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

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

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

4. 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

5. THE POLICY DEVELOPMENTS IN FINLAND ? 1945 LACK OF CONSUMER GOODS INDEPENDENT INDUSTRIES DOMESTIC MARKET RAW MATERIALS AS COMPETITIVE FACTOR GROWING NATIONAL DEMAND INVESTMENT SUBSIDIES MANUFACTURING DRIVEN INTERNATIONAL COMPETITION TECHNOLOGY POLICY TECHNOLOGY SUBSIDIES INVESTMENT DRIVEN INTERNATIONAL COOPERATION SKILLS AS COMPETITIVE FACTOR INTRODUCTION OF NATIONAL INNOVATION SYSTEM PRECONDITIONS FOR TECHNOLOGICAL&SOCIETAL ADVANCEMENT RISK/VENTURE CAPITAL MARKET/INNOVATION DRIVEN TECHNOLOGY& SOCIETY POLICY FOR SOCIAL SCIENCES SURVIVAL POLICY WEALTH DRIVEN ? 2000 TECHNOLOGICAL ADVANCEMENT NATIONAL COMPETITIVENESS © S&T Balance Industrialization & Construction of welfare state Export, technology & innovation

6. 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

7. Competitiveness comparison 2001 IMDWEF Technology 200220012000 2003 Population over 20 mill. less than 20 mill. 2003 Population over 20 mill. less than 20 mil. 2003 ScienceTechnology UNDP 2 2 1 3 4 5 7 8 9 10 11 13 14 16 19 USA Taiwan Sweden Japan Switzerland Denmark Israel Estonia Canada Norway Germany UK Australia Finland 1 2 4 5 6 11 7 14 8 10 12 15 9 3 3 1 4 6 23 24 12 26 8 2 7 15 10 5 3 3 2 - 3 4 - 18 - 8 12 11 7 9 1 1 1-6-9----2-4831-6-9----2-483 - - 4 - 6 5 8 19 - 10 - 3 3 1-5-2----6-3791-5-2----6-379 - 2 - 3 8 11 25 - 14 - 6 6 1 24 9 7 6 13 8 - 14 29 5 17 23 2 2 Ranking by the science and technology factor Sources: The World Competitiveness Yearbook (IMD), The Global Competitiveness Report (WEF) And Human Development report (UNDP) DM 36054 11-2003 Copyright © Tekes

8. Technology index (WEF) DM 36054 04-2004 Copyright © Tekes 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

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

10. Future orientation ” Prepare answers to questions, which will be asked after 5 years ” Motto: Future orientation

11. 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

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

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

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

15. Circulation of innovation policy Setting policy agenda Analysing policy Implementation Public interestPrivate 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) © S&T Balance

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

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

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

19. 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

20. 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

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

22. R&D investments of public and private sectors 1999- 2006 in Finland 1M € Source: Statistics Finland 710% 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

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

24. Multiplication of public money in the innovation system Short term investment Long term investment Government Parliament Ministries Government Parliament Ministries Funding agency grants loans equity funding Funding agency grants loans equity funding Universities Research institutes Universities Research institutes Cumulative tax Public finance New technology, knowledge, skills Businesses, employment Venture capital Pres/Multiplicatioon publicmoney© S&T Balance

25. 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

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

27. 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 Research Product development projects Innovations © S&T Balance

28. 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

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

30. Cooperation between companies Share of cooperating companies of all innovating companies Source: Towards a European Research Area - Key Figures, Special Edition. EU 2001 %

31. Technological success rate of enterprise research projects concluded in 2002 concluded 1145 projects 611 mio. € 905 projects 511 mio. € No information 240 projects, 100 mio. € Stopped or failed projects 37 projects, 17 mio. € Otherwise as expected, but late 188 projects 117 mio. € Success as expected or better 525 projects 278 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

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

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

34. 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

35. Thank you for your kind attention! S&T Balance