Posted: 14 Nov 2016 Last revised: 28 Jun 2017
Date Written: October 11, 2016
The Global Innovation Index measures the innovation performance of countries using a wide range of indicators. The key findings of the index reveal policy issues which relate to countries’ efficiency in utilizing their resource endowments for innovation activities, countries' potential to expand their innovation outputs and the key role of the economic environment in fostering innovation. However, the use of equal weighting undermines the usefulness of the Global Innovation Index in offering policy insights towards this direction. We propose a two-step process that utilizes multi-directional efficiency analysis to identify asymmetric potential improvements across countries and innovation pillars, and then applies partial least squares regression conditional each country’s nearest neighbors within a multidimensional space of economic environment. The novelty of our approach is that we assess the potential that a country has to innovate in relation to its economic environment, hence distinguishing between what is considered optimal and what is actually feasible. Three policy directions are outlined when considering countries’ innovation efficiency and potential to innovate, which may contribute in designing tailored innovation policies.
Keywords: multi-directional efficiency analysis; partial least squares; nearest neighbors; Global Innovation Index
JEL Classification: C44, O30, O38, O57
Suggested Citation: Suggested Citation
Philippas, Dionisis and Tziogkidis, Panagiotis and Leontitsis, Alexandros, A Two-Step Approach for Identifying the Optimal Innovation Policy Direction Using the Global Innovation Index (October 11, 2016). Available at SSRN: https://ssrn.com/abstract=2868639