Research and Innovation Policy Guidelines for

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1 The Research and Innovation Council of Finland Research and Innovation Policy Guidelines for

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3 Research and Innovation Policy Guidelines for The Research and Innovation Council of Finland 2010

4 ISBN ISBN (pdf) Lay-out: Osmo Leppälä/ Station MIR Printing: Kopijyvä

5 Foreword The Finnish Research and Innovation Council draws up a policy report on education, research and innovation (ERI) once during each term of office. This report sets out the policy guidelines on the national measures and funding required during the next government term of office ( ). The report sets out measures that will improve the quality and effectiveness of Finnish ERI in order to promote prosperity and competitiveness. The low level of internationalisation of the innovation system is one of its particular weaknesses. In order to rectify the situation, the Council published a strategy in December 2009 on promoting the internationalisation of Finnish education, research and innovation in The policy guidelines have been prepared during an unstable period. Many factors are impacting on the operating environment and its development, such as changes in the international division of labour with respect to intellectual and financial resources as well as other growth factors, and disruptions, such as the ending of the long period of economic growth in autumn 2008 with recession. These changes are reshaping global interaction and markets as well as activities in ERI and the conditions for them. The Council s recommendations will be impalemented within the limits of the sustainability of public finances. Investments in knowledge and competence are investments in the future and a key part of Finland s strategy to ensure long-term prosperity and competitiveness. A more open and dynamic operating environment will pose demanding challenges for Finland s competitiveness and well-being in the 2010s. For this reason, the innovation system is in a dramatic state of change. Even before the recession, it had become apparent that success would require changing established practices and modes of action, improving structures and being emboldened to test new things, as well as political support to accelerate reforms. What is needed are actions so that ERI investment leads to higher quality education and research, successful innovations and new jobs, as well as growth enterprises. The reforms will be successful if Finland is able to strengthen its position among the top countries through knowledge and expertise. The state of the innovation system was analysed thoroughly in the international evaluation (2009) and in the State and Quality of Scientific Research in Finland report by the Academy of Finland (2009). Along with other information, the recent policy documents on the European Research Area as well as wide-ranging material on the OECD s innovation strategy have been intensively exploited during the process of preparation of the Council s policy guidelines. Mari Kiviniemi Prime Minister

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7 Contents Development programme : summary Finland in an open world: national strategy Choices, priorities Specialisation, raising profiles Strategic development policies Operational priorities Strong scientific research and useful applications Growth entrepreneurship, support for businesses and innovations Services Demand- and user-orientation Utilisation and application competencies Evaluation The European Union Structural reforms: supporting innovation environments Structures of higher education institutions Reforming the public research institute sector Research infrastructures Access to and use of public data Attractive poles of excellence Strengthening human resources Appendices Appendix 1 Strengths, opportunities and challenges of Finland s ERI system Appendix 2 Trends in research and development funding Appendix 3 Government decree on the Research and Innovation Council Appendix 4 Information on the indicators in Figures 3 and Research and Innovation Policy Guidelines for

8 Development programme : summary Finland has decided to invest in knowledge and expertise as its strategy for success. Education, research and innovation (ERI) will support economic growth and the positive development of the economy, the sustainable reform of social structures and the well-being of citizens. The development programme focuses on the recommendations and policies that will be most important for the next government term. The programme also includes issues that have a development timetable extending to the year The foundations of the innovation system will be assured when the system 1) ensures the adequacy and renewal of human resources, 2) promotes the creation of high-quality knowledge and competence in Finland and the efficient transfer of knowledge created elsewhere for our own use and 3) accelerates the exploitation of knowledge and expertise, and the creation, introduction and commercialisation of innovations. The steering and funding of ERI will focus on the quality, relevance and exploitation of the activities, as well as on measures through which new and sustainable growth and employment conditions are supported. Developing the innovation system requires that: structures are reformed and organisational, operational and regional fragmentation will be reduced the co-ordination and steering of policy actions will be strengthened at government level the prioritisation and selection of subject matters and contents will be undertaken the exploitation of ERI activities will be promoted extensively universities, polytechnics and public R&D institutes are supported in raising their profiles and specialising in their fields of strength; the quality of research will be improved multi-lateral cooperation will be enhanced and the division of labour between HEIs, public R&D institutes and enterprises clarified steering systems, incentives and the regulatory environment will be developed the efficiency and effectiveness of the business and innovation service system will be improved the position of the SME sector within the innovation system will be strengthened a long-term infrastructure policy will be created and the wide use of public data enhanced evaluation expertise and the exploitation of evaluation data will be strengthened the funding base for research and innovation will be diversified the internationalisation of ERI activities of the entire innovation system will be enhanced the means for monitoring policies will be improved. 6 Research and Innovation Policy Guidelines for

9 Basic policy lines The grand challenges and development issues are taken into consideration in a systematic way in ERI policy guidelines, the allocation of resources, and when developing actions and measures. The management, operating practices and culture of the public sector are renewed in a way that improves cross-sectoral implementation of wideranging development measures. Development measures focus on ERI sectors of an internationally high level, which are most important in terms of the good development of the economy and well-being. The internationalisation trend is accelerated. Finland s visibility and attractiveness as an operating and living environment as well as a cooperation partner is strengthened. Competitive, high-profile, and attractive innovation environments are created. In order to improve productivity, flexible organisations are created alongside technological development, administration is reduced and structures streamlined. Investments are made in developing management and working life. Occupational wellbeing and productivity should be considered in tandem. The integrated development of technological and social innovations is strengthened. Operating models that bring together the skills of many different actors are promoted. The ability to merge various competences and technologies is improved. Cooperation between the public and private sectors is strengthened in ways that promote research and innovation, as well as create jobs, new businesses and welfare services that better meet demand. Structures and operating models that encourage the crossing of boundaries and continuous innovation are created. Experimentation and the taking of greater risks are encouraged. The entrepreneurial culture as well as instruments and incentives that support entrepreneurship are strengthened. Increasing and managing risk-taking need to be supported by political commitment and clear policies that improve the performance of both the public and private sector. Strategic development policies Higher education institutions, research institutes and world-class poles of excellence are strengthened with resources that are freed up by dismantling current structures and activities. Incentives for business cooperation are created for higher education institutions (HEIs). The efficient utilisation of research results from HEIs is promoted. Research and innovation support services within HEIs are reorganised into larger units that enhance competence. Efforts are made to increase the number of companies engaged in research and innovation. An R&D tax incentive aimed at companies is introduced on the basis of separate preparatory work. Direct public support is channelled more selectively to pioneers, with an emphasis on experimentation and risk-taking. Public business and innovation services are improved to better meet business needs. Services form an overall package of complementary services. The customer relationship strategy of the Ministry of Employment and the Economy, which aims at improving the effectiveness of services, is implemented. Research and Innovation Policy Guidelines for

10 Public providers of capital implement the internationalisation programme for the domestic risk financing market, which will attract foreign actors and venture capital to Finland. Private venture capitalists are encouraged to participate in funding knowledge-based companies and in accelerating the growth and internationalisation of companies. The opportunity for introducing a tax incentive for private individuals operating as venture capitalists is looked into. In addition to the EU, the partnerships to be prioritised within international cooperation include bilateral agreement countries in scientific and technological cooperation and the FinNode countries. The FinNode network is used effectively in the internationalisation of Finnish innovation environments of excellence and networks, as well as in market access. Finland takes the initiative in reforming the EU s research and innovation policy. Structures that support participation must be strengthened. The share of EU funding of the entire research and innovation funding of universities and research institutes is doubled in the 2010s (5.8% in 2009). The flexibility of EU programmes to changes in the operating environment and response to business needs must be improved. This will increase the participation of companies in EU cooperation and link Finnish research and technology programmes more closely to EU-level programmes. The development of the European research and innovation area is promoted by opening up national programmes and national funding. Programmes are opened up in a way that makes room for voluntary joint pilot projects of member states. Effective principles, procedures and criteria are sought and legislation is harmonised. Finland should participate in the most promising trials. The productivity and quality of the service sector is improved by increasing research, innovation and internationalisation, as well as by developing partnerships between the public and private sectors. The public sector promotes the creation of lead markets and supports the creation and dissemination of innovations by introducing innovations itself. New cooperation and test platforms are created, the quality and availability of services are improved, and the related business skills and management are strengthened. The public sector to an increasing extent exploits policy measures that have an effect on demand, such as public procurement, regulation and standardisation. Public sector procurement and procurement methods are developed to promote innovation. Special expertise in procurement is improved and support services to assist procurement units are created. Demand- and user-oriented piloting, demonstration and testing projects are developed as well as new funding and other support practices that promote them. The ministries ensure that the regulatory environment and steering systems support the exploitation of research and innovation, as well as experimentation and risk-taking. 8 Research and Innovation Policy Guidelines for

11 Understanding about the role of standards in research and innovation is improved, and participation in the work to draw up standards is activated. A Government resolution on the use of standards is prepared. Performance and quality objectives are set for policy actions, and mechanisms for monitoring the attainment of objectives are specified. The compilation of statistics on innovation activities must be improved so that the extent of the activities can be better evaluated and policies made more effective. The independence of evaluations is strengthened with respect to the subject of the evaluation. Evaluations are international in scope. Evaluation results are more closely linked to the development and decision-making of organisations and functions. Public research and innovation funding and other support organisations are evaluated. The international evaluations of Tekes, the Finnish Funding Agency for Technology and Innovation, and the Academy of Finland are launched in the years Structural development The steering and incentives for higher education institutions and research institutes are developed. The models for financing universities and polytechnics are reformed. The models support improving the quality of teaching and research, internationalisation, the utilisation and effectiveness of research results, and raising the profile of higher education institutions in their fields of strength. The importance accorded to the quality of research is strengthened in the steering and funding models of universities. The number of new students in education within multidisciplinary scientific universities aiming to be among the best internationally is reduced. The status of polytechnics in the innovation system is clarified and strengthened. The creation of stronger alliances between higher education institutions is enabled. The strategic steering of public research institutes is strengthened at government level. The research priorities serving the Government s activities are specified at government level at the start of the term of government, policies on the structural development of the research institute sector are drawn up, and the required resources organised. An action plan extending to 2020 on structural development and the allocation of resources is prepared. The measures and resources of the Centre of Expertise Programme are redirected after the programming period ends in The programme model is revised and the activities updated. Effective tools and cooperation platforms are created on the basis of regional strengths and needs in the research and innovation policy as well as in the regional policy. The activities of the Strategic Centres for Science, Technology and Innovation (SHOK) are continued. Adequate resources are safeguarded to strengthen the skills base and innovation potential. The funding base is expanded. An evaluation of the activities and effectiveness of the Centres is carried out in A research infrastructure body is established that will prepare and implement a national and international infrastructure policy, which is in line with the ERI policy guidelines, and its evaluation and funding. The Government makes a resolution at the start of its term on the national policies on public data. Research and Innovation Policy Guidelines for

