Methodology

Index Methodology and Definitions

The purpose of the IT Industry Competitiveness Index is to compare countries in different regions of the world on the extent to which they possess the conditions necessary to support a strong IT industry. To achieve this, the Economist Intelligence Unit maintains a benchmarking model which scores individual countries on the key attributes of a competitive IT sector.

There are six categories of indicator used in the index; these are set out in the table below, along with their weights in the index, and that of each indicator in the category. The main data sources for each indicator are also provided, along with an indication of whether the score is based on quantitative data (for example, US$ spend, number of students) or on a qualitative assessment made by Economist Intelligence Unit analysts.

Qualitative indicators are scored on a 1-5 basis. Quantitative indicators are normalized through the population set so that each country is measured from 0 to 1 by applying a formula (Yij = [xij - minij] / [maxij - minij]) to each data point. Each indicator is then converted into a score of 0-100 by applying the appropriate multiplier (20 for the qualitative indicators, 100 for the quantitative indicators). As the weights sum to 1, the composite score for each country is also based on an index range of 0 to 100 (with 100 representing the highest and best possible score).

When employing a normalization method of scoring as we have, there occurs some score distortion in selected indicators at both the highest and lowest ends of the score range. This occurs when indicator scores are based solely on quantitative data, and explains why some countries' scores in certain categories shown are below 1 while others exceed 80 in the same category.

Normalization is also the reason why some countries' scores in individual categories, or the overall index, may be lower than in the previous year even though their actual performance may not have deteriorated. If the score of the global leader in a quantitative indicator is lower than that of the previous year's leader, the scores of other countries in that indicator will be affected, possibly irrespective of their actual performance.

No changes have been made to the indicators or scoring methodology in 2011, and the previous weights remain unaltered. We have, however, changed the source of data used in scoring one important indicator—IT patents. Statistics on IT-specific patent applications collected by the World Intellectual Property Organization (WIPO) are now used for this indicator. (The European Patent Office was the source used in 2009).

Indicator Weight Main data sources Year Type of score
Category 1:
Overall business environment 		10%
Foreign investment policy:
Government policy towards foreign capital; cultural receptivity to foreign influence; risk of expropriation; investment protection 		20% Economist Intelligence Unit: Business Environment Rankings 2006-10 Qualitative: assigned by Economist Intelligence Unit analysts
Private property protection:
Degree to which private property rights are guaranteed and protected 		35% Economist Intelligence Unit: Business Environment Rankings 2006-10 Qualitative: assigned by Economist Intelligence Unit analysts
Government regulation:
Level of government regulation (mainly licensing procedures) on setting up new private businesses 		25% Economist Intelligence Unit: Business Environment Rankings 2006-10 Qualitative: assigned by Economist Intelligence Unit analysts
Freedom to compete:
Freedom of existing businesses to compete in domestic markets 		20% Economist Intelligence Unit: Business Environment Rankings 2006-10 Qualitative: assigned by Economist Intelligence Unit analysts
Category 2:
IT infrastructure 		20%
IT investment:
Market spending on hardware, software and IT services (US$ per 100 people) 		15% IDC 2010 Quantitative
PC ownership:
Desktop and laptop computers per 100 people 		35% Pyramid Research, ITU 2010 Quantitative
Broadband penetration:
Broadband connections (xDSL, ISDN PRI, FWB, cable, FTTx) per 100 people 		25% Pyramid Research 2010 Quantitative
Internet security:
Secure Internet servers per 100,000 people 		10% World Bank, Netcraft 2010 Quantitative
Mobile penetration:
Mobile phone subscriptions per 100 people 		15% Pyramid Research 2010 Quantitative
Category 3:
Human capital 		20%
Enrolment in higher education:
Total number of students in higher education, as % of gross university-age population 		25% UNESCO 2009 Quantitative
Enrolment in science:
Enrolment in tertiary-level science programmes (number of people) 		15% UNESCO 2009 Quantitative
Employment in IT:
Employment in technology sector (number of people) 		20% OECD; Economist Intelligence Unit estimates 2010 Quantitative
Quality of technology skills:
The education system's capacity to train technologists with business skills (project management, customer-facing application and web development, etc) 		40% Economist Intelligence Unit 2010 Qualitative: assigned by Economist Intelligence Unit analysts
Category 4:
R&D environment 		25%
Public sector R&D:
Gross government expenditure on R&D (US$ at purchasing power parity-PPP, per capita) 		15% UNESCO; World Bank 2008 Quantitative
Private sector R&D:
Gross private-sector expenditure on R&D (US$ at PPP, per capita) 		15% UNESCO; World Bank 2008 Quantitative
Patents:
Number of new domestic IT patent applications filed by residents each year, as % of total patent applications 		50% WIPO, Economist Intelligence Unit estimates 2007 Quantitative
Royalty and license fees:
Receipts from royalty and license fees (US$ per 100 people) 		20% World Bank, IMF 2009 Quantitative
Category 5:
Legal environment 		10%
Intellectual property protection:
Comprehensiveness, transparency of IP legislation; adherence to treaties 		35% Economist Intelligence Unit: Business Environment Rankings; national sources 2006-10 Qualitative: assigned by Economist Intelligence Unit analysts
Enforcement of IP rights:
Enforcement of IP legislation by government authorities and courts 		35% Economist Intelligence Unit; USTR; national sources 2010 Qualitative: assigned by Economist Intelligence Unit analysts
Electronic signature:
Status of electronic signature legislation 		10% National sources 2010 Qualitative: assigned by Economist Intelligence Unit analysts
Data privacy and spam:
Status of data privacy and anti-spam laws 		10% National sources 2010 Qualitative: assigned by Economist Intelligence Unit analysts
Cybercrime:
Status of cybercrime laws 		10% National sources 2010 Qualitative: assigned by Economist Intelligence Unit analysts
Category 6:
Support for IT industry development 		15%
Access to investment capital:
Access to medium-term finance for investment from domestic and foreign sources 		20% Economist Intelligence Unit: Business Environment Rankings 2006-10 Qualitative: assigned by Economist Intelligence Unit analysts
E-government strategy:
Existence of a coherent national government strategy to achieve e-government objectives, aimed at improving both public service delivery and efficiency of back-office operations 		30% UN; European Commission; Economist Intelligence Unit analysts 2010 Qualitative: assigned by Economist Intelligence Unit analysts
Public procurement of IT:
Government spending on IT hardware, software and services (US$ per capita) 		15% IDC; Economist Intelligence Unit estimates 2010 Quantitative
Government technology neutrality:
Existence of an even-handed public policy stance on technology or sector development (absence of preferential government support for specific technologies or sector) 		35% Economist Intelligence Unit analysts 2010 Qualitative: assigned by Economist Intelligence Unit analysts