This report presents the 2021 update of the Innovation Output Indicator (101), which is a composite indicator periodically published by the European Commission since 2013 aiming to quantify the extent to which ideas for new products and services carry an economic added value and are capable of reaching the market. The report presents the latest figures for the composite index and its underlying indicators for 40 countries, including European Union (EU) Member States (MSs) and selected EFTA, DECO and emerging economies. The four components of the IOI provide a benchmark for countries and the European Union as an aggregate in terms of patent-based technological innovation, skilled labour force feeding into the economic structure of a country, competitiveness of knowledge-intensive goods and services, and employment in fast-growing enterprises in innovative sectors. The methodology is unchanged with respect to the refinements introduced in the 2017 edition and adopted in the 2019 version. Results show that the overall IOI international ranking remained broadly unchanged since 2011. The EU continues to be outperformed by Israel, Japan, the UK and the US, but there is some evidence of convergence, as the gap between the leader (Israel) and some top-performers countries (Japan, the UK and the EU) has somewhat declined since 2011. As compared to 2019, EU performance in innovation output remained broadly unchanged. Within EU MSs, Ireland, Finland, and Sweden are the top-performers in terms of innovation output, and Croatia, Lithuania and Romania those with the lowest IOI. As compared to 2019, the largest relative increases in IOI scores are observed in Greece, Lithuania and Malta, and the strongest relative falls in Romania, Slovakia and Sweden. The analysis also documents the importance of benchmarking a country's performance not only according to its composite scores, but also according to the various components. Most notably, the multivariate analysis on the relationship between the component indicators shows that the component measuring employment in fast growing enterprises in innovative sectors (DYN) has a weak, positive association with the rest of the components and, as a consequence, with the IOI aggregate index. This may suggest that innovation performance of countries is constituted by two rather distinct underlying dimensions: one referring to the performance of the technologyand knowledge-based economy and the second one concerning entrepreneurship and business dynamism in innovative sectors. Strong performance in one of these two dimensions does not automatically imply strong performance in the other, suggesting that innovation policy should carefully monitor and foster the development of both in their own merits.
