How To Understand And Understand The Culture Of Finnish Innovation

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Catherine Harper
3 years ago
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1 The Dodgy Success of the National Innovation System of Finland Markku Sotarauta

2 Dodgy o False or dishonest o Causing a lack of trust or confidence o In bad condition o Not sound, good, or reliable (Merriam-Webster dictionary) What s dodgy in the FinNIS?

3 Export Import High technology imports (red) and exports (blue) from Finland in in billion euros (Finnish Customs 2015). Percentage of high technology imports (red) and exports (blue) of the total imports/exports 3 from Finland (Finnish Customs, 2015).

Percentage of high technology imports (red) and exports (blue) of

4 FinNIS? Economic perfomance

5 FinNIS? Economic perfomance

6 FinNIS? Economic perfomance

7 National innovation system Interaction among private and public firms (either large or small), universities, and government agencies may be technical, commercial, legal, social, and financial, inasmuch as the goal of the interaction is the development, protection, financing, or regulation of new science and technology (Niosi 1993) Network of institutions in the public and private sectors whose activities and interactions initiate, import, modify, and diffuse new technologies (Freeman 1987) A focusing device

development, protection, financing, or regulation of new science and technology (Niosi 1993) Network of institutions in the

8 How did it [the concept of the national innovation system] enter Finland? Well, we met Bengt-Åke Lundvall in Japan, in a conference, liked his presentation and then we kind of talked with him and thought this is something that might help us to reorganise and rethink our way of doing things. it was quite early, don t remember exactly, 1990 or 1991 or so. [Senior innovation policy officer]

kind of talked with him and thought this is something that might help us to reorganise and

9 The promise The systems of innovation literature are careful in its promises o Most associate innovation systems with economic growth o Some explicitly argues that a successful innovation system generates economic growth (Carlsson 2006; Ernst 2002) For policy making, a generic model to see beyond o individual organisations, and o the siloes of public policy making o In the early 90 s, a cheap way to change industrial policies Broad-based innovation policy -> innovation -> economic growth and employment We promised big things to ourselves but measured mainly inputs

to see beyond o individual organisations, and o the siloes of public policy making o In the early 90 s, a cheap way to change industrial

10 All the relevant economic, social and political institutions / Innovation system (Asheim & Gertler 2005) (Autio 1998) Knowledge-creating sub-system development, diffusion, and use of new knowledge individuals and organisations learning capacity Knowledge-utilising sub-system Relationships Innovation policy as actions by public organizations (Lundvall 1992; Lundvall et al. 2002) (explicit measures) ability to innovate Innovation = Something new (invention) + implementation + value added (Edquist 2008)

and use of new knowledge individuals and organisations learning capacity Knowledge-utilising sub-system Relationships Innovation policy

11 Public research organizations HEI and other organizations Technology mediating organizations Skilled labour R&D Brokering Contractors Customers Companies Competitors Collaborators Finance, subsidies, brokering etc. Public policies and governance

Brokering Contractors Customers Companies Competitors

12 Public policies and governance / Public research organizations HEI and other Technology mediating organizations Contractors Companies Competitors Customers Collaborators

13 The end of policy learning?

14 Earlier warning signs / The national innovation system of Finland is o complex and inward-looking o has a mix of contradictory rationales (e.g. SHOK programme) o not well enough developed incentives for diverse provision of finance o immature VC culture o immature entrepreneurial culture and fundability of companies growth entrepreneurship is very low o public sector dependent o mediocre in non-technical innovation o backward looking, based on the 90 s o NIS playing a conserving role in the economic structure instead of being the force of change Finland is at risk of becoming a victim of its economic success (Sabel & Saxenian 2008)

15 Data Innovation system and venture capital (VC) related reports (warning signs) The sample of reports o In total 164 reports o By MEE, MTI, MOF, PMO, Sitra, Etla Here, especially VC o historical data of Finnish VC investments o VC investments o New VC funds raised o Share of investors (LPs) to VC funds in Finland 2007 and 2013

especially VC o historical data of Finnish VC investments 1990-2013 o VC investments

16 VENTURE CAPITAL INVESTMENTS IN FINLAND 140,00 / 120,00 100,00 Million Euro 80,00 60,00 40,00 20,00 0, Source: EVCA (2014) European Private Equity Activity - Statistics on Fundraising, Investments & Divestments

20,00 0,00 2007 2008 2009 2010 2011 2012 2013 Source: EVCA (2014).

17 (Source: European Venture Capital Association 2015)

INVESTORS (LPs) TO FINNISH VC FUNDS IN 2007 Academic ins tu ons 0 % www.sotarauta.

18 INVESTORS (LPs) TO FINNISH VC FUNDS IN 2007 Academic ins tu ons 0 % / Private individuals 2 % Unclassified 10 % Banks 5 % In Finland share of government money has increased significantly in VC funds Capital markets 0 % Endowments and founda ons 0 % Sovereign wealth funds 0 % Other asset managers (including PE houses other than fund of funds) 0 % Pension funds 27 % Insurance companies 12 % Corporate investors 16 % Fund of funds 4 % Government agencies 23 % INVESTORS (LPs) TO FINNISH VC FUNDS IN 2013 Unclassified 1 % Family offices 1 % Corporate investors 2 % Endowments and founda ons 3 % Other asset managers (including PE houses other than fund of funds) 2 % Pension Insurance companies 1 % funds 6 % Private individuals 7 % Family offices 6 % Fund of funds 17 % Source: EVCA (2014) European Private Equity Activity - Statistics on Fundraising, Investments & Divestments Banks 0 % Capital markets 0 % Academic ins tu ons 0 % Sovereign wealth funds 0 % Government agencies 55 %

ons 0 % Sovereign wealth funds 0 % Other asset managers (including PE houses other than fund of funds) 0 % Pension funds 27 % Insurance companies 12 % Corporate investors 16 % Fund of funds 4 %

19 Warnings The Finnish system seems to be better equipped for promoting a diversity of ideas, inventions, and ventures than helping them to compete on the markets and in the selection of potential successes (Luukkonen 2010) The lack of coordination at a high strategic level is a further problem in the Finnish system (Ruohonen 2007)

in the selection of potential successes (Luukkonen 2010) The lack of coordination

20 Contradiction 2: internationally at the hub of / technological progress (dia pinched from Gordon Murray)

21 / (dia pinched from Gordon Murray) but a long way (spatially, culturally and emotionally) from global markets gmurray@ex.ac.uk

(dia pinched from Gordon Murray) Contradiction 3: Socially cohesive www.

22 (dia pinched from Gordon Murray) Contradiction 3: Socially cohesive / The preferred Finnish model? gmurray@ex.ac.uk

(dia pinched from Gordon Murray) www.sotarauta.

23 (dia pinched from Gordon Murray) / but at the cost of (rarely) celebrating those risk taking individuals that act differently/ entrepreneurially too conformist?

24 Conclusions Fairly strong policy learning in the 1990 s Learning failures in the 2000 s o Warning signs not heard or believed or o Governance rationales of the 90 s dominate o Production rationale has been to fine-tune policy tools o HEI system targeted o Leadership and capabilities Positive signs o New activities at a grassroots level o Universities becoming much more proactive (thank you new University Act)

Government financing for innovative enterprises Policy mix and changes over time lessons learned

Government financing for innovative enterprises Policy mix and changes over time lessons learned Pertti Valtonen, Counsellor Ministry of Employment and the Economy, Finland International Conference, Entrepreneurship