Business

Ireland’s global innovation ranking would climb significantly without GDP measure, council says

National Competitiveness and Productivity Council finds modified gross national income improves the Republic’s position to 12th

A view of the Dublin docklands, where several multinationals are based: The National Competitiveness and Productivity Council has 're-estimated' the State's innovation performance relative to other countries based on modified gross national income. Photograph: iStock

Laura Slattery
Thu Apr 4 2024 - 11:37

The State would have been placed 10 spots higher in a global ranking of the most innovative countries if modified gross national income had been used rather than gross domestic product (GDP), according to the National Competitiveness and Productivity Council (NCPC).

The Republic made a “marginal improvement” in the Global Innovation Index (GII) 2023 published last September, ranking 22nd among 132 economies, up from 23rd in the 2022 study but down from 19th in 2021.

The index, which is compiled annually by the World Intellectual Property Organisation, ranks economies according to their innovation capabilities and covers 80 indicators, some 30 of which are measured or scaled in terms of GDP.

The NCPC said in a bulletin that “a majority of these understate Ireland’s actual performance” and it has now “re-estimated” the State’s innovation performance, finding that if modified GNI – often denoted as GNI* – had been used it would have been ranked 12th overall.

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When assessed in terms of GDP the State remains below the EU average for market sophistication, with this gap increasing in 2023. It has also dropped marginally behind the EU average for human capital and research. It outperforms other EU countries in five other areas.

But when using GNI* the State “comfortably outperforms” the EU average on all pillars with the exception of market sophistication, for which it performs on a par. The gap between the State and the best performing countries also “closes considerably”.

The NCPC, which makes recommendations to the Government on key competitiveness and productivity, said that using GNI* resulted in “a more accurate assessment” of the State’s relative performance in light of the “well-documented limitations” of GDP as a measure of economic activity here given the distorting effect of multinational companies on the statistics.

Its bulletin – issued by NCPC chair Frances Ruane and prepared by Dermot Coates and Keith Fitzgerald – concludes that the GII’s use of standard international indicators “typically understate Ireland’s true performance in terms of innovation”.

The Republic last featured in the GII’s top 10 in 2018, when it was ranked 10th, although its decline in the rankings since then means its five-year average over the 2019-2023 period is 18th.

Laura Slattery

Laura Slattery

Laura Slattery is an Irish Times journalist writing about media, advertising and other business topics

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