U.S. ranked best for fostering business innovation.

Political and economic turmoil are making businesses around the world less likely to invest in innovation, even though most executives believe that’s the best way to increase profits and create jobs, a new survey shows.

About 71 percent of respondents who saw unfavorable changes in government budgets or policies because of the global economic crisis said their companies also reduced funding for R&D.

Those were some of the findings from GE’s Global Innovation Barometer, a survey of 2,800 business executives in 22 countries. StrategyOne conducted the study, which also found:

• Countries where executives were more satisfied with the political and social environment tended to have a higher GDP growth–about 5.19 percent, on average–than places where businesses were worried about policies. Those countries had an average GDP growth of 2.32 percent.
• Most executives – 92 percent – believe that innovation is the most important step in creating a competitive national economy.
• About 88 percent of those surveyed found it was harder to get venture capital, private investment or government funding.
• And 77 percent said their companies either less willing to take risks or were reconsidering their commitment to doing so.
• A majority of 77 percent agreed that individual entrepreneurs and small or mid-size companies can be as innovative as large corporations.

“This year’s study confirms a lot of what we’ve been seeing in the global marketplace, that the uncertainties inherent in today’s economic environment are challenging business’ ability to innovate,” said Beth Comstock, senior vice president and chief marketing officer of GE.

“We see these results, in some ways, as a rallying cry for business leaders to understand where and how their innovation strategies are being challenged and to drive to new models.”

Most executives also think the United States offers the best environment for innovation, followed by Germany, Japan and China.

Japanese executives, however, ranked their country among the worst innovation environments. Russia, Poland and France were also unhappy.

Business leaders from Israel, the United Arab Emirates, Sweden and Singapore gave high marks to their country’s nnovation environment.

“Investing in innovation is a critical piece of global competitiveness, and it comes in many forms – from traditional R&D to new products, markets and business models,” Comstock said.

“Cutbacks today will have reverberations on economic and social progress for years to come, and may seriously hinder a company’s ability to compete. Governments and businesses both need to do their part to shore up the fragile innovation ecosystem.”

To view the complete results of the survey, visit www.ge.com/innovationbarometer.