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IC for Finland: Beyond the Nokia Success
The First World Conference on Intellectual Capital for Communities, June 20, 2005
World Bank Office
Prof. Pirjo StåhleLappeenranta University of Technology
Pirjo Ståhle 2005 2
Content
• Facts about Finland• ”The Finland Phenomenon”• Finland from perspectives of
competitiveness and IC • Nokia’s influence• The future challengies of Finland• Some forgotten dimensions of IC
Pirjo Ståhle 2005 3
Facts about Finland
• independent republic since 1917, current president mrs Tarja Halonen
• joined the EU at the beginning of 1995 • population is 5.2 million, sixth largest country
(338 000 sq.km) in Europe• about two thirds of people live in urban areas• the capital is Helsinki, 560 000 residents• neighbouring countries are Sweden, Norway,
Russia and Estonia
Pirjo Ståhle 2005 4
Facts about Finland (2)
• forest covers about 75 % of Finland, water covers almost 10 %
• 190,000 lakes and about 180,000 islands• 20 universities and 29 polytechnics• the metal, engineering and electronics
industries account for 50 % of export revenues, the forest products industry for 30 %.
• one of the leading countries in Internet use, more mobile phone than fixed network subscriptions
Pirjo Ståhle 2005 5
”The Finland Phenomenon”1990-2000
• From deep depression to top competitiveness.• One of the main reasons to quick economic recovery
was the transformation of the industrial structure in 1990s.
• It took less than a decade for electronics and ICT to become a biggest industry in Finland. Its contribution to the growth of GNP in 1995-2000 is about 0,85 % of which Nokia covered alone almost 0,7 %.
• There is no other case in the post war history where either one branch of industry or one company would have influenced in a country’s economy as strongly as this.
Pirjo Ståhle 2005 6
Finland from Perspective of the Competitiveness Reports
• According to WEF, Finland was the most competitive economy in theworld in 2004.
• IMD ranks Finland 6th in overall competitiveness in 2005. The threemost competitive countries were USA, Hong Kong and Singapore.
• Based on the Lisbon Review, Finland was the most competitive country in the EU in 2004, followed by Denmark and Sweden.
• Based on the comparisons of the European Commission, Finland wasamong the leading countries in investing into and performance of the knowledge-based economy.
Sources: WEF, The Global Competitiveness Report 2004-2005 and The Lisbon Review 2004; IMD, The WorldCompetitiveness Yearbook 2005; EU, Science, Technology and Innovation Key Figures 2003-2004 and
The European Innovation Scoreboard 2004; United Nations University, The Millennium Project 2001;OECD, Program for International Student Assessment PISA 2003
Pirjo Ståhle 2005 7
• The European Innovation Scoreboard 2004 shows that Sweden, Finland,Germany and Denmark are the leading innovative countries in the EU.
• In a comparison made by the University of United Nations, Finland was ranked second in overall ranking. Finland was also ranked second in education,technology and information indices.
• According to the OECD PISA 2003 study, young Finns were among the OECD top in mathematics, science and problem-solving.
Sources: WEF, The Global Competitiveness Report 2004-2005 and The Lisbon Review 2004; IMD, The WorldCompetitiveness Yearbook 2005; EU, Science, Technology and Innovation Key Figures 2003-2004 and
The European Innovation Scoreboard 2004; United Nations University, The Millennium Project 2001;OECD, Program for International Student Assessment PISA 2003
Pirjo Ståhle 2005 8
IMDTotal compe-
titiveness2004 2005
2214
177
201058
19693
13
WEFBusiness
competitiveness2003*2002
112354967
118
15121310
22153
10946
13121115147
2004*1123456789
1011121314
WEFGrowth
competitiveness
USASwedenTaiwanDenmarkNorwaySingaporeSwitzerlandJapanIcelandGreat BritainNetherlandsGermanyAustralia
FinlandFinland
* Applying 2003 formula
661
14117
1538
214
2213239
Competitiveness 2002-2005Total rankingTotal ranking
Sources: IMD, The World Competitiveness Yearbook 2005 andWEF, The Global Competitiveness Report 2004-2005
Pirjo Ståhle 2005 9
Competitiveness in technology and science2002-2004
2003 20022004USATaiwan
SwedenJapanDenmarkSwitzerlandIsraelNorwayGermanyCanadaEstoniaAustraliaGreat Britain
FinlandFinland
12
45678
101213151718
22
13
45879
131411101916
12
45
1167
10128
149
15
33
WEFTechnology
17
1096
152313144
282017
IMDTechnology Science
18
42
135
15263
17392514
1111 1010
20042004
33
Sources: IMD, The World Competitiveness Yearbook 2004 andWEF, The Global Competitiveness Report 2004-2005.
