Tracking country innovation performance : the Innovation Output Indicator 2023

This report presents the 2023 results of the Innovation Output Indicator (IOI), a composite indicator published by the European Commission since 2013 to offer an output-focused metric of innovation performance at the country and EU levels. The IOI measures countries' capacity to derive economic benefits from innovation by tracking the extent to which innovative ideas reach the market, create knowledge-intensive jobs, and increase country technological capability. The report presents the latest figures for the composite index and its underlying indicators for 46 countries, including European Union (EU) Member States (MSs) and selected EFTA, OECD and emerging economies. According to the IOI, Sweden and Germany are the best performers in the EU and are followed by Finland, and Ireland. Germany outperforms the other EU countries in the domestic value added content of its knowledge-intensive manufacturing exports, whereas Sweden is very strong in terms of IP applications. Conversely, Romania, Latvia and Poland reported the lowest performance among EU countries. The EU, as a single block, leads New Zealand, Australia, China, and Brazil, but it still lags behind its main competitors, including United States, South Korea and Japan. The largest improvements over time in the IOI were achieved by South Korea, Japan, Norway, and China. Performance of the EU27 block also improved over time, while the same holds for the majority of the EU Member States. In addition, the top-ranked countries showcase relatively balanced achievements across the different dimensions considered in the IOI. The report includes an analysis of the change over the last decade in the innovation output performance using insights from non-parametric performance benchmarking and total factor productivity measurement. The aim of this section is to identify countries defining the frontier of innovation output possibilities, the economies that have pushed this frontier forward over time, as well as countries that have achieved large progress in their innovation outputs during the previous decade. The results indicate that there are six well-performing countries (Switzerland, Luxemburg, Japan, Israel, South Korea, and the United Kingdom) forming the frontier of innovation output possibilities. On average, in 2012 the innovation output of the EU27 Member States was 63% of that realised in the best-practice frontier, a figure which in 2022 had improved to 70.2%. In addition, performance improvements are found to be mostly driven by countries' own efforts in catching up with best practices over time. These findings can contribute to identifying successful innovation policies and point towards examples to follow for underperforming countries. The IOI results are complemented by a contextual analysis to better understand differences across EU countries in relation to the aggregate index, as well as to its single components. This section includes, among others, a comparison of the IOI scores with indicators related to the green and the digital nature of innovation outputs, which are crucial for realising the twin digital and green transition and decoupling economic growth from environmental harm. The results indicate that IOI scores are closely related to both environmental and digital patenting activity, highlighting that most countries which do well on total innovation output are also developing environment- and digital- related technologies.