European Innovation Scoreboard: Base Findings

Innovation input and innovation output

The concept of innovation efficiency is a key dimension of innovation policy. Innovation efficiency can be measured as the ability of firms to translate innovation inputs into innovation outputs. The ratio between the EIS composite index for inputs (education, investment in innovation, etc) and outputs (firm turnover coming from new products, employment in high tech sectors, patents, etc) provides a simple measure of this relationship for national innovation systems by assuming a linear relationship between inputs and outputs1.

The composite indicator for Inputs is computed as the average of the 14 indicators covered in Innovation drivers, Knowledge creation and Innovation & Entrepreneurship. The composite indicator for Outputs is computed as the average of the 10 indicators covered in Applications and Intellectual Property.
Figure 5 shows graphs of the composite index scores for Inputs against the scores for Outputs. The results give an indication of the efficiency with which a country transforms its innovation inputs (education, investment in innovation) into innovation outputs (turnover coming from new products, employment in high-tech sectors, and patents).

Countries above the diagonal line perform better on outputs than on inputs, suggesting that they are more efficient at transforming inputs into outputs than countries below the diagonal line. The picture is very diverse, with both highly innovative countries, such as Germany and Switzerland, and average performing countries such as Italy falling above the diagonal line. Most of the new Member States fall on the other side of the diagonal, with relatively large investments but poor performance on outputs. However, innovation is a long-term process and the evolution of the output performance of these countries will probably improve in the years to come based on current investment in inputs. Among the more advanced countries, Iceland is an example of a country that is a poor performer on applications despite a favourable general business environment with high investments in R&D and a good education level.