Germany Seizes Lead in Innovation Index

2020 Bloomberg Innovation Index released;

Germany secured first place in the 2020 Bloomberg Innovation Index, ending South Korea's six-year reign at the top. Singapore moved to third position. The United States dropped one place to ninth. The annual Bloomberg Innovation Index, now in its eighth year, analyzes dozens of criteria using seven metrics including research and development spending, production capacity and the concentration of high-technology public companies. The ranking shed light on economies' capacity for innovation, a key theme at the annual World Economic Forum held in Davos, Switzerland between 21-24 January. In the Bloomberg Index, Germany ranked in the top five for value-added manufacturing, high technology intensity and patent activity. Carsten Brzeski, chief economist at ING Germany, said "The manufacturing sector remains highly competitive and a source of innovation" and added "Germany's performance in such indicators remains strong and quite good compared to recent signs of economic weakness." Noting that Germany's service innovation was far less impressive, Brzeski highlighted that approximately one-third of research and development spending in Germany occurs in the automotive industry. Brzeski said "Disruption in this sector and prolonged weakness could impact Germany's level of innovation strength."

Germany's "manufacturing powerhouse" status;

was built on the automotive manufacturing industry, but pollution concerns, trade conflicts and slowing economies are exerting negative pressure on demand in this sector. The global economy appears to be shifting away from manufacturing and focusing on services. At this point, Brzeski identified a lack of innovation in higher education in Germany as an "increasing concern". Brzeski advised the German government to use its fiscal surplus to ensure Germany maintains and protects its innovative role. South Korea's narrow miss on the leadership cannot really be attributed to a collapse in innovative capability. Chang Suk-Gwon, a business administration professor at Hanyang University in Seoul, emphasized the importance of research and development spending. Professor Gwon stated that research and development means "life or death" for large South Korean companies driving the technology-focused economy, such as Samsung Electronics Co., LG Electronics Inc. and Hyundai Motor Co. Gwon said, "We have no other natural resources – we only have our brains to work with." Gwon noted that South Korea's most important strength is technological superiority, otherwise China will catch up to South Korea. Singapore's rise from sixth place last year to third place overall was supported by productivity and value-added manufacturing gains. Singapore also maintained its position as the world's best in higher education productivity in this index.