China is climbing up the world innovation rankings faster than other countries. Since the Economist Intelligence Unit first published its global innovation index two years ago, China has moved up from 59th to 54th in the rankings—an improvement we thought would take five years has been achieved in just two. According to the study, A new ranking of the world’s most innovative countries, which was sponsored by Cisco, other gainers include India and Turkey. But while the emerging markets are moving up the pecking order, the developed world still hogs the top spots—Japan and Switzerland remain first and second respectively in the league table, followed by Finland and the US. Ireland retains 19th ranking. The ranking compares 82 countries by their innovativeness and looks at the factors that bring this about.

The report includes innovation predictions for the next five years, and more gains for the emerging world are expected. But even so, developed countries will not lose their status as the most innovative in the world. Japan, the US and European countries such as Switzerland, Finland, Germany and Sweden will still rank among the top 10 globally in 2013. But countries such as China, India and South Africa will continue to rise up the innovation rankings, albeit from a much lower level.

The Economist Intelligence Unit measures innovation performance by the number of patents granted to people from different countries by the patent offices of the US, the European Union and Japan. The index also looks at factors that help or hinder the ability to innovate, such as the amount of research and development (R&D) undertaken and the technical skills of the workforce.

Key findings of the report include:

• China surpasses expectations. Between 2002-06 and 2004-08, China rose from 59th to 54th in the Economist Intelligence Unit’s innovation index. To achieve such an improvement in just two years is impressive—we had expected it would take five years for China to reach this level in the rankings. One reason for the jump is that China is making a concerted effort to build a more innovative economy by investing heavily in R&D and education (although weak protection of intellectual property still holds the country back).

• India makes strides, but Russia and Brazil do not. India is advancing at a steady pace up the innovation ranks as the number of patents granted increases and both innovation-specific and broad environmental factors improve. From 58th in 2002-06 it advanced to 56th in 2004-08. In 2009-13, it is forecast to reach 54th. Russia and Brazil, in contrast, lost ground between 2002-06 and 2004-08 and will stay put in 2009-13. Brazil is improving in both patents granted and innovation inputs, but not as quickly as some peers. Russia, however, has seen a deterioration in the both the innovation environment and number of patents granted.

• Developed nations keep the top slots. Japan, Switzerland and Finland are predicted to keep their first, second and third places respectively through to 2013. But the US is expected to slip from fourth place in 2004-08 to fifth in 2009-13. The innovation environment is weakening slightly, with US government support for academic R&D slipping and the country lagging in the number of graduates obtaining degrees in science and engineering.

• The current economic crisis will weaken innovation performance in the next five years. The 2007 index forecast a 6% average increase in innovation performance, as measured by number of patents granted, between 2007 and 2011. The Economist Intelligence Unit now forecasts only a 2% increase on average between 2009 and 2013, as the recession constrains spending on R&D, education and training, and causes firms to focus on their immediate needs.

“Innovation flourishes where countries combine investment in education and research with a sound business environment,” says Nigel Holloway, Director of Research Americas at the Economist Intelligence Unit.“For China to sustain its momentum, it will have to address factors such as weak protection of intellectual property, the restriction on the flow of scientific ideas and excessive red tape.”

The Economist Intelligence Unit’s Innovation Index analyses the innovation performance of 82 economies. It is based on countries’ innovation output, as measured by the number of patents granted by the patent offices of the US, European Union and Japan, and innovation inputs, based on the Economist Intelligence Unit’s Business Environment Ranking (BER) model. The Index measures the following direct innovation inputs: R&D as a percentage of GDP, the quality of local research infrastructure, the education of the workforce, technical skills, the quality of information and communications technology infrastructure and broadband penetration. The innovation environment includes political conditions, market opportunities, policy towards free enterprise, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.