Twelfth pillar: Innovation

Eleventh pillar: Business sophistication

Business sophistication concerns the quality of a country’s overall business networks, as well as the quality of individual firms’ operations and strategies. When companies and suppliers are interconnected in geographically proximate groups (“clusters”), efficiency is heightened, leading to greater opportunities for innovation and to the reduction of barriers to entry for new firms. Individual firms’ operations and strategies (branding, marketing, the presence of a value chain, and the production of unique and sophisticated products) all lead to sophisticated and modern business processes.

Although less-advanced countries can still improve their productivity by adopting existing technologies or making incremental improvements in other areas, for countries that have reached the innovation stage of development, this is no longer sufficient to increase productivity. Firms in these countries must design and develop cutting-edge products and processes to maintain a competitive edge. This requires an environment that is conducive to innovative activity, supported by both the public and the private sectors. In particular, this means sufficient investment in research and development especially by private, high-quality scientific research institutions, collaboration in research between universities and industry, and protection of intellectual property.

Although the 12 pillars of competitiveness are described separately, this should not obscure the fact that they are not independent: not only they are related to each other, but they tend to reinforce each other. For example, innovation (12th pillar) is not possible in a world without institutions (1st pillar) that guarantee intellectual property rights, cannot be performed in countries with poorly educated and poorly trained labor force (5^th pillar), and will never take place in economies with inefficient markets (6th, 7th, and 8th pillars) or without extensive and efficient infrastructure (2nd pillar).

Although the actual construction of the Global Competitiveness Index will involve the aggregation of the 12 pillars into a single index, measures are reported for the 12 pillars separately because offering a more disaggregated analysis can be more useful to countries and practitioners: such an analysis gets closer to the actual areas in which a particular country needs to improve.

The specific weights are attributed to each subindex in every stage of development. They are shown in Table 2.1. To obtain the precise weights, a maximum likelihood regression of GDP per capita was run against each subindex for past years, allowing for different coefficients for each stage of development. The rounding of these econometric estimates led to the choice of weights displayed in Table 2.1.

Дата добавления: 2014-01-11