Author: Teona Turashvili

According to the Global Innovation Index, Georgia has improved its innovation level, especially in terms of institutional structure and regulatory environment. However, major weaknesses remain, such as lack of support for research and education by the government and the private sector, and limited use of innovation in business.

In 2016, Georgia received a score of 33.9 (out of 100), an insignificant increase compared to the previous year (33.8). Compared to 2015, Georgia gained 9 positions in the ranking of 128 countries and currently holds the 64th place (see. Figure #1).

Despite this positive change, the country has low results in human capital, business development and creative outputs. In addition, among post-Soviet countries Georgia falls behind the Baltic States, Russia, Moldova, Ukraine and Armenia.

About the Global Innovation Index

The Global Innovation Index was launched in 2012 and is being published annually. The index aims to reveal global tendencies in innovation development and showcase mechanisms that help achieve long-term growth, productivity and job growth. The index helps countries identify what is needed to create an innovation friendly environment. The 2016 report was co-authored by the Cornell University and the World Intellectual Property Organization (a UN agency).

Each country is evaluated using seven criteria:

1. Institutions

2. Human capital & research

3. Infrastructure

4. Market sophistication

5. Business sophistication

6. Knowledge and technology outputs

7. Creative outputs

All of the above criteria are further broken down into sub-indicators.

Georgia’s Results

Georgia received the highest score for its institutional structure (69.2), which assesses the country's political stability, government efficiency, business environment and regulations (see. Figure #2). The country has the worst result in human capital and education, with a score of 23.2 (out of 100) and 91st place in the global ranking. Georgia also performed poorly (score of 26.5 and 9th place) in business sophistication (the degree to which the private sector supports innovation).

A comparison with the 2015 report reveals that Georgia has worsened its results in precisely those components, where it had the lowest scores to begin with (see Figure #3). The components of business sophistication and human capital & research are a good example of this. The only exception is the creative outputs component, where Georgia improved its score by 1.6 and its ranking by 23 positions. However, despite this improvement, the result in this component is still modest, which is mainly due to lack of online creativity and use of ICT technologies by the private sector.

Georgia has an average score in market sophistication (44.3) and infrastructure (41.7).

The Global Innovation Index is divided into two sub-indices: the innovation input and innovation output indices, which are used to calculate the innovation efficiency ratio. The innovation input index is calculated by averaging of the first five indicators (institutions, human capital & research, infrastructure, market and business sophistication). The innovation output index is calculated by averaging of the remaining two indicators (creative outputs, knowledge & technology outputs).

The innovation efficiency score is a ratio of the innovation output and innovation input, and ranges from 0 to 1, where 1 is the best score.

Georgia has a score of 26.7 and holds the 60th place in terms of innovation outputs, and has a score of 41 and holds the 67th place in terms of innovation inputs. As a result, the country’s innovation efficiency ratio is 0.7 (67th place among 128 countries), an increase of 0.1 from the previous year.

The Global Innovation report lists the strengths of weaknesses of each country. Georgia’s strengths are:

• Ease of starting a business (score of 97.8 and 6th place)

• Tariff rate (score of 95.7 and 5th place)

• Ease of getting credit (score of 85 and 7th place)

• Print and publishing manufactures (score of 83.2 and 4th place)

• Ease of protecting minority investors (score of 68.3 and 20th place)

• Foreign direct investment net inflows (score of 66.8 and 10th place)

The report also compares Georgia to other lower-middle income countries and states that Georgia is performing above average in this income group.
Georgia’s weaknesses are mainly related to market and business sophistication, and human capital & research:

• University / industry research collaboration (score of 27.3 and 117st place)

• Expenditure on education (score of 10.4 and 115th place)

• Expenditure on research and development (score of 1.3 and 103rd place)

• Private companies offering formal training for their staff (score of 9.4 and 91st place)

• Average score of top 3 universities in the QS World University Ranking (score of 0 and last place together with 56 more countries)

A Comparison of Georgia and Several Post-Soviet Countries

Georgia holds the 8th place among 15 post-Soviet countries and is behind the three Baltic States, Russia, Moldova, Ukraine and Armenia (see. Figure #4).

However, in terms of the innovation efficiency ratio Georgia is ahead of Lithuania and Russian from these 7 countries. Moldova and Estonia have the best innovation efficiency ratios.

In terms of Institutional framework and infrastructure Georgia falls behind only the Baltic States. Georgia is behind only Russia and Ukraine in terms of market sophistication.

In all other components (knowledge and technology outputs, creative outputs, human capital & research, and business sophistication) Georgia falls behind all 7 better performing post-Soviet countries. The only exception is human capital & research, in which Georgia is ahead of Armenia.

Judging by the results, Georgia should encourage research and innovation, introduction of innovative technologies in education, use of innovation by the private sector, and creation of innovative products.

Conclusion

Georgia has improved its position in the Global Innovation Index. However, the improvement is small enough to suggest that the country has not seen any fundamental changes in innovation development. The country faces several challenges that need to be overcome as soon as possible in order to achieve any significant progress in innovation.

The analysis of the results shows that over the past two years Georgia has worsened its results in precisely those components, where it had the lowest scores to begin with. Specifically, Georgia’s scores in human capital and education, business sophistication, knowledge and technology outputs range from 20-30 out of 100.

Even though Georgia performs well in terms of institutional structure and regulatory policy, the country's economic development, the development of its private sector and the scientific base still lag behind global tendencies.

In order to achieve progress, Georgia must take steps to development education and research. In addition, the private sector must also be involved in the innovation process, which can be achieved by promoting competition and providing incentives for innovation.