12 Most Innovative Economies in Europe

Published on January 31, 2024 at 3:50 pm by Meerub Anjum in Business, Economy, Industries, Lists, News

In this article, we will look into the 12 most innovative economies in Europe. If you want to skip our detailed analysis, you can go directly to the 5 Most Innovative Economies in Europe.

Innovation Landscape of Europe

According to a report by McKinsey and Company, Europe has substantial public R&D spending, however, it lags behind China at 25% and the US at 28% in terms of private investment in research and development. The region invests 1.7% less compared to the US in intangible assets such as software, databases, and intellectual property. The report highlights the lack of resource allocation for R&D in Europe. The R&D share in software and computers is only around 8%. European countries generate 50% fewer patents per capita compared to the US in digital, quantum computing, and big data.

The market fragmentation in the region results in hurdles for Europe to scale up its innovation, compared to the US and China. Nonetheless, Europe is home to various innovative companies and is a hub for innovative startups. To counter the market disadvantages, Europe must capitalize on key trends. The report suggests multiple ways in which Europe can improve innovation in the region. A focus on growing sectors and developing innovation hubs can help Europe excel in technological advancements.

The European Union is allotting significant energy and resources to introduce updated comparative advantages in AI, offering ethical and secure industry uses. The EU has also made investments in quantum computing, following in the footsteps of the global technology leaders. On January 31, Reuters reported that Germany has officially reinforced the EU’s landmark Artificial Intelligence Act. This move is a significant step toward developing unified rules for AI development and deployment. After being under discussion for several years, the act seeks to develop a balance between fostering innovation and providing ethical and secure AI systems.

Among its other efforts to bridge the gap in the region’s innovation landscape, the European Union is making an investment of €8.1 billion in 68 microelectronics and communication technology projects across 14 EU members, according to an article by Reuters, published on June 8, 2023. This strategic move by the EU aims to strengthen the region’s technological landscape by funding research in areas such as 5G/6G, AI, chip technology, quantum computing, and autonomous driving. Companies such as ASML Holding N.V. (NASDAQ:ASML), Airbus SE (OTC:EADSY), and Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC) are some of the major players, among a total of 56 companies involved in the projects. The first products are expected to be released by 2024, with full completion by 2032.

Major Players in the European Market Driving Innovation

Some of the most valuable companies in the European market driving innovation and technological advancements in the region include Novo Nordisk A/S (NYSE:NVO), Accenture plc (NYSE:ACN), and TotalEnergies SE (NYSE:TTE).

Novo Nordisk A/S (NYSE:NVO) is a global pharmaceutical leader. On November 23, 2023, the company announced its investments of €2.1 billion to expand a production site in France. This strategic move by the company aims to boost its capacity for the development of current and future drugs to treat chronic diseases, including GLP-1 products. This investment will expand the site’s footprint to twice its current size, utilizing cutting-edge technology, and creating more than 500 new jobs upon its completion in 2028. This investment signifies Novo Nordisk’s A/S (NYSE:NVO) commitment to innovation in its product portfolio.

Accenture plc (NYSE:ACN) is an information technology leader in the European market. As of January 31, the company boasts a market cap of $229.64 billion. On January 30, the company announced that it had finalized its acquisition of a leading Italy-based AI consultancy, Ammagamma. This strategic move will bolster Accenture plc’s (NYSE:ACN) workforce with more than 90 AI specialists. This will further support the company’s $3 billion investment in AI. With a strong track record in Italy’s major sectors including automotive and pharmaceuticals, Ammagamma will now provide its expertise to Accenture plc’s (NYSE:ACN) clientele.

On January 30, the leading European energy company, TotalEnergies SE (NYSE:TTE) announced its partnership with Wenea to build an electric mobility network in Spain. The company has acquired 200 charging sites. Both companies are in discussion to develop a strategic partnership to invest in high-power charging sites. This strategic move by both countries aims to strengthen TotalEnergies SE’s (NYSE:TTE) position in Spain.

Talking about the acquisition, Mathieu Soulas, Senior Vice President New Mobilities and Marketing at TotalEnergies said:

“We are pleased to acquire this nationwide network of fast and ultra-fast charging points and are willing to build a solid partnership with Wenea, a pioneer in EV charging in Spain. Spain has Europe’s fifth largest automobile fleet, and the proportion of electric vehicles is expanding rapidly. For TotalEnergies, this is a great opportunity to extend our network in Europe and stake out a position as a benchmark high-power charging player in Spain. This announcement also confirms the Company’s commitment to the energy transition in the country, where TotalEnergies has a business portfolio of more than two million contracts of gas, electricity and related services and is developing numerous solar projects, for a total production capacity of over 3 GW.”

