iterative. They re-evaluate and, if it’s not working, they tinker with the policy, so they have got more effective at creating desirable strategies.’
National government commitment to innovation means there is a huge amount of state capital available to local authorities to make this happen, while protectionist policies help shield domestic ideas from international competitors.
‘They are also looking at what they need to change policy-wise to make this ecosystem work for the relevant talent,’ says Coplin.
China possesses a wealth of human capital, both domestically and within its overseas communities, but the more restrictive social legislature can create barriers to relocation. In particular, the hukou system – a form of local registration which provides access to social services – is tightly controlled, making it challenging for residents to move between regions.
‘The national-level talent plans are looking at facilitating relocatees becoming embedded in the broader system post-move, for example, getting their kids into a local school,’ says Coplin.
‘This really worked for the biotech industry where the bottleneck in terms of innovative capacity was previously scientists and their ideas.’
However, this more disparate approach to innovation strategy begins to create problems as companies approach scale-up.
Competition between regions means a glut of similar companies can develop in parallel, which then struggle to expand beyond the local level. But those that make it to the international market have therefore already survived stiff competition.
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