I Foro de Ciencia, Tecnologia, Innovación y Competividad Acuerdo nacional, CONCYTEC, PERÚCOMPITE, PROLÍDER, CEPAL, OEA Lima; April 9, 2008 The Finnish

I Foro de Ciencia, Tecnologia, Innovación y Competividad

Acuerdo nacional, CONCYTEC, PERÚCOMPITE, PROLÍDER, CEPAL, OEA

Lima; April 9, 2008

The Finnish Case

Dr. Heikki KotilainenS&T Balance

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Background for CEPAL’s study on Public-Private Alliance for Export Development

I Foro de Ciencia, Tecnologia, Innovación y

Competividad

The Finnish Case

Contents

1. Introduction, Finland as a country2. Innovation policy and respective organizations3. Funding principles4. Funding of innovation and national programs5. Conclusions

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Competividad

The Finnish Case

1. Introduction, Finland as a country

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Finland in Figures *Total Area: 338,000 sq km, this makesFinland the seventh largest country in EuropeNeighbouring Countries: Sweden, Norway,Russia, EstoniaCapital: HelsinkiMain Cities & Population: Helsinki(555,000), Espoo (213,000), Tampere(195,000), Vantaa (178,000), Turku (172,000) and Oulu (120,800). Approximately one million people live in the Helsinki Metropolitan Area. Population: approx. 5,3 millionPopulation Density: 17 inhabitants per square kilometre, 62 % of the population lives in towns and cities. Currency: Euro. Until 2002 markka, also known as the Finnish mark (FIM).Languages: Finnish (93 %) and Swedish (6 %) are official languages. Sami (Lappish) is the mother tongue of about 1,700 people.Climate: The climate of Finland is marked by distinctive seasonal variations. Winters are cold and summers relatively warm.National Legislature: Finland has a unicameral parliament with 200 members.Finland in the International Community:Member of EU, UN, OECD and WTO, among others.Major Exports: Electronic and electrical products, pulp and paper, machinery and equipment, metal products, transport vehicles, timber and wood, chemicalsGDP: $176.4 billion (2006)GDP per capita (PPP): $33,700 (2006)GDP real growth rate: 5.5% (2006)GDP composition by sector (2006)

Agriculture: 2.7%Industry: 30.3%Services: 67%

Unemployment rate: 7% (2006)

ECLAC Finnish Report 2007

THE POLICY DEVELOPMENTS IN FINLAND

?

1945

•LACK OF CONSUMER GOODS

•INDEPENDENT INDUSTRIES•DOMESTIC

MARKET

•RAW MATERIALS ASCOMPETITIVE FACTOR•GROWING NATIONAL

DEMAND•INVESTMENT

SUBSIDIES

MANUFACTURING DRIVEN

•INTERNATIONAL COMPETITION

•TECHNOLOGY POLICY•TECHNOLOGY

SUBSIDIES

INVESTMENT DRIVEN

•INTERNATIONALCOOPERATION

•SKILLS AS COMPETITIVEFACTOR

•INTRODUCTION OFNATIONAL INNOVATION

SYSTEM•PRECONDITIONS FOR

TECHNOLOGICAL&SOCIETAL ADVANCEMENT•RISK/VENTURE

CAPITAL

MARKET/INNOVATION DRIVEN

•TECHNOLOGY&SOCIETY

•POLICY FORSOCIAL SCIENCES

SURVIVAL POLICY

WEALTH DRIVEN ?

2000

TECHNOLOGICAL ADVANCEMENT

NATIONAL COMPETITIVENESS

© S&T Balance

Industrialization &Construction of

welfare state

Export, technology &

innovation

Finnish Trade

Trade in High-Tech products, 1991-2006* Export by Industry, 1996-2006*

The biggest surpluses in Finland’s foreign trade in high technology were recorded in trade with:Russia (+ EUR 1.2 billion)United Kingdom (+ EUR 600 million)Saudi Arabia & United Arab Emirates (both+ EUR 615 million) Italy (+ 520 EUR million). The balance was the most negative for Finland in trade with China (- EUR 1.5 billion).

