The Economist’s IT Industry Competitive Index Ranks 64 Countries; U.S. on Top

For a country to attain a thriving information technology (IT) sector, an environment that promotes competitiveness, protects innovation, and invests in education and infrastructure must be supported. According to a report released this month by the Economist Intelligence Unit, which created an “IT Industry Competitiveness Index” to measure and compare this environment, the U.S. ranks first among 64 countries from around the world. Authored by Kim Thomas, The Means to Compete: Benchmarking IT Industry Competitiveness used a combination of 25 quantitative and qualitative indicators to produce a score and ranking for each county in the report.

 

Besides the U.S., the countries with overall index scores in the top 10 were Japan, South Korea, the United Kingdom, Australia, Taiwan, Sweden, Denmark, Canada and Switzerland. The assortment of indicators was organized into six distinct categories, each with a specific weighting for the composite index score. These categories included:

• Overall business environment (10 percent)
• IT infrastructure (20 percent)
• Human capital (20 percent)
• Legal environment (10 percent)
• R&D environment (25 percent)
• Support for IT industry development (15 percent)

The value for the IT infrastructure category, for example, was calculated by incorporating data on the number of broadband connections in the country, the number of secure internet servers, the number of desktop and laptop computers, and the market spending on hardware, software, and IT services, all normalized by each county’s population. The R&D environment was computed by utilizing data on government expenditures on R&D, private sector R&D, new domestic patents, and receipts from royalty and license fees.

 

All of the countries included in the report also were ranked within each of the six categories. The U.S. was the only country to rank in the top five across all categories.

 

Besides accounting for a component of a country’s gross domestic product, the IT sector is also a major contributor to productivity growth, the report states. Of the top 22 countries with the highest composite IT Index, all but four are among the world’s top 22 countries in terms of IT labor productivity.

 

The author predicts that the index’s top tier of countries will not change in the near future, but provides two trends that are likely to affect the lower tiers of the index in the coming years. The first is that a number of emerging economies will compete with countries like China and India, offering low-cost IT skills. Mentioned are Malaysia, Brazil and Vietnam, as well as some Eastern European countries that will compete on this front. Second, smaller emerging markets will develop niches in software development and IT services. Similar to many sectors across the global economy, emerging countries will move higher and higher up the value chain, competing not only on a low-cost basis, but also on one based on the creation of innovative products and services.

 

Appendix 1 includes additional information about the methodology, weighting system and data sources for all of the quantitative and qualitative indicators. While this methodology and indicators are targeted for investigating the IT sector at the national level, many of the considerations for the composition of the “IT Industry Competitive Index” may be relevant at the state and regional level as well.

 

The Means to Compete: Benchmarking IT Industry Competitiveness can be found at:

http://www.eiu.com/site_info.asp?info_name=eiu_Business_Software_Alliance_means_to_compete

 

Links to this report and more than 4,500 additional TBED-related research reports, strategic plans and other papers also can be found at the Tech-based Economic Development (TBED) Resource Center, jointly developed by the Technology Administration and SSTI, at http://www.tbedresourcecenter.org/.