5: Foundations

Beyond national statistics and measurements of current productivity, this study includes some broad measurements of the Foundations for biotechnology innovation. This category focuses on more general factors that can support operations at biotech companies. Specifically, this category measures a country’s capabilities in the foundations that are perceived to be necessary to start building an innovation-based biotechnology industry. In general, these data answer questions such as: Are the roads readily accessible? Are the ports efficient? Are there opportunities for entrepreneurship? How easy is it to be an entrepreneur in the country in question? If a country scores poorly in Intensity, Enterprise Support and Education/Workforce, it should start with Foundations.

Here, we rely on five components. Data from the OECD lie behind three of them: “biotechnology R&D spend,” “R&D business expenditures per GDP” and “government support of R&D per GDP.” For data on “infrastructure quality,” we turned to the World Economic Forum (Schwab, K. 2010. The Global Competitiveness Report, 2010–2011. World Economic Forum), which uses an international survey to produce its index. Last, we derived a component called “innovation and entrepreneurship opportunity” from the 2010 Legatum Prosperity Index.

To see how some of these components impact a country’s innovation, let’s focus on a few of them. First, “biotechnology R&D spend” can spawn a spillover effect. That is, such spending can encourage a researcher to leave one company to start a new one. Second, “government support of R&D per GDP” has a large impact on the total amount of money available, and providing government financial support at a level that it’s hard for the biotechnology sector to do without. 

Combining these categories into our Foundations index reveals that Sweden earned the top ranking, as it did in our 2010 edition. In fact, the top ten countries in this category—Sweden, Finland, Israel, Switzerland, Japan, Denmark, Singapore, South Korea, U.S. and Iceland—received scores in a range that only varied by about 18 percent. Nonetheless, compared with last year, the numbers show some movement. For example, Singapore dropped from second place with a score of 7.73 in 2010 to seventh this year with a score of 7.09. Israel moved up a bit, from a fourth place finish in 2010 with a score of 7.75 to third in 2011 with a score of 7.88. Finland, on the other hand, made a big jump from fifth in 2010 with a score of 7.74 to second in 2011 with a score of 8.10.

The U.S. dropped from a score of 7.03 in 2010 to 6.86 in 2011, which put it in ninth place. Although the U.S. scored high on “biotechnology R&D spend” and “innovation and entrepreneurship opportunity,” it earned only a mediocre score on “infrastructure quality” and faltered even more on “R&D business expenditures per GDP” and “government support of R&D per GDP.”

The incomplete nature of these data sets precludes some generalizations. Moreover, no well defined mathematical model describes the precise relationship between these factors and success in the biotechnology industry. Instead, this metric serves as a tool for finding gaps in a nation’s ability to innovate. For instance, our data indicate that China should invest more in its Foundations.