S T S T Balance I Foro de Ciencia

S T S&T Balance I Foro de Ciencia, Tecnologia, Innovación y Competividad Acuerdo nacional, CONCYTEC, PERÚCOMPITE, PROLÍDER, CEPAL, OEA Lima; April 9, 2008 The Finnish Case Dr. Heikki Kotilainen S&T Balance Background for CEPAL’s study on Public-Private Alliance for Export Development

S I Foro de Ciencia, Tecnologia, Innovación y Competividad T S&T Balance The Finnish Case Contents 1. 2. 3. 4. 5. Introduction, Finland as a country Innovation policy and respective organizations Funding principles Funding of innovation and national programs Conclusions

S T I Foro de Ciencia, Tecnologia, Innovación y Competividad S&T Balance The Finnish Case 1. Introduction, Finland as a country

Finland in Figures * Total Area: 338, 000 sq km, this makes Finland the seventh largest country in Europe Neighbouring Countries: Sweden, Norway, Russia, Estonia Capital: Helsinki Main 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 million Population 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, chemicals GDP: $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 WEALTH DRIVEN ? INVESTMENT DRIVEN TECHNOLOGICAL ADVANCEMENT NATIONAL COMPETITIVENESS • INTERNATIONAL COMPETITION • TECHNOLOGY POLICY • TECHNOLOGY SUBSIDIES MANUFACTURING DRIVEN • RAW MATERIALS AS COMPETITIVE FACTOR • GROWING NATIONAL SURVIVAL DEMAND POLICY • INVESTMENT SUBSIDIES • LACK OF CONSUMER GOODS • INDEPENDENT INDUSTRIES • DOMESTIC MARKET 1945 © S&T Balance Industrialization & Construction of welfare state • TECHNOLOGY& SOCIETY • POLICY FOR SOCIAL SCIENCES ? MARKET/INNOVATION DRIVEN • INTERNATIONAL COOPERATION • SKILLS AS COMPETITIVE FACTOR • INTRODUCTION OF NATIONAL INNOVATION SYSTEM • PRECONDITIONS FOR TECHNOLOGICAL&SOCIETAL ADVANCEMENT • RISK/VENTURE CAPITAL 2000 Export, technology & innovation

Finnish Trade in High-Tech products, 1991 -2006* The biggest surpluses in Finland’s foreign trade in high technology were recorded in trade with: Export by Industry, 1996 -2006* High technology products accounted for 21. 3 per cent of all Finnish exports in 2006 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). * Source: Tekes, 2006

Competitiveness comparison Ranking by the science and technology factor WEF Technology UNDP IMD Technology Science Population over less than 20 mill. 20 mil. 2003 2002 USA 1 1 Finland 2 3 Taiwan 3 2 Sweden 4 4 Japan 5 5 Switzerland 7 6 Denmark 8 11 Israel 9 7 Estonia 10 14 Canada 11 8 Norway 13 10 Germany 14 12 UK 16 15 Australia 19 9 2001 1 3 4 6 23 24 12 26 8 2 7 15 10 5 2000 1 2 24 9 7 6 13 8 14 29 5 17 23 2001 2 1 3 4 18 8 12 11 7 9 2003 1 6 9 2 4 8 3 2003 3 4 6 5 8 19 10 - 2003 1 5 2 6 3 7 9 2003 6 2 3 8 11 25 14 - Sources: The World Competitiveness Yearbook (IMD), The Global Competitiveness Report (WEF) DM 36054 And Human Development report (UNDP) 11 -2003 Copyright © Tekes

Technology index (WEF) 4. 0 4. 5 5. 0 5. 5 6. 0 6.

S T I Foro de Ciencia, Tecnologia, Innovación y Competividad S&T Balance The Finnish Case 2. Innovation policy and respective organizations

Future orientation Motto: ”Prepare answers to questions, which will be asked after 5 years” 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. DM 88582 03 -2004 Copyright © Tekes

Tasks in the Finnish Innovation System PARLIAMENT Future committee General policy Government Mo. E Academy of Finland Science & Technology Policy Council MEE Tekes TE-centres Sitra Foundation of Inventions S&T&I policy S&T&Innovation policy formulation, implementation, funding Public Universities Research Institutes Centers of Excellence Private Enterprises Research labs R&D performing Semiprivate Finvera Sitra/VC Industrial Investment/VC Private Venture Capital Banks Research funds Business funding © S&T Balance Tasks innov.

The Triple Helix Confederations of Industry EU Commission -state aid -regulations -FP Industry Industry Clusters Banks Venture Capital Business angels Semiprivate SITRA Finvera Industrial Invest Centres of Excellence Technology/Science Parks Knowledge Centres Sectorial Institutes Tech Transfer offices Institutes, labs © S&T Balance Science & Technology Policy Council Universities Research institutes Ministries Agencies Patent offices, Government IPR Regional centres TE-centres

R&D/GDP in Finland SERVICE POLICY ? INNOVATION POLICY % % TECHNOLOGY POLICY OUTPUT ADDITIONALITY COGNITIVE CAPACITY INPUT ADDITIONALITY SCIENCE POLICY © S&T Balance BEHAVIOR ADDITIONALITY

