We require at least 7 years of financial data for a given firm to be considered on our list of most innovative companies. We also use a form “research and development” screen by excluding industry groups in which no member has reported R&D or similar spending. Also, to control for size differences, we include only those with a market value greater than $10 billion. This year we’ve seen an increase in our sample size and the number of companies with high innovation premium levels. As a result, the average innovation premium of our list has risen and companies that may have made the cut in the past ended up falling short this year (e.g. Google GOOGL +0.46% and Apple both have positive premiums, at 29.1% and 10.2% respectively, but that knocks them down to the 115th and 282nd spots this year). In very rare cases when a company derived more than 80 percent of their revenues from a single high economic growth market (e.g., India, China), we assumed a small portion of the company’s innovation premium was derived from higher domestic market growth rather than true innovation (i.e.,, entering new products, services, or markets). Accordingly, we made a slight downward adjusted to the firm’s innovation premium using a formula that compares the particular domestic region’s growth and compares it to rest of the world and assumes a portion of a company’s growth will come from those differences in market growth. However, this adjustment only made a minor change in a firm’s ranking and did not move any companies on, or off, the list. The innovation premium shown in the tables in this chapter reflect a weight average innovation premium over five years with the weighting as follows: most recent two years (30%), years 3–4 (15%), and year 5 (10%).
We require at least 7 years of financial data for a given firm to be considered on our list of most innovative companies. We also use a form “research and development” screen by excluding industry groups in which no member has reported R&D or similar spending. Also, to control for size differences, we include only those with a market value greater than $10 billion. This year we’ve seen an increase in our sample size and the number of companies with high innovation premium levels. As a result, the average innovation premium of our list has risen and companies that may have made the cut in the past ended up falling short this year (e.g. Google GOOGL +0.46% and Apple both have positive premiums, at 29.1% and 10.2% respectively, but that knocks them down to the 115th and 282nd spots this year). In very rare cases when a company derived more than 80 percent of their revenues from a single high economic growth market (e.g., India, China), we assumed a small portion of the company’s innovation premium was derived from higher domestic market growth rather than true innovation (i.e.,, entering new products, services, or markets). Accordingly, we made a slight downward adjusted to the firm’s innovation premium using a formula that compares the particular domestic region’s growth and compares it to rest of the world and assumes a portion of a company’s growth will come from those differences in market growth. However, this adjustment only made a minor change in a firm’s ranking and did not move any companies on, or off, the list. The innovation premium shown in the tables in this chapter reflect a weight average innovation premium over five years with the weighting as follows: most recent two years (30%), years 3–4 (15%), and year 5 (10%).
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