This is the seventh edition of the European Innovation Scoreboard(EIS). The EIS is the instrument developed at the initiative of the European Commission, under the Lisbon Strategy, to provide acomparative assessment of the innovation performance of EU Member States. The EIS 2007 includes innovation indicators and trend analysesfor the EU27 Member States as well as for Croatia, Turkey, Iceland, Norway, Switzerland, Japan, the US, Australia, Canada and Israel. Tables with definitions as well as comprehensive data sheets for every country are included in the Annexes. The EIS report and its annexes, accompanying thematic papers, interactive tables to view results and the indicators database are available on this website.

The methodology for the 2007 EIS remains largely the same as that used in 2006, although a more robust analysis of country groupings has been added. For the first time, Australia, Canada and Israel have been included as these countries provide interesting comparisons to EU Member States. The thematic reports that accompany this year's Scoreboard are on innovation in services, wider factors influencing innovation performance and on innovation efficiency. In addition, the 2007 EIS reflects on seven years experience in comparing countries' innovation performance and where the main future challenges lie.

Sweden, Finland, Denmark, Germany and UK are the most innovative EU countries and ahead of the US

Based on their innovation performance, the countries included in the EIS 2007 fall into the following country groups:

• The innovation leaders include Denmark, Finland, Germany, Israel, Japan, Sweden, Switzerland, the UK and the US. Sweden is the most innovative country, largely due to strong innovation inputs although it is less efficient than some other countries in transforming these into innovation outputs.
• The innovation followers include Austria, Belgium, Canada, France, Iceland, Ireland, Luxembourg, and the Netherlands.
• The moderate innovators include Australia, Cyprus, Czech Republic, Estonia, Italy, Norway, Slovenia and Spain.
• The catching-up countries include Bulgaria, Croatia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania and Slovakia. Turkey currently performs below the other countries.

These country groups appear to have been relatively stable over the last five years. Within these groups, countries have changed their relative ranking but it is rare for a country to have moved between groups. Only Luxembourg seems to be on the verge of entering the group of innovation leaders.

Czech Republic, Estonia and Lithuania are on track to reach the EU average within a decade

Although there is relative stability in the country groupings, over a longer time period there is a general process of convergence, with the countries showing below average EU innovation performance moving towards the EU average and closing the gap with the innovation followers and leaders. Based on trends over recent years, it would take most moderate innovators and catching-up countries 20 or more years to close the gap with the EU. However Cyprus, Czech Republic, Estonia, Lithuania and Slovenia seem to be in a position to close this gap in a shorter period of time, and for the Czech Republic and Estonia and Lithuania this could occur within 10 years.

A persistent but decreasing innovation gap with the US and Japan

The innovation gap between the EU and its two main competitors, the US and Japan, has been falling but remains significant. The US keeps its lead in 11 out of 15 indicators for which comparable data are available, and Japan keeps its lead in 12 out of 14 such indicators. A comparison over time shows that the EU is experiencing an increasing lead over the US in S&E graduates, employment in medium-high and high-tech manufacturing and Community trademarks, and a stable lead in Community designs. The EU is experiencing a declining gap with the US in broadband penetration, early-stage venture capital, ICT expenditures and triad patents. But the gap with the US is increasing in public R&D expenditures and high-tech exports.

Innovation policies might need to better take account of the needs of services innovators

Services are becoming more and more important as the major contributor to GDP and employment in the European economies. A comparison between manufacturing and services firms of the importance for innovation of different policy actions shows a bias towards manufacturing firms in two areas: demand from public procurement and support from innovation programmes. Here better policy interventions could help to improve the innovative capabilities of services firms. Elsewhere there do not seem to be systematic differences in innovation performance between service and manufacturing firms, although this may be due to current limitations in measuring innovation in services.

Social capital and knowledge flows are potential key factors in innovation performance

Although there is a general process of convergence in innovation performance, there still remain large differences in performance between the European countries. An analysis, which builds upon previous EIS reports, examines the effect of 26 indicators measuring various aspects of a country’s wider environment on each of the 5 EIS innovation dimensions. This shows that beyond GDP, differences in social capital and technology flows have the greatest power to explain differing levels of innovation performance.

Most Member States could improve their efficiency in transforming innovation inputs into outputs

Innovation performance in the EIS is measured as the average performance on both innovation inputs and innovation outputs. Efficiency analyses between the different input and output dimensions show that for most countries there are efficiency gains to be reached. This applies to countries of all levels of performance: many of the innovation leaders have relatively low innovation efficiency while several of the moderate innovators and catching-up countries have relatively high efficiencies.

Non-R&D based innovation is as widespread as R&D driven innovation

R&D is important as a driver of productivity increases and has often been the focus, both by policy makers and academics, of measuring innovation. However, an analysis of European innovative firms shows that almost half of these innovate without doing any R&D, for example through organisational or marketing innovations. In particular the least innovative countries have the highest shares on non-R&D innovators. It is therefore important to understand if there are different behaviours and needs between non-R&D and R&D innovators in order to improve the effectiveness of public policies to stimulate innovation.