With this context, let’s have a look at the 12 most innovative economies in Europe.

12 Most Innovative Economies in Europe

Methodology

To rank the most innovative countries in Europe, we utilized metrics such as R&D Expenditure, High Technology Exports in US$, and Digital Adoption Index (DAI). High technology exports showcase a country’s ability to transform its R&D into commercial products and services competing globally. This provided us with a framework to rank the most innovative economies in Europe.

First, we sorted the countries based on their R&D expenditure. Then, we sourced DAI and high-technology exports data of the countries and allotted ranks to the countries on our list based on each metric. In the end, we assigned weights to each of our metrics, 40% to R&D Expenditure, 40% to High Technology Exports, and 20% to DAI. Then, we calculated a weighted average of each country’s rank across these metrics as the ‘Insider Monkey Score’. Our list ranks the countries in descending order of the calculated score.

By the way, Insider Monkey is an investing website that tracks the movements of corporate insiders and hedge funds. By using a consensus approach, we identify the best stock picks of more than 900 hedge funds investing in US stocks. The top 10 consensus stock picks of hedge funds outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). Whether you are a beginner investor or a professional one looking for the best stocks to buy, you can benefit from the wisdom of hedge funds and corporate insiders.

12 Most Innovative Economies in Europe

12. Italy

R&D Expenditure as a Percentage of GDP (2021): 1.45%

High Technology Exports (2021): $38.9 billion

Digital Adoption Index (2016): 0.765

Insider Monkey Score: 3.3

Italy is ranked among the most innovative countries in Europe. In 2021, it spent 1.45% of its GDP on R&D. The high technology exports of the country were reported to be $38.9 billion in 2021.

11. Czechia

R&D Expenditure as a Percentage of GDP (2021): 1.99%

High Technology Exports (2021): $41.3 billion

Digital Adoption Index (2016): 0.723

Insider Monkey Score: 3.1

Czechia is ranked 11th on our list. The country reported an R&D spending of 1.99% in 2021. The high technology exports of the country were reported to be $41.3 billion in 2021.

10. Denmark

R&D Expenditure as a Percentage of GDP (2021): 2.81%

High Technology Exports (2021): $12.4 billion

Digital Adoption Index (2016): 0.791

Insider Monkey Score: 3.1

Denmark ranks 10th on our list. According to the World Bank, the country reported a DAI of 0.791 in 2016. In 2021, the country spent 2.81% of its GDP on R&D. The high technology exports of the country were $12.4 billion in 2021.

9. Finland

R&D Expenditure as a Percentage of GDP (2021): 2.98%

High Technology Exports (2021): $5.49 billion

Digital Adoption Index (2016): 0.806

Insider Monkey Score: 2.8

Ranked 9th on our list, Finland spent 2.98% of its GDP on R&D in 2021. The high technology exports of the country were $5.49 billion in 2021. In 2016, the country reported a DAI of 0.806.

8. France

R&D Expenditure as a Percentage of GDP (2021): 2.29%

High Technology Exports (2021): $97.5 billion

Digital Adoption Index (2016): 0.753

Insider Monkey Score: 2.5

France is ranked among the 12 most innovative countries in Europe. It reported spending of 2.29% of its GDP on research and development in 2021. The high technology exports of the country were reported to be $97.5 billion in 2021.

7. United Kingdom

R&D Expenditure as a Percentage of GDP (2021): 2.91%

High Technology Exports (2021): $66.7 billion

Digital Adoption Index (2016): 0.764

Insider Monkey Score: 2.2

The UK reported a DAI of 0.764 in 2016. In 2021, the country spent 2.91% of its GDP on R&D. The high technology exports of the country were $66.7 billion in 2021. It is ranked 7th on our list.

6. Sweden

R&D Expenditure as a Percentage of GDP (2021): 3.42%

High Technology Exports (2021): $19.0 billion

Digital Adoption Index (2016): 0.831

Insider Monkey Score: 1.9

Sweden is ranked 6th on our list of the most innovative economies in 2024. The country spent 3.42% of its GDP on research and development in 2021. The high technology exports of the country were reported to be $19 billion in 2021.

Click to continue reading and see the 5 Most Innovative Economies in Europe.