Introduction

This is the fifth edition of the European Innovation Scoreboard (EIS). The EIS is the instrument developed by the European Commission, under the Lisbon Strategy, to evaluate and compare the innovation performance of the Member States. The EIS 2005 includes innovation indicators and trend analyses for all 25 EU Member States, as well as for Bulgaria, Romania, Turkey, Iceland, Norway, Switzerland, the US and Japan. The list of indicators and the methodology for calculating the Summary Innovation Index (SII) have been revised in close co-operation with the Joint Research Centre (JRC). The revised methodology now captures more dimensions of a country's innovation performance, although ensuring continuity with results of the former EIS editions. The Annex includes tables with definitions as well as comprehensive data sheets for every country.

Development of national innovation performances

With respect to the situation in Europe , significant national differences are still observed. Figure I shows the Summary Innovation Index (SII) on the vertical axis and the average growth rate of the SII on the horizontal axis. Countries above the horizontal dotted line currently have an innovation performance above the EU25. Countries to the right of the vertical dotted line had a faster than EU25 average increase in the SII.

Based on their SII score and the growth rate of the SII, the European countries can be divided in four groups:

• Switzerland, Finland, Sweden, Denmark and Germany make up the group of “ Leading countries” .
• France, Luxembourg, Ireland, United Kingdom, Netherlands, Belgium, Austria, Norway, Italy and Iceland all belong to the group of countries showing “ Average performance” .
• Countries “ Catching up” are Slovenia, Hungary, Portugal, Czech Republic, Lithuania, Latvia, Greece, Cyprus and Malta.
• Countries “ Losing ground” are Estonia, Spain, Bulgaria, Poland, Slovakia, Romania and Turkey .

No short-term convergence is expected

Although many countries show signs of catching-up, none of these countries is expected to complete this process by 2010. Using a simple linear extrapolation of current performances and growth rates, only Hungary , Slovenia and Italy are expected to reach the EU25 average within 20 years. For the other countries this process will take even longer, for some even more than 50 years. This also means that it would take more than 50 years for the EU25 to catch up to the US level of innovation performance.

The gap between the US and the EU still exists

The US and Japan are still far ahead of the EU25 as shown in Figure II. The innovation gap between the EU25 and Japan is increasing and the one between EU and US is close to stable. About 70% of the EU-US innovation gap is explained by lagging EU performance in three indicators: USPTO patents, population with tertiary education and ICT expenditures. The EU-Japan innovation gap is largely explained by lagging EU performance in three indicators: USPTO patents, Triad patents and population with tertiary education. However the economic interpretation of these statistical differences is to be conducted with care, where for example, the patenting performance does not only reflect a difference in term of innovation performance, but also in term of business usages and sector coverage.

Inputs and Outputs: transforming innovation assets into results

For the first time, the EIS has developed an input/output approach. This analysis allows for a better understanding of transformation of innovation assets (education, investment in innovation, etc) into innovation return (firm turnover coming from new products, employment in high tech sectors, patents, etc).

Although for many countries relative input performance is close to relative output performance, for several countries we see large differences in relative performance. Switzerland , Germany , Luxembourg , Ireland and Malta are examples of countries showing much better performance on outputs, therefore successfully transforming their assets into innovation success. Iceland , Estonia , Lithuania , Cyprus and Norway are examples of countries showing much lower performance on outputs than on inputs.

One possible explanation for these observed differences might be the receptiveness of a country's population to new products and services, as it has been measured by the Innobarometer 2005. Among the 10 European countries which have the highest share of population attracted by innovative products or services, 9 have an above average output/input rate. Conversely, 7 countries among the 10 where population readiness for innovation is the lowest are below average output/input rate.

Key dimensions of innovations

Innovation is a non-linear process and the EIS indicators are distributed among five categories that cover different key dimensions of innovation performance. Innovation drivers measure the structural conditions required for innovation potential, Knowledge creation measures the investments in R&D activities, Innovation & entrepreneurship measures the efforts towards innovation at the firm level, Application measures the performance expressed in terms of labour and business activities and their value added in innovative sectors, and Intellectual property measures the achieved results in terms of successful know-how.

Not all countries perform on the same level in each of these dimensions and some countries may even prove to be especially weak in one or several dimensions of innovation. As there is evidence that an even performance on these five dimensions fosters innovative performance, countries which show a below average performance on one of these dimensions as compared to the country's overall performance, might be in danger of hampered future innovative performance.

Innovation drives economic performance at sectoral level

There is weak evidence at the country level that innovative performance drives economic performance. Various explanations can emerge: GDP growth is influenced by so many parameters that the impact of innovation is hardly measurable, some forms of innovation may only be partially captured by the EIS, the impact of innovation can only be measured on the long term. This may explain why some of the European innovation leaders, like Sweden and Finland have not yet been sufficiently successful in transforming their innovation excellence into higher GDP per capita. Conversely, at sectoral level, such positive evidence exists. More innovative sectors tend to have higher growth rates of labour productivity as measures by turnover per employed persons.