Technology spending may be softening in many parts of the world as the credit crunch bites, but the longer term fundamentals of IT industry competitiveness remain constant. An innovation-friendly culture, a steady flow of talent, advanced technology infrastructure, a robust legal regime, well-balanced government support and an open business environment are all vital factors that enable a country's IT producers to thrive. These form the basis of the Economist Intelligence Unit's "IT industry competitiveness index", in which the United States ranks as first in the world in 2008, maintaining its top position from the previous year.
As an incubator of high-tech start-ups and technology innovation and as a developer of talent, the US remains second to none. However, there is no room for complacency, as three new countries — Taiwan, Sweden and Denmark — move into the top five this year, displacing others such as Japan and South Korea. IT industry environments elsewhere in Europe and Asia, including in emerging markets, are also becoming more competitive.
The index results are highlighted in a new report, How technology sectors grow: Benchmarking IT industry competitiveness 2008, written by the Economist Intelligence Unit and sponsored by the Business Software Alliance (BSA). Following are the major conclusions of the research, and the key implications of the index for governments and IT industry leaders:
"Policymakers and business leaders need to address the full combination of factors that enable competitive IT industries," maintains Denis McCauley, director of global technology research with the Economist Intelligence Unit. "Few countries can hope to build strong IT production sectors without strong business and legal environments, deep pools of talent, support for innovation, and the widespread use of technology throughout society."
“This year’s index shows that a country’s IT competitiveness rankings can move upward or downward very quickly,” says Robert Holleyman, president and CEO of BSA. “The ability of information technology to deliver jobs and a better quality of life is strongly affected by the six drivers of competitiveness. This report should serve as a guide for governments on advancing innovation and economic performance.”
IT industry competitiveness index, 2008 | ||||||||
Overall scores and ranks | ||||||||
Country | Score | 2008 rank | 2007 rank | Country | Score | 2008 rank | 2007 rank | |
USA | 74.6 | 1 | 1 | Latvia | 38.1 | 34 | 34 | |
Taiwan | 69.2 | 2 | 6 | Lithuania | 37.1 | 35 | 35 | |
UK | 67.2 | 3 | 4 | Malaysia | 34.2 | 36 | 36 | |
Sweden | 66.0 | 4 | 7 | South Africa | 32.6 | 37 | 37 | |
Denmark | 65.2 | 5 | 8 | Turkey | 32.4 | 38 | 39 | |
Canada | 64.4 | 6 | 9 | Romania | 32.3 | 39 | 40 | |
Australia | 64.1 | 7 | 5 | Saudi Arabia | 32.3 | 40 | 38 | |
South Korea | 64.1 | 8 | 3 | Croatia* | 31.6 | 41 | -- | |
Singapore | 63.4 | 9 | 11 | Thailand | 31.5 | 42 | 41 | |
Netherlands | 62.7 | 10 | 12 | Brazil | 31.0 | 43 | 43 | |
Switzerland | 62.3 | 11 | 10 | Mexico | 30.7 | 44 | 44 | |
Japan | 62.2 | 12 | 2 | Bulgaria | 30.2 | 45 | 42 | |
Finland | 61.5 | 13 | 13 | Argentina | 30.1 | 46 | 45 | |
Norway | 59.7 | 14 | 14 | Philippines | 29.8 | 47 | 47 | |
Ireland | 59.4 | 15 | 15 | India | 28.9 | 48 | 46 | |
Israel | 56.7 | 16 | 20 | Russia | 27.7 | 49 | 48 | |
New Zealand | 56.6 | 17 | 17 | China | 27.6 | 50 | 49 | |
Austria | 56.1 | 18 | 19 | Venezuela | 25.7 | 51 | 52 | |
Germany | 55.4 | 19 | 16 | Colombia | 25.4 | 52 | 51 | |
France | 54.3 | 20 | 18 | Egypt | 25.3 | 53 | 55 | |
Hong Kong | 54.1 | 21 | 21 | Sri Lanka | 24.9 | 54 | 50 | |
Belgium | 53.4 | 22 | 22 | Peru | 24.8 | 55 | 54 | |
Spain | 46.3 | 23 | 24 | Ecuador | 24.5 | 56 | 53 | |
Estonia | 45.7 | 24 | 25 | Ukraine | 24.3 | 57 | 56 | |
Italy | 45.6 | 25 | 23 | Indonesia | 23.1 | 58 | 57 | |
Slovenia | 45.5 | 26 | 27 | Kazakhstan | 22.9 | 59 | 58 | |
Portugal | 42.2 | 27 | 25 | Bangladesh* | 22.4 | 60 | -- | |
Hungary | 40.6 | 28 | 28 | Vietnam | 21.4 | 61 | 61 | |
Czech Rep | 40.4 | 29 | 29 | Pakistan | 20.9 | 62 | 60 | |
Chile | 39.6 | 30 | 31 | Azerbaijan | 19.5 | 63 | 62 | |
Slovakia | 39.5 | 31 | 31 | Nigeria | 19.0 | 64 | 63 | |
Poland | 39.0 | 32 | 30 | Algeria | 18.5 | 65 | 59 | |
Greece | 38.2 | 33 | 33 | Iran | 16.5 | 66 | 64 | |
*New to the index in 2008. | ||||||||
Countries are scored on a scale of 1 to 100. | ||||||||
Source: Economist Intelligence Unit, 2008. |
Methodology: How the scores were derivedThe IT industry competitiveness index is organised into six distinct categories of quantitative and qualitative indicators, numbering 25 in all. The category and indicator weights were formulated by the Economist Intelligence Unit's modelling team using, as a guide, individual correlation coefficients of each indicator against a measure of IT labor productivity. The result is an overall index score and category scores for each country. The categories and their weights are: overall business environment (10 percent), IT infrastructure (20%), human capital (20%), legal environment (10%), R&D environment (25%) and support for IT industry development (15%).
The scoring methodology remains unchanged from last year, with one important exception. Country scores in the indicator covering patents, which are assessed in the R&D environment category, are now based on an estimation of IT-related patent registrations rather than using figures covering the entire economy, as was the case in 2007. This is a heavily weighted indicator in the model, and the change has resulted in some movement in ranks in both the R&D environment category as well as the overall index.
Qualitative indicators are scored by Economist Intelligence Unit analysts according to specific scoring criteria. Quantitative indicators are normalised through the population set so that each country is measured from 0 to 1 by applying a formula to each data point. Each indicator is then converted into a score of 0-100. The composite score for each country is also based on an index range of 0 to 100, with 100 representing the highest and best possible score. The data used in the rankings are sourced from the Economist Intelligence Unit, the United Nations, the World Bank, the World Intellectual Property Organization, IDC, Pyramid Research and other organisations. For more information on the methodology, please refer to our white paper.
How technology sectors grow: Benchmarking IT industry competitiveness 2008
is available free of charge at www.eiu.com/sponsor/BSA/technologysectors