Japan is the global leader for innovation, with Switzerland, the United States and Sweden trailing behind, according to a new study.

The study, released this week, surveyed 82 nations' economies from 2002 to 2006. It was carried out by the Economist Intelligence Unit, a research firm spin-off from the Economist magazine. The survey was conducted among 485 responding senior executives.

Innovation in the study is defined as “the application of knowledge in a novel way, primarily for economic benefit”. One of the main factors affecting the ranking is the number of patents per 1 million people in a country. The study noted that “although Japan’s population is less than half of that of the U.S., the ratio of patents per million population is 3.5 times higher than that of the U.S.” Japan also has the highest ratio among the 82 countries.

The study says that it is the most innovative country despite having lower rankings in direct factors that drive innovation, such as the stock of human capital, as well as IT and telecommunications infrastructure.

The country's once strong symbiotic ties between large companies and associated smaller firms have broken down, but they continue to drive some innovation, the study said.

The study predicts that all four leading countries will keep their ranking for the next four years, however one country that will see the quickest progress for innovation will be China, as continues to pour money into research and development as the country's economy develops at a fast pace. Currently, It Is ranked second in spending, at US $136 billion. First Is the United States with $330 billion. Japan is below China at $130 billion.

The country is expected to rise five or six places in the next four years from its current 59th place innovation rank.

The report also said that in the four years to come, the EU would not be able to close the innovation gap between Japan and the U.S.

While Japan is the top innovative country, 40 percent of respondents said that the most suitable place for innovation is the U.S., far ahead of second place India at 12 percent. Only 2 percent of respondents thought Japan was the best place to innovate. The study said there may be a language bias in the places to innovate result, since the survey was conducted only in English.

There were 12 countries in the top 25 with a population less than 10 million, indicating a small country advantage to innovation, the study said.

The study is called Innovation: Transforming the way business creates and was sponsored by Cisco Systems. The complete report is available online.

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