US3I – 2016 Findings and Results

The 2016 edition of the U.S. – Israel Innovation Index (US3I) marks the third year that the Index has been compiled (following 2011 and 2013). The Index uses a set of 20 quantitative indicators covering government, industry, human capital and research and development activities to comparatively measure the intensity of the U.S. – Israel relationship in science and technology collaboration against that of the U.S and 16 other countries. The Index is designed to track changes in these relationships over time, and to provide a data-driven source for analyzing and discussing changes in the relative relationship between the U.S. and Israel and that of comparator countries. The 2015 Edition is the first that provides a year-over-year comparison of positioning. This paper provides an overview of the 2016 U.S. – Israel Innovation Index Findings, for a complete discussion of methodology please see the 2013 US3I report.

OVERALL FINDINGS AND COMPARISON TO PRIOR YEAR

The U.S. Israel Innovation Index measures quantitative and qualitative aspects of the U.S. – Israel relationship in innovation-related, knowledge intensive activities. It then compares that relationship to that between the U.S. and other countries. As an index, the US3I is benchmarked to a starting value. That starting value was the U.S. – Israel relationship in 2013, which was set to a point value of 100. All subsequent relationships assessed in the Index are measured relative to this benchmark value. Figure 1, at right shows the topline results for the 2016 US3I.

In general, the intensity of the relationships measured in the US3I increased between 2013 and 2015 – with all countries except Brazil showing an increase in the assessed intensity of their relationship with the U.S. in 2016 as compared to 2013. On average scores increased by slightly more than 14%. This indicates that bilateral relationships are becoming closer rather than staying steady or declining.

As in 2013 the 2015 Index shows three groupings of relationships. A leadership group comprised of Switzerland, Israel, and Canada; a lagging group of Turkey, Brazil and Russia; and a large closely clustered group in the middle representing the remaining countries. Switzerland retains the overall leadership position, however in the 2013 Index Israel has overtaken Canada to move into the second place position. More important than the absolute rankings, are the relative changes in positioning between the countries. Because the Index assesses relationships relative to both one another and to the baseline year of 2013, the scoring allows the analysis of how relationships have changed against each other. For 2015 Israel’s relationship with U.S. increased greater than any other country included in the Index – with a 38.5% increase in relative intensity. By comparison Canada’s assessed position increased 24.5%, and Switzerland’s by only 18.5%. So although Switzerland retains the leadership position, both Canada’s and Israel’s relationships with the U.S. have increased in intensity at a faster rate between 2013 and 2016; and are thus closing the assessed gap with the U.S – Swiss relationship.

Looking specifically at the increase in the assessed score of the U.S. – Israel relationship, the increase was primarily driven by a large increase – a more than doubling – of Israel’s competitive position in the research and development category of indicators. As the Index is a relative score – comparing countries to a common benchmark and to each other – an assessed decline in Canada’s human capital positioning also was contributing factor in the swap in placement between Canada and Israel.

The US3I compiles indicators across four different categories; Government, Private Sector & Industry, Human Capital and Research & Development. The indicator categories provide a level of granularity in the discussion of Index findings, allowing analysis of changes in specific areas with might be associated with policy and economic changes and factors. The volatility seen between 2013 and 2106 in the U.S. – Israel relationship in the Research & Development category is also seen in the other relationships included in the Index. For most of the assessed relationships the Research and Development category was both the largest contributor to scores (as a share of the topline aggregate findings) and the most dynamic, changeable category year over year.

CATEGORY LEVEL RESULTS

The intensity of the U.S. – Israel leads in both the Government and Research and Development categories. This is a change from the 2013 US3I, in which this relationship led only in the Government category.   As in 2013, the comparative position of U.S – Israel relationship is weakest in the Human Capital category.

Government Category

As compared to 2013, relative positioning changes in the Government category were slight, although all assessed relationships saw increases in intensity. The U.S. – Israel relationship retains the leadership position, while that of the U.S and Russia remains the laggard. The assessed scores and positioning for the Government category of indicators in the 2016 US3I is shown in Figure 2, at right.

• Indicators covering Government Appropriations for R&D (GBAORD), Science and Technology Treaties, Science and Technology Trade Agreements, and Bilateral Science and Technology cooperation organizations saw little change in positioning between 2013 and 2016.
• Data on the indicator reporting U.S. Foreign Operations Spending in the target country shows generally decreases for all countries for which there is an activity. However, the decrease in amounts spent in Israel is proportionally less than for the other included countries.

Due to the relatively nature of the Index, this translates to a slight increase in the assessed intensity of the U.S. – Israel relationship in this indicator. It suggests that U.S. policy places more value on the relationship with Israel, than with the other countries, in this category.

Overall the Government indicator category reflects a situation of relative stability. It is reasonable to expect that this category policy changes would be gradual and would take a period of years to be reflected in significant changes in most of the indicators used here.

