3.5. Innovation

The Basque Country ranks low in the patents per million inhabitants indicator, some distance from the European average

One of the most commonly used indicators for measuring technological output is patents per million inhabitants, despite the limitations it presents (for example, not all industries use patents as a way to protect their innovations to the same extent, nor does everything that is patented turn out to be exploited commercially or take the form of a true innovation). This is an indicator which the OECD has not updated since last year and for which, due to the delays which occur in publishing data on patent applications and these being associated with their priority date, data are only available up to 2015. As indicated in last year’s report, the Basque Country’s ranking in this indicator stands out as positive when compared to the Spanish autonomous communities and cities, but it is in an intermediate position with regard to European regions as a whole, and the Basque Country ranks close to the bottom among comparable regions, a considerable distance from the German level (internationally, the most notable country for this indicator), as well as from the EU-28 average.

Table 10. Status of the Basque Country in terms of innovation indicators
Table 10. Status of the Basque Country in terms of innovation indicators. PCT patents per million inhabitants.
Table 10. Status of the Basque Country in terms of innovation indicators. Publications (WoS) per million inhabitants
Table 10. Status of the Basque Country in terms of innovation indicators. Publications in Q1
Source: OECD REGPAT and InCites. Compiled by authors.
NB: Except when no data were available, the rankings have been compiled based on 218 European regions (in blue), the Basque Country and the group of 30 comparable regions (in green), and the 19 Spanish autonomous communities and cities (in red).
Graph 10. Variation in innovation indicators
Graph 10. Variation in innovation indicators. PCT patents per million inhabitants
Graph 10. Variation in innovation indicators. Publications (WoS) per million inhabitants
Graph 10. Variation in innovation indicators. Publications in Q1
Graph 10. Variation in innovation indicators. Legend
Source: OECD REGPAT and InCites. Compiled by authors

The Basque Country’s position in the ranking for scientific output is clearly higher than that for patents

In the science world, innovation output can also be measured using publications per capita indexed in the Web of Science (considered to be high quality in the academic sphere). This is a new indicator incorporated into the Competitiveness Observatory by Orkestra using InCites as a data source. Doing so makes it possible to obtain more recent estimates than those produced by Leiden University for the 2019 Regional Innovation Scoreboard (RIS). In this we see that, comparatively, the Basque Country’s position in the ranking in terms of scientific output (primarily dependent on the research activity of universities and research centres) is clearly better than in patents (primarily dependent on the research activity of firms and technology centres). This is the result of the strong commitment of the Basque Country, starting in the first decade of the century, to reverse the weakness of its scientific system, compared to other advanced economies. Thus, the growth of publications in the Basque Country was very high until 2015, when it topped the Spanish average, and since then, it has been growing at a similar rate to that of other comparable territories. One area in which Basque publications stand out positively is the indicator that measures the percentage of publications in journals with the greatest impact (those in the first quartile in terms of their impact factor). The Basque Country ranks very high in this indicator, indicating that there is an effort to publish in journals with the greatest impact.

Graph 11. Index of innovative companies compared to sales of new-to-firm or new-to-market products (normalised values, 2016)
Graph 11.  Index of innovative companies compared to sales of new-to-firm or new-to-market products (normalised values, 2016)
Source: Regional Innovation Scoreboard with data from the Community Innovation Survey 2016.

The Basque Country has performed notably well in percentage of sales from newto-firm or new-tomarket products

