Finland, Ireland, Sweden, Switzerland and the US are among the countries that rank highest in terms of global innovation, according to new research.
An evaluation of 26 countries by Forrester Research found that developed nations such as the US and Japan are spending an average $1,270 per capita per year on R&D with little to show for their science and technology investment.
Taxpayers' money is being wasted because many politicians and bureaucrats confuse innovation with invention, according to the Forrester Wave: National Innovation Networks Q4 2006 study.
"National empowerment, power, wealth and well-being depend more on deployment of innovation than on the invention itself," said Forrester vice president and research director Michelle de Lussanet.
"The biggest flaw in most innovation agendas is that they look at nations as closed systems, as if nations must have all innovation capabilities in-house. It cannot be done."
Instead, the study sees an emerging global ecosystem of collaborative innovation among countries, companies, universities and other organisations.
These "innovation networks" involve countries identifying and assuming a specific role - inventor, transformer, financier and broker - to match their unique skill set.
But it is now the turn of governments to nurture and strengthen these collaborative market structures by instituting forward-looking public policies, the analyst firm believes.
"Nations must shed their inward-looking innovation attitudes to become successful in the end-to-end global innovation value network," said Forrester vice president Navi Radjou.
"They must play to their strengths and pair up with nations that complement these strengths."
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