12 Human capital The educational level of the population is raised. As a result of cohorts decreasing in size and the more effective use of educational places, the number of student places in higher education will be reduced in the 2010s. The educational offering is tailored on the basis of foresight in accordance with the long-term needs of the labour market. A research career system is implemented. The attractiveness of research careers is boosted and post-doctoral education is strengthened. The transparency and predictability of the various stages of a career are improved. Mobility between sectors is enhanced by creating incentives and by allocating resources to it. The quality of postgraduate education is brought up to an internationally high level. An evaluation of graduate schools is carried out by the year Higher education institutions and research institutes build strategic, durable partnerships and develop funding solutions that support this together with steering, funding and cooperation parties. The recruitment practices of higher education institutions and research institutes are changed to attract international students, researchers and experts. An active employment and skills-oriented immigration policy is created along with the legislation to support it. More comprehensive implementation of the integration policy requires considerably increased resources. The preparatory work on a policy for multiculturalism is started by the Government in Development of funding The recommendations on allocating and increasing the volume of public funding determine the economic framework of the development programme. The Government, the Cabinet Committee on European Union Affairs and the Research and Innovation Council set the objective levels for R&D funding in connection with the debate on the Europe 2020 Strategy in spring The national objective is to maintain the share of R&D funding of GDP at 4 per cent in the 2010s. Public investment must be 1.2 per cent of GDP. The main criterion for the development of funding is adequate, productive R&D funding that is allocated correctly and can be reallocated in a flexible way. The contribution of the private sector should be a minimum of 2/3. The reallocation and pooling of resources to form more effective entities that create a critical mass and which are often based on partnerships is vi tal. This alone is not enough. Joint funding arrangements between various parties are necessary in order to ensure adequate resources as well as the quality and social relevance of research and innovation activities. Incentives and steering that enhance networking and risk-taking are essential for improving competitiveness and the ability to cooperate. Additional private funding is needed in addition to public financing. Legislation on higher education is amended to support the export of education. 10 Research and Innovation Policy Guidelines for

13 Public research and innovation funding: development principles Funding will be long-term and predictable, and allocated under transparent criteria. The share of public funding of total R&D funding will be raised (26% in 2009). The share of public competitive funding will not increase (competitive vs. direct budget funding in 2010 was 48:52). Long-term skills development requires a stable funding base: the diverse and strong education and science base of the university system will be safeguarded. The specialisation of HEIs within their fields of strength will be accelerated through funding and effective incentives; the fragmentation of education and research will be reduced. New and current resources are directed towards the most important targets: strengths and selected priority fields; SHOKs; infrastructures; the research career system; internationalisation. Funding promotes the application, introduction and commercialisation of the ERI results. Research and innovation by companies will be activated through funding, with the aim of improving the ability to innovate within a larger number of companies in all sectors. The funding models of universities and polytechnics will be updated by 2013 so that resources are allocated to enhance the international scope of their ERI activities, as well as to improve their quality and promote their exploitability. The funding for research institutes is updated so that resources can be flexibly reallocated in accordance with the need for research-based evidence within society and for decision-making. Co-ordinated development calls for the creation of a common funding mechanism. The funding basis for universities and public R&D institutes will be diversified; quantitative objectives and incentives are set for international funding through steering. A larger share of the EU s Structural Funds will be used for strengthening the knowledge base and for research and innovation as well as cross-border cooperation. Research and Innovation Policy Guidelines for

14 Expanding the funding base of research institutes will be necessary in the future. In strengthening the funding structure for universities and research institutes, opportunities must be sought for strengthening financial cooperation with foundations and efficient joint funding models for covering the operating costs of research and innovation infrastructures. Priorities in innovation funding include ensuring competitiveness and capacity for renewal in the fields of strength within business, promoting demand- and user-oriented innovation activities, and experimentation supporting this, and growth companies. The functioning of financial markets should be improved through close cooperation between public and private venture capital and a clear division of tasks. In order to strengthen financing for start-ups and growth companies, the opportunity for introducing a tax incentive for private individuals operating as capital investors will be looked into. Taxation promoting research and innovation and entrepreneurship on a wide scale should be urgently reformed. R&D tax incentives for companies will strengthen the knowledge base and accelerate research and innovation by companies in a way that increases competitiveness and employment. Reforms should be evaluated as soon as possible after their introduction so that incentives can be further developed and their appropriateness ensured. By the end of 2011, according to the regulation in force, a natural person and the estate of a deceased person can deduct from their earnings a cash donation of up to a maximum of 250,000 euro which is made to a higher education institution for the purpose of promoting science or art or to a fund operating in connection with a higher education institution. The opportunity to make the tax deduction entitlement for donations by private individuals permanent will be looked into. The quantitative recommendations for public R&D funding (1 are presented below. Development of R&D funding: the aim is to achieve a public funding level of 1.20% by the year 2015 (the recommendation for the 2011 level and according to the value of money in 2011).* Government R&D funding, EUR mill ~ % of GDP R&D expenditure, total, EUR mill ~6 930 > % of GDP 3.96 ~3.90 ~3.90 ~3.95 ~3.95 > * Macroeconomic forecasts of the Ministry of Finance, 29 September Statistics Finland, R&D statistics, 28 October ) When reviewing the funding, it should be taken into account that many investments that are essential to research and innovation activities and the exploitation of their results do not come within the scope of R&D funding. These include funding for start-up and growth companies, grants for internationalisation and the creation and maintenance of cooperation and test platforms and living lab environments. The funding has been treated within the limits of internationally accepted official definitions of R&D activities. No generally accepted definitions and statistics exist yet on innovation funding. 12 Research and Innovation Policy Guidelines for

15 The State undertakes to make financial investments in the universities in proportion to the private capital investments they obtain. The increase in public R&D funding for (from the level in 2011 and according to the value of money in 2011) totals EUR 370 million. R&D funding will increase in real terms by at least 4.0 per cent per year. The increase is set out below by organisation and main area of use for the 2011 level. By organisation M Area of use Tekes 70 corporate R&D 45, SHOK 20, others 5 Academy of Finland 40 basic research 30, SHOK 10 Universities 25 basic research Polytechnics 20 R&D Public research institutes 35 R&D; VTT 15 Ministries 135 R&I infrastructures 120 Others (1 45 EVO funding 15, health and welfare R&D 10, internationalisation Total 370 1) In order to strengthen clinical research, government subsidy for scientific heath research in unversity hospitals (EVO) will be increased by EUR 15 million. Strengthening R&I in the health and welfare sector requires the targeted strengthening of resources of many different actors. Funding that promotes internationalisation cannot be allocated in its entirety in advance to actors. These types of costs include attracting foreign researchers and experts to Finland and an increase in operating expenditure due to increased international cooperation in R&I. In the university reforms, the State agreed to the capitalisation of new universities so that they would be established as financially sound, solvent and creditworthy institutions. The universities undertake the public tasks set for them by the State, irrespective of their legal personality, the emphasis of statutory tasks or geographical location. The State will continue to be the universities main source of finance in the future as well. The development of funding is safeguarded through the university index. In 2011, this means an increase of EUR 45 million in state funding for the universities. Research and Innovation Policy Guidelines for

16 The funding base of the universities is expanding. The universities can also use funds acquired through the university s business activities, donations and capital income for their activities. The Government supports fundraising by universities through incentives that ensure equal treatment. If a university manages to raise a minimum of one million euros in private donations for the university s basic capital by the end of June 2011, the State will award 2.5 times the same sum as co-financing for the capital of the university in question. If private capital investments are made in accordance with the universities own objectives to a level of EUR 330 million, the State will allocate EUR 830 million in co-financing for capitalisation by the end of By the start of September 2010, universities subject to public law had collected a total of EUR 49 million in capital investments and foundation universities EUR 193 million, the share of which accounted for by Aalto University was EUR 160 million. In addition to the fact that the return on foundation capital is available for the universities, a reservation for increasing the operational funding for Aalto University by EUR 100 million by the year 2012 was made in the Government s decision on spending limits for This increase will be transferred in stages from so it is open for competition for all universities on the basis of the quality of operations. The proposal means a cumulative increase in of 4 x 21.5 million euros in the core funding received by universities from the State so that the level of funding will rise by around EUR 86 million by the end of the period. The level increase (25 million) in the table is based on a statistical practice whereby 30 per cent of funding is calculated as going towards research in universities. The condition for the increase is the development of steering and funding criteria in a way that promotes specialisation by the universities and allocates increasing resources to supporting the universities international areas of strength. The proposal concerning the ministries contains EUR 120 million reserved for research and innovation infrastructures and an increase in uncommitted research appropriations for structural development in the research institute sector and the implementation of significant horizontal research programmes. The increase in funding for infrastructures is not permanent in nature. The funding is intended for establishing infrastructures. Questions relating to the maintenance of infrastructures will be solved later. The proposal has taken into consideration the fact that a tax incentive system for R&D will be introduced in Finland. Its purpose is to supplement the current support structure based on direct public funding and to activate a significantly larger number of companies to participate in research and innovation. If the system is not adopted, it will have an impact on the recommendations. In this instance, it would be necessary to raise, if nothing else, the amount of direct funding by more than was set out. The estimated immediate effect in terms of lost tax revenue of the proposed tax incentive model is an estimated EUR 120 million. The net tax cost from the impact of the new economic activity, valued at over EUR 150 million, arising as a result of the incentive would fall to half this sum. 14 Research and Innovation Policy Guidelines for

17 1. Finland in an open world: national strategy Through their expertise, the Finns have built a country in which the well-being of its citizens, high-quality work environments and good competitiveness of companies have been combined with socially and environmentally sustainable development in a balanced way. Education, which is highly valued by the Finns, the pursuit of equality, a positive attitude towards research and technology and interest in trying new things have supported this development. This can be seen, for example, in the form of high rankings in various international comparisons. Finland is well-placed to succeed in global cooperation and competition in the future as well. Our innovation system is world class and open to cooperation, albeit nationally focused. International cooperation and competition have increased and taken on new forms as societies have opened up and communication and transport infrastructures have developed. The advancement of globalisation has opened up new channels and mechanisms for developing the economy, education, science and technology, and has also promoted cross-border interaction between countries, regions and communities. The world has become politically and economically an increasingly multipolar and pluralistic place in which relations between countries and operational priorities vary on a caseby-case basis. The biggest change has been the rise of China to become a major player in the global economy. Brazil, Russia and India as well as other individual emerging economies in Asia, South America and Africa have boosted their political and economic importance in the 21st century, including in the ERI sector. Maintaining the vitality of domestic industry has called for an orientation towards growing markets. At the same time, the focus of production has shifted abroad. What is essential is how successful we are in the future at keeping enough industrial production in Finland to secure the development of a diverse and competitive business sector. Succeeding in this is vital in order that our knowledge base strengthens and the number of jobs with high added-value increases. Industry is needed in parallel with the development of competitive services and a service society. The recession, the increasing indebtedness of public finances, demographic trends, environmental challenges and international competition are changing the operating environment and the conditions for education, research and innovation (Figure 1). The ability to react flexibly to changes in competition and the division of labour requires countries and actors to have effective tools for managing change. They are vital for developing national and regional innovation environments and for strengthening international cooperation and competitiveness. The national strategy and its implementation programme provide support in responding to the changes in the operating environment. Finland s basic long-term policy is still valid: Research and Innovation Policy Guidelines for

