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Shift in International Innovation Powers Between East Asian Economies and Western Superpowers Over the Last Decade

By Kirwin Lee, Senior Associate

Innovation has increasingly become a significant indicator of a country’s economic and social progress, and new developments in advanced technologies are particularly representative of a nation or region’s competitiveness. Bertelsmann Stiftung have recently published a new study entitled “World class patents in cutting-edge technologies – The innovation power of East Asia, North America and Europe” which looks into some of the most important patents in cutting-edge technologies such as 3D printing, 5G, and energy conversion, and analyses how international innovative power has shifted over the last 10 years. In this article we aim to provide a summary of the findings in the report, while highlighting some noteworthy trends in the changes in patent power amongst major industrial nations in North America (USA, Canada), Europe (Germany, UK), and East Asia (China, Japan, and South Korea).

What makes Bertelsmann Stiftung’s study particularly interesting is that in their analysis they have adopted a new approach which addresses some of the shortcomings associated with conventional patent analysis methodologies. Bertelsmann Stiftung recognised that strictly quantitative analyses using absolute patent numbers fail to take into account crucial differences in quality between patents. For example, some countries may have soared in recent years in terms of absolute patent numbers, but many of the patents have little value and can potentially distort the true overview of a nation’s innovational competitiveness. Bertelsmann Stiftung therefore aimed to provide more indicative results by only looking at what they refer to as “world class patents”. To be regarded as “world class”, a patent (or a patent family) has to be frequently cited in other patent applications and for which applications were filed in many markets. Also, the patent has to concern relevant technologies “with a potential for changing the economy and society, and helping master major challenges”, as explained in the report. By taking into consideration market coverage and technological relevance of patents, a region’s innovation power can be more accurately defined and measured.

In the Bertelsmann Stiftung report, 58 cutting-edge technologies including precision medicine, hydropower, and autonomous driving were sorted into ten broader subject-fields: Environment, Energy, Nutrition, Infrastructure, Digitalisation, Security, Materials, Health, Mobility, and Industry. Even though East Asian countries have been rapidly catching up in a number of domains, the USA still holds the largest number of world class patents in 50 out of 58 cutting-edge technologies, especially excelling in the areas of Health and Security. In fact, over 2010 to 2019 the USA is the only country capable of keeping up with China where completely new technologies (e.g. blockchain) are concerned. As another major economy in North America, Canada has been performing immensely in the field of Digitalisation with the second-largest number of world class patents in quantum computing, only ranking after the USA. Furthermore, Canada has also shown promising potential in the Infrastructure domain, demonstrating a growth rate of around 12% in world class smart city patents between 2010 and 2019.

As a continent, Europe would occupy the top position in 12 out of the 58 cutting-edge technologies where world class patents are concerned, mostly leading in technologies corresponding to the subject-fields of Nutrition, Environment, Energy, and Materials. However, there is not a single European country that holds the most world class patents among these 58 technologies. In particular, the study points out that even though Germany currently remains the strongest European patent power, its position as an innovation leader has been increasingly challenged. Germany takes the second place in seven out of the 58 technologies as indicated in the report, but it is noted that the industrial nation has been losing ground to East Asian countries in its shares of world class patents notably in Environment and alternative fuels. Like Canada, the UK has also demonstrated relative strength in Digitalisation. The UK has also been successful in maintaining its share of high-quality patents in the field of Energy technologies.

China and South Korea have made massive leaps in terms of patent quality over the last decade, with China leading in Environment and Nutrition and especially outperforming other nations in the fields of recycling, water treatment, and waste management. In fact, China currently holds more than a quarter of all world class patents in recycling technology. China has also impressively overtaken Germany in a number of areas in numbers of world class patents, such as photovoltaics and thermal solar energy. On the other hand, South Korea has scored exceptionally well in digital infrastructure technologies, only coming in second behind the USA in new 5G mobile radio standard. South Korea has also demonstrated impressive growth figures in the areas of artificial intelligence, big data, and cloud computing, although it has not made it to the top 5 spots. As a traditional innovation powerhouse, Japan still dominates in electric vehicles, batterytech, and advanced coatings in terms of its proportion of world class patents in these areas despite the slow growth in recent years. However, Japan has lost considerable ground in the fields of artificial intelligence and autonomous driving.

In the summary section of the report, Bertelsmann Stiftung outlines a number of helpful recommendations based on results of their study, which includes further development of European and international cooperation in innovation strategies, as well as better application and commercialisation of new ideas. Authors of the study also call for a positive attitude towards entrepreneurship and aligning innovation with arising needs in our societies.

Within the next decade, it looks like we should expect even bigger disruptions to the USA’s number one position in a number of technological areas as East Asian countries continue to make significant breakthroughs in their technological research and entrepreneurial capabilities. It is hoped that all these innovation leaders would take heed of the recommendations set out by Bertelsmann Stiftung and help foster a healthy competition environment while promoting a more internationally collaborative culture in innovation.