1 The success enjoyed, mistakes made 25 years of Finnish innovation policy Markku Sotarauta
2 This story is about Economic landscape: Ups and downs of the Finnish economy The role of Nokia Policy learning in the 90 s The end of policy learning? Draws upon Evaluation of the Finnish National Innovation System (2009) Customized Innovation Policies and the Regions (2011;; 2013) Innovation Ecosystems, Leadership and Innovation Policy ( ) Appr. 200 interviews Meta-analysis of 164 policy documents Descriptive statistics
3 Economic Landscape
4 (The New York Times, 20 July 2015)
6 Export to Russia, Import from Russia Import Export (Source: Finnish Customs / MTV.fi)
7 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 7 from Finland (Finnish Customs, 2015).
8 Venture capital investments made by Finnish private equity firms (Source: Finnish Venture Capital Association, 2015) Million1Euro
9 !80,0!!70,0!!60,0! FUND&RAISING&TO&FINNISH&VENTURE&CAPITAL&FUNDS&BY& &INVESTOR&TYPE& Million&Euro&!50,0!!40,0!!30,0!!20,0!!10,0!!0,0! -100% Academic!ins5tu5ons! Banks! Capital!markets! Corporate!investors! +50% -96% +415% Endowments!and!founda5ons! Family!offices! Fund!of!funds! Government!agencies! Insurance!companies! Other!asset!managers!(including!PE!houses!other!than!fund! -98% -92% Pension!funds! Private!individuals! Sovereign!wealth!funds! Unclassified! Source: EVCA (2014) European Private Equity Activity - Statistics on Fundraising, Investments & Divestments -94% 2007! 2013!
10 Government agencies share of investments in the European and Finnish venture capital funds (EVCA, 2015) 70" 60" %" 50" 40" 30" 20" 10" 0" 2007" 2008" 2009" 2010" 2011" 2012" 2013" 2014" Europe" Finland"
11 Why Nokia Finland?
12 milj. / High tech exports from Finland Electronics and communication High tech products, total
13 From Green Gold to Cellular Gold Finnish manufacturing production volume by industry ( billions in 2000 prices) (adopted from Rouvinen et. al. 2003, 89)
14 Vendors' market share of mobile phone unit sales to end users worldwide from 1997 to 2014 (Statista, the Statistics Portal)
15 / (Source: Etla)
16 ICT s success in the 90 s was made possible by o evolution of specialized skills o a result of the mix of technical solutions chosen by the many competing telecom operators (variety) and o thus Finnish telecommunications engineers became recognized as leading experts in interface technology o institutions supporting all this
17 Late 1800 s (Blomström et al., 2002) The Telephony Decree of the Finnish Senate (1886) o WHAT: Numerous private operator licenses granted to circumvent Russian telegraph regulations o WHY: To create an obstacle to Russian efforts to nationalise the Finnish telephone system. o RESULT: Finland became one of the few European countries where private operators competed with the state in local operations -> strong local capabilities Finnish telecommunications equipment markets were open to foreign suppliers - small multioperator market Finland became very early a test market for the latest technology
18 1920 s Radio technology lurked in the shadows in many Finnish firms well before it had commercial applications (Ylä-Anttila 2003)
19 1960 s / 1970 s (Rouvinen &Ylä-Anttila, 2003) A call for tenders by the Finnish army for a battlefield radio spurred companies to capitalize their earlier accumulated expertise (1963) o Ultimately the army did not have the resources to purchase the system o the prototypes served as the forerunners of commercial handsets The Auto Radio Puhelin (ARP, Car Radio Telephone) network was introduced in 1971 o Finland s first mobile telephone network
20 In Tampere Professorship in computer sciences in 1965 (University of Tampere) o First in the Nordic Countries o Professor and students established Softplan (later merged with Nokia) Professor of electronics, digital signal processing in 1977 (Tampere University of Technology)
21 1970 s / 1980 s Telecommunications standardisation in the Nordic and European contexts o Finland was an early adopter of NMT in the 1970s (Nordic Mobile Telephone) o NMT was open to third country suppliers as well later GSM (Groupe Spécial Mobile). Nokia and Ericsson were among the first to adopt GSM, which eventually became almost universally accepted
22 2010 s /
23 Microsoft writes off $7.6 billion from Nokia deal, announces 7,800 job cuts / o That's more than the $7.2 billion Microsoft paid for Nokia's phone business year earlier 2015
24 Innovation Policy in Finland
25 Constructing cluster flavored innovation policies (Sotarauta 2012) Economic stagnation, confusion Recession Investment driven economy Source: Statistic Finland, 11 March 2016
26 Growth of R&D Expenditure (%) Growth of R&D Employment (%) South Ostrobothnia 254,3 South Ostrobothnia 188,7 Oulu 437,7 Oulu 100,0 Tampere 481,5 Tampere 109,8 Helsinki 188,0 Helsinki 56,4 0,0 100,0 200,0 300,0 400,0 500,0 0,0 50,0 100,0 150,0 200,0
27 Challenges of the Finnish System, as Presented in 2009 for the International Panel Evaluating the Finnish NIS / Loosing ground in competitiveness o Main growth drivers weakening, core sectors in turmoil o A victim of its economic success (Sabel & Saxenian, 2009) Lot of R&D inputs little output? Heavy technical orientation Innovation dominated by established larger firms primarily in manufacturing Low level of internationalization o Low international researcher mobility Lack of growth aspirations
28 National innovation system Network of institutions in the public and private sectors whose activities and interactions initiate, import, modify, and diffuse new technologies (Freeman 1987) o A focusing device o New language
29 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]
30 o Innovation policy is actions by public organisations that influence innovation processes (Edquist 2008) An interactive process;; an act of balancing, reconciling and co-ordinating. To customize is to modify something to suit a particular individual or task To fine-tune is to make small adjustments to (something) in order to achieve the best or a desired performance BUT, to suit who and/or what;; a) region, cluster or a firm OR b) dominant theory, globally circulating policy wisdom, recognized needs, latest fashion, power-holders interests or what?