Pirjo Ståhle 2005 10
Ranking of EU countries
DenmarkSwedenUKNetherlandsGermanyLuxembourgFranceAustriaBelgiumIrelandSpainItalyPortugalGreece
Infor
mation
socie
tyInn
ovati
on
and R
&DLib
eralis
ation
Finan
cial
servi
ces
Enterp
rise
Social
inclus
ionSus
taina
ble
deve
lopmen
t
Networ
kind
ustri
es
132647598
111014121315
142673
13598
1011121415
12635847
109
1211131415
412873569
101512131114
13427856
10119
12131415
32517
1069
1284
11151314
21284
125976
1011131415
143762895
101312111415
The Lisbon reviewThe Lisbon review
Source: WEF, The Lisbon Review 2004
FinlandFinland
Totalrank
123456789
101112131415
Pirjo Ståhle 2005 11
Finland from IC perspective
• Human focus• Market focus• Process focus• Renewal and development focus
Pirjo Ståhle 2005 12
Persons with Tertiary Educationproportion of population aged 25-64 in 1999
FinlandSweden
NorgeDenmark
Island
NetherlandsBelgium
United KingdomSpainIrland
ItalyAustriaGreece
LuxemburgPortugal
PolandFrance
GermanySwitzerland
Czech RepublicHungary
0 5 10 15 20 25 30 35Source: Statistical Yearbook of Finland 2004, Statistics Finland
Pirjo Ståhle 2005 13
People with a Tertiary or Working with Science and Technology Occupations(in 2003, per cent of the population aged 25-64)
DenmarkSwedenFinland
NetherlandsGermany
FranceIrelandSpain
SloveniaAustria
Chech RepublicSlovakiaHungary
ItalyPolandGreece
%
0 10 20 30 40 50Occupation and education Total
Source: Eurostat, New Cronos
Pirjo Ståhle 2005 14
Public Educational Expenses in 2002
%
Percent of GDP
* =2001
DM 36054 and 3806501-2005 Copyright © TekesSource: OECD, Eurostat 2004
0 1 2 3 4 5 6 7 8 9 10
JapanGreece
LuxembourgIreland*Czechia
SpainGermany*
ItalyNetherlandsEU 15 & 25*
USAHungary
PolandEstonia*Austria*France
PortugalBelgium*
FinlandSweden
Denmark
Great Britain*
Pirjo Ståhle 2005 15
GDP and the Well-being Index
0,000
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,0 52,5 55,0 57,5 60,0 62,5 65,0
GDP per capita in 1999, (corrected for purchasing power)US dollars
FINLAND
Luxembourg
USA
DenmarkGermany
Norway
Sweden
Iceland
Austria
SwitzerlandCanada
Sources: Robert Prescott-Allen (2001): The Wellbeing of Nations: A Country-by-CountryIndex of Quality of Life and the Environment; Human Development Report 2001.
The United Nations Development Program.
50.0 52.5 55.0 57.5 60.0 62.5 65.0WI=Well-being Index
DM 36054 and 3806504-2002 Copyright © Tekes
Pirjo Ståhle 2005 16
Foreign PhD StudentsForeign PhD students as a percentage of total PhD enrolment in 2001
%0 5 10 15 20 25 30 35 40 %
DM 3605401-2005 Copyright © Tekes
SwitzerlandGreat Britain
BelgiumUSA
AustraliaSweden
Denmark *)Canada **)
NorwayAustriaIceland
SpainNew Zealand
CzechiaPortugal **)
FINLANDTurkey *)Slovakia
KoreaMexico
Italy*) 1999 **) 2000
Source: OECD Science, Technology and Industry Outlook, 2004
Pirjo Ståhle 2005 17
Exports´ Share of GDPin 2002
%
Source: Statistics Finland.