The 2019 RIS was published recently. This publication calculates a compound indicator which combines output indicators and input indicators. The resulting typology may turn out to find similarity between regions that have very disparate performance, including in the same group regions with good and with mediocre results for innovation input with others that report the opposite performance, achieving good results despite not having invested as much. For this reason, as on previous occasions, instead of considering this compound indicator, we have reviewed the indicators used in order to incorporate those we consider most relevant into this analysis, including them in the appropriate section. Some of the indicators overlap with those that already form part of the framework, while others have been calculated specifically for that report, for example, through express requests from the Community Innovation Survey, as they are not available at the regional level in Eurostat. One of these indicators used to measure innovation performance is the percentage of sales that come from new-to-firm or new-to-market products, as this makes it possible to analyse to what extent innovation translates into higher sales. Unlike the patent indicator, which is in reality an indicator of the success of an invention process, frequently linked to R&D activities, but not necessarily to innovation, the sales of new products indicator more properly reflects that innovation has taken place and has reached the marketplace, also without necessarily having anything to do with prior R&D activities (as that sale of a new product may be due to an activity as prosaic as the purchase of a new machine). In Graph 11 we can see the very notable performance with regard to this indicator, much higher than might be expected if we consider the modest result in terms of the percentage of SMEs introducing product or process innovations, although the Basque Country stands out among Spanish regions in the latter indicator.

Tabla 11. Sales from all firms with 10 or more employees, according to their degree of product novelty (Basque Country, 2014–17; remainder, 2016)
Tabla 11. Sales from all firms with 10 or more employees, according to their degree of product novelty (Basque Country, 2014–17; remainder, 2016)
Source: Eustat (Basque Statistics Office) and Eurostat.

The level of novelty of the products sold by Basque firms is particularly noteworthy in the industrial sector and for large firms

This analysis can be rounded out with a more detailed study of the Innovation Survey published by Eustat (Basque Statistics Office). Although it is necessary to take some methodological differences into account (which are discussed below in section 4.1.1), la Table 11 shows that the percentage of sales corresponding to products which have not undergone changes is usually very large in the economy (in any event, over 80% for all firms, and over 70% for innovative firms). Additionally, this percentage is higher in services than in industry, and in small firms than in the largest ones. Those differences are also all the more marked when the comparison focuses on products with a more radical degree of innovation: those which are new to the market, and not just to the firm. In the comparison by territory, the Basque Country has shown some improvement in the degree of innovation in its products, ranking on the same level as Spain and ahead of the average for the EU and for Germany. The improvement is even greater if we focus solely on the group of innovative firms, for which the Basque Country shows a lower percentage of sales from unchanged products. The Basque Country’s improvement has taken place particularly in industrial and larger firms although Basque SMEs also show improved innovative behaviour when compared to the other territories. What is more, we find that progress in the percentage of sales due to innovative products has been greater in the new-to-market category than just new-to-firm.

In the contribution of total factor productivity to productivity growth, the Basque Country is at around the EU-28 average

Unlike approaches to measuring innovation based on the use of a wide battery of indicators, which are largely based on innovation surveys, the traditional approach most used in economics to measure innovation is that pioneered by Nobel Prize winner Solow in the mid-20th century. Utilising what is known as growth accounting, this author proposed measuring innovation using total factor productivity (TFP).

In the topic report that accompanies this analytical report as part of the competitiveness report for this year, we have performed a growth accounting estimate for the Basque Country, using a methodology similar to that employed by The Conference Board for a wide range of countries. From the results of this, shown in Table 12, it is possible to conclude that TFP is beginning to recover following a sharp downturn early in the crisis. However, current growth rates are lower than those achieved during the 2001–2007 period and would be even lower still if they were compared with those achieved in the final decades of the last century. As TCB (2019) and the OECD (2019), warn, mature economies are facing low growth in productivity and standard of living. Amid this grim outlook (which is of particular concern for the USA), the Basque Country is close to the EU-28 average and clearly above that of Spain.

Table 12. Contribution of total factor productivity (TFP) to growth of the apparent productivity of labour
Table 12. Contribution of total factor productivity (TFP) to growth of the apparent productivity of labour
Source: Compiled by authors based on data from Eustat (Basque Statistics Institute), IVIE (Valencian Institute of Economic Research), Alberdi (2015) and The Conference Board.
  1. OECD (2019). OECD Compendium of Productivity Indicators 2019. OECD Publishing, Paris.

  2. The Conference Board (2019). The Conference Board Productivity Brief 2019.

  3. Alberdi-Larizgoitia, A. (2015). Indizea. Informe para Innobasque 2015. Innovación, capital intangible y productividad de la economía vasca 1995-2012. Vitoria-Gasteiz, Spain: Ekonomiaz.perea.