A much better benchmark is the number of patents granted per capita. Also the number of new small technology related businesses created per year per capita is not a bad measure (although you should also consider business failure rate too).

THIS NEW HERE is totally wrong, and we go back again to the SAME HISTORICAL MISTAKE OF ICELANDERS. THEY NEED ANYHOW TO BE AT THE FIRST PLACE.

IN INNOVATION?? HAHAHAHA, I LAUGH TIL MY STOMACH HURTS. Iceland has not ITC innovation industry to talk of, space sciences, nanotechnology, biotechnology, and many other of the innovative industries of the 21st century are not developed, not even present in Iceland. Iceland makes a good work in applying RENEWAL ENERGIES, but they do so because they have no other chance for getting electricity. But for the rest Iceland is about HEAVY INDUSTRY of ALUMINIUM and FISHING. Which are nothing of innovative in the industry chain, but just SUPPLIERS OF RAW MATERIALS AS ALUMINIUM AND FISH. NOTHING ELSE.

The CUTS IN EDUCATION SYSTEM, have destroyed any chance for Iceland to develop innovative technology at similar levels as in any other EU country.

INNOVATION HAS TO BE MEASURED BY ITS PRODUCTS AND WHAT THEY BRING INTO A COUNTRIES ECONOMY. Iceland significant exports are just aluminium, fish and wool. Are they highly innovative products?? NO! they are just RAW OR LOW ELABORATED GOODS. WE ARE NOT TALKING ABOUT NOKIA HERE…

ICELAND NEEDS TO WAKE UP, TO START WITH, BY REALIZING WHAT MODESTY AND REALISM MEANS… Not by inviting an Indian professor that uses to fantasize about everything, loves to come to Iceland, and is an irrelevant figure abroad…

I AM A POSTGRADUATE STUDENT AT ICELANDIC UNIVERSITY AND WE ARE STILL WAITING FOR MONEY TO FUND OUR “INNOVATIVE” PROJECTS. The have been calling the general population to come with “innovative ideas” to reactivate the country’s economy WHILE THEY HAVE BEEN SHUTTING DOWN REAL PROJECTS DEVELOPED BY EXPERTS… YEAH now a farmer is going to come out to be the developer of the last ITC and BIOTECHNOLOGY findings of the world…
hahahaha, what a punch of CLOWNS!!

The answer is in the next appendix, Appendix II Definition & Sources.

The report you linked to was last years, 2008/9. But per that appendix, the data sources were mainly 2007, with a very few 2008 but many more 2005/6.

Add a year onto all those and Iceland still looks good.

Another classic example of why people should step back and consider whether the output makes sense before publishing :) .

http://www.insead.edu/facultyresearch/centres/elab/gii/GII%20Final%200809.pdf

For instance

I – Institutions & Policies: Variables
1.1.01 Starting a business – Time (days)
1.1.02 Dealing with licences – Time (days)
1.1.03 Voice & Accountability
1.1.04 Political Stability
1.1.05 Government Eff ectiveness
1.1.06 Regulatory Quality
1.1.07 Rule of Law
1.1.08 Control of Corruption
1.1.09 Laws relating to ICT
1.1.10 Burden of government regulation
1.1.11 Intellectual property protection
1.1.12 Legal Framework
1.1.13 Soundness of banks
1.1.14 Legacy of innovation
1.1.15 R&D expenditure as a % of GDP

Soundness of the Banks!! Legal Framework!! Burden of government regulation !! Political Stability!!

How can a country that has lost all is banks due to terrible regulatory control, corruption, is soon to have a constitutional crisis, fall of government, falling GDP, national bankruptcy and potentially having a brain drain score highly in these areas??