0 10 20 30 40 50 60 70 80 90
USAGreeceJapan
SpainItaly
FrancePortugal
IcelandGermany
NorwaySwitzerland
DenmarkFinland
KoreaSwedenAustria
EUNetherlands
HungaryCzechiaIreland
Belgium
Great Britain
DM 32186, 36054 and 3806512-2004 Copyright © Tekes
Pirjo Ståhle 2005 18
Size and Growth of the ICT Sector
0 5 10 15
Greece **Germany
ItalySpain
AustriaPortugal *
France Denmark
NorwayEU
CanadaJapan
HungaryOECD
BelgiumNetherlands
SwedenUSA
New ZealandGr. Britain **
Korea *Finland **
Ireland *
%
Share of ICT value added in business sector value added in 2000
* 1999** 2001
ICT manufacturing
DM 3605411-2004 Copyright © TekesSource: OECD, Technology and Industry Scoreboard 2003
ICT services
Pirjo Ståhle 2005 19
0 2 4 6 8 10 12
PortugalSpain
CzechiaGermany
Australia **Italy
Korea *EU
USAAustriaOECD
DenmarkHungary **Norway **
France Belgium
UK **Netherland
Japan *Canada **
SwedenFinland **
%* 1999** 2001
ICT manufacturing
Share of the ICT Sector in Business Sector Employmentin 2000
DM 3605411-2004 Copyright © TekesSource: OECD, Technology and Industry Scoreboard 2003
ICT services
Pirjo Ståhle 2005 20
Labour Productivity in IndustryValue added per hour workedValue added per hour worked
20
30
40
50
60
70
80
90
100
110
74 76 78 80 82 84 86 88 90 92 94 96 98 00
FINLAND
SwedenNetherlands
Great Britain
FranceGermanyJapanCanada
USAUSA 2000 = 100USA 2000 = 100
DM 36097 and 36054 08-2004 Copyright © TekesSource: University of Groningen
Pirjo Ståhle 2005 21
Growth in Labour Productivity 1990-2002
0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5
SwitzerlandSpain
New ZealandNetherlands
IcelandCanada
USAFrance
BelgiumDenmark
ItalySwedenGreeceJapan
GermanyGreat Britain
AustraliaFinlandNorway
PortugalKorea
IrelandGDP per hour worked, annual change
Source: OECD Science, Technology and Industry Scoreboard 2003 DM 36097 and 3605401-2004 Copyright © Tekes
The whole national economyThe whole national economy
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 %
Pirjo Ståhle 2005 22
Countries with the Least Corruption
DM 3605410-2004 Copyright © Tekes
0 1 2 3 4 5 6 7 8 9 10
Hong KongGermany
LuxembourgAustriaCanada
Great BritainNetherlands
AustraliaNorway
SwitzerlandSweden
SingaporeIceland
DenmarkNew Zealand
Finland
Nocorruption
Totallycorrupted
Source: Transparency International Corruption Perceptions Index 2004
Grade in 2004Grade in 2004
Pirjo Ståhle 2005 23
EIS 2004 - Summary Innovation Index
Source: European Innovation Scoreboard 2004
0,00 0,25 0,50 0,75
PolandGreece
HungaryCzechia
LuxembourgPortugal
SpainItaly
EstoniaAustriaNorway
EU 15Ireland
NetherlandsFrance
BelgiumGreat Britain
DenmarkGermany
SwitzerlandUSA
FinlandSweden
Japan
0.00 0.25 0.50 0.75
Pirjo Ståhle 2005 24
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
5,0
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04
OECD
Est.
R&D Input in Some OECD Countries
Sources: OECD, Main Science and Technology Indicators and Statistics Finland.
