Global innovation faces slowdown despite wider investment

Global innovation faces slowdown despite wider investment | Photo: Matt Ridley

The Global Innovation Index 2025 (GII), published by the World Intellectual Property Organization (WIPO), offers a revealing snapshot of the world’s inventive capacity. Covering 139 economies, the report finds that innovation is spreading more evenly across the globe.

Countries from diverse income levels are building research institutions, improving digital infrastructure, and nurturing start-up ecosystems. Yet behind this apparent success lies a more sobering trend: global innovation momentum is weakening.

According to WIPO, R&D growth has fallen to its lowest level since the 2009 financial crisis. Venture capital deal counts have contracted sharply, and patent filings, which rose briefly after the pandemic, are now stagnating. This pattern suggests that the innovation engine powering economic and technological progress is sputtering, even as more nations invest to join it.

A widening base, thinner returns

The diffusion of innovation capacity has been one of the most notable transformations of the past decade. In Africa, countries such as Kenya and Rwanda have become regional technology hubs, with Nairobi’s “Silicon Savannah” leading digital payments and mobile health solutions. In Latin America, Chile’s public innovation agency CORFO continues to attract cleantech investment, while Brazil’s research institutes drive advances in agri-biotechnology. Southeast Asia, too, has seen steady progress, with Vietnam and Malaysia rising in global rankings for their manufacturing innovation and educational investment.

Yet these successes coexist with stagnating global productivity and limited cross-border spillovers. Much of the recent innovation surge has occurred in narrow technological niches, concentrated in digital consumer services rather than in high-impact sectors like green manufacturing, advanced materials, or biotechnology. Despite wider participation, transformational innovation, the kind that redefines industries, remains largely confined to a few economies with mature ecosystems, such as the United States, South Korea, and parts of Europe.

Structural bottlenecks behind the slowdown

One key obstacle is the fragmentation of innovation ecosystems. Many emerging economies have invested in laboratories and start-up incubators but lack the financial and institutional depth to sustain later-stage growth. For example, while India’s digital start-ups attract record seed funding, fewer than 10% progress to large-scale commercialisation. Limited venture networks, weak intellectual property protection, and complex regulations often stifle momentum.

Meanwhile, global talent mobility has become increasingly restricted. Visa policies, geopolitical tensions, and rising nationalism have made it harder for researchers and entrepreneurs to collaborate internationally. The ongoing US-China technology rivalry illustrates how restrictions on semiconductor trade and data sharing can slow not just bilateral innovation but global knowledge diffusion. According to WIPO, the number of international co-authored scientific papers has plateaued after years of growth, signalling a subtle fragmentation of research collaboration.

Capital caution and the retreat of risk

Innovation also depends on risk-taking capital, yet the financial environment has turned markedly more cautious. Global venture capital funding fell by over 40% between 2021 and 2024, according to WIPO and Crunchbase data. Higher interest rates and tighter monetary policy have driven investors toward safer assets, curbing enthusiasm for long-term technology bets.

This retreat is particularly evident in fields requiring heavy upfront investment, such as quantum computing, fusion energy, and biotechnology. Even sectors with strong policy backing, like climate technology, face shortfalls. For instance, while green tech investment surpassed USD 1 trillion globally in 2024, the majority went to large-scale renewable infrastructure rather than to early-stage innovation. The result is a system that funds deployment more readily than discovery.

Corporate R&D tells a similar story. Large firms, under shareholder pressure, are prioritising incremental innovation, improving efficiency or software features, over exploratory research. This conservatism protects near-term profits but undermines long-term breakthroughs. The semiconductor industry, once a hotbed of radical innovation, now channels much of its effort into process optimisation rather than paradigm-shifting architectures.

Policy fragmentation and uneven digitalisation

Another factor behind the slowdown is regulatory complexity. The proliferation of differing data laws, privacy standards, and AI governance frameworks has created barriers for companies operating across borders. For instance, the EU’s AI Act, while aiming to ensure ethical standards, may impose compliance costs that deter smaller firms. In developing economies, meanwhile, a lack of digital regulation leaves start-ups without clear guidance on issues like data sharing and cybersecurity, discouraging collaboration.

The digital divide also persists. Despite expanding broadband coverage, vast gaps remain in computational capacity and cloud infrastructure. According to the International Telecommunication Union, over 2.5 billion people still lack meaningful internet access. This means that large portions of the world’s population remain excluded from the global innovation cycle, limiting the diversity and inclusivity of new ideas.

Reimagining innovation for a multipolar era

To restore momentum, innovation must be understood as a systemic process, not a sum of isolated investments. The most resilient innovation ecosystems integrate finance, education, regulation, and culture into coherent strategies. Switzerland, for example, continues to top the GII rankings thanks to its long-term investment in public-private research collaboration and its stable funding for universities. South Korea’s coordinated industrial policy and sustained R&D spending, now exceeding 4.9% of GDP, illustrate how consistent policy alignment drives innovation output.

For emerging economies, the challenge lies in bridging the transition from imitation to creation. Building trust between academia and industry, nurturing venture networks, and improving IP enforcement can help transform investment into impact. International partnerships, such as cross-border clean energy consortia and open-source medical research networks, offer templates for sharing costs and expertise.

Innovation as a collective responsibility

Ultimately, global innovation is a shared endeavour that underpins social progress, economic opportunity, and environmental resilience. It is central to Sustainable Development Goal 9, which calls for inclusive industrialisation and technological advancement. Reinvigorating this momentum requires nations not just to spend more, but to cooperate more, aligning policies, data standards, and educational priorities.

As the Global Innovation Index 2025 warns, the world does not suffer from a lack of ideas but from a lack of systemic coherence. Unless innovation systems are made more open, networked, and equitable, new investment will continue to yield diminishing returns.

To explore the data and country comparisons in detail, the full report is available on the WIPO website. Complementary insights on regional policy strategies can be found at the OECD Innovation Policy Platform.