Where Innovation Clusters

We all like to think of the genius innovators coming up with Eureka ideas on their own, but most innovations don’t work that way. The pandemic helped remind us of the importance of proximity, that being with other talented people helps spur creativity. Those hallway conversations often trigger unexpected ideas and synergies. Talented people like to have other talented people around them, whether that is within a company or in a geographic region.

Well, you may have missed it, but there is a UN agency, the World Intellectual Property Organization (WIPO), that looks at such things, and has been issuing a Global Innovation Index since 2017. It released the 2025 Index today.

The top ranked cluster was Shenzhen-Hong Kong-Guangzhou (China), followed by Tokyo-Yokohama (Japan) and San Jose-San Francisco (United States). Last year, the top two positions were reversed, while San Jose-San Francisco was 6^th.

Part of the shake-up in the ratings was inclusion of venture capital investments in the ratings; previously, only patent filing and scientific publishing data were used. "Venture capital investment activity helps capture how scientific and technological knowledge translates into start-up creation and, ultimately, new goods and services in the marketplace," WIPO said. The change helped San Jose-Sam Francisco rise, as well as London (21^st to 8^th) and Bengaluru (56^th to 21^st). Indian clusters benefited generally.

Carsten Fink, chief economist of the WIPO’s department for economics and data analytics, said: “We don’t just want to track science and technology activity. We also want to see how clusters turn ideas into entrepreneurship and ultimately new products and services that emerge in the marketplace.”

"Innovation clusters form the backbone of strong national innovation ecosystems, helping to anchor and strengthen the journey from ideas to market. The inclusion of VC deal activity in this year's GII cluster methodology is recalibrating our understanding of innovation strength, and these new results highlight which clusters are turning scientific research into economic results," WIPO Director General Daren Tang said in the report.

For example, WIPO noted that the top two clusters account for nearly one-in-five patent applications globally, and the top ten clusters accounted for 40 per cent of the world’s patent applications and 35 per cent of its venture capital deals

If only looking at patent filing volume, the top three are the Tokyo-Yokohama, Shenzhen-Hong Kong-Guangzhou, and Seoul clusters, contributing 10.3 percent, 9 percent, and 5.4 percent of the global total, respectively. In terms of scientific research output, the top three are Beijing, Shanghai-Suzhou, and Shenzhen-Hong Kong-Guangzhou, with 4 percent of the global total, 2.5 percent, and 2.4 percent, respectively.

"VCs fund technology enterprises, integrate resources, and reduce risks, thereby driving the rapid development of the technology industry. In turn, the prosperity of the technology sector delivers substantial returns to VC investors, attracting more capital inflows and further fostering innovation and upgrading within the industry. This dynamic interplay serves as a crucial driving force for innovation-led development during China's economic transformation," Yang Delong, chief economist at Shenzhen-based First Seafront Fund, told the Global Times.

It’s a virtuous circle.

Here are the top 15 clusters:

1: Shenzhen-Hong Kong-Guangzhou (China)

2: Tokyo-Yokohama (Japan)

3: San Jose-San Francisco (United States)

4: Beijing (China)

5: Seoul (South Korea)

6: Shanghai-Suzhou (China)

7: New York City (United States)

8: London (Britain)

9: Boston-Cambridge (United States)

10: Los Angeles (United States)

11: Osaka-Kobe-Kyoto (Japan)

12: Paris (France)

13: Hangzhou (China)

14: San Diego (United States)

15: Nanjing (China)

If one accounts for population size, San Jose-San Francisco would come out on top, followed by Cambridge (U.K.).

Thirty-three economies have a cluster in the top 100. If you are someone who notices such things, the U.S. has 4 of the top ten, versus China’s 3, but in the top 15 each have 5. Among the top 100, China has 24 while the U.S. has 22. Germany is next, but only with 7. It is the third consecutive year China has had the most clusters in the top 100.

I think about this in light of the current war n science being waged by the Trump Administration, whether that is cutting NIH/NSF funding, firing federal scientists, attacking our top research universities, or using the phrase “gold-standard science” when what it really means is science that adheres to personal or political positions (I’m talking about you, RFK Jr.!). We’re losing a generation of young scientists, undermining out decades of research, imposing disastrous cuts on science agencies.  I mean, you cannot overstate the risk that American science is under, and that will have consequences to our innovation.

Talent is fluid. If the best scientific laboratories and research universities are no longer here, if the post WWII federal funding for funding for science and innovation dries up, then leading researchers will go elsewhere. Europe, Canada, Australia, and – you guessed it! – China are all rolling out the welcome mats for U.S. scientists.  

Venture capital is even more fluid. The U.S. has long had one of the most robust and forward-looking venture capital system in the world, which has been to our benefit, but the thing is, venture capital doesn’t respect borders. It seeks only returns. If there’s more innovations happening in clusters elsewhere in the world, VCs will put their money there.

It certainly doesn’t help that we’re discouraging international students from our universities, demonizing immigrants, even restricting H1-B visa for skilled workers. If we don’t want the smartest people from other countries studying and working here, there are plenty of other places where they can – and will – go.

It won’t be them who suffer the consequences.

The Global Innovation Index reminds is that innovation is truly global, and that the U.S.’s historical outsized footprint in innovation continues. But it also shows that it’s fair to say that China is by now at least our equal, and there are many other hotspots of innovation in the world eager to leapfrog ours should they falter.

I love science and innovation. I think it’s healthy that there are so many strong centers for them all around the world. I’ve long been proud of America’s preeminence in both, but I hate that we appear to be squandering it, letting China and others take the lead in inventing the future.  

I’ll be curious to see what trends the 2026 Global Innovation Index shows, but, I have to admit, I’m kind of scared about what the 2030 Index will show.