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  1. S T AMERICAS INNOVATION FORUMMarch 30 – April 2, 2008Conrad Resort, Punta del EsteURUGUAY S&T Balance The Finnish Case Dr. Heikki Kotilainen S&T Balance

  2. S T AMERICAS INNOVATION FORUMMarch 30 – April 2, 2008Conrad Resort, Punta del EsteURUGUAY S&T Balance • The Finnish Case • Contents • Introduction, Finland as a country • Innovation policy and respective organizations • Funding principles • Funding of innovation and national programs • Conclusions

  3. S T AMERICAS INNOVATION FORUMMarch 30 – April 2, 2008Conrad Resort, Punta del EsteURUGUAY S&T Balance • The Finnish Case • Introduction, Finland as a country

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

  6. Finnish Trade Trade in High-Tech products, 1991-2006* Export by Industry, 1996-2006* High technology products accounted for 21.3 per cent of all Finnish exports in 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). * Source:Tekes, 2006

  7. Population Population over20 mill. over20 mill. less than20 mill. less than20 mil. USA Taiwan Sweden Japan Switzerland Denmark Israel Estonia Canada Norway Germany UK Australia 1 3 4 5 7 8 9 10 11 13 14 16 19 1 2 4 5 6 11 7 14 8 10 12 15 9 1 4 6 23 24 12 26 8 2 7 15 10 5 1 24 9 7 6 13 8 - 14 29 5 17 23 2003 2003 2003 2003 Finland 2 3 3 2 2 - 3 4 - - 18 - 8 12 11 7 9 - - 2 - 3 8 11 25 - 14 - - - - - 4 - 6 5 8 19 - 10 - - - 1 3 6 Competitiveness comparison Ranking by the science and technology factor WEFTechnology UNDP IMD Technology Science 2003 2002 2001 2000 2001 1 - 6 - 9 - - - - 2 - 4 8 3 1 - 5 - 2 - - - - 6 - 3 7 9 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) 4.0 4.5 5.0 5.5 6.0 6.5 Source: The Global Competitiveness Report 2003,3/4 based on quantitive material, 1/4 on query DM 36054 04-2004 Copyright © Tekes

  9. S T AMERICAS INNOVATION FORUMMarch 30 – April 2, 2008Conrad Resort, Punta del EsteURUGUAY S&T Balance The Finnish Case 2. Innovation policy and respective organizations

  10. Future orientation Motto: ”Prepare answers to questions, which will be asked after 5 years” 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. PARLIAMENT Future committee General policy Tasks in the Finnish Innovation System Government Science & Technology Policy Council MoE MEE S&T&I policy Sitra S&T&Innovation policy formulation, implementation, funding Academy of Finland Tekes TE-centres Foundation of Inventions Public Universities Research Institutes Centers of Excellence Private Enterprises Research labs R&D performing Business funding Semiprivate Finvera Sitra/VC Industrial Investment/VC Private Venture Capital Banks Research funds © S&T Balance Tasks innov.

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

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

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

  16. Circulation of innovation policy Setting policy agenda Analysing policy (Council, audit) (Ministries, agencies, universities, industry,Evalution + outside experts) Public interest Private interest 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

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

  18. S T AMERICAS INNOVATION FORUMMarch 30 – April 2, 2008Conrad Resort, Punta del EsteURUGUAY S&T Balance The Finnish Case 3. Funding principles

  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 © S&T Balance Admini.involvement

  20. Public funding of R&D and additionality Source: Tekes publication 188/2006 © S&T Balance

  21. 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

  22. R&D Expenditures in Finland 20065789 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%) Competitive funding Institutional funding © S&T Balance Source: Statistics Finland

  23. R&D investments of public and private sectors 1999-2006 in Finland R&D/GDP 3,45% 3,48% 3,46% 3,43% 3,35% 3,30% 3,34% 3,16% 1M € 68,2% 70,9% 71,1% 69,9% 710% 70,5% 70,1% 70,8% Source: Statistics Finland © S&T Balance

  24. S T AMERICAS INNOVATION FORUMMarch 30 – April 2, 2008Conrad Resort, Punta del EsteURUGUAY S&T Balance The Finnish Case 4. Funding of innovations and national programs

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

  26. 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

  27. Research and Innovation New knowledge Curiosity Business models Customer needs ”If innovation is the commercial application of existing knowledge in a new context, technologically driven innovation is only one form of this. Innovation is distinct from research, which results in new knowledge and from the entrepreneurial function that spots market opportunities for products and services. It is the result of the interaction of these two functions” ”Innovate for a competitive Europe”, A new Action Plan for Innovation, European Commission, 2004 Research Innovation R & D WORK Linear model Scientific excellence Turnover/earnings Growth and Employment Meet R&I © S&T Balance

  28. RESEARCH PARADIGMS Old paradigm (LINEAR MODEL) BASIC RESEARCHAPPLIED RESEARCHDEVELOPMENT New paradigm (CONCURRENT MODEL) SCIENTIFIC UNDERSTANDING PROBLEM SOLVING DEMAND Basic research MARKET Appliedresearch SOCIETAL & BUSINESS CHALLENGES Development TECHNOLOGICAL SOLUTIONS © S&T Balance

  29. 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

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

  31. Process Character of Technology Transfer RESEARCH (SUPPLY) INDUSTRY (DEMAND) CURIOSITY KNOWLEDGE CREATION SCIENTIFIC EXCELLENCE PUBLICATIONS ADAPTATION OF SCIENTIFIC RESULTS FOR TECHNOLOGICAL USE ”Requirement for technological success” ADAPTATION OF TECHNOLOGICAL KNOWLEDGE FOR INDUSTRIAL USE ”Requirement for market success” • CUSTOMER • NEEDS • MARKET& • MARKETABILITY • STRATEGY • PRODUCT • PORTFOLIO • R&D PORTFOLIO • COMPETENCE • MONEY& • FINANCING • IPR • REVENUES TECHNOLOGY TRANSFER Can we do it? Can we market it? Is it possible? How we do it? © S&T Balance Transfer process

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

  33. Unique features of Finnish innovation system • Simultaneous implementation of following issues: • Genuine and voluntary cooperation within Triple Helix • High degree of concensus and implementation • Funding simultaneously universities, research insititutes and • industry to couple basic, applied research to development • High degree of freedom for decision making • In-house assessment of projects (Tekes) • System for national technology programmes • Genuine, holistic and simple system (few actors: Tekes, Academy) • Clear share of labour: Tekes for applied research and development • The Academy for basic research) © S&T Balance Uniqueness of FI system

  34. Technological success rate of enterprise research projects concluded in 2002 concluded 1145 projects 611 mio. € No information 240 projects, 100 mio. € 16 % 84 % Stopped or failed projects 37 projects, 17 mio. € 905 projects 511 mio. € 3 % Success less than satisfactory, 155 projects 99 mio. € 19 % 54 % 23 % Success as expected or better 525 projects 278 mio. € Otherwise as expected, but late 188 projects 117 mio. € Number and volume of projects 57305, 04-2003 Copyright © Tekes

  35. S T AMERICAS INNOVATION FORUMMarch 30 – April 2, 2008Conrad Resort, Punta del EsteURUGUAY S&T Balance • The Finnish Case • 5. Conclusions

  36. 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! UNDERSTANDABLE and PREDICTABLE operation FLEXIBLE adaptation to rapidly changing environment CONTINUOUS EVALUATION of results and processes FEEDBACK WIDE ACCEPTANCE in the society © S&T Balance

  37. 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

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