Ranking competitiveness

I know some folks have made a big deal out of the fact that the latest World Economic Forum's Global Competitiveness Report shows the US now number two behind Switzerland. They shouldn't. I've always be skeptical of these composite rankings (although I understand why they are necessary). In this case the difference between Switzerland and the US is the difference between 5.60 and 5.59 on their competitiveness scale. Close behind are Singapore, Sweden, Denmark, Finland, Germany, the Netherlands, Japan, and Canada.

I'm also skeptical of some of the indicators used. For example, as far as I can tell, the number of patents grant is a good indicator of . . . the number of patents granted. It tells us nothing about the quality of those patents (for example if they are junk or overly broad), the technical significance of the ideas embodies in the patent, or the commercial relevance.

Far more interesting are some of the subjective measures gauged through a survey of business executives. Take for example the follow question on innovation, "In your country, how do companies obtain technology? (1 = exclusively from licensing or imitating foreign companies; 7 = by conducting formal research and pioneering their own new products and processes)". Japan and Germany top the list at a score of 5.9 with the US sixth with a score of 5.5. Ireland is 30th with a score of 3.8 and India is 35th with a score of 3.6. Another interesting question was "How numerous are local suppliers in your country? (1 = largely nonexistent; 7 = very numerous)". Japan and Germany had the highest scores, followed by India and Qatar. The US was 7th. Then there is this question: "How well do companies in your country treat customers? (1 = generally treat their customers badly; 7 = are highly responsive to customers and customer retention)." not surprisingly Japan came in on top with a score of 6.3; the US was 9th with a score of 5.7.

The country profiles give an interesting snapshot of where a nation is relative to others. For the US there are some surprising results. For example, the US is 39th with respect to the strength of auditing and reporting standards, 22nd on ethical behavior of firms and 26th on judicial independence. (There are also some answers I would expect from a survey of businessmen.)

I could go on and on with the specific of the measures, but I think you get the point. I'm not sure I completely believe the numbers, but it is interesting to see how countries rate themselves on such measures.

So, all in all an interesting report. But don't take the rankings all that seriously. Best to look carefully under the hood, where things are much more interesting.