High interest rates are likely to continue to impact the financing of innovation, making the outlook for the rest of 2023 and 2024 uncertain.
Switzerland has emerged as the world’s most innovative economy, according to the Global Innovation Index (GII) 2023, produced by the World Intellectual Property Organisation (WIPO). The ranking puts Sweden, the US, the UK, and Singapore in the top five most innovative economies, while European countries make up 16 of the top 25.
The GII 2023 also highlights that the world’s five biggest science and technology (S&T) clusters are located in East Asia, with China having the largest number of S&T clusters.
The cluster in Paris, France was the only European location to make the top 15 of the global S&T clusters, based on size. However, the UK’s Cambridge cluster, along with San Jose-San Francisco, California, US, were found to have the most ‘intensive science and technology in proportion to population.’ These were followed by Oxford, UK; Eindhoven, the Netherlands; and Boston-Cambridge, US.
The report also noted that there was strong activity in science and technology clusters in certain emerging economies including Brazil, India, Argentina, Egypt and Thailand.
‘Science and Technology clusters are among the most critical of components for the innovation performance of any economy. By bringing science, business and entrepreneurs together, these cities or regions are able to build an ecosystem that translates scientific ideas into on-the-ground impact. It is also heartening to see that these S&T clusters are growing at a particularly fast pace in emerging economies.’ said WIPO Director General Darren Tang.
Investment in R&D by businesses reached a ‘historic high’ of $1.1 trillion in 2022 according to the GII. While the R&D spend increased by 7.4% in 2022, this represents less than half of the 15% increase seen in 2021.
The WIPO findings also indicate that global government R&D budgets increased in real terms in 2022 with Japan, the Republic of Korea seeing ‘significant increases,’ and Germany experiencing a smaller increase. These moves made up for cuts in other economies, the WIPO findings indicate.
While R&D investment held up, the WIPO GII 2023 provided a note of caution in relation to venture capital investment, which took a significant plunge last year. ‘Reflecting a deteriorating climate for risk finance, the total value of VC investments declined sharply by close to 40% in 2022, albeit from unusually high levels in 2021. Africa was the only region not to see a decline in 2022,’ the report said.
The report added that high interest rates are likely to continue to impact the financing of innovation, making the outlook for the rest of 2023 and 2024 uncertain.