31 Main national innovation funding schemes in Finland Strategic / twitter: for science, technology and innovation 300 million euros yearly Forest cluster - ICT and services - metal products and mechanical engineering - energy and the environment - built environment innovations - health and well-being Tekes Programmes 500 million euros yearly Academy of Finland s Programmes Centres of expertise programme 20 million euros yearly Strategic research Industrial research Experimental development Source: Tekes
32 Main national innovation funding schemes in Finland Strategic / twitter: for science, technology and innovation 300 million euros yearly Forest cluster - ICT and services - metal products and mechanical engineering - energy and the environment - built environment innovations - health and well-being Tekes Programmes Less 500 million than 300 euros million yearly Academy of Finland s Programmes Centres of expertise INKA - programme 20 programme million euros yearly Strategic research Industrial research Experimental development Source: Tekes
33 Main national innovation funding schemes in Finland Strategic / twitter: for science, technology and innovation 300 million euros yearly Forest cluster - ICT and services - metal products and mechanical engineering - energy and the environment - built environment innovations - health and well-being Tekes Programmes Less 500 million than 300 euros million yearly Academy of Finland s Programmes AIKO- Centres of expertise INKA - 20 programme programme (experimentation) million euros yearly Strategic research Industrial research Experimental development Source: Tekes
34 The Finnish Strategic Centres for Science, Technology and Innovation (SHOK) o Non-profit limited-companies with research programmes o Established and run by leading firms, universities and other stakeholders o Concentrated funding scheme In the Finnish Metals and Engineering Competence Cluster (Fimecc ltd.) the size of research programmes vary between M 20 and M 51 o Dialogue between companies and research institutions o Critique Large company dominated Process innovation, incremental Maintaining old industrial structure Very focused -> not always suitable for regional efforts
35 National Competence Clusters and the Regional Centres of Expertise ( ) Living business Joensuu, Hämeenlinna, Lahti, Helsinki HealthBio Kuopio, Oulu,Helsinki, Tampere, Turku Health and Well-being Kuopio, Oulu, Helsinki, Tampere Nanotechnology Joensuu, Jyväskylä, Kokkola, Mikkeli, Oulu, Helsinki, Tampere Digital Content Hämeenlinna, Helsinki, Tampere, Kouvola Food Development Kuopio, Helsinki, Seinäjoki, Turku Forest Industry Future Joensuu, Jyväskylä, Kajaani, Kokkola, Mikkeli, Lappeenranta, Turku Ubiquitous Computing Jyväskylä, Oulu, Pori, Helsinki, Tampere Tourism and Experience Management Helsinki, Rovaniemi, Savonlinna, Turku Maritime Lappeenranta, Pori, Turku, Vaasa, Raahe Energy Technology Joensuu, Jyväskylä, Vaasa, Pori ja Tampere Cleantech Kuopio, Lahti, Oulu, Helsinki Intelligent Machines Hyvinkää, Hämeenlinna, Lappeenranta, Seinäjoki, Tampere
36 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 ü growth entrepreneurship is very low o public sector dependency o mediocre in non-technical innovation o backward looking, thinking 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)
37 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)
38 Conclusions Finnish innovation policy is focused, customized and multi-scalar Focused innovation policy prevails nationally o Customization occurs at all levels o Critics call for more active generic and explorative innovation policies National innovation system is (was) celebrated but fragmented, inward looking and stagnating (Veugelars et al 2009)
39 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 and the economic structure of the 90 s dominate policy thinking o Production rationale has been to fine-tune policy tools
40 TODAY innovation policy not high on public agenda o Local and regional government reform, social and health system reform, immigration, fiscal stress o HEI system targeted o Less intermediary agencies and programmes o Less money invested in R&D o Even more exploitative mode than earlier
41 Positive signs - new activities at a grassroots level o universities more active o students more entrepreneurial o gaming industry emerging (small but symbolic) o new digital solutions created o platform thinking o
42 Demola Tampere A Local Innovation Platform A firm or public organization, or other organization A challenge Solution Possible financial compensation Credits Experience Demola University of Tampere Tampere Univ. of Tech Tampere Univ. of Applied sciences Multidisciplinary group of students Contacts Guidance