19/7/2014: Global Innovation Index 2014: Ireland vs 'Periphery'

In the previous post I gave detailed breakdown of Ireland's performance in Global Innovation Index 2014. I used small open economies and Switzerland (the world's highest ranked economy) as a reference group.

Here, primarily for the reason of convention, are the comparatives of Ireland's performance relative to the Euro area 'peripheral' states:

Clearly, Ireland is a much stronger performer in Innovation than all other 'peripheral' states. This is neither surprising nor unexpected. Crucially, the gap is wider today than in 2007-2008 and the gap is rather persistent over time. Average ex-Ireland 'peripheral' state rank was 34st in 2014 against Ireland's 11th, this is a very significant gap. This gap increased from 16-19 points on average for 2007-2010 period to 32 points in 2012 and 23 points in 2014.

Furthermore, it appears that even if we are to abstract away from the metrics very heavily influenced by the tax optimising MNCs, Ireland (under such a metric closer to 20th-23rd position in the World rankings) would still post a stronger performance than any other 'peripheral' state (best - Spain at 27th).

19/7/2014: Global Innovation Index 2014: Ireland's Performance

Global Innovation Index is out this week and the 2014 edition focus is on Human Capital (here) a topic close to my heart (see my TEDx talk on this here).

Here are some interesting comparatives taken over the Index history for Ireland and its core peers.

Firstly, in 2014, top 20 ranks are:

Ireland shows good performance, with 11th place in 2014, slightly down on 10th place in 2013 and significantly down on 7th place in 2012 rankings, but still better than historical average of 16th rank.

Here is evolution of Irish rankings over time, compared to other small open economies of Europe that rank in top 25 this year:

Not a bad performance for Ireland, I must say, though we should be aiming for a place in the top-10.

However, over longer time horizon our performance is second best in the group of peer economies:

The above chart highlights top 3 performers in terms of rankings dynamics (green bars) and worst 3 performers (red bars).

It is worth noting that Luxembourg is, in my view, an economy that simply should not be ranked due to massive distortions in its rankings induced by large share of the companies operating in the country only as post-box offices and due to huge proportion of its workforce not being residents of the country. In Ireland, there are some distortions as well, and these are very significant, but of magnitude they are much smaller than those in Luxembourg.

Here are some Ireland vs Switzerland comparatives in specific sub-indices:

Institutions:

The above shows relatively strong performance for Ireland, except for:

• Political Stability and Environment
• Government Effectiveness

Ireland leads Switzerland strongly on

• Business Environment metrics

Human Capital and Research:

Overall, we have a strong lead compared to Switzerland in:

• Education, when it comes to Spending on Education and on School Life Expectancy (so we spend more and our students stay in school longer, on average)
• Tertiary Enrolment (we have more student-age people in tertiary education)

We significantly lag Switzerland in:

• Tertiary Inbound Mobility (ability to attract students into Ireland)
• R&D
• Researchers
• Spending on R&D
• University Rankings (quality of education)

 Infrastructure:

We outperform Switzerland in nothing, save for GDP per unit of energy use, which is of course consistent with the fact that a larger share of our GDP accrues to tax optimisation than in the already low-tax Switzerland.

We lag Switzerland in everything else...

Market Sophistication:

We lead Switzerland in Credit, thanks to allegedly greater ease of getting credit in Ireland (I am not sure what the Index analysts mean by that, given that our credit supply is negative). Despite beating Swiss in 'credit' we lag them in Investment, which, presumably means that while we borrow more and easier, we do not invest what we borrow... may be it is because our businesses are buying BMWs and Mercs instead of machinery and technology? I have no idea...

Business Sophistication:

Remember that Ireland beats Switzerland on Ease of Doing Business. But with all that 'Ease' around, we are really not that far up on Switzerland in actual Business Sophistication... and if we strip out FDI inflows and imports of high tech equipment and inputs (a proxy for how many ICT MNCs we have 'operating' from here), we are probably actually ranked lower than Swiss.

Knowledge & Technology Outputs:

When it comes to actual Knowledge & Tech outputs, all of the above 'advantages' of Ireland over Switzerland vanish. Just as Savings vs Investments, we are good on inputs, but much less good on deriving anything meaningful from them. Control for tax optimisation activities of ICT services MNCs in Ireland and we sink even further below Switzerland.

Creative Outputs:

We are keen on painting Ireland as a Creative Land, while the Swiss are, as we often note, boring and 'Germanic' - aka not creative and too stringent. Right? Not really. Swiss beat us hands down on Creative Output metrics. We only outperform them in terms of Wikipedia edits and YouTube uploads - presumably due to the need to control our reputation by editing out unpleasant references to our social and industry and politics 'stars' from the public domain and down to our 'craic' in pubs and bars that get mistakenly posted on-line... I am, of course, being slightly sarcastic.

So net conclusions (on serious note):

1. We are getting better and are strong performers when it comes to many 'inputs' into Innovation; but
2. We are not that great in deriving 'outputs' from the 'inputs' we commit.
3. Much of the performance upside for Ireland is down to distortionary activities of a handful of MNCs trading from Ireland; and
4. Much of the performance downside for Ireland is down to indigenous activities of the rest of our economy.