Linking innovation, productivity, and competitiveness: implications for policy and practice

A country's competitiveness is a complex concept that has been widely studied from different perspectives. Given that the competitive performance depends on the formation of intellectual capital and society's capacity to innovate, economic research has identified innovation and productivity as key engines for the increase of competitiveness. There are several alternatives approaches for measuring innovation, productivity, and competitiveness. These approaches lead to different assessments, since there is no universally accepted definition and measuring technique of the aforementioned concepts. Moreover, these definitions appear to have several overlaps and this complicates the analysis of their relations. The aim of this paper is to present a methodological framework for studying the dynamic linkage among innovation, productivity, and competitiveness and explore the implications for policy and practice. For each one of these measures, an overall score is estimated, using a regression-based model that follows the principles of multi-objective mathematical programming. For the purpose of the analysis, a database containing a set of 25 indicators for 19 countries for the period 1998-2008 has been developed. The most important results include a series of contour maps and gap analysis diagrams that illustrate the evolution of the overall innovation, productivity, and competitiveness indices and compare the performance of the examined countries. These results show that, by average, there are no significant gaps among innovation, productivity, and competitiveness, although several variations may be found for particular countries. The motivation for this research from a policy and management perspective, is to explore whether, how and why certain combinations of competitiveness, productivity and innovation levels for a given country as well as across countries reveal any particular set of intrinsic strengths or weaknesses as well as more effective entry points regarding public sector (policy) interventions. A systematic profiling and comparison of competitiveness, productivity and innovation competence levels may reveal guidelines and insights for private sector (management) choices and initiatives as well.