18 Figure 1. Change factors in the operating environment. Globalisation Sustainable development education, research Changes in the operating envinronment and development trends technology, innovations Demographic change The dynamics of ERI activities The strategy of Finland is to ensure sustainable and balanced social and economic development. It is crucial that economic development is connected to other development activities in society and the environment, as well as increasing the wellbeing of the population. The basic prerequisite is to increase productivity. This applies to all sectors, fields and actors of the economy, not just those involved in global, open competition. Important factors contributing to the strategy s implementation include the population s high educational level, the intensive development and exploitation of knowledge, know-how and intangible capital more broadly, as well as close multilateral cooperation. Strengths must be maintained and new ones created in a more focused way through international cooperation. What is essential is ERI activities of an internationally high standard in sectors that are most important to the economy and wellbeing. The internationalisation trend should be accelerated. The function of ERI policy is to promote the implementation of the strategy. New dimensions to research and innovation policy have emerged alongside examination based on traditional R&D activities (Figure 2). 16 Research and Innovation Policy Guidelines for

19 Figure 2. From traditional R&D towards a broad-based system of research and innovation: the development in the dynamics of the interactive relations between actors and functions. Actor Innovations Technological and non-technological innovations and their combinations Enterprises / R&D organisations Research and development Business, marketing and organisational innovations A systemic and multidisciplinary approach as well as non-r&d-based innovation increase Customers / users Technological choices (social shaping of technology) Public and private service and other innovations In order to promote world-class innovation environments, the Government has undertaken significant reforms during its current term. These include the structural reform of higher education institutions, amending the financial and administrative status of universities, the structural and operational development of the research institute sector, preparatory work on an infrastructure policy and the research career system, the creation and introduction of new measures and operating models for the innovation policy (incl. demand- and user-oriented measures), as well as supporting Strategic Centres for Science, Technology and Innovation (SHOK). In recent years, Finland has performed well in various economic and social sectors in international comparisons (e.g. WEF, IMD, Lisbon Review, EIS). The Council s internationalisation strategy (2009) contains an evaluation of the state of Finland s ERI system based on the results of benchmarking (Appendix 1). Success factors include major investment in R&D, the large number of R&D employees, the specialisation of the economy and companies in knowledge-intensive growth areas, a strong culture of cooperation, a world-class school system, highquality healthcare system, the consideration of the environmental perspective in decision-making, and the well-working business environments. Most of Finland s partner and competitor countries such as Switzerland, Holland and Denmark have actively developed their innovation systems. They have managed to catch up with our head start and in many instances have overtaken Finland. The basic policy instruments are, however, more or less the same in the different countries. Differences can be Research and Innovation Policy Guidelines for

20 Figure 3. Finnish innovation system in international comparison: input indicators (see Appendix 4). 12. Foreign-owned companies share of business sector turnover 11. Venture capital investment 10. R&D in the service sector 9. Foreign-born researchers in R&D personnel 8. Foreign students in higher education 1. Government R&D budget R&D personnel 2. Annual increase in government R&D budget 3. Funding for basic research 4. Government funding of business R&D (incl. tax incentives) 5. Higher education expenditure on R&D financed by enterprises 6. Business enterprise R&D financed by abroad Average of OECD/EU/ data Finland Average of the top five countries by indicator seen in the amount of resources, the effectiveness of the legislative environment and in how effectively policy measures are used and renewed. In addition to its strengths, Finland has challenges relating to the national economy and the need to develop ERI activities (Figures 3 and 4). Many people are unemployed, the employment rate is relatively low and the supply of labour over the long term is insufficient. The dependency ratio is worsening and the population ageing. The volume of fixed investments has clearly decreased since the start of the 21st century and is below the average for the OECD region. Finland is also not ranked among the top internationally in purchasing power and the standard of living. International comparisons have paid particular attention to the relative weakening of the quality and impact of scientific research in Finland. This poses a challenge for public development measures and the sustainability of state finances. In developing education, research and innovation, consideration must be paid to Finland s size and, in addition to percentages, also to absolute volumes. Although investment in R&D is proportionally among the highest in the world (4.0% of GDP), it is low at the global level (0.6% of global R&D). Therefore, what is more important is to ensure that education, research and innovation in Finland are of an internationally high level and that we have a global presence and are an attractive partner. Finland has to make some clear choices that will support a) specialisation in competitive areas of strength, b) the ability to identify and support promising research, knowledge and business areas and c) the strengthening of high-profile and attractive 18 Research and Innovation Policy Guidelines for

21 Figure 4. Finnish innovation system in international comparison: output indicators (see Appendix 4). 11.Reduced use of materials and energy 10. Employment in knowledge-intensive sectors 9. Share of turnover from product innovations 1. Scientific articles Citations received by articles 3. Funding received from EU 7th R&D Framework Programme 4. Accepted projects in EU 7th R&D Framework Programme 8. Non-technological innovation in the manufacturing sector 5. Triadic patents 7. Knowledge-intensive services exports 6. International cooperation in patenting Average of OECD/EU/ data Finland Average of the top five countries by indicator poles of excellence. The seriousness of the matter is illustrated by the fact that despite a high-level of competencies, a functioning social infrastructure and world-class innovation environments, Finland s appeal as an investment target and as a work and living environment for experts is still weak. The situation has not changed during the new millennium and rectifying the situation is becoming increasingly more challenging. Internationalisation is an objective that covers the entire system. What is needed are measures that promote the openness of our environment, genuine internationalisation in everyday life and an open-minded attitude. Internationalisation is vital because we are dependent on development elsewhere. Our own resources are limited and most of the knowledge and skills we need are produced abroad. International cooperation is also one way of improving the quality of research and innovation, eliminating duplication and bringing together domestic actors and funding for joint projects. Participating in the globalisation process and being able to influence it are in Finland s interest. The openness of economies and societies creates new opportunities. There is also major change underway in the division of labour relating to the global relocation of growth factors. It is important that domestic actors are able to improve their position and strengthen their know-how in international value networks that are undergoing transformation. Enhancing and exploiting growth factors arising from education, research and innovation are an essential element of sustainable economic growth. Research and Innovation Policy Guidelines for

22 Particular challenges for Finland include the ageing population, an adequate labour supply and how the quality and availability of welfare services are ensured. The working age population started to decline in 2010, and the retirement of the baby boom generation is underway. Production and consumption are decreasing, and the tax base for public finances is getting smaller. Solutions have to be found for the sustainability of public finances. In terms of growth and productivity, an adequate supply of labour is crucial. Competition between employers for skilled employees is becoming more intense. Positive development in productivity is necessary in all sectors and in all organisations in the public and private sectors. Strengthening the environment for businesses will safeguard jobs and enable new ones to be created. Increasing productivity requires not only technological development but also organisational, administrative and structural reforms that enhance efficiency. There must be futher investment in enhancing the quality of management and working life. The key sources of productivity include integrating the results of technology and innovations into new products as well as production and operating practices. Success is not determined by the latest technology but the most productive technology that can be adopted widely into use. Making use of technology created elsewhere and the opportunities provided by the legislative environment are also vital. In this, Finland has room to improve. Finland must be able to exploit human capital (1 and the investments made in it more efficiently. Finland s industrial productivity is of an international high level, whereas in services it is only the EU average. The differences in productivity between the various sectors are considerable. A range of different evaluations of public-sector productivity has been presented, which indicates difficulties in its measurement. The most significant sources of productivity are in developing services and in the efficient, widespread application of generic technologies (ICT, nano, bio) in all sectors. It is generally considered to be the case that from the perspective of sectors and companies as well as products, processes and (global) value chains, there will be no return to how things were before the recession. Economic growth is not only founded on industrial and production know-how; it gains momentum from new ways of working and operating, new earnings logics, successful sectors and products, as well as innovative and completely new companies and sectors. Industry will remain a major part of the economy even though its share of production, jobs and tax revenue is falling in developed countries. The roles played by services and the third sector are increasing. Up until now, R&D-intensive countries have managed to keep hold of highly skilled jobs. The situation is predicted to change as the share of emerging economies increases in professions demanding a high level of expertise. Choices, priorities Up until the present, Finland has succeeded in exploiting the opportunities offered by technical development and globalisation, and in many sectors has risen to the forefront of competitiveness and productivity development. The core question is how we can continue to create strengths and pull factors that will improve our position as an international actor. Successful choices require a good knowledge base, insightful foresight and focused decision making. 1) Innovation investments constitute the largest proportion of intangible investments, R&D expenditure being the largest item. The others are trademarks, human capital, organisational structures, software investments, digitised data, brands, business models and design. Intangible capital emphasises the importance to the economy and productivity of the employees competence as well as the creation, application and introduction of new knowledge. 20 Research and Innovation Policy Guidelines for

23 Resources will be allocated towards priority areas, which include the SHOK sectors (1, expertise in software, as well as the bio sector and nano sector insofar as Finnish expertise is among the best in the world. In addition, there will be a focus on sectors in which Finnish research exceeds a critical mass and is internationally renowned, as well as on new initiatives, for example solutions and clean technologies that save energy and the environment. The need for expertise in the welfare sector, new operating practices, and the integrated development of technological and social innovations is increasing. This calls for the considerable strengthening of international cooperation in these sectors. Public-private partnerships, for example, in primary and specialised health care could produce important welfare services for the nation, as well as jobs and new businesses. What is essential is that national-level choices guiding ERI funding and activities are not undertaken on the basis of individual educational fields, disciplines or sectors. In top-down choices, it is important that they determine the broader fields of development and application of knowledge and expertise that will meet the most important needs of society and the economy. Often, there is no need to draw up new wide-ranging national policies. The issue concerns long-term objectives that need to be monitored and updated. Insightful and brave choices call for a strengthening in strategic guidance and more effective political decision-making. Compared with other countries, there is close interaction in Finland between companies, higher education institutions, research institutes and public administration. This creates good opportunities to further strengthen cooperation in making choices, as well as in research and innovation. Finland needs to create established and open operating models in which private and public operators participate in the work that results in decisions on choices. In the future, strategic decision-making must also be able to combine top-down and bottomup processes, in the latter of which, more detailed choices are made for specific disciplines, technologies and sectors. There are always risks associated with choices. Therefore, a balance needs to be maintained between strategic and free research. A strong and wide-ranging knowledge base is the foundation for the ability to innovate. A great deal of attention is being paid to major societal challenges, such as climate and energy issues. In order to fight the recession, many countries are investing billions of euros in areas that are important in terms of the sustainable development and growth of society and the environment, such as in energy management and infrastructures. Investments in R&D and knowledge in these sectors have also been increased in Finland, and international cooperation and clean environment business opportunities promoted. Research and innovation in the environment and energy are among Finland s focus areas. Joint efforts are needed in these sectors rather than operations based on numerous separate programmes. Positions in value creation chains, which are undergoing a transformation, must be strengthened in a way that supports activities with high value-added. In relation to the environment and energy, Finland must pay particular attention to rich natural resources and their sustainable and innovative exploitation. Finland has the potential to be a successful actor in growing markets by developing technology and enchancing a front-runner position. International interest in these markets is increasing at a rapid pace. 1) SHOK sectors refers to six Strategic Centres for Science, Technology and Innovation and their areas of competence: 1) energy and the environment; 2) metal products and mechanical engineering; 3) the forest cluster; 4) information and communication industry and services; 5) health and well-being; 6) built environment innovations. Research and Innovation Policy Guidelines for

