Innovation & Productivity Key to Global Competitiveness
The World Economic Forum today released its annual Global Competitiveness Report, ranking 142 economies based on productivity across a dozen interrelated “pillars of competitiveness” including innovation, infrastructure, higher education and training, and the macro-economic environment. Competitive economies are those that have in place factors driving the productivity enhancements on which their present and future prosperity is built, says the report.
European countries dominate this year’s Top 10 - claiming 7 of the 10 most competitive economies. The US saw its rank slip to #5. While recognized for being ‘an innovation powerhouse’, the US got low marks for political strife, wasteful government spending, policymaking seen as being less than transparent and regulation that puts a burden on companies. The greatest weakness cited for the US is its lack of macroeconomic stability.
While not in the Top 10, a number of emerging markets continue their advancement up the list, with China taking the lead. These economies are becoming more robust and are mirroring the shift in economic activity from the West to developing economies, the Geneva-based forum said.
The twelfth and final pillar measured by the World Economic Forum is innovation.
Innovation is particularly important for economies as they approach the frontiers of knowledge… countries must design and develop cutting-edge products and processes to maintain a competitive edge. This requires an environment that is conducive to innovative activity…
Amid the present economic uncertainty, it will be important to resist pressures to cut back on R&D spending—both at the private and public levels—that will be so critical for sustainable growth going into the future.
Key to innovation-driven economies like the US will be continued innovation and ‘business sophistication’ - conducive to higher efficiency in the production of goods and services – which leads to improved productivity and greater competitiveness.
Business sophistication concerns the quality of a country’s overall business networks as well as the quality of individual firms’ operations and strategies. This is particularly important for countries at an advanced stage of development, when the more basic sources of productivity improvements have been exhausted to a large extent.