The 2011 innovation index ranking, as established by the INSEAD business school, shows at the top of the list a handful of small countries such as Switzerland, Sweden, Singapore, Hong Kong, Finland, Denmark, the first big nation and economic heavyweight being the United States, at the 7th place. The horizontal red line corresponds to the median score — 34.18, or the score of Greece —.

A brief glance suffices to gain the insight that, should the ranking be valid and truthful, small and dynamic economies are more adept to innovation than the big powers or the natural resource rich countries. Other data pertaining to science and technology prestigious awards and to world-class universities seem to confirm the hunch that "small is beautiful".

Innovation, commonly understood as the introduction of something new, is viewed by leading economists as the cornerstone of competitiveness, economic change and progress. The reader will indulge with a brief refresher of basic economic ideas. According to Walras (1834-1910) and the neoclassics, the market is a complete system, where agents have an immediate and total knowledge of the environment, a system that tends to equilibrium through the mechanical interplay of supply and demand.

Schumpeter (1883-1950) considers these premises to be wrong, leading to a stationary, immobile state that does not match reality. Instead he sees competition as a process of creative destruction. Innovations destabilize entrenched market positions, pushing some agents to the forefront and others to oblivion, and percolate through society by diffusion and imitation, generating a wave of economic development along several time scales. During the late 1990s, impressed by the spread of laptop computers and Internet, and currently awed by the mobile and the smartphone tsunami, business consultants revamped Schumpeter's creative destruction concept, branded it "disruptive technology" and are selling it profitably to businesses that care for competitiveness.

The innovation index by nation triggers some puzzling questions. For starters, it is doubtful that the innovation drivers at the country level can be extrapolated to the firm, and vice-verse. For example, whatever the skills of the firm to foster and use its innovation capability, it has only limited influence on such key but exogenous factors as the political environment, general education or general infrastructure. Symmetrically, a fertile environment does not necessarily breed innovation within the walls of the firm.

Secondly, whilst several clues strongly suggest that small countries are more effective than large ones in marshaling innovation and other competitiveness factors, political and business establishments seem intoxicated by the ambition to build huge superpowers — of which the European Union is an illustration — broadly aimed to become "the most competitive and the most dynamic ... economy in the world" (EU Lisbon strategy, 2000).

Achievements speak for themselves : a shaky Euro currency, many EU members in financial straits, a slump that prevails throughout Europe. One can only hope that reality is not following the fable : the toad wanted to inflate to the size of a bull and ended up exploding...

Sources: see INSEAD.

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