European Innovation 2008: The Global Information Technology Report 2007-2008 puts Estonia ahead of Ireland for second year and US magazine BusinessWeek in its special report on the State of European Innovation in its current issue, says that at first glance, the 2008 World's Most Innovative Companies ranking from BusinessWeek and Boston Consulting Group makes depressing reading for Europhiles. Only 10 European companies made the top 50, and only one—Finnish mobile handset maker Nokia —made the top 10. North American companies dominate the list, with Asian companies second and coming on strong.

A closer look, though, reveals Europe has plenty of innovative momentum, even if its big multinationals remain underrepresented in the league tables. In several key segments such as mobile telecommunications and autos, European companies are powerful, even dominant forces for innovation.

BusinessWeek says that the evidence suggests that much innovation in Europe comes from small and midsize companies—and they don't tend to show up in surveys. In a study by researchers at French business school Insead, which looked at innovation by country rather than by companies, European nations did well. Germany was second, and 5 of the top 10 spots went to European countries. Professor Soumitra Dutta, author of the Insead study, attributes Europe's progress in part to deregulation forced by the European Union. "The EU process is a great trigger for innovation," Dutta says.

For example, Germany's engineering companies, most of them relatively small, have prospered by supplying the machinery used by manufacturers around the world, including China, India, and Russia. The innovative engineering sector is one reason the German economy has been surprisingly resistant to global economic turmoil.

Denmark is the most networked economy in the world, followed by Sweden and Switzerland, according to The Global Information Technology Report 2007-2008, released in April by the World Economic Forum. Among the top ten, the Republic of Korea (9) and, to a lesser extent, the United States (4) post the most notable improvements (moving up 10 and 3 positions, respectively).

“The successful experience of the Nordic countries, Singapore, the United States or Korea shows that a coherent government vision on the importance of ICT, coupled with an early focus on education and innovation, are key not only for spurring networked readiness, but also to lay the foundations for sustainable growth,”saidIrene Mia, Senior Economist of the Global Competitiveness Network at the World Economic Forum and Co-Editor of the Report.

Published for the seventh consecutive year with record coverage of 127 economies worldwide, the Report has become the world’s most comprehensive and authoritative international assessment of the impact of ICT on the development process and the competitiveness of nations.

Under the theme Fostering Innovation through Networked Readiness, this year’s Report places a particular focus on the role of networked readiness in spurring innovation through topics covered in the analytical chapters.

The report was co-produced by the World Economic Forum and Insead. Soumitra Dutta, Professor in Business and Technology at the French business school, commented last year on the Baltic state of Estonia's 20th ranking, ahead of Ireland's 21st:

“Estonia didn’t exist as a free country until about 20 years ago,”when it regained its independence from Moscow, Dutta says. “The government of Estonia, ex-Prime Minister Mart Laar and his key advisers, saw technology as a key enabler for not just promoting the development of the country but also for promoting an open and informed society with a transparent, open government … (These) were seen as very important requirements for the country coming out of the ex-Soviet bloc.”

Laar was just 32 years old when he became the prime minister of Estonia. “So a very young prime minister, supported and surrounded by very young, key advisers and they saw technology as a key enabler for the future development of the country … They wanted to make Estonia a modern, prosperous, open society and saw technology as a key enabler of that.”

And his advice to governments looking to make rapid progress? Leadership from the government is important,  Dutta says, and top officials need to understand that technology represents a broad development tool and that this has to be reflected in national policy.

“Many countries like, for example, Singapore, Estonia and Finland have very sophisticated national policies for articulating how technology should be used … and then of course what you need is a very capable, educated population, a workforce and society in general,” which can access technology and use it effectively. Plus, he says, countries also need effective public/private partnerships “because the government cannot do it alone, neither can the private sector – you need a good combination of public/private partnership to do it.”

Estonia has one of the most modern telecommunications networks in Europe, low connectivity costs and high rates of computer literacy, which have led to an explosion of innovative service applications, notably in banking, education, health, transport and public administration.

In this year's report, Ireland fell two ranks to 23rd place.

The shambolic implementation of broadband in Ireland reflects serious senior management and leadership deficiencies among politicians and the public sector, which were highlighted in an OECD report that was published on the Irish public service this week. 

Global Information Technology Report 2007/2008 Full Rankings

OECD Report on Irish Public Service: Lack of Strategic Vision, Poor Leadership; Limited Accountability and Performance Evaluation; Many Performance Initiatives and Isolated Reforms that do not Reinforce each other