High technology products accounted for 21.3 per cent of all Finnish exports in 2006

* Source:Tekes, 2006

Competitiveness comparison

2001

IMDWEFTechnology

2002 2001 2000 2003

Populationover

20 mill.less than20 mill.2003 2003

Populationover

20 mill.less than

20 mil.20032003

ScienceTechnologyUNDP

221

345789

101113141619

USA

TaiwanSwedenJapanSwitzerlandDenmarkIsraelEstoniaCanadaNorwayGermanyUKAustralia

FinlandFinland1

2456

117

148

101215

9

331

46

23241226

827

1510

5

332

-34--

18-8

1211

79

111-6-9----2-483

- -4-658

19-

10---

331-5-2----6-379

- -2-38

1125

-14

---

661

24976

138-

1429

51723

22

Ranking by the science and technology factorRanking by the science and technology factor

Sources: The World Competitiveness Yearbook (IMD), The Global Competitiveness Report (WEF)And Human Development report (UNDP)

DM 3605411-2003 Copyright © Tekes

Technology index (WEF)

4,0 4,5 5,0 5,5 6,0 6,5

IcelandGermany

NorwaySingapore

CanadaEstonia

IsraelDenmark

SwitzerlandKoreaJapan

SwedenTaiwanFinland

USA


Source: The Global Competitiveness Report 2003,3/4 based on quantitive material, 1/4 on query

4.0 4.5 5.0 5.5 6.0 6.5


Competividad

The Finnish Case

2. Innovation policy and respective organizations

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Future orientation

”Prepare answers to questions, which will be asked after 5 years”

Motto:

Future orientation

The Innovation Policy of Finland• Education, science, technology and know-how have been

a conscious focus of the industrial policy and the foundation of the Finnish economy and society for a very long time.

• The results of the policy can be seen today: the transformation from a low-tech country to a knowledge based society.

• Investments in innovations are important, but as important are a consistent long term focus on national facilitating conditions, as well as operational measures to build up a well-committed, co-operative, well balanced, confidential and dynamic innovation environment.

• Regional development is a special challenge, because the birth of innovations is very centralized.

• Small countries, like Finland too, have a lot of challenges in the future.


Tasks in the Finnish Innovation System

PARLIAMENTPARLIAMENT

GovernmentGovernment

MoE MEEScience & Technology

Policy Council

Future committeeFuture committee

Academyof

Finland

TekesTE-centres Foundation

of Inventions

PublicUniversitiesResearch InstitutesCenters of Excellence

PrivateEnterprisesResearch labs

SemiprivateFinveraSitra/VCIndustrial Investment/VC

PrivateVenture CapitalBanksResearch funds

General policy

S&T&Ipolicy

S&T&Innovation policy formulation,

implementation, funding

R&Dperforming

Business funding

Tasks innov.

Sitra

© S&T Balance

IndustryIndustryIndustryIndustry

MinistriesAgencies

Patent offices, IPR

Regional centresTE-centres

Centres of ExcellenceTechnology/Science ParksKnowledge CentresSectorial InstitutesTech Transfer officesInstitutes, labs

The Triple Helix

UniversitiesResearchinstitutes

Government

Industry

Science & Technology

Policy Council

Confederations ofIndustry

BanksVenture CapitalBusiness angels

EU Commission-state aid

-regulations-FP

SemiprivateSITRA

FinveraIndustrial Invest

Clusters

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R&D/GDP in FinlandR&D/GDP

0

0,5

1

1,5

2

2,5

3

3,5

4

1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2004 2005

%

SCIENCE POLICY

TECHNOLOGY POLICY

INNOVATION POLICY

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SERVICE POLICY ?

