By David Born

Innovation remains a decisive driver of competitiveness and economic resilience. This has become even more apparent in an environment shaped by shifting global value chains, increasing geopolitical tensions and rising expectations around security, efficiency and sustainable development.

The Innovation Indicator 2025 by Federation of German Industries (BDI) and Roland Berger in cooperation with Fraunhofer Institute for Systems and Innovation Research (ISI) and the Center for European Economic Research (ZEW) compares the innovation performance of 35 economies and analyses their capabilities across key dimensions of innovation. The results show a diverse picture. At the top of the ranking, Switzerland, Singapore and Denmark continue to demonstrate strong and stable innovation performance. Several smaller economies such as Sweden, Finland and Belgium also score highly, supported by focused strategies and effective resource deployment.

In contrast, several economies lose momentum: China, Taiwan and Australia see declining innovation capability partly due to their dependence on international markets, while countries like Poland, Turkey and Italy face structural conditions that limit progress. Japan performs weakly again, driven by low scientific output and limited international integration in R&D.

Key technologies remain an important differentiator. Economies that perform well in fields such as advanced materials, energy technologies, biotechnology or digital networks tend to benefit from strong national innovation systems with a clear emphasis on science and technology. Some countries are progressing, for example China with advances in biotechnology and new energy technologies or Japan with strong positions across several key technology areas. Other economies face challenges linked to structural weaknesses, persistent trade imbalances or low integration into global R&D networks, as seen in the United States or in European economies such as France and Italy.

Sustainability performance also shows notable shifts. Several countries that previously ranked high have lost ground, including Germany, Denmark and Finland. Others improve significantly: Especially China shows strong performance driven by environmental innovations. These movements reflect both policy choices and the ability of national innovation systems to develop and scale environmentally relevant technologies.

Many economies generate knowledge effectively but face difficulties in bringing new ideas to market. Efficiency challenges are visible in countries such as Austria, where strong knowledge generation contrasts with weak commercialization. At the same time, openness in innovation systems has declined in recent years, triggered by the Covid-19-pandemic and exacerbated by growing protectionism and a stronger focus on technological sovereignty. Some economies, including Switzerland, Denmark, the Netherlands and Singapore, remain comparatively open, while others such as Japan or the United States show low levels of international integration.

The Innovation Indicator 2025 highlights the importance of targeted investment, international partnerships and the ability to translate scientific strength into economic impact. Economies that succeed in balancing openness and strategic security and manage to adapt their innovation systems to a more dynamic, uncertain environment are likely to maintain stronger long-term innovation performance.