By Stefan Schaible and David Born

Innovation is essential for advanced economies to remain competitive, foster growth, and secure prosperity. It is also key to addressing global challenges like decarbonization, climate change, and pandemics. Against this backdrop, the Federation of German Industries (BDI) and Roland Berger present the Innovation Indicator 2024. This indicator compares the innovation capability of 35 economies using a structured measurement model. The analysis focuses on three key aspects: first, assessing the current state of innovation ("Creating Innovations"), second, exploring the technological future of the countries ("Developing Future Fields through Key Technologies"), and third, evaluating the sustainability of economic systems to determine if they operate within planetary boundaries and can be successful in the long term ("Sustainable Economy").

The top positions in the overall ranking of the 2024 Innovation Indicator are once again occupied by smaller nations, as in previous years. Switzerland remains in first place with 71 points, followed by Singapore, which increased its score by three points to reach 68. Denmark also achieved 68 points, making it one of the most dynamic and innovative countries in the world. It improved its performance by an impressive eight points and leads in several key technologies, such as energy technology and biotechnology. The positive developments in Singapore and Denmark have brought the top three countries closer together, while the gap between them and the next-ranked countries—Sweden (58 points), Ireland (55), and Finland (52)—has widened significantly.

No major industrial nation ranks in the top 10

After several smaller countries, including Belgium and Austria, the first major industrial nation appears at rank 11: South Korea with 44 points. Germany follows closely behind with 43 points (-2), dropping from 10th to 12th place, and the UK comes in at 13th place with 42 points (+1). The United States, with 35 points (-7), ranks 18th, continuing the slow but steady decline in innovation capacity that began in the mid-2000s. The temporary stabilization of this trend was largely undone by the Covid-19 pandemic.

The pandemic also impacted China. As the only major economy to have shown a highly dynamic improvement in innovation capacity over the years, China consistently climbed the rankings. Currently, it holds 25th place, ahead of countries like Italy and Japan. However, the pandemic and the government’s strict isolation measures have led to stagnation in China’s innovation index since 2020.

Japan ranks 28th, at the lower end of the middle field. Japan's relatively poor performance in the innovation ranking is largely due to weaknesses in areas such as international networking, scientific performance, workforce availability, and government investment in research and development. Despite Japan's strong performance in R&D activities, patent applications, and high technology, these strengths are not enough to significantly improve its overall ranking.

The lower positions in the ranking are occupied by seven emerging economies, including four of the five BRICS countries (Brazil, Russia, India, South Africa) as well as Turkey, Mexico, and Indonesia. With indicator scores ranging between 21 and 12 points, they hold the lowest rankings on the list.

Small countries often highly specialized, larger ones more diversified

The size of an economy significantly influences its scientific and technological specialization, and consequently its innovation activities. Smaller countries need to specialize to effectively focus their limited resources and capabilities. This allows them to more easily excel in specific areas, as seen with Switzerland, Singapore, and Denmark—countries whose scientific institutions rank among the best in the world. Their industries focus on fields like pharmaceuticals, biotechnology, electronics, and automation, where new research is particularly crucial.

Larger countries, on the other hand, have a much broader range of activities. This diversity allows them to reach critical mass in many sectors, but it can also reduce their overall effectiveness. Larger economies are also more heterogeneous, meaning specific activities are often regionally concentrated, such as in clusters. When looking at individual U.S. states, for example, the country’s overall weak innovation ranking is somewhat mitigated. Massachusetts would rank 7th and California 13th if assessed independently, both much higher in the global comparison. Similarly, the German state of Baden-Württemberg would rank 4th, just behind Switzerland, Singapore, and Denmark. Therefore, while some regions in these countries are global innovation leaders, others lag significantly behind.

The 2024 Innovation Indicator reflects the state of global innovation activities, based on scientifically backed data collected and analyzed by the Fraunhofer Institute for Systems and Innovation Research (ISI) and the Centre for European Economic Research (ZEW). The report highlights that a country’s current position is the result of past decisions and investments. Conversely, the future is shaped by the actions taken today. Countries that fail to implement the necessary measures now will struggle to keep up with the innovation leaders in the coming years. In Germany, for instance, there is a concerning investment backlog in many areas. Cutting back on building new knowledge and technologies threatens Germany’s competitiveness, especially as more countries enter the innovation race.