24 Major societal challenges that are faced by all countries, such as climate change, energy and food security, and the ageing of the population, require major investments, and, in the coming years, will guide national and international priorities in research and innovation policy. These challenges must be included as priorities in ERI policy guidelines, the allocation of resources and when developing actions. Finland must identify its own strengths, and resources must be combined to create new knowledge, expertise and business activities. The vision of the European Union s 2020 Strategy is smart, sustainable and inclusive growth. Finland must make choices, in terms of content, which interlink with the EU Strategy. Public and private actors must cooperate in defining a common vision and ways forward. The numerous development measures underway need to be coordinated. ERI activities need to be brought together to form programme work and other activities based on multidisciplinary cooperation. In order to succeed on the global market, business enterprises must increase their ERI activities. Enterprises awareness of the benefits of joint international projects and their ability to influence them must be improved. In order to support this, the number of joint international projects of, for example, VTT Technical Research Centre of Finland and Finnish companies should be increased and more Tekes funding should be channelled into the type of international projects that are undertaken through close, multilateral cooperation in research and innovation. Priority partners in ERI activities from Finland s perspective include countries with a bilateral agreement on cooperation in science and technology and FinNode countries (South Korea, Japan, China, Russia and the US) in addition to EU countries, as well as emerging economies such as India and Brazil. Finland s international FinNode innovation centres are located in China, the US, Russia and Japan (India in 2011). The aim is to bring together domestic actors Finpro, Sitra, the Academy of Finland, Tekes and VTT and resources in a new way that improves coordination and the effectiveness of cooperation. The aims are to promote market access for enterprises in target regions, increase mobility and cooperation in research and innovation, as well as high-light Finland as an investment target. The FinNode network must be used more effectively in the internationalisation of Finnish poles of excellence and networks, as well as in market access. Strategic programmes that bring together the actions of various organisations are necessary in order to improve the effectiveness of international interaction. This will enhance the creation of attractive consortia that have a critical mass within target areas. Correspondingly, the expertise of FinNode countries and other partner regions should be exploited and investments attracted to Finland. Organisations focused on education, research and innovation, too, should participate in joint international actions. Public actions must focus on improving the competitiveness of the economy and society and supporting new opportunities opening up in education, research and innovation. At the same time, the public sector s own ability to innovate must be strengthened in a more diverse way. The management, operating practices and culture of the public sector must be changed in a way that improves cross-sectoral implementation of diverse development measures. The government should ensure the basic conditions for research and innovation, in other words, that education, the regulatory environment, infrastructures and core structures of the ERI system are of a high level and that the ability to react to changes improves. Competitive conditions for the emergence of innovation environments must be ensured. 22 Research and Innovation Policy Guidelines for

25 Specialisation, raising profiles Education, research and innovation together with its development must be made more effective in all sectors of the innovation system. The means to achieve this include prioritising activities, developing a national and international profile, specialisation in areas of strength, selective decision-making and steering that supports quality, effectiveness and internationalisation. This requires better change management and the ability to take a selective approach. Resources must be transferred to higher quality and more effective tasks in relation to the needs of society. All the activities and policy actions currently underway are not necessary. When creating new measures and structures, it must also be possible to dismantle previous ones. This is essential when developing structures for higher education institutions and research institutes and in strengthening attractive poles of excellence. There is a need for new structures and operating models that support the crossing of boundaries and continuous innovation, boldness to implement trials and take risks, a culture that supports entrepreneurship as well as instruments and incentives supporting these new structures and models. In addition to choices and development measures relating to current strengths, promising, embryonic knowledge sectors that are still small in terms of their critical mass, technologies and other competitive advantages should be identified. Experimentation and risks are part of all research and innovation and other creative activities. New ideas, technologies and operating practices must be piloted in a broadminded way, and choices must be made in an uncertain environment. This is demanded of researchers, entrepreneurs and those intending to become entrepreneurs, financiers and decisionmakers. Increasing and managing risk-taking needs to be supported by political commitment and clear policies that have an impact on both the public and private sector. The quality and effectiveness of education, research and innovation as well as the overall functionality of the innovation system must be improved in a way that promotes converting competence into viable business activities, new companies and jobs. In addition to creating and using new operating practices and models, traditional R&D work, technological development and research-based innovation must be continued. The core of science and technology policy must be safeguarded. Specialisation and a clear division of labour between actors is a requirement for the functioning of the entire innovation system and for improving efficiency. Universities, polytechnics and research institutes must engage in much closer and more diverse cooperation in education, research and innovation, as well as build joint infrastructures and service structures. All research organisations must identify their areas of strength and create a profile for themselves both in Finland and internationally. They must draw up clear strategies for themselves and make concrete choices on priorities on their basis. The quality of ERI activities, relevance, which is a prerequisite for developing society and the economy, the elimination of fragmented structures and the creation of critical masses should be evident in the choices. Likewise, it should be ensured that alongside the top units, the broad-based knowledge base created by education and research is strengthened. Research and Innovation Policy Guidelines for

26 24 Research and Innovation Policy Guidelines for

27 2. Strategic development policies 2.1 Operational priorities Strong scientific research and useful applications I mproving high-quality scientific research is a necessary requirement for creating successful applications. The work undertaken by the Academy of Finland and Tekes as well as funding for research careers, internationalisation and mobility in general, and other support strengthen the knowledge foundation and promote the creation of new applications, and the societal impact of education, research and innovation. The importance of the most significant actors carrying out research, universities and research institutes in maintaining, transferring and renewing knowledge, education and culture is central. All education, research and innovation should aim to be of a high standard. In the fields most important to the economy and well-being, we have to be among the best internationally. The goal of creating non-technological and social innovations has emerged alongside R&D-based activities. Partnerships, users and customers play a key role in their creation. The possibilities for user communities to be organised, implement joint projects, and produce new innovations have improved. Networked communities have been created in which new innovations are created through interaction and in practice learning, in addition to traditional R&D. The dynamics of innovation highlight the need for reforms in the public sector and policy measures, as well as for all those operating in producer and supply roles in the market. The public sector s own innovation activities and exploitation of innovations should be developed in a focused way. The ability to identify and understand the changing needs of users, implement development projects supporting this, and transform knowledge into practical solutions and new business activities must be improved. Growth entrepreneurship, support for businesses and innovations As an export-led economy, Finland needs growth companies that can successfully commercialise Research and Innovation Policy Guidelines for

28 ideas as products and services for international markets. The country needs individuals who have the ability and desire to be entrepreneurs and to operate in the global market. By international comparison, Finland has a relatively high number of start-ups and growing enterprises, but progressing to the international market and continuing the growth have proved to be difficult. The lack of interest in entrepreneurship among educated young people is one of the key challenges. Key skills for the value creation of business enterprises and other critical production factors are usually dispersed among several partners and R&D organisations as well as various regions. In order to succeed, businesses must be able to specialise and network at an international level. There are a large number of public and private support services available for internationalisation, but their quality varies and they do not always meet the overall needs of companies. The situation is not satisfactory from the enterprises perspective. A firm aiming to access international markets needs high-quality research and innovation activities and fundamental business skills and needs to combine these to achieve growth-oriented entrepreneurship. Public support must promote the growth dynamic. Clarifying the division of labour between private and public actors is vital. There needs to be holistic common policy measures incorporating many actors. In addition to developing funding and business services, teaching that raises awareness of business activities at all educational levels, and the promotion of a good climate for entrepreneurs and business skills are also important. The basic principle is that business and innovation services are produced in the private sector. Public development measures should focus on correcting market failures and removing administrative and systems deficiencies relating to public actions. Numerous actions have been undertaken to try and improve the creation and operating conditions of growth companies. Tekes has introduced a programme for funding young, innovative companies. Finnish Industry Investment Ltd, together with pension insurance companies, has set up a fund that invests in growth companies. The business accelerator programme VIGO of actors in the administrative sector of the Ministry of Employment and the Economy was launched in The aim is to bring together funding from Tekes and Avera (a subsidiary of Finnvera) as well as top-level business expertise in the private sector to develop the most promising embryonic growth companies. The operations of the six business incubators that are part of the programme have started up. The programme may be expanded depending on the experiences gained. The share of enterprises that have grown rapidly of all the businesses employing over 10 people is around five per cent. However, their share of the growth in employment ( ) has been around half. In addition to supporting growth entrepreneurship, consideration must be given to the fact that companies that are growing moderately are also still important in terms of the economy and employment. Public actors in venture capital have focused on funding the seed and start-up stages, while private investors have focused on the business enterprise sectors that are in the rapid growth stage as well as on corporate acquisitions. Although the division of labour between public and private actors is in principle clear and well-founded in terms of start-up and new companies, funding shortfalls and gaps as well as the continuity of funding have emerged as challenges. The financial market does not function optimally, especially in terms of the needs of startup companies and those in the seed stage. Public funding does not carry companies to the stage where they would start to interest private venture capitalists. Furthermore, the investment by investors remains small. Both in Finland and Europe, there 26 Research and Innovation Policy Guidelines for

29 are not enough venture capitalists and funding in general to meet the need. The needs of enterprises also vary by sector and stage of development. The volume of venture capital markets has developed weakly in Finland, and the proportion of funding from foreign investments is low. Public business and innovation services are being developed so that their availability improves and that they meet business needs in a more targeted way. It should be ensured that services comprise a comprehensive package that complement each other. To promote this, the Ministry of Employment and the Economy is implementing a customer relationship strategy. It will be ensured that there are effective structures that meet the needs for exploiting research and innovation activities as well as for growth entrepreneurship. The public sector should take greater risks in terms of start-up companies. However, it is not possible to fund and support companies over the entire life cycle from the start-up stage to internationalisation and growth using public funds. Therefore, incentives need to be created for private financiers. Private venture capitalists will be encouraged to participate in funding young businesses and in accelerating the growth and internationalisation of enterprises. The possibility to introduce a tax incentive for private individuals operating as venture capitalists will be looked into. Public providers of venture capital are implementing an internationalisation programme through which Finland will gain access to foreign venture capital. International opportunities, such as those offered by the European Investment Fund, for investments in growth companies should also be exploited. There has not yet been any tangible progress in the introduction of R&D tax incentives for businesses. A greater number of enterprises should be encouraged to engage in research and innovation. Activating enterprises requires that the introduction of tax instruments is piloted and that tax instruments are developed. At the same time, it is important that the efficiency of the direct support system granted to companies is not weakened through development measures or that overlapping support systems and structures that reduce the tax base are created. Tax incentives based on separate preparatory work should be introduced, in addition to direct support for R&D. A tax incentive for research and innovation targeted at business enterprises will strengthen the knowledge base and competitiveness of the innovation system, increase research and innovation activities and the number of companies engaged in them, accelerate the utilisation of results and promote growth entrepreneurship. In this way, direct public support can be channelled more selectively to pioneers, with an emphasis on experimentation and risk-taking. Tax incentives could activate a large number of business enterprises and support small development projects. Services The importance of services to the economy, employment, productivity and well-being is increasing. Services account for over two-thirds of gross domestic product. Private services cover almost three-quarters of all services. A particular challenge is the fact that a half of service companies are not engaged in innovation activities. Moreover, companies often carry out innovation work alone and do everything themselves rather than acquire solutions produced elsewhere. The R&D intensity Research and Innovation Policy Guidelines for