USA
Japan
Denmark
Sweden
Canada
France
Singapore
FINLAND
Germany
Israel
IcelandSouth Korea
Austria
ChinaNorway
Percentage of GDP
Great Britain
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
Pirjo Ståhle 2005 25
European Applications for Patents (EPO)
0 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320
LithuaniaPoland
PortugalSlovakia
LatviaGreeceEstoniaCzech
HungarySpain
SloveniaItaly
Ireland
EU25France
BelgiumUSA
JapanAustria
LuxembourgDenmark
NetherlandsGermany
FinlandSweden
Applications per million inhabitants in 2002
DM 36052 and 3605409-2004 Copyright © TekesSource: OECD, Eurostat 2002
Great Britain
Pirjo Ståhle 2005 26
Applications for High Technology Patentsin Europe
Source: OECD, Eurostat 2002
0 20 40 60 80 100 120
PolandCzech Latvia
PortugalSlovakia
LithuaniaGreeceEstonia
SloveniaSpain
HungaryItaly
LuxembourgAustria
EU25Ireland
BelgiumFrance
Great BritainJapan
DenmarkGermany
USASweden
NetherlandsFinland
Applications per million inhabitants in 2002
DM 36052 and 3605409-2004 Copyright © Tekes
Pirjo Ståhle 2005 27
0,0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1,0
ItalyPolandGreece
SpainAustria
GermanyIrelandEU 25EU 15
PortugalNetherlands
BelgiumFrance
NorwayGreat BritainSwitzerland
IcelandDenmark
FinlandUSA
Sweden
Venture Capital Investments in Seed and Start-up phases
Source: European Innovation Scoreboard 2004
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
Average 2002-2003
Per thousand of GDPDM 36104 and 36054
03-2005 Copyright © Tekes
Pirjo Ståhle 2005 28
SMEs Participating in InnovationCooperation
%0 5 10 15 20 25
SpainItaly
GreecePortugal
EUGreat Britain
AustriaGermany
FranceNetherlands
BelgiumEstoniaIcelandNorwaySweden
DenmarkFinland
Source: European Innovation Scoreboard 2004
Pirjo Ståhle 2005 29
Inclination for Entrepreneurship
0 10 20 30 40 50 60
FinlandNetherlands
BelgiumSwedenAustria
DenmarkGermany
Great BritainFrance
EU15Greece
ItalySpain
IrelandUSA
Portugal
%
Willingness for self-employment
DM 3605404-2005 Copyright © Tekes Source: Flash Eurobarometer 160, 2004
Pirjo Ståhle 2005 30
Effects of Nokia and the ElectronicsIndustry on the Finnish GDP Growth
Sources: Nokia Oyj, Statistics Finland, National Board of Customs
Pirjo Ståhle 2005 31
(Ali-Yrkkö et. al., 2000, 13)
Pirjo Ståhle 2005 32
Pirjo Ståhle 2005 33
Pirjo Ståhle 2005 34
Finland’s Challenge on Some Crucial Areas of Competitive Edge
The level of know how compared to international top level
R&D Production Commercialization
The international top level of performance
Source: Sitra 2005
Pirjo Ståhle 2005 35
From Information Society to Knowledge-value Society
-1.00-0.80
-0.60-0.40
-0.200.000.20
0.400.60
0.801.00
Informationindividual, technicalcompetencies
Knowledgecapable organizations
Knowledge-valueinnovative society
FinlandSwedenDenmarkNetherlandsGermanyUKUSAJapan
Naumanen, 2005
Pirjo Ståhle 2005 36
IC for Finland
• The potential of national intellectual capital extremely high
• Nokia has been a major driver, as well as the whole ICT sector
• Weaknesses in mastering the knowledge based value chain -> to realize the IC potential
• No new nokias in sight, the only possibility is to support innovativeness further and to learn how to extract value from it
Pirjo Ståhle 2005 37
Organizational competence
Organizational renewal
Intangible assets
POTE
NTI
AL
IPRsBUSINESS APPLICATIONS
HUMAN CAPITAL
STRUCTURAL CAPITAL
STRATEGIC CAPABILITY
INNOVATIVENESSCONNECTEDNESS
Value Creation of a Public CompanyMarket Value
Market/Shareholder
Communication
Market Expectations
Physical Capital Intellectual CapitalFinancial Capital
Customers
Innovations
AD
DED
VA
LUE
Brand
Market Efficiency
Pirjo Ståhle 2005 38
The Forgotten Dimensions of IC
• the meaning of strategic capability– competitiveness is context dependent -> strategic
capability and renewal capability are crucial– (high political and citizen based consensus on
national knowledge society strategy in Finland)• renewal capability needs to be better
operationalized– relationship and overlap of competitiveness and IC
need to be clarified ->potential and realized IC– clear conseptualization -> better indicators from
forsight perspective – (development going on in Finland)
Pirjo Ståhle 2005 39
The Forgotten Dimensions of IC (2)
• the meaning of systemic features– drivers (Nokia)– global connectedness: links to global flows
of knowledge and financial capital (difficulties for Finland to attract foreign investments, as well as using foreign licensing)
– cumulation of know-how