A market driven approach for innovation in Finland

A market driven approach for innovation in Finland Timo Kekkonen Director, Confederation of Finnish Industries, EK

• Some facts and features of the Finnish Innovation System • Stages of competitivity – elements of knowledge-based economic growth • What has been done – what should be done ? 25. 04. 2007 2 Timo Kekkonen

R&D Input in some OECD countries Percentage of GDP Israel Sweden FINLAND Japan Iceland South Korea USA Denmark Germany Austria OECD France Singapore Canada Great Britain Norway China 5. 0 4. 5 4. 0 3. 5 3. 0 2. 5 2. 0 1. 5 1. 0 0. 5 Est. 25. 04. 2007 3 Timo Kekkonen

R&D in Finland Billion euros 6. 0 Enterprises Universities 5. 0 Other public research 4. 4 4. 6 4. 8 5. 0 5. 3 5. 4 3. 9 4. 0 3. 4 2. 9 3. 0 2. 2 2. 0 1. 0 0. 9 1. 5 1. 7 1. 8 1. 1 0. 0 Est. 25. 04. 2007 4 Timo Kekkonen

R&D Input in Finland by Sector Total 3. 8 billion euros in 2005 Billion euros 4. 0 3. 5 3. 0 2. 5 2. 0 Other sectors Other industries Pulp and paper Chemical industry Metals and engineering industry 1. 5 1. 0 0. 5 0. 0 25. 04. 2007 5 Timo Kekkonen Electronics industry

Competitiveness -Total ranking 2005 -2006 Switzerland Finland Sweden Denmark Singapore USA Japan Germany Netherlands Great Britain Hong Kong Norway Taiwan Iceland Israel Canada 25. 04. 2007 6 WEF Global competitiveness 2006 2005 1 4 2 2 3 7 4 3 5 5 6 1 7 10 8 6 9 11 10 9 11 14 12 17 13 8 14 16 15 23 16 13 WEF IMD Business Total competitiveness 2006 4 8 3 10 7 14 5 5 11 3 1 1 9 17 2 26 6 15 8 21 10 2 14 12 21 18 13 4 19 25 15 7 Timo Kekkonen Sources: IMD, The World Competitiveness Yearbook 2006 and WEF, The Global Competitiveness Report 2006 -2007 DM 36054 10 -2006 Copyright © Tekes

Science, Technology and Innovation in Finland • • • High R&D investment (3. 5% of GDP – 30/70 public/private ratio) Long term political commitment Strong cooperation & networking between industry and academia An effective and dynamic public innovation environment Finland is ranked high in international competitiveness comparisons High level of education Productivity in our industry has developed rapidly Rapid growth of the high tech sector Global competitivity of most industrial sectors 25. 04. 2007 7 Timo Kekkonen

Long term development of Finnish industry and science/technology/innovation policy (1/2) 1950’s establishment of basic industries for domestic needs 1960’s gradual diversification of industrial base opening up foreign trade 1970’s rapid development of traditional industries industrial policy to encourage investments/regional development setting up new universities 1980’s beginning of modern science and technology policy technology financing systems and organisations were set up first targets regarding the share of RTD of GNP were set special attention was paid to education and training 25. 04. 2007 8 Timo Kekkonen

Long term development of Finnish industry and science/technology/innovation policy (2/2) 1990’s rapid growth of knowledge intensive sectors (ICT) rapid growth of RTD investments especially by the private sector increase of international cooperation adaption of the Finnish educational system to changing needs 2000’s new global division of labour continues rapidly globalization of the Finnish industry increases the share of services increases of Finlands GDP increases the shift from technology policy to innovation policy continues 25. 04. 2007 9 Timo Kekkonen

• Some facts and features of the Finnish Innovation System • Stages of competitivity – elements of knowledgebased economic growth • What has been done – what should be done ? 25. 04. 2007 10 Timo Kekkonen

Four (five) stages of competitiveness of a country PROGRESS Concentration on Innovation Concentration on Investments Concentration on Knowledge Concentration on Prosperity Concentration on Production Factors DECLINE 25. 04. 2007 11 Timo Kekkonen

Public Policies During the Different Stages Investment based growth Knowledge-based growth Innovation-based growth Channelling of capital Investments into knowledge capacity – education, research Development of the operational environment: Regulatory framework, structures, finances, public services etc. 25. 04. 2007 12 Timo Kekkonen

Drivers for growth and conditions for their utilisation Investments are the drivers for growth l Education l Research and development l Innovations l Capital Conditions for the utilisation of drivers for growth l Opening up of markets l Flexibility of structures and regulations l Incentives l for the success of innovative companies l for private risk investments l Macroeconomic policies The impact of drivers for growth remain minor without continual structural reform. 25. 04. 2007 Timo Kekkonen 13 DM 218475 09 -2006 Copyright © Tekes

• Some facts and features of the Finnish Innovation System • Stages of competitivity – elements of knowledge-based economic growth • What has been done – what should be done ? 25. 04. 2007 14 Timo Kekkonen

Some International Trends Within Innovation Policies • • • National strategic choices are made (focus) Promotion of new networks (open innovation) University structures are changed (specialization – flexibility) The use of financial incentives broadening (non-linear innovation model) The use of taxation as a R&D incentive is increasing Demand-driven innovation policy – the use of public procurement etc. 25. 04. 2007 15 Timo Kekkonen

What have we done/should we do in Finland ? • Continue to increase public R&D investments • Make further efforts to internationalize our innovation environment – especially our university system • Make strategic choices – implent the SCSTI-strategy – reform our university structure – reform our public research institutes • Encourage development of ”radical innovations” • Mobilise private capital for start-ups and growth companies ( eg. by introducing tax incentives) • Promote the productivity within the service sector (private & public) 25. 04. 2007 16 Timo Kekkonen

What is our competitive advantage in the future? Each company has to continuously find a competitive advantage - each country / region has to develop a competitive advantage – What could be the competitive advantage of the Finnish Innovation System • The ability to create a growing number of radical innovations • Ensuring a world-class knowledge-base (in selected areas) • An excellent capability to transform knowledge into a competitive advantage … into innovations 25. 04. 2007 17 Timo Kekkonen