30 of Finland s service sector does not reach the level of the leading OECD countries. In order to improve productivity and quality, the service sector must increase research and innovation activities and internationalisation, as well as deepen the partnership between the public and private sectors. Business services are one of the fastest growing sectors. They support the research and innovation activities of other sectors and contribute to the reform of the sectors. These services are playing an increasing role in the application and transfer of knowledge and technology between sectors. The wide-ranging use of information and communications technology enables new kinds of services and service systems, as well as the cooperation, operating and administrative practices that support them. Cooperation and test platforms that support the creation of innovations should be created, the quality and availability of services improved, and the related business skills and management strengthened. The development of innovative services should be promoted in a way that accelerates the creation of new products and improves the productivity and competitiveness of services. Tekes, the Finnish Funding Agency for Technology and Innovation supports such activities through its recently launched programmes. Their crucial element is that the development of technology and business competence are advanced in an integrated manner. Ensuring adequate knowledge and skills also requires a critical mass of an internationally high standard in scientific research into services. Partnerships between the public and private sectors in producing and introducing services have strengthened. At the same time as the public sector is undertaking measures to improve the operating environment and conditions for companies, it should also take advantage of new opportunities offered by private actors in developing public services. Promoting innovations should be laid down as a task of the public sector. Public actors can open up and encourage markets by introducing innovations. Succeeding in this calls for reforms to the operating culture and a holistic development approach, as well as ensuring the functioning of the legislative environment. Development work needs to pay increasing attention to the fact that around a half of Finnish industrial enterprises also provide services. The percentage is the highest in the world after the United States. Hence, service businesses have also developed considerably through manufactoring industry activities. Companies providing both products and services spend more money on R&D than industrial companies and offer many different services. Drawing a line between services and production is artificial. Boundaries may exist between companies and within them. Especially in large industrial companies, the share of services is increasing and the production of goods is decreasing. The functions considered as support to manufacturing, such as planning, logistics and maintenance, are key sources of value added. The future of the economy will to a great extent depend on how exports of (industrial) services increase and how the service content of goods is enhanced. Demand- and user-orientation In order to improve the effectiveness of innovation policy, new opportunities for innovation created by the needs of demand and users must be seized upon more effectively. Promising innovations and development potential exist, but there are barriers to their exploitation, which could be removed through measures undertaken by the public sector. However, it needs to be emphasised that assessing customer needs and demand is a natural task for companies. The public sector s task is to create 28 Research and Innovation Policy Guidelines for

31 demand and improve the functioning of markets as well as their friendliness towards innovation. Users are a significant, and to date under-used, innovation resource. Users knowledge should be better linked to the creation of new products and content as well as to the reform of public services. In this way, research and innovation processes could be accelerated and the practical use of the results of development work improved. Information and communications technology, new research methods, design and new development platforms offer a variety of new opportunities to consider the needs of users and to include them in innovation. This requires new expertise within companies. These matters will be promoted by implementing the Action Plan for Demand and User-driven Innovation Policy drawn up under the direction of the Ministry of Employment and the Economy. Demand-driven innovation requires supportive markets and innovation processes that are common to both users and developers. Open competition in service markets should be enhanced so that the development, application and introduction of services that takes place through interaction between customers, users and producers is accelerated. Innovative markets are a prerequisite for the success of Finnish companies in global competition. Therefore, Finland should promote the creation of lead markets within the EU and strengthen EU initiatives (e.g. the Innovation Union) through its own actions. Finland should specify application areas in which pioneering work by Finnish companies will be promoted. This requires decisions that cut across the boundaries of the Government s administrative sectors. A decision-making model to support this is also needed. The issue involves ensuring coherence in the various actions undertaken by the public sector in order to achieve common objectives. The government has policy measures that influence demand. These mesures could be used to significantly greater effect to promote innovations. Such measures include public procurement, regulation and standardisation. For example, regulation could be enacted in a way that increases demand in the market for innovations (e.g. increasing energy efficiency). Funding and other support mechanisms that promote piloting, demonstration and testing should be created. Effective, innovation-friendly creation is a means of supporting research and innovation, boosting the use of results as new research initiatives or business activities, and improving productivity and prosperity. Key instruments in this are public procurement and its development, especially in a way which encourages research and increases innovations. This can take place alongside of stimulating innovation in the business sector. Public procurement is a tool that has been used only to a limited extent in promoting research and innovation. In 2008, the public sector made procurements totalling around EUR 31 billion. In addition to the procurement of actual innovations and R&D services, some of the procurement is of a type whereby the public sector could function as a demanding customer and a mediator between customer groups, or bring different interest groups together. An increase of just one per cent in the public procurement of research and innovation would mean a significant additional investment that would boost the creation of and expertise in innovative markets. There is a need for support functions and services in order to promote innovative procurement. Nobody has been given responsibility for developing these kinds of activities and consequently very little progress has been made in this respect in recent years. Promoting research and innovation through procurement calls not only for the good organisation of Research and Innovation Policy Guidelines for

32 procurement but also for special skills, the development of risk management tools and incentives, the provision of training on procurement know-how and training that supports it for responsible parties, and increased cooperation. It also requires the creation and implementation of new operating models supporting procurement. Good application areas include welfare services, energy supply, the environment and social infrastructures, especially communications, transport and construction. Public sector procurement operations and methods will be developed to promote innovation. This will require the clear setting of responsibility for development within the Government. In addition to the good organisation of procurement and professionalism, there is a need for special expertise and centralised support services to assist procurement units. Utilisation and application competencies Utilising the results of research and innovation has emerged as a more important focus of policy measures, while research and innovation activities are being accorded an increasingly important role as central building blocks of the economy and wellbeing. There is plenty of scope to develop the operating models and structures for utilising research, technological development and competence. The shift in policies from a research and technologyfocused direction to a demand and user-driven one has expanded the concept of utilisation. Both at the national and regional level, the public sector as a producer and user of innovations has started to attract a new kind of attention. Critical development issues include inadequate purchasing competence, which is also related to the question of innovative public procurement, as well as legislative and attitude issues concerning the production of public (service) innovations. The intensive adoption of research results and competence requires that societal structures support the exploitation and renewal occurring in various sectors of the economy, not just in business. The transfer of research results into practice is not as productive as it could be. From the perspective of higher education institutions, the exploitation of new knowledge and competence is linked to the transfer of ownership, the role of companies owned by higher education institutions, education serving entrepreneurship and business skills, the development of research and innovation services, as well as the universities joint service units. Developing public and private innovation services into needsbased and broader packages is vital. The service structure does not support the utilisation of R&D results or university business cooperation in the best way possible. The most effective way to exploit the results is through multilateral partnerships. The Tekes Tuli programme, which supports the creation of new research-based businesses, has identified three key challenges relating to the commercialisation of research results of higher education institutions. These are 1) the inadequate commitment of HEIs strategic management and limited resource allocation for commercialisation units, 2) a lack of incentives for commercialisation within higher education institutions and 3) problems relating to measuring the effectiveness of the activities and managing the project portfolio as well as creating value. The project is being implemented in the years The programme, which has a budget of EUR 50 million, involves 14 universities, 21 polytechnics and 5 research institutes. Increasing interaction between universities and polytechnics is vital in entrepreneurship and IPR issues, as well as more broadly in exploiting competence and research and innovation results. Development measures are needed to enhance the identification and implementation of business ideas, 30 Research and Innovation Policy Guidelines for

33 to ensure the effectiveness of the legislative environment and to take account of the special needs of young, knowledge-intensive companies. The research and innovation services of higher education institutions should be reorganised so that research results can be better exploited. The joint units of higher education institutions that pool resources in these services at the regional level, together with strategic development measures can work to remove weaknesses. It must be ensured that entrepreneurship, commercialisation and the practical adoption of research results are promoted through the structural development of higher education institutions and research institutes and the development of the legislative environment. It is important that policies and procedures pertaining to utilisation are consistent within the entire higher education system and that the objectives and ownership of the activities as well as the steering system are clearly set out. The broad introduction of research and innovation results will be accelerated by setting strong incentives for the universities to increase and strengthen cooperation with the business world and to promote the wide-scale exploitation of results. There is considerable scope for improving the transfer into practice of competence and research results. Finnish R&D activities produce many ideas, the recognition and further development of which are not at a satisfactory level. The shortage of funding is only one factor. The effectiveness and impact of research and innovation could be improved through more efficient management of the overall development of utilisation. According to a report by the Academy of Finland, the barriers to applying project results include: 1) users do not understand the application potential of results, 2) there is no suitable user party, 3) legislation and policies, 4) developing applications is uneconomical. In the demand and user-driven policy, the utilisation of research data and the needs perspective are emphasised and receive equal weight alongside the traditional researcher-oriented perspective. The definition of users of research data is ambiguous. Customer relationships and needs are easier to demonstrate in commissioned research and development work. This is difficult in basic research and more generally in R&D that creates knowledge. The ministries will ensure that the regulatory environment and steering systems support exploitation, experimentation and risk-taking. In this way, it will be possible to promote new forms of education, research and innovation (e.g. demand and user innovations, open innovation) and the efficient division of labour between different sectors and actors in the innovation system. Rules supporting innovative activities and the utilisation of results could be created under a common regulatory basis. Legislation still too frequently sets outdated or otherwise inappropriate restrictions. The development of the legislative environment and intensive exploitation are needed. It is important that the incentives for research and innovation permitted under EU state aid rules and the Competition Act are made full use of in Finland. Innovation activities undertaken by the public sector and their effectiveness must also be improved by developing the legislative environment and by enhancing competence relating to regulations and standardisation. The potential for standardisation and the legislative environment in general to comprehensively promote innovation activities needs to be determined. It is crucial that the targets and sectors that can be significantly affected by these means are recognised. The expediency of new incentives and meas- Research and Innovation Policy Guidelines for

34 ures must be verified by implementing various kinds of experiments. Familiarity with standardisation and the legislative environment more broadly must be strengthened; measures supporting this are needed both in the ministries and in financing and other expert organisations. For companies, standards are key strategic tools that promote access to markets. Awareness of the importance of standards in research and innovation should be raised, especially in SMEs, public administration and education in technical fields. The public sector must focus more effort on standardisation work, especially in areas important in terms of society, such as services, energy use in buildings, biofuels, environmental protection, nanotechnology and metrology. In addition, the better functioning and compatibility of public-sector information systems requires the effective use of standardisation. In the follow-up work to the Ministry of Employment and the Economy s policy on standardisation, attention will be paid to ensure that knowledge on the role of standards in research and innovation is improved and participation in the work to draw up standards is activated. A Government resolution on the use of standards in the public sector should be prepared. State aid will be directed towards nationally important fields of standardisation. According to a report, SMEs are not sufficiently aware of the importance of intellectual property rights in their business activities, and neither do they make use of existing information (e.g. patents) in their own development work. In 2009, the Government adopted a resolution on a strategy on incorporeal rights (IPR strategy) extending to the year Strengthening an IPR operating environment that effectively supports innovation activities and creative work requires that competence on IPR is promoted within the entire SME sector and that the clarity and appropriateness of legislation is improved. Evaluation As R&D investment increases, it is important that the added value and appropriateness of support and policy measures can be proven. The level of legislative drafting must also be improved and the effectiveness of legislation evaluated in advance. Numerous favourable evaluations of the societal impact of education, research and innovation activities have been presented in recent years. However, the evaluation reports do not provide a structured overall picture. This is a result of the indirect nature of the impact and the multifaceted interaction with other actors in the environment. There are many mechanisms and dissemination channels linked to the societal impact of the exploitation of ERI activities. In addition, the time spans of the impact are long. Evaluating effectiveness is generally considered to be a difficult area to develop. Enhancing the research and innovation dynamic and improving the effectiveness of policy measures require focused evaluation and a knowledge base supporting this. Evaluation strengthens policy development and strategic decision-making. It is a tool for common learning, understanding and utilisation. Precisely defining the objectives of policy measures is important in terms of the relevance of the evaluation. Therefore, more attention should be paid to creating monitoring and data collection systems. Enhancing competence and rectifying shortcomings in the knowledge base require investment and long-term development. In enhancing evaluation competence and developing the performance of evaluations, particular responsibility rests not only with public expert and funding organisations but also the Government Institute for Economic Research (VATT), VTT Technical Research Centre of Finland, the Ministry of Finance, and other ministries and research organisations that are important with respect to education, research and innovation. The development project for evaluating and measuring the effectiveness of research 32 Research and Innovation Policy Guidelines for