INPUT ADDITIONALITY

OUTPUT ADDITIONALITY BEHAVIOR ADDITIONALITY

COGNITIVE CAPACITY

%

Circulation of innovation policy

Setting policy agenda

Analysing policy

Implementation

Public interest Private interest

National strategy

Sector policies

Implementation of strategies

Instrument set-up

Research

Strategic intelligence

Policy evaluation

Impact evaluation

Performance evaluation

Policy circulation

Source: Tekes

(Council, audit)

(Ministries, agencies, universities, industry)

(Ministries, agencies, universities, industry,Evaluation + outside experts)

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Planning and implementing of technologyand innovation policy

3 year outlines

Ministries(Education, Employment & Economy, Finance etc.)

Annual objectives and agreements

Institutions(Academy of Finland, Tekes, Universities

VTT, Sectoral Institutes)

GovernmentScience and technology

policy council, STPC

Annual & semi-annualreports

and feedback

Plans

Operations

Tech.plocy execution© S&T Balance

BALANCE BETWEEN THE SCIENCE, TECHNOLOGY AND SOCIAL DEVELOPMENT

MAINTAIN CLEAR NATIONAL FOCUSSTPC

MANAGE KEY DEMANDSBUSINESS & SOCIAL CHALLENGES

Funding Agency forBasic Research

Funding Agencyfor Applied Research and Development

PROACTIVE VISION

(Science and University Community, Society)

BOTTOM-UP REQUESTS

ADAPTING TOCUSTOMERS

(The Business Community,

Society)

NATIONAL POLICY

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The Academy

Tekes


Competividad

The Finnish Case

3. Funding principles

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Prerequisites for administration involvement in R&D

•Business and research understanding

•Genuine interest in facilitating development

•Trust by industrial community

•Trust by research community

•Money and funding opportunities

Admini.involvement© S&T Balance

The Selection of Areas for R&D Funding

Administration•social needs•white spots on technology map•emerging technologies•globalisation challenges•emerging legislation

Industry•globalisation challenges•technology needs•clustering needs•new business models

Research•utilizing the strengths of research•improving the weaknesses of research•improving the industry cooperation•facilitating the technology transfer•improving the infrastructure of research

R&D fnding areas© S&T Balance

R&D Expenditures in Finland 20065789 M€; 3,45%/GDP

Private 4108 M€

71,0%

Public 1681 M€

29,0 %

Tekes504,3M€

(30,0%)

Academy of Finland

275,8 M€(16,4%)

Universities446,4 M€

(26,6%)

Researchinstitutes282,0 M€

(16,8%)

Others172,7M€

(10,2%)

© S&T Balance Source: Statistics Finland

Competitive funding Institutional funding

R&D investments of public and private sectors 1999-2006 in Finland

0

1000

2000

3000

4000

5000

6000

7000

1999 2000 2001 2002 2003 2004 2005 2006

Universities

Public sector

Enterpr.

1M €

Source: Statistics Finland

71

0%

70,8

%

70,1

%

70,5

%

69,9

%

71,1

%

70,9

%

68,2

%

© S&T Balance

3,16%3,34% 3,30%

3,35% 3,43%3,46%

3,48%3,45%

R&D/GDP


Competividad

The Finnish Case

4. Funding of innovations and national programs

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Multiplication of public money in the innovation system

Short term investment

Long term investment

GovernmentParliamentMinistries

GovernmentParliamentMinistries

Funding agency•grants•loans

•equity funding

Funding agency•grants•loans

•equity funding

UniversitiesResearch institutes

UniversitiesResearch institutes

Cumulative tax

Public finance

New technology, knowledge, skills

Businesses, employment

Venturecapital

Pres/Multiplicatioon publicmoney© S&T Balance

Innovation Trends

Innov.trends

© S&T Balance

User-based innovations

Merger of manufacturing and service

Mulitidisciplinary innovations

Public and private sector innovations

Globalisation of innovations

Small firm innovations- large firm interventions

RESEARCH PARADIGMS

Old paradigm (LINEAR MODEL)

BASIC RESEARCH APPLIED RESEARCH DEVELOPMENT

New paradigm (CONCURRENT MODEL)

