Creativity and innovation - How is Malta shaping up?

It is nowadays an accepted fact of business life that creativity and innovation are crucial to the competitiveness and sustain-ability of an economy. The creation, utilisation and servicing of new products, processes and markets is essential not merely to reap efficiencies and lower costs but perhaps even more importantly to create a competitive edge based on supply capabilities that are not readily replicable by competitors. Creativity and innovation are thus the lifeline for all business. While usually readily associated with new economy activities and high technology sectors, innovation is perhaps even more crucial for the so-called traditional sectors of economic activity, which constantly need to re-invent themselves in terms of their product offer and market placing.

It is for this reason that innovation is nowadays attract-ing considerable interest not only from a business manage-ment perspective, but also from the academic and policy-making spheres.

The EU has specific pro-grammes aimed at funding and encouraging innovation in European business, aimed at firms of different sizes and activity type. Within the local context, Malta has a national research and innovation strategy which was developed through consultation between govern-ment and social partners, providing the framework for the implementation of specific measures in this field.

Measuring innovation performance

The measurement of innovation performance of a country is therefore a key consideration in assessing economic strength and future prospects and is an indispensable element of policy design. The European Innovation Scoreboard (EIS) is a statistical tool which provides an insight into the innovation performance of individual EU member states and other economies, allowing for comparisons between countries and over time. The scoreboard tracks innovation performance by considering five essential factors which are indicative of the inputs going into and outputs coming out of innovation activity. These are:

• Innovation drivers: these relate to the extent to which the population has access to education and sources of information, which are essential inputs in the innovation process. The number of graduates, youth educational attainment and broadband penetration are among the indicators of innovation drivers.

• Knowledge creation: this measures the extent of public and private investment in research and development activities, which is another essential input towards innovation.

• Innovation and entrepreneurship: this facet focuses on the extent to which entrepreneurship is vibrant in a country and its focus on innovative activities. The quantity of venture capital and the importance of innovation by small and medium enterprises (SMEs) are among the indicators in this respect.

• Application: this measures a facet of the output of innovation by gauging the extent of turnover and income ensuing out of innovative activities. Sales of new products and employment in high-tech industries are among the main indicators in this regard.

• Intellectual property: this is another important output of innovation activities, measured by the number of patents, trade marks and industrial designs.

These five innovation factors are summarised into a single indicator called the summary innovation index (SII). The SII thus gives a snap-shot of the aggregate national innovation performance of the analysed countries, as shown in Figure 1. On the basis of these results, the EIS classified countries as follows:

The innovation leaders include Denmark, Finland, Germany, Israel, Japan, Sweden, Switzerland, the UK and US. Sweden is reported to be the most innovative country, but its leading position is mostly based on strong innovation inputs.

• The innovation followers include Austria, Belgium, Canada, France, Iceland, Ireland, Luxembourg, and the Netherlands.

• The moderate innovators include Australia, Cyprus, Czech Republic, Estonia, Italy, Norway, Slovenia and Spain with SII scores below the EU average.

• The catching-up countries include Bulgaria, Croatia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania and Slovakia. Although their SII scores are significantly below the EU average, these scores are increasing towards that of the EU27 over time with the exception of Croatia and Greece.

• Mr Muscat is director general of the Federation of Industry