35 and innovation that was launched in 2008 by Tekes and the Academy of Finland, and which is still ongoing, is one of the most important projects. These organisations have taken this work as far as they can on their own. The reorganisation at the national level of the evaluation work performed by public actors in research and innovation should be considered in evaluating impact. Finnish actors with evaluation responsibility must strengthen international cooperation in evaluation at the Nordic level, and in EU and OECD cooperation as well as globally. Organisations have often performed self-evaluations or commissioned evaluations of their own operations. The focus has frequently been on the evaluation of an individual programme, project or instrument. These kinds of operational evaluations can be justifiably considered to be part of the organisation s own operational development. However, the independence of the body being evaluated must be highlighted when it comes to strategic evaluations and evaluations covering the entire organisation. As far as is possible, performance and quality objectives should be set for policy actions, and mechanisms for monitoring the attainment of objectives should be specified. Enhancing the effectiveness of measures calls for the development of the knowledge base and indicator systems and an improvement in their quality in a way that also enables new indicators to be created. The key actors are the Ministry of Education and Culture, the Ministry of Employment and the Economy as well as expert and funding organisations in the sphere of education, research and innovation. The problems relating to evaluations include the limited utilisation of evaluation results, unclear development responsibilities and the division of labour in evaluations, as well as the fragmented nature of expertise. There are also shortcomings in the development of the measures and in the knowledge base. Assesment of impacts is still new, and established operating models do not exist. Evaluations should be more closely linked to other development work and decision-making. Evaluations should be examined as a whole and the reorganisation of activities considered. In developing evaluations, particular attention should be paid to the successful organisation and division of responsibility of the activities. Those undertaking performance guidance and financiers have often carried out evaluations themselves or ordered them from external experts. There is justification for ensuring that the ordering party and object of the evaluation do not have a direct link in the evaluation. The evaluations of organisations and significant instruments in terms of their volume as well as actions should be performed more independently than at present. All organisations that support research and innovation will be evaluated systematically in the future. The operations of research and innovations funders have expanded and the funding they allocate has increased positively. This has increased the need to evaluate the effectiveness and impact of all public support service providers in a more comprehensive and precise manner. The position of the Academy of Finland and Tekes within the innovation system is key, and it has become even stronger. It needs to be ensured that the services offered by funders are allocated in a focused and appropriate way and that they are sensible in terms of developing the competence needs and activities of customers. The Ministry of Employment and the Economy will launch an evaluation of the operations, results and effectiveness of Tekes in The evaluation will be performed independently by external experts. An evaluation of the Academy of Finland will take place in Research and Innovation Policy Guidelines for

36 The European Union As international interaction continually comes ever closer, more attention needs to paid to improving the effectiveness of cooperation. Those geographic areas that have high-level special expertise and development potential, especially within research and competence areas important to Finland, need to be prioritised in cooperation on education, research and innovation. Engaging in closer cooperation, especially with leading global partners, requires that world-class competence exists in Finland. The EU constitutes a natural frame of reference for international action for Finland. In Europe, education, research and innovation have become important policy fields that aim to support governments economic and employment policies in a more conscious way. This development is also reflected in the actions and regional cooperation of the EU and its member states. Topical issues in terms of the future of the European training, research and innovation area include the Europe 2020 Strategy and its flagship projects, such as the Innovation Union and the Digital Agenda. Finland is a proactive and influential partner in the EU and in the initiatives of the European research and innovation policy, such as in deepening cooperation within national R&D programmes and promoting top-level European research. In this way, we can exploit the opportunities within the EU to strengthen our expertise in selected fields and promote a knowledge-based economy in Europe. Finland is a high-profile actor in promoting new instruments (such as public procurement, lead markets, demand and user-driven approaches, and IPR practices). Finland supports actions that strengthen the position of education, research and innovation as well as resources for them within the EU. Funding for high-level scientific research must be strengthened both within the EU and in member states. The application and diverse utilisation of knowledge and competence will be promoted increasingly through financial and other means. Research and innovation funded by the EU should always aim to create European added value. EU actions need to boost multilateral cooperation. Only projects that cannot be implemented nationally must be supported through EU funding. In order to improve the quality and effectiveness of research and innovation as well as to strengthen global cooperation, the EU s interaction with third countries and parties needs to be strengthened, especially in defined, selected areas. From Finland s perspective, cooperation in education, research and innovation within, for example, the Nordic and entire Baltic area needs to be significantly strengthened, and especially in a way that would also promote broader cooperation at the EU and global level. Opening up national programmes and funding is a way of promoting the development of the European research and innovation area. In this respect, the EU has not made much progress. However, opening up programmes and funding is necessary for strengthening competence and competitiveness, as well as in terms of the positive development of the research and innovation area. Progress needs to be made in a way that makes room for voluntary joint pilot projects of member states. Effective principles, procedures and criteria must be sought and, where appropriate, legislation harmonised. Finland must participate in the most promising trials. The EU must devise initiatives that can assist in coordinating education, research and innovation policy actions within the EU and their exploitation. How successful the EU is in building a competitive education, research and innovation area will be crucial for the EU achieving its goals for the 2010s. 34 Research and Innovation Policy Guidelines for

37 What is essential in terms of the efficiency of the activities and effectiveness of funding is that research and the key programmes and structures funded by the EU (such as the framework programmes for research, ERC, EIT, JTI) as well as the work implemented within the most important European research infrastructures (e.g. ESA, CERN, EMBL) complement each other strategically. It is important to be able to link domestic programmes to EU-level research and development programmes. Finnish research organisations and companies have succeeded relatively well in the application rounds for EU research programmes, and Finland is a net recipient in EU R&D funding. On the other hand, in proportion to the number of researchers and the R&D intensity, Finland s participation does not reach the EU average level. Therefore, creating and supporting support structures for research organisations is vital. In order to support focused internationalisation, quantitative foreign funding objectives must be set for each organisation. The share of EU funding of the entire R&D funding for universities and research institutes needs to be doubled in the 2010s (5.8% in 2009). The SME sector in particular has to increase its own participation in international cooperation. The number of Finnish SMEs participating in the EU s Research Framework Programme is modest. On the other hand, the needs of SMEs should be better considered in EU projects. Enterprises need more relevant development actions and instruments that meet their needs over the short and medium term. There must be an improvement in the programmes flexibility and reactions to changing conditions. It will be important to increase the transparency of application processes and programmes, implement risky projects and reduce bureaucracy. Enterprises should also actively make use of other international cooperation channels, such as COST and Eureka. Research and Innovation Policy Guidelines for

38 2.2 Structural reforms: supporting innovation environments Structures of higher education institutions In recent years, universities have been reformed to enable them to achieve the highest international level in scientific research. The legal personality of the universities was amended as a result of the Universities Act on 1 January The Government has made significant additional investments in the universities. Their new autonomous status provides the universities with the opportunity to expand their funding base and develop their own HR policy. The universities have sharpened their profiles in line with their strategies within areas of education and research in which they excel. The resources of Finland s higher education institutions are underutilised. The current provision of education is disproportionately high and the use of educational places is ineffective. In Finland, 43 per cent of year-olds are in higher education, in other OECD countries the figure is only one-fifth. Only around a half of university students complete a degree in the objective time frame of 7 years. Sixty per cent of students at polytechnics complete a degree in five years. The average age at which students complete a higher university degree is and 25 for a degree from polytechnics. Small and less centrally located units frequently encounter problems in attracting students. Students have limited opportunities to choose. Support services are lacking and the conditions for education, research and innovation inadequate. Four of Finland s research universities have not had a single centre of excellence in research (nominated by the Academy of Finland) in the years The overly fragmented nature of the higher education and research sector, the prolongation of studies as well as increasing internationalisation require decisive development measures. As a result of limited profilisation and specialisation, the higher education and research system does not serve national and regional needs in the best possible way. Structural development must be accelerated in order to strengthen the quality and effectiveness of the sector. All higher education institutions must have the capacity to engage in high-quality and international operations. There are still too many higher education units. The fragmented nature of the higher education field is illustrated by the fact that a reduction in units from the current number of 130 to 50 units would only affect 10 per cent of the provision of teaching. Together with the reduction in the size of age cohorts, completing degrees within a standard time and raising the pass rate to 75 per cent would enable new places at higher education institutions to be reduced in theory by 10,000 places. By eliminating duplication, adjusting the intake to the size of the decreasing age cohorts and accelerating studies, it would be possible to free up an estimated EUR million. The resources that are freed up must be allocated towards accelerating the time needed to complete studies, strengthening the priority areas and profiles of higher education institutions, as well as boosting scientific research, the conditions for research careers and research environments. The teaching, research and innovation activities and a regional impact of polytechnics must be strengthened. 36 Research and Innovation Policy Guidelines for

39 The models for financing universities and polytechnics will be reformed by the year The models must support higher education institutions teaching and the quality of research, internationalisation, effectiveness and profileraising activities. The weight given to research in steering and funding models must be strengthened. The models for universities must adopt criteria that support the quality and exploitation of research. The prerequisites for teaching and research that aims to achieve an internationally high level will be created through structural solutions, discretionary investments and steering. The number of new places in education within multidisciplinary research universities aiming to be among the best internationally will be reduced. The resources that are thus freed up should be used for the teaching, research and research environments of the universities concerned. The Finnish higher education system has been developed on the basis of a dual model. The universities have strengthened their ability to undertake high-quality scientific research, artistic activities and provide research career opportunities, as well as their position in the international field of research and innovation. The strength of the polytechnics is their interaction with companies and other appliers and developers of knowledge. The core function of polytechnics is to train competent individuals who can update their competencies and apply their knowledge in practice. Polytechnics develop technology, management, marketing and services and other fields of knowledge that are vitally important to the business sector and the public sector. The research undertaken within polytechnics is essentially applied research. Polytechnics are important contributors in the changes and internationalisation taking place within the business community and public sector in their regions. The status of polytechnics in the innovation system will be clarified and strengthened. Polytechnics meet regional needs and aim to achieve the highest level in teaching that serves the practices in their fields of strength, applied research and development. Cooperation between the polytechnics and universities is already currently extensive in many areas. This trend needs to be continued and supported. In regions with smaller polytechnics and universities, the creation of stronger alliances between higher education institutions should be enabled. Universities and polytechnics could have strategic alliances, joint units, services, programmes and campuses. The functioning, quality and effectiveness of the innovation system will be improved by merging competences and functions. Reforming the public research institute sector The structural development of the innovation system was initiated under a Government resolution in the spring of However, despite numerous reports and policy papers, there has been little progress in reforming public research institutes. No major reforms have been undertaken at the system level. The most important structural solutions have included the division of the functions of the Finnish Institute of Marine Research between the Finnish Meteorological Institute and the Finnish Environment Institute, and the merger of Stakes (the National Research and Development Centre for Welfare and Health) and the National Public Health Institute to become the National Institute for Health and Welfare (THL). The Ministry of Agriculture and Forestry and the Ministry of the Environment have set up the LYNET consortium of six research institutes in their administrative sectors (the National Food Agency, the Research and Innovation Policy Guidelines for