Circulation of innovation policy Setting policy agenda (Council, audit) Public interest Private interest Analysing policy (Ministries, agencies, universities, industry, Evaluation + outside experts) Research National strategy Strategic intelligence Sector policies Policy evaluation Implementation (Ministries, agencies, universities, industry) Implementation of strategies Impact evaluation Instrument set-up Performance evaluation Source: Tekes © S&T Balance Policy circulation

Planning and implementing of technology and innovation policy Science and technology policy council, STPC Plans Government 3 year outlines Ministries (Education, Employment & Economy, Finance etc. ) Annual objectives and agreements Operations Institutions (Academy of Finland, Tekes, Universities VTT, Sectoral Institutes) © S&T Balance Annual & semiannual reports and feedback Tech. plocy execution

BALANCE BETWEEN THE SCIENCE, TECHNOLOGY AND SOCIAL DEVELOPMENT MAINTAIN CLEAR NATIONAL FOCUS STPC NATIONAL POLICY ADAPTING TO CUSTOMERS (The Business Community, Society) Funding Agency for Basic Research Funding Agency The Academy for Applied Research and Tekes Development BOTTOM-UP REQUESTS © S&T BBalance MANAGE KEY DEMANDS BUSINESS & SOCIAL CHALLENGES PROACTIVE VISION (Science and University Community, Society)

S T I Foro de Ciencia, Tecnologia, Innovación y Competividad S&T Balance The Finnish Case 3. Funding principles

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 © S&T Balance Admini. involvement

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 © S&T Balance R&D fnding areas

R&D Expenditures in Finland 2006 5789 M€; 3, 45%/GDP Private 4108 M€ 71, 0% Tekes 504, 3 M€ (30, 0%) © S&T Balance Public 1681 M€ 29, 0 % Academy of Finland 275, 8 M€ (16, 4%) Competitive funding Universities 446, 4 M€ (26, 6%) Research institutes 282, 0 M€ (16, 8%) Others 172, 7 M€ (10, 2%) Institutional funding Source: Statistics Finland

R&D investments of public and private sectors 19992006 in Finland R&D/GDP 3, 35% 3, 46% 3, 45% 3, 30% Source: Statistics Finland © S&T Balance 710% 70, 8% 70, 1% 70, 5% 69, 9% 71, 1% 70, 9% 68, 2% 1 M € 3, 16% 3, 34% 3, 43% 3, 48%

S T I Foro de Ciencia, Tecnologia, Innovación y Competividad S&T Balance The Finnish Case 4. Funding of innovations and national programs

Multiplication of public money in the innovation system Government Parliament Ministries Public finance Funding agency Cumulative tax Short term investment Venture capital • grants • loans • equity funding Businesses, employment Long term investment Universities Research institutes New technology, knowledge, skills

Innovation Trends User-based innovations Merger of manufacturing and service Mulitidisciplinary innovations Public and private sector innovations Globalisation of innovations Small firm innovations- large firm interventions © S&T Balance Innov. trends

RESEARCH PARADIGMS Old paradigm (LINEAR MODEL) BASIC RESEARCH APPLIED RESEARCH DEVELOPMENT New paradigm (CONCURRENT MODEL) Basic research DEMAND Applied research Development TECHNOLOGICAL SOLUTIONS © S&T Balance PROBLEM SOLVING MARKET SOCIETAL & BUSINESS CHALLENGES SCIENTIFIC UNDERSTANDING

Product development projects Innovations Research © S&T Balance The relation between the national technology programme and innovation INNOVATIONS ON MARKET Company 5 Company 3 Company 4 Company 2 Company 1 Technology programme, joint research with multiple participants

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 © S&T Balance Objectives natl progr

PROCESS CHARACTER OF TECHNOLOGY TRANSFER RESEARCH CURIOSITY KNOWLEDGE CREATION SCIENTIFIC EXCELLENCE TECHNOLOGY TRANSFER ADAPTATION OF SCIENTIFIC RESULTS FOR TECHNOLOGICAL USE ”Requirement for PUBLICATIONS technological success” What is possible ? Can we do it? ADAPTATION OF TECHNOLOGICAL KNOWLEDGE FOR INDUSTRIAL USE ”Requirement for market success” How we do it? INDUSTRY CUSTOMER NEEDS MARKET& MARKETABILITY STRATEGY PRODUCT PORTFOLIO R&D PORTFOLIO COMPETENCE MONEY& FINANCING IPR REVENUES How we market it? Transfer process

Cooperation between companies Share of cooperating companies of all innovating companies % 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. € 16 % No information 240 projects, 100 mio. € 84 % 905 projects 511 mio. € 54 % Success as expected or better 525 projects 278 mio. € 3 % 19 % 23 % Stopped or failed projects 37 projects, 17 mio. € Success less than satisfactory, 155 projects 99 mio. € Otherwise as expected, but late 188 projects 117 mio. € Number and volume of projects 57305, 04 -2003 Copyright © Tekes

S T I Foro de Ciencia, Tecnologia, Innovación y Competividad S&T Balance The Finnish Case 5. Conclusions

Acceptability of State Aid and Other Incentives in the Society COMPLIANCE with national and international legislation EFFECTIVE Implementation Speed is crucial! FLEXIBLE adaptation to rapidly changing environment TRANSPARENCY of criteria and processes UNDERSTANDABLE and PREDICTABLE operation CONTINUOUS EVALUATION of results and processes WIDE ACCEPTANCE in the society © S&T Balance FEEDBACK

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