You are using an older browser version. Please use a supported version for the best MSN experience.

The world's 10 most innovative companies

Forbes Logo By Jeff Dyer and Hal Gregersen of Forbes | Slide 1 of 11: A Tesla production supervisor, examines a Model S for paint quality at the company's factory in Fremont, California.

How we rated the companies

Most innovation rankings are popularity contests based on past performance or editorial whims. We set out to create something very different with the World’s Most Innovative Companies list, using the wisdom of the crowd. Our method relies on investors’ ability to identify firms they expect to be innovative now and in the future. You can learn more about our research on innovation by visiting learn.theinnovatorsmethod.com.

Companies are ranked by their innovation premium: the difference between their market capitalization and a net present value of cash flows from existing businesses (based on a proprietary formula from Credit Suisse HOLT). The difference between them is the bonus given by equity investors on the educated hunch that the company will continue to come up with profitable new growth.

To be included, firms need seven years of public financial data and $10 billion in market cap. (Facebook FB +1.28%, for example, would be in the top ten if we used only 2012 data.) We include only industries that are known to invest in innovation., excluding industries that have no measurable investment in R&D, so banks don’t make the list. Nor do energy and mining firms, whose market value is tied more to commodity prices than it is to innovation. Big caveat: Our picks do not correlate with subsequent investor returns. To the extent that today’s share price embeds high-growth expectations, one might even anticipate returns to investors to be low, as these expectations may be difficult to meet.

Click ahead for the world's 10 most innovative companies.

© REUTERS/Noah Berger

More From Forbes

image beaconimage beaconimage beacon