Bloomberg Index: Croatian Technological Innovation Has Died?

Lauren Simmonds

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As Novac/Marko Biocina writes, almost no week manages to go by without the results of some sort of global index being presented to the Croatian public, and then based on these results people draw varying conclusions about the state of the Croatian economy and society in general. A recent example of such a practice was the publication of the annual report of the Corruption Perceptions Index of Transparency International, where Croatia recorded a modest rating of 47 points, placing it below countries such as Jordan and even Rwanda.

This fact, as expected, provoked a barrage of reactions and outrage at the fact that Croatia is more corrupt than the aforementioned sub-Saharan nation, which less than three decades ago was the scene of the worst form of genocide in recent global history. Of course, such interpretations were very much exaggerated, at least insofar as the aforementioned research didn’t pretend to measure the level of corruption, but instead the level of perception of corruption.

However, on the other hand, the very comparison of the Croatian score with the measured perception of corruption in developed Western European countries is indeed an indicator that points to the fact that corruption is a much more serious problem here than it is in some other European nations. As such, composite indexes need to be able to read and there are countless similar examples. If we were unreservedly guided by the final ranking of the legendary (or perhaps notorious) Doing Business survey of the World Bank, we could come to the conclusion that it’s easier for business owners and entrepreneurs to do business in Northern Macedonia than it is in Germany and Ireland, easier in Kazakhstan than Austria, and easier Azerbaijan than Switzerland, and in the aforementioned Rwanda than in let’s say, the Netherlands.

It would, on that note, also claim that it is easier for Croatian entrepreneurs to do business than it is for their colleagues in Italy and Luxembourg. The cause of these strange discrepancies is often in the methodology of the index itself, the mathematical formula according to which the individual components are added together in the calculation of the final score. Precisely because of this, sometimes an exceptional result in one category measured by a country will allow it to soar in the overall standings in spite of mediocre ratings, and sometimes excellence in one field will remain methodologically “buried” in the final total.

Then there is the question of evaluating how important each component is to the overall final score. For example, when an uninformed reader reads that Croatia ranks 20th among the 28 member states of the European Union in the Index of Economic and Social Digitisation (DESI), one might think that we still stand better than our general economic and development position in the same bloc. However, when this score is decomposed, it turns out that most slightly or significantly below-average results in a number of categories measuring the progress of digitisation in Croatia are significantly improved by the best score across the EU in regard to the percentage of Croatian residents consuming their media and news online.

It’s worth really asking how true some of these reflections about Croatia actually are. There are many such examples, but – taking into account all the pitfalls of composite indices – it must be noted that such a depressing index as the new edition of the Bloomberg Innovation Index, an annual survey measuring the innovation of 60 most important countries, hasn’t been seen for a long time.

In this year’s edition of that research, South Korea returned to the throne after a one-year break, while from the Croatian perspective, the most important information is that of the ten most innovative countries in the world, seven are EU member states., and six more are among the best 25. Croatia, on the other hand, is ranked 45th (out of 60), two places lower than last year, although with a slightly higher overall score. The initial conclusion, which is often seen in various other comparative studies, is that Croatia is stalling because it is progressing too slowly compared to other countries.

However, a much worse conclusion can be read by a more detailed analysis of the components of the index itself. The Bloomberg index consists of these seven thematic areas: investment intensity in research and development, added value in production, productivity, the number of high-tech companies, the efficiency of higher education, the number of researchers and activity in patent applications.

Most European countries, and even those whose overall score isn’t significantly higher than the Croatian one, record a result among the top 10 in one of these categories. The Czech Republic came fourth, and Slovenia is eighth in the world in terms of value added in production. Iceland is the best in the world in terms of productivity and fifth in terms of the number of researchers. Lithuania is second, Portugal third, and Estonia eighth in the efficiency of higher education. Romania is the 22nd country in the world in terms of the number of high-tech companies. And Croatia? The sad conclusion is that today Croatia is not among the top 30 in the world in any indicator of innovation. Has Croatian technological innovation really taken such a horrendous nosedive?

The country has the best relative rating in terms of higher education, where Croatia comes in 33rd place, but to understand the overall context, it should be emphasised that the Croatian higher education system is rated worse than those in Algeria and Saudi Arabia. According to the criteria of patent activity and the number of high-tech companies, as such Croatian technological innovation, we aren’t even in the top 50. Croatian technological innovation is, at least if you were to take this index as gospel, died of death, and there of course, in this day and age, isn’t a single segment of social activity that is exempt from it. The question of whether we really needed a complicated composite index to realise that sad truth is a burning one, and while technology companies continue to bloom in Croatia, despite the often embarrassing lack of digitalisation, we also have to look a little deeper than another rather damning index rating.

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