DEMAND

SCIENTIFIC UNDERSTANDING

TECHNOLOGICAL SOLUTIONS

PROBLEMSOLVING

MA

RK

ET

Basic research

Applied research

Development

SO

CIE

TA

L &

BU

SIN

ES

S

C

HA

LL

EN

GE

S

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The relation between the national technology programme and innovation

Technology programme, joint research with multiple participants

Company 1

Company 2

Company 3 Company 4

Company 5

INNOVATIONS ON MARKET

Re

se

arc

hP

rod

uct

dev

elo

pm

ent

pro

ject

sIn

no

vat

ion

s

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THE GENERAL OBJECTIVES OF THE NATIONAL

TECHNOLOGY PROGRAMMES

•To promote the industrial competitiveness to keep up with the global market change•To give input to the industrial innovation process•To create new knowledge to fulfil the needs of research, Industry and society•To create the critical mass and centres of excellence in important technological areas•To enhance the co-operation between industry and universities and research institution•To promote international co-operation•To support research education and to educate internationally oriented research managers•To enhance the research and high-tech image of the country

Objectives natl progr© S&T Balance

PROCESS CHARACTER OF TECHNOLOGY TRANSFER

CURIOSITY

KNOWLEDGE CREATION

SCIENTIFIC EXCELLENCE

PUBLICATIONS

CUSTOMER NEEDS

MARKET&MARKETABILITY

STRATEGYPRODUCT

PORTFOLIOR&D PORTFOLIO

COMPETENCEMONEY&

FINANCINGIPR

REVENUES

RESEARCH INDUSTRYTECHNOLOGY TRANSFER

Transfer process

ADAPTATION OFSCIENTIFIC

RESULTSFOR

TECHNOLOGICAL USE

”Requirement fortechnological success”

ADAPTATION OF

TECHNOLOGICAL KNOWLEDGE

FOR INDUSTRIAL

USE

”Requirement formarket success”

What is possible ? Can we do it? How we do it? How we market it?

Cooperation between companies

Share of cooperating companies of all innovating companies

0 10 20 30 40 50 60 70

Italy

Greece

Portugal

Spain

Germany

Austria

EU

Belgium

Netherlands

France

Great Britain

Ireland

Denmark

Sweden

Finland

Source: Towards a European Research Area - Key Figures, Special Edition. EU 2001

%

Technological success rate of enterprise research projects concluded in 2002

concluded 1145 projects

611 mio. €

905 projects511 mio. €

No information 240 projects, 100 mio. €

Stopped or failed projects37 projects, 17 mio. €

Otherwise as expected, but late 188 projects

117 mio. €

Success as expected or

better525 projects278 mio. €

16 %

84 %

3 %

23 %

54 %

Number and volume of projects

Success less than satisfactory, 155 projects

99 mio. €

19 %

57305,04-2003 Copyright © Tekes


Competividad

The Finnish Case

5. Conclusions

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Acceptability of State Aid and Other

Incentives in the Society COMPLIANCE

with national and international legislation

TRANSPARENCYof criteria and processes

EFFECTIVE Implementation

Speed is crucial!

FLEXIBLE adaptation to rapidly

changing environment

UNDERSTANDABLEand

PREDICTABLEoperation

WIDE ACCEPTANCE in the society

CONTINUOUS EVALUATIONof results and processes

CONTINUOUS EVALUATIONof results and processes

FEEDBACKFEEDBACK

© S&T Balance

Lessons learned from the Finnish Case• Invest in people

• Consistency in policies

• Clear national strategy i.e. right choices

• Long term investments in R&D; Government as facilitator and investor

• Co-operation within the ”triple helix”

• Strong national agencies with freedom to act and implement the policies

• Balanced development of basic research and industrial R&D

• Continuous evaluation of the organizations, operations and programmes and quick feedback to decision makers

• Benchmark the best performers, don’t copy any of them

© S&T Balance

Thank you for your kind attention!

S&T Balance

Documents

I Foro de Ciencia, Tecnologia, Innovación y Competividad Acuerdo nacional, CONCYTEC, PERÚCOMPITE, PROLÍDER, CEPAL, OEA Lima; April 9, 2008 The Finnish