40 Finnish Geodetic Institute, MTT Agrifood Research Finland, the Finnish Forest Research Institute, the Finnish Game and Fisheries Research Institute, and the Finnish Environment Institute). The Advisory Board for Sectoral Research was appointed in 2007 in order to improve the effectiveness of the steering and coordination of research institutes. The tasks and composition of the Advisory Board were reformed in However, adequate coordination of the Government s strategy, policy objectives, budgeting and steering has not been achieved through closer cooperation. The system, based on agreements reached within the framework of the Advisory Board, is not effective at reallocating resources according to the changing needs of society. The Advisory Board s subcommittees have drawn up research programmes. Organising funding has proved to be an obstacle to initiating the comprehensive and socially important programmes. Resources are tied to the budget funding of research institutes. The State s budget funding is allocated unequally between administrative sectors and fields of activity. In addition, access to external funding varies in different research fields. The ministries do not have adequate knowledge about commissioning research nor do they have any uncommitted funds, which is a prerequisite for developing a purchaser provider model. The knowledge base for examining research issues is narrow. The utilisation of research data in decision-making is not at a sufficiently adequate level. On the other hand, the ways in which researchers make new knowledge and their expertise available also need to be developed. Three perspectives need to be given consideration in developing the research institute sector. It must be ensured that the Government receives research data for strategic management and evidence-based policy needs. Ministries also need an increasing amount of research data on their operating environment, the acquisition of which requires uncommitted appropriations. The third perspective concerns research institutes and their structures as part of the innovation system that is becoming increasingly international. The research institute sector as a whole is heterogeneous and fragmented, and research institutes have overlapping functions with higher education institutions. The division of labour is not clear. Many research institutes undertake high-level scientific research that is relevant to society. They also have infrastructures of a high standard and internationalisation support services. Many institutions succeed to a high degree in competition for funding from the EU s framework programme. The relative citation index, describing the effectiveness of publication activities, is high in many research institutes. The importance of research institutes as independent actors in multidisciplinary and applied research is increasing. Institutes can act as bridge builders in the creation of forums, structures and strategies that provide a way of pooling resources to solve problems relating to the climate and natural resources, health, energy and food security. Coordinating the funding and steering of research institutes at government level is a necessary prerequisite for ensuring that the research institute sector can be reformed and the priorities changed in accordance with the changing needs of society and decision-making. Structural reforms require strong political steering of the measures. Public research institutes must be developed so that multidisciplinary, high-level and relevant research with respect to society is strengthened. There needs to be considerably fewer units than at present. The aim is to improve operational productivity through means such as freeing up resources from fixed structures and research support services. Fragmented and overlapping operations should be eliminated and research compiled by subject area. Research institutes and higher education institutions should establish joint infrastructures and support services. At the 38 Research and Innovation Policy Guidelines for

41 same time, the division of labour between higher education institutions and research institutes should be clarified. The strategic steering of public research institutes will be strengthened at government level. A specific body with appropriate authority comprising users of research information and representatives of research and innovation organisations will prepare the issues required for political decision-making, ensure the performance of research needed by the government and steer the structural development of the sector. Working groups can be appointed to complement and directly support the activities. The research priorities serving the Government s activities will be specified at the start of the term of government, policies on the structural development of the public research institute sector will be drawn up and the required resources organised. The body will draw up an action plan extending to 2020 on structural development and the allocation of resources. Resources will be redirected to knowledge-intensive sectors and international level research in accordance with the changed needs of society. The action programme will specify what percentage of public research institutes resources will be channelled to horizontal projects serving decision-making and how much will be allocated as uncommitted appropriations of ministries and to developing the competence of research institutes. Research institutes will receive full budget funding for their official tasks. The necessary reallocation between the ministries will be undertaken in the programme. Research infrastructures Research infrastructures constitute a key part of the national strategy. There has been significantly less investment in infrastructures in Finland than in many of Finland s cooperation and competitor countries. Research infrastructures are essential in developing expertise and technology as well as in strengthening high-level education, research and innovation and multilateral cooperation. Infrastructures also affect location decisions of international companies. For a small country like Finland, infrastructures must be developed through national and international cooperation. Finland s first national-level research infrastructure road map (2009) set out proposals on establishing new infrastructures and using existing ones more effectively. The road map also examined interest in the EU s ESFRI (European Strategy Forum on Research Infrastructures) initiatives. Investments in infrastructures of this size have been rare to date in Finland. The national infrastructure policy is also international. In terms of the success of Finnish innovation environments, research infrastructures have to be of an internationally high standard and be competitive. This makes it possible to engage in full cooperation with leading centres and experts, and strengthen high-level competence in Finland. The opportunities opened up by global and many European cooperation arrangements must be exploited to a greater extent. This requires joint decisions and actions between the various administrative sectors as well as between public and private actors. The road map has in practice been under-resourced and has not been implemented. Some national commitments and small-scale funding has been allocated in the years on an individual basis to a few, partially international infrastructures presented in the road map: atmospheric sciences, bio and health sciences, and e-infrastructures to update high-performance computing and to establish a new data centre. Research and Innovation Policy Guidelines for

42 The preconditions for the national infrastructure policy include the creation of strategic decisions, structures, and operational processes in all relevant organisations. Cooperation efforts and investments by different sectors and organisations should be pooled and used for current road map projects and new needs. The road map presented proposals on sustainable funding principles, the formulation of an infrastructure policy and the establishment of a related organisation as well as proposals on the required resources. Decisions regarding these proposals have yet to be made. In order to create operating structures, a permanent national research infrastructure body will be established, which is allocated enough resources and other means to ensure its effective operation. The body will formulate an infrastructure policy in line with the education, research and innovation policy guidelines, and strengthen broad-based cooperation with national and international actors. The ministries, expert and funding organisations as well as users will participate in the work. Development will require making more effective use of current infrastructures through cooperation between the different organisations and sectors, as well as joint investments in new needs. The systematic and pooled development of infrastructures and financial management requires a separate budget item. Infrastructure policy, its organisation and funding will be monitored and evaluated regularly. The road map will be updated where necessary, however, at least every three years. Access to and use of public data The use of public data repositories in Finland is underdeveloped compared to leading EU and OECD countries. The production of information by the authorities, registers and research material constitute a globally unique fund of knowledge for developing research and innovation and the information society. Efforts will be made to improve access to materials through measures carried out within the ministries and through their joint development actions. In addition to the Government s policies, the Ministry of Finance, the Ministry of Transport and Communications, and the Ministry of Education and Culture, in particular, coordinate projects common to all administrative sectors to advance the use of repositories. The importance of data in a high-level knowledge economy is increasing. More extensive access to materials and e-services that make use of them will increase the efficiency of research and innovation, make new discoveries possible, and allow the use of material in new contexts in an innovative way. Access to materials and the application of data will promote user-driven exploitation of knowledge. Achievements in the utilisation of research and data have been brought about most successfully in countries that understand the way how to link information policy, legislation, e-services, the research culture and commercial exploitation to each other. Success in the exploitation of data is based on open cooperation between various sectors and the coordination of national development. Many demanding challenges have to be solved. A considerable proportion of material is currently difficult to find and use. The problems relate to the organisation and quality of the material, the fragmented nature of various actors and systems, and the terms of use and services supporting the use of materials. The full exploitation of materials will require structural changes, common policies, new services, a clear division of roles and cooperation as well as resources for reforms. Open access calls for measures such as the creation of common data repositories and the development of e-services that support their use. The grounds and pricing for the shared use of data should be harmonised and technical and legal so- 40 Research and Innovation Policy Guidelines for

43 lutions supporting them should be developed. The reforms should safeguard personal data protection and take into consideration competition in public knowledge production in relation to private actors in the sector. A national information policy supported by common e-services is needed in order to exploit data materials more effectively. A long-term funding system for developing the data infrastructure will guarantee that existing and new materials can be easily accessed using online services and without jeopardising personal data protection. There are several concrete recommendations for actions. Data policy will be implemented from the level of Government, across all administrative sectors, down to the activities producing the data. The Government will issue a resolution at the start of its term of office on the basic guidelines for the information policy. Legislation will be amended in accordance with OECD recommendations and EU directives (e.g. the Act on Criteria for Charges Payable to the State, the Statistics Act, and copyright legislation). The management of information policy in public administration will be strengthened by the Ministry of Finance. The coordination of actors and the compatibility of strategies and development projects within national projects should be improved. The ministries will determine the roles and objectives of state organisations in producing and disseminating data and information. Common practices and principles for storing and exploiting data within the public sector and research organisations will be created. A common long-term storage system for research data should be established. Public data should be available as a general rule at minimum expense. Attractive poles of excellence Innovations are often produced through cooperation between different parties in networks that develop around special expertise. The actors in the networks locate themselves in places offering the best operating conditions. One of Finland s biggest challenges is to create and maintain world-renowned clusters that can act as nodes that attract innovation actors, businesses and capital. Finns need to be proactive in their areas of strength in transnational cooperation networks. Large, multidisciplinary centres have the best capacity to become global poles of excellence and innovation, encouraging creative and open research environments, dynamic labour markets and high-quality business services. A rich variety of expertise and a critical mass provide the conditions for creating innovations at the interfaces of various fields of knowledge and strengthen the ability of the operating environment to innovate. The SHOKs (the Strategic Centres for Science, Technology and Innovation) are one of the most important new research and innovation policy instruments of recent years and are also platforms for broad-based cooperation. The six centres currently have a total of over 200 owners, the majority of which are companies and the rest mainly higher education institutions and research institutes. The operations of the strategic centres have got off to a promising start. In the future, consideration must be given to their long-term funding, strengthening the R&D dynamics and the introduction of good operating models, for example, through evaluations. In the light of current information, it would not be appropriate to set up any new centres. Support for the operations of the strategic centres should be continued and the operating conditions for developing a knowledge base in the different fields safeguarded. The task of the centres is not only to support new companies and fields but to raise our traditional industrial base higher up in the value chain. What is important is that the results Research and Innovation Policy Guidelines for