Private Sector and Industry Category

Similar to the Government category there were few changes in positioning of the assessed relationship in the Private Sector and Industry category. The U.S – Switzerland relationship retains the leadership position while that of the U.S – Brazil remains in the laggard position. The assessed intensity of the U.S – Switzerland relationship has increased in relative strength over that of the U.S – -Israel, which as in 2013 in the second ranking position in this Indicator. The assessed scores and positioning for the Private Sector & Industry category of indicators in the 2016 US3I is shown in Figure 3, above.

• With the exception of Israel which shows a decline, assessed positioning in the level of industry-financed Research and Development as a percent of GDP was generally stable.
• The assessed intensity of Canada’s relationship with the U.S in bilateral trade in high-technology goods shows a notable increase, while that of the U.S. – Singapore shows a notable decrease. This likely accounts for the swap in positioning of Canada and Singapore in the overall category rankings.
• Scoring in the indicator assessing the trade in transactions of affiliates of multinational companies shows significant increases for a number of included countries, including Brazil, Canada, Israel, and Finland.
• Data comparing the number of cross-listed technology stocks, shows a general pattern of decreased intensity.
• Data on Foreign Direct Investment in high-technology areas shows decreased intensity in Brazil and Switzerland with notable increases in Canada, Finland and Israel.

Human Capital Category

Several changes were noted in positioning of the relationships in the Human Capital category. The U.S – Switzerland relationship overtook that of the U.S. – Canada in the leadership position while that of the U.S and Brazil and Russia remain in the laggard position. The U.S -Singapore relationship increased in intensity and overtook that of the U.S. – Israel. The assessed scores and positioning for the Human Capital category of indicators in the 2016 US3I is shown in Figure 4, above.

• Scoring in the indicator quantifying higher education sector spending on R&D was relatively constant as compared to 2013. Large swings in this indicator would be unexpected.
• In general, the level of activity increased for all countries in bilateral article co-authorship levels.
• Similarly, levels of U.S doctorate degrees awarded in S&T fields to nationals from the comparator countries also increased. However, there was a comparatively greater increase in South Korea and Singapore, which partially contributed to Singapore’s relationship overtaking that of Israel.
• The number of H1-B visas decreased for most countries, including Israel, which saw a relative decline in intensity in the relationship for this indicator compared to its own position in the 2013 US3I.
• There was little change in the indicator assessing level of cooperation in distributed computed projects, where the U.S. – Switzerland relationship continues to dominate due to the large amount of activity in biomedical and physics related projects.

Research and Development Category

The Research and Development category showed the most change between 2013 and 2016. The U.S – Israel relationship increased in intensity and overtook both that of the U.S. – Switzerland and that of the U.S – Singapore to move into the leadership position. The U.S – Canada relationship increased in intensity significantly moving up four positions into the third position ranking. The assessed scores and positioning for the Research and Development category of indicators in the 2016 US3I are shown in Figure 5, above.

• Scoring in the both the indicator quantifying gross domestic expenditure on research and development (GERD) on R&D and the indicator tallying bilateral flows of R&D funds within affiliates of multinational companies were relatively constant as compared to 2013. The magnitude of the U.S – Switzerland relationship in pharmaceutical R&D in particular far outpaces that of the other relationships, meaning that this indicator is likely to show large changes, unless the U.S. – Switzerland dynamic changes.
• Most of the change observed in the Research and Development category relates to significant increases in the indicator measuring co-patent applications to the U.S. Patent and Trademark Office for joint teams between the U.S. and participants from the target countries as second-listed inventor or lower. All countries, except South Korea and Turkey, saw increased activity levels, many with orders of magnitude increase in the non-benchmarked raw data. The assessed score of the U.S. – Israel relationship in this indicator, for example, was five times that of the 2013 Index.
• Unlike the indicator assessing USPTO co-patents, positioning and scoring for the global patent application data looking at first listed inventors filing in the target countries showed little change.

The significant changes in the USPTO co-patent data were unexpected, and the underlying reasons are worth further analysis.

CONCLUSION

The 2016 U.S. – Israel Innovation Index measures a U.S. – Israel relationship in innovation related activities that continues to be strong and dynamic. While this year’s Index results show that relationships with the U.S. are increasing in intensity for most of the countries included; that between the U.S. and Israel is increasing faster than others. The U.S. – Israel relationship is particular dynamic in the Research and Development category, with significant levels of patent activity occurring between the two countries. As in prior years, the U.S – Israel relationship is less intense in the area of Human Capital, where biomedical and pharmaceutical industry-related relationships between the U.S. and European countries exert a strong influence on the Index results.

The Index is a quantitative data driven product intended to serve as an independent source of data and analysis that can be used as input in the discussion of innovation-related activities in any of the included countries. As subsequent editions are published discussion of multi-year trends in relationships, categories, and indicators will be possible. This trend data will deepen the insights provided through this analysis.