Why is Japan the source of so many bright ideas?

After evaluating various parameters and applying weightages, a May 2007 Economist Intelligence Unit (EIU) study, titled ‘Innovation: Transforming the way business creates’, has ranked 82 countries on innovation. Japan appears right on top of the list, way above the next contenders: Switzerland, the United States and Sweden. India occupies a modest 56th position (projected for 2007-2011; otherwise 58th position for 2002-2006).

The EIU study, which was sponsored by Cisco Systems, found:

“Japan, Switzerland, the US and Sweden are the world’s top four innovators among the 82 economies.

Sizeable spending on R&D is likely to yield dividends in terms of new products and services. Among firms that have R&D spending equal to at least 5% of their revenue, 45% of respondents perform better than their peers; this compares with 35% of the firms that spend less than 5% of revenue on R&D.

A broad range of factors were cited in explaining what makes a country innovative, with the top determinants being technical skills of the workforce (92% of respondents) and quality of IT/telecommunications infrastructure.”

“But how important is innovation, which countries innovate better than others, and why? To find out, the Economist Intelligence Unit undertook two parallel research studies in a programme sponsored by Cisco. The first was a worldwide survey of 485 senior executives to gauge a better understanding of the drivers of innovation and their relative importance. The second was a ranking of 82 of the world’s economies by innovation performance during 2002-06, with a forecast for the countries to 2011.”1

“The EIU study created four indices for each of the 82 countries examined. Apart from the innovation index based on patents granted, two further indices ranked each country’s direct drivers of innovation (national research effort, education standards, technical skills, broadband penetration, etc) as well as those indirect environmental factors considered conducive for innovation (such as rule of law, tax regime, economic stability, labour flexibility and patent protection). Finally, an aggregate enabling index was created from a 70/30 weighting of the direct and indirect drivers.”2

To answer the question ‘Why is Japan the source of so many bright ideas?’, The Economist offered another article, ‘Mother of invention’, with possible explanations. Here’s an excerpt:

“Despite having one of the best-educated workforces in the world, superb IT infrastructure, a well-oiled administration, good rule of law and protection of intellectual property, Japan ranks a lowly 14th in terms of its enablers for innovation. So, why does the country perform so well on the output side of the innovation equation, despite having such feeble drivers on the input side?

No one really knows. You can make educated guesses. The concentration of talent in manufacturing. The pursuit of excellence. The ferocious rivalry between Japan’s large electronics firms. The lingering relic of the country’s post-war catch-up mentality. Fears of economic isolation given the expansion of the European Union and the emergence of the North American Free-Trade Area. Anxiety about a rapidly ageing society facing a formidable pensions and health-care crisis.

All this may or may not play a part. But beyond the more obvious economic imperatives lie certain social factors that appear to be at work as well.”

A PDF version of the EIU report can be found here.

[1 ‘Innovation: Transforming the way business creates’, Economist Intelligence Unit.
2 ‘Mother of invention’, Economist.com, 3 August 2007]