Some analogies can help to answer this question.
Does money make you smart? No. Education does. However, to get a good education, you need sufficient funds to pay for it.
Examining the top 20 countries from the Global Innovation Index reveals that they all have high income. The only middle-income country on this list is China, which, with its exception, proves the rule: the nation needs to become rich to afford innovative development.
On the one hand, this rule is supported by the classical theory of Harvard professor M. Porter, which states that a country progresses from being resource-driven to investment-driven and finally to innovation-driven. On the other hand, this rule conflicts with the ongoing debate over sovereignty. If a non-rich country prioritizes independence and voluntarily adopts technological restrictions, it may meet its needs, but it hardly ensures competitive and innovative growth.
Does money prove you are smart? It depends on how you earn it. The lists of the top 20 most innovative and the wealthiest countries are not the same, even though they match 60%. The most fortunate way to become rich is inheriting natural resources, such as oil, which doesn’t guarantee innovation.
- Some oil-rich countries, such as the UAE and KSA, have become high-income. However, they are now focusing on turning their oil-dependent economies into innovation-led.
- Other oil-rich countries, such as Iran and Nigeria, are still middle-income. They are struggling to become wealthy before they can focus on innovation.
- Still, Norway and the US prove that nations can be oil-rich, wealthy, and innovative at the same time. What’s the secret? Based on the financial market recipe, a player that wants to to turn “dumb money” into “smart money” needs information, strategy, and discipline.
Does enrichment make you smarter? It depends on how you spend it. Evaluating the most innovative countries, we found the strongest (among the weakest) correlation between R&D expenses as a percentage of GDP and the value of the Global Innovation Index (+0.37).
All other analyzed economic variables are less strongly linked to innovation development in the group of selected countries: economic growth (+0.29), GDP per capita (+0.19), and government expenditure as a percentage of GDP (-0.17). There is also a weak and negative correlation between e-government budgets to GDP and the value of the UN E-Gov Index (-0.16).
Our educated guess is that a high-income nation can become more innovative if it allocates funds to the productivity-enhancing R&D, rather than through aggregate spending volume.
In conclusion, money does not make a country more innovative. It can enrich a country and open opportunities for some of the wealthiest to boost innovations smartly. Non-rich countries are left behind in the innovation race due to poverty and, at times, sovereignty traps.
