Europe’s Most Innovative Countries: Effort Spent vs. Money Made
Which country deserves the title “Europe’s most innovative country”? Is it Sweden or Germany? Or perhaps Belgium, Switzerland, or The Netherlands deserve the honor? As the creators of the leading innovation benchmark for global equities, scoring companies for their innovativeness is our expertise. Beyond the company level, however, our innovation scoring methodology also offers a bird’s eye view on where innovation manifests globally.
Several global innovation scoreboards rank the most innovative countries in the world. Typically, such rankings compare countries based on strengths and weaknesses in their innovation systems (predominantly input factors such as costs and efforts). Take, for example, the European Commission’s European Innovation Scoreboard (EIS) (see Figure 1), which classifies European countries into Innovation Leaders, Strong Innovators, Moderate Innovators, and Emerging Innovators. The scoreboard uses an assortment of 32 innovation indicators along dimensions such as the attractiveness of the country’s research systems, companies’ investments in research and development, and the use of information technology.
According to the recently released 2022 Scoreboard, based on 2021 data, Europe’s top five innovators are (1) Sweden, followed by (2) Finland, (3) Denmark, (4) The Netherlands, and (5) Belgium. Ireland, Luxembourg, Austria, Germany, Cyprus, and France qualify as “Strong innovators,” scoring above the EU average. Estonia, Slovenia, Czechia, Italy, Spain, Portugal, Malta, Lithuania, and Greece obtain a “Moderate innovator” designation, whereas Hungary, Croatia, Slovakia, Poland, Latvia, Bulgaria, and Romania close the ranks as Emerging Innovators. Switzerland, while not in the EU list, comes in ahead of Sweden when taken into consideration.
Figure 1: The European Innovation Scoreboard ranking 2022
While input-focused rankings such as the EIS are informative in their own right, they are of limited value for investors looking to identify where innovation brings measurable and tangible outputs in the form of cash inflows in listed equities. When we look instead at where innovation revenues are being generated with the help of our expert-led innovation screening approach, quite a different landscape emerges (see Figure 2). In 2021, total revenues of all listed companies headquartered in the European countries included in the EIS totaled USD 12.2 Trillion, out of which USD 584.6 Billion were revenues generated through innovative products and services.
Ranked by materiality of a country’s innovation revenues contribution to Europe’s total innovation revenues, (#1) Germany and (#2) France, which rank 9th and 11th in the EIS, lead the innovation revenues chart, with 33.7% (USD 196.9 B) and 23.4% (USD 136.7 B) respectively, followed by (#3) Switzerland (12.4%, USD 72 B), which does not feature in the EIS list, and (#4) The Netherlands (9.3%, USD 54.2 B), (#5) Belgium (5.5%, USD 32.3 B), (#6) Sweden (4.8%, USD 27.8 B), (#7) Finland (3.5%, USD 20.6 B), (#8) Italy (2.8%, USD 16.5 B), (#9) Ireland (1.5%, USD 8.9 B), (#10) Spain (0.9%, USD 5.0 B), (#11) Austria (0.7%, USD 4.1 B), (#12) Poland (0.6%, USD 3.2 B), (#13) Denmark (0.6%, USD 3.2 B), (#14) Hungary (0.2%, 907 M), (#15) Cyprus (0.1%, 610 M), and (#16) Greece (0.1%, 396 M).
Figure 2: Ranking of countries by share of Europe’s total innovation revenues and Singularity Innovation Score (country’s innovation revenues / country’s total revenues)
European Innovation Scoreboard ranking appears in brackets after the country name.
Yet another picture emerges when we consider each country’s Singularity Innovation Score (SI-Score), which reflects the share of a company’s revenues that are derived from products and services that are relevant in innovation value chains. On the country level, the SI-Score represents the total share of innovation revenues of all the country’s listed companies as a percentage of their total revenues. The World’s SI-Score sits at 4.0, meaning that only 4% or USD 3.04 T of USD 76.0 T revenues generated by the World’s listed equities represent innovation revenues, whereas Europe’s SI-Score is 4.8.
Based on Singularity Innovation Score, (#1) Belgium (SI-Score: 11.5) tops the list as having the highest share of innovation revenues to total revenues with the help of Umicore (SI-Score: 85), a global leader in advanced materials and recycling of EV batteries, which makes up about 75% (USD 24.2 B) of Belgium’s total innovation revenues. (#2) Switzerland (SI-Score 9.8) comes out ahead in second place for its leading players in the Robotics and Automation equipment manufacturing and Bioinformatics space. (#3) The Netherlands (SI-Score: 6.1) stands out with industry-leading technologies enabling global innovation in Compute Power and Advanced Materials. (#4) Germany’s (SI-Score: 6.0) innovation landscape includes leaders in Advanced Materials and Robotics and Automation, whereas (#5) Sweden’s (SI-Score: 5.2) main contributors include IT provider Hexagon (SI-Score: 100) and food additives producer AAK (SI-Score: 94). Finally, (#6) Finland (SI-Score: 5.1), powered by innovators in biodiesel manufacturing, (#7) Ireland (SI-Score: 5.0), home to natural flavors and food additives producer Kerry Group (SI-Score: 84), and (#8) France (SI-Score: 4.9), a European hotspot for New Energy and Big Data companies, close the ranks of countries with above-average scores. In contrast to the EIS, where Denmark ranks third, its SI-Score of 1.1 places it outside the top ten (# 17) both for its low contribution to Europe’s innovation revenues and the low share of innovation revenues in the country’s total revenues. Austria (SI-Score: 1.8) and Estonia (SI-Score: 0), both classified as Strong Innovators in the EIB, also rank outside the top ten (#12 and #24, respectively) based on their innovation revenues in listed equities.
Figure 3: Comparison of European Innovation Rankings
As the comparison chart shows (Figure 3), a country’s innovativeness can be viewed in many different ways. As for innovation outputs in the listed equities space, the SI-Score provides a starkly different perspective on Europe’s top contributing innovation leaders from rankings resulting from input-based measures.
Interested to learn more about our research on the World’s top innovators? Visit the www.singularity-group.com for more information on the Singularity Innovation Score and our unique innovation-based investment products.
About The Singularity Group
The Singularity Group (TSG) makes applied innovation investable in listed equities. TSG is the initiator of the Singularity Index™ (Bloomberg ticker: NQ2045), a global, all-sector benchmark and gold standard for applied innovation. The Singularity Strategies include The Singularity Fund (UCITS Lux) and the Singularity Small&Mid (UBS AMC). The Swiss investment boutique works closely with the Singularity Think Tank, a network of entrepreneurs and academics with deep insights into innovation value chains. Their input forms the foundation of TSG’s proprietary innovation scoring system that quantifies the engagement of companies within a set of curated Singularity Sectors worldwide across all market capitalizations and industries. The Singularity Score defines how much value listed companies are generating through applied innovation.
For more information on how our Think Tank’s insights fuel our strategy, please visit www.singularity-group.com.
Footnote: 1) Including Switzerland, which is not in the EIS