44 of the centres are also broadly utilised outside the centres. Public funding for the strategic centres has to date mainly been the responsibility of Tekes, the Finnish Funding Agency for Technology and Innovation. In the years , it has provided funding in the region of EUR 120 million for research at the centres. Around 20 per cent of Tekes funding is planned to be allocated to the strategic centres in 2012 (cf. approx. 14% in 2010). The Academy of Finland has also financed the strategic centres and reserved funding as of 2011 especially to be allocated to the centres fields of operation. The national funding base must be expanded in the future with a focus on private funding, and an increasing amount of funds must be acquired from abroad. It must be ensured that funding procedures react quickly to needs. The objectives of the strategic centres include that their high-level expertise and reputation attracts innovative and leading global companies and top international experts to Finland. At their current stage of development, the strategic centres have not yet reached this objective, but in the near future, the acquisition of international expertise and investments will be topical and necessary. An evaluation of the operations and effectiveness of the strategic centres needs to be undertaken. This would involve identifying effective practices, their transfer into practice and creation (including administrative operating models, building research agendas, cooperation practices between owners of the strategic centres and in relation to external parties) and reviewing the results to date. The objective of the evaluation will be to accelerate the development of research and innovation undertaken by the strategic centres and to enhance the effectiveness of the results. The Ministry of Employment and the Economy will initiate an evaluation during Finland s visibility and attractiveness as an operating and living environment as well as a cooperation partner needs to be considerably enhanced. Internationally competitive, highprofile, and attractive innovation environments should be created. Domestic actors need to focus greater attention and resources on the opportunities opened up by working together, interaction and new combinations of different competences. A high-level of competence in Finland is a prerequisite for successful interaction at home, in working with leading centres and in promoting development in areas needing support. In order to improve the societal impact of research and innovation investments, regional and local level development measures as well as national policies must both interact with and support each other. In this way, successful choices concerning priority and specialisation fields can be promoted and the transfer into practice of the results of research and innovation can be enhanced. The same applies to the coordination of regional policy that strengthens knowledge and competence by means of research and innovation policy. The key actors in this are the Ministry of Employment and the Economy together with the Ministry of Education and Culture. Coordinating actors at the regional level are the Centres for Economic Development, Transport, and the Environment, technology centres as well as regional offices of research institutions and local, including private, educational, research, and intermediary organisations. The central role played by the regions and the clear objective of the various programmes are essential in joint strategy processes and actions. The coherence of national and regional development measures will be strengthened in jointly agreed fields and sectors of the innovation system and in chosen instruments. Policy actions that support the strengthening of the strategic centres should be drawn up in close cooperation between the 42 Research and Innovation Policy Guidelines for

45 ministries, higher education institutions and the largest conurbations. Cities and higher education institutions in many areas are independently creating high-level innovation environments. The State and major cities have the best public resources for building attractive environments. The more strategic and effective use of these resources would accelerate the entire country s growth. Strengthening innovation environments does not mean allocating national innovation policy resources to regions, and neither does it mean the advance selection of poles of excellence as target areas. Interaction aiming at significant synergy benefits can be improved by means of strategy processes and coordinated joint operating models, which can eliminate duplication between various actors and instruments and strengthen weaker areas as well as enhance use of resources and effectiveness of measures. The international evaluation of the innovation system provided new ideas to this review. However, their implementation is still ongoing. The interim evaluation of the Centre of Expertise Programme ( ), which promotes regionbased research and innovation, was published in the summer of The aim has been to boost cooperation between actors and regions and the networking of competence. The aim is to create interesting and competitive poles of excellence in terms of their content. The Centre of Expertise Programme has been highly effective in deepening the division of labour and cooperation between regions, identifying areas of strength and making choices, and, in particular, in developing the competitiveness and appeal of small localities. Through the programme, knowledge and expertise have been disseminated and refined for broader utilisation in Finland. Making progress in this context requires that the range of regional policy programmes and other measures for supporting the basic requirements and competencies for regional development are improved. The impact of the Centre of Expertise Programme has been hindered by the programme s multilevel structure, incoherent cooperation and operating practices, the fragmented allocation of resources, and the programme s unclear role in promoting innovation by companies. The programme s role in the middle ground of national innovation policy and region-based development work has not been specified in an effective way. The objectives of various policy sectors have not been coordinated. The measures and resources of the Centre of Expertise Programme will be redirected after the programming period ends in The programme model will be revised and the activities updated at the end of the current period. Effective tools and cooperation platforms based on regional strengths and needs should be created in both research and innovation policy as well as in regional policy. A clearer mission and clearer objectives for strengthening expertise, cooperation and internationally competitive poles of excellence and innovation environments are needed. Tools for implementing the objectives of the national innovation policy should be clearly distinguished from tools that aim at strengthening regional vitality. A more effective tool and cooperation platform should be created separately for research and innovation policy (e.g. world-class expertise and cooperation, the creation and introduction of new knowledge) and regional policy (e.g. strengthening the basic conditions for expertise and cooperation to meet the demand and needs of regions and the labour market). Research and innovation as well as regional development instruments would both be more effective in their own policy sectors and have clearer objectives and measures. The skills base should be strengthened through various means and levels of ambition nationally and in centres and regions of differing levels. Research and Innovation Policy Guidelines for

46 2.3. Strengthening human resources Globalisation is changing Finland s business structure. New jobs have been created, especially in the service sector and expert and research tasks demanding high-level expertise. Continuous change in the structure of professions and an increase in skills requirements are typical of the development in the labour market. The basic conditions for operating successfully at the global level are created through education. The educational level of the population in Finland has risen steadily. The educational level within younger age groups is relatively competitive at the international level, although taking into consideration all age groups, it is only the OECD average. There is still a long way to go for Finland to become a leading country in knowledge and creativity. Maintaining a comprehensive, high-level education system that has a broad content is well-founded. The abilities of Finnish school children are among the best in the world. Excellent learning outcomes and educational equality have been achieved at moderate cost. These achievements must be extended to higher education. The educational level of the population will be raised. As a result of cohorts decreasing in size and the more effective use of educational places, the number of new places in higher education can be reduced in the 2010s. The objective is that by the year 2020 the proportion of year-olds who have a university degree will be 42 per cent and the proportion of dropouts of year-olds would remain under 8 per cent. The educational reserve, its assessment by area and level of education should better correspond to future demand for labour. The need for education and skills of varying levels is illustrated by the fact that among R&D employees (approx. 80,000 in 2009) only 14 per cent had a doctoral degree and over 40 per cent had no university-level degree at all. The aim is to raise the proportion of those with a doctoral degree to 20 per cent of R&D employees. Taking care of intellectual resources and the availability of skilled labour means that the provision of education is adequate, of high quality and targeted correctly at all educational levels and in all forms of education. Successfully assessing and directing education and competence requires close coordination in planning and development actions between actors at the regional level as well as a common knowledge base and foresight. The number of student places in higher education will be reduced in the 2010s. However, public expenditure allocated to education will not be reduced. Resources saved through reducing the number of new places, shortening studying times and raising the pass percentage will be reallocated in a way that improves the quality and effectiveness of education and research. The provision of education should be tailored on the basis of the long-term needs of the labour market. 44

47 According to an evaluation by the Ministry of Education and Culture, there will be a need to reduce education during the 2010s in fields such as applied arts, communication and information sciences, computer science, electrical and automation engineering as well as in the tourism sector. Provision would need to be increased in the social welfare and health sector, in medicine, mechanical engineering, metal and energy technology and cleaning services. According to another evaluation, the number of places in Ph.D training needs to be reduced in the culture and arts, economic sciences, management, electrical and automation engineering, computer science and health sectors. There is a need for an increase in the medical, legal, chemistry and process and materials engineering sectors. So-called generic skills, which means the ability to solve problems, analytical skills, critical thinking, knowledge management, as well as interaction and performance skills, will be highlighted in all sectors in future competence. Entrepreneurial and management skills are also essential. The importance of these skills in the labour market has continuously increased. The international development of skills assessment will assist in better understanding the nature of skills and abilities. Structural changes in the nature of work have gathered pace alongside the creative destruction that has contributed to Finland s productivity development for a long time (in other words, work places with low productivity are replaced through competition with places of high productivity). Workers transfer from one job to another within organisations and sometimes as the content of the job continuously changes. In this development, the employees diverse skills and mobility are emphasised, the advancement of which requires new incentives and security that balances the uncertainties of the labour market. The importance of lifelong learning and maintaining expertise is increasing. Keeping up with the change requires sufficient opportunities for updating professional skills. In order to strengthen intellectual capital and meet educational needs, the recruitment base and activities must be expanded, education must be made international in scope, and the quality of education improved. The key is internationalisation based on the high level of education and research, the attractiveness of a research career, increased mobility and more active participation in international organisations. New, targeted resources are also needed to support this. In order that the quality of university education and research can be improved in the future, the universities must seek a competitive advantage, and recruit gifted, young researchers as well as senior researchers who are distinguished in teaching and research work. One of the key national challenges is to succeed in recruiting the most gifted individuals. In addition to a high-quality research environment, there is a need for a predictable career and opportunities for long-term research with an internationally competitive salary. Some of the biggest problems with a research career include unpredictability, the difficulty of moving between sectors within a research career, the reconciliation of work and family, ensuring gender equality, the limited degree of national and international mobility, and the weak financial position of researchers. The aim is that there will be 1,600 graduate school places. A greater proportion of postgraduate students will enter scientific and high-quality doctoral education and in this way receive diverse working life skills. The aim is to produce younger doctoral students who graduate more rapidly from graduate schools that have good networks and are more multidisciplinary and international. The number of R&D employees with a doctorate has increased, and researchers can be found extensively in various sectors in society and business life. Research and Innovation Policy Guidelines for

48 An evaluation of graduate schools will be carried out by the year 2013 at the latest. The evaluation will examine issues such as the number of graduate schools, the quality of education and the development of its content, as well as the functioning of the schools as part of the universities, and cooperation with research institutes and other partners. The quality of postgraduate education will be brought up to an internationally high level. In terms of policy measures and their systematic monitoring, statistics need to be developed to determine the number of doctoral students and doctors, their individual fields of expertise and job prospects. Of the heterogeneous group of those holding a doctor s degree, it is important that the group who should be the particular focus of decisions and who can be influenced most clearly are identified. The progressive tenure track for researchers will cover, where applicable, other sectors alongside universities and research institutes. The model is based on the parallel development of instruments of public and private research financers and the structure of positions in universities and research institutes. The starting point is to clarify the different stages of a research career and to base advancement in the research career on common criteria through external evaluation. For example, Aalto University and the University of Helsinki have already launched a new research career model. Funding for a research career should be based on joint funding, which is the most effective means of acquiring the necessary resources for its development. It can be partly implemented utilising existing resources and allocating them effectively. Additional funding must be allocated to internationalisation and increasing the number of Academy Research Fellows. Creating a tenure track for young, promising researchers is the priority. The early stage of a research career requires transparency. Creating and establishing a tenure track model will need a long transitional period, during which the traditional model must be preserved, where applicable, alongside the new practice. The allocation of resources for the model must be carried out through joint measures by higher education institutions, research institutes, and cooperation and funding organisations. The tenure tracks must be harmonised, and not be specific to each university. Research careers will be promoted by implementing a high-quality research career system and by improving the transparency and predictability of the various stages of a career. The attractiveness of research careers will be boosted and post-doctoral education strengthened. According to an incidence model created in a foresight project to evaluate the need for doctoral graduates in 2020, a figure of 1,600 doctoral degrees a year is in balance with the labour market demand for doctoral graduates. The requirement is that the trend in employment of doctoral graduates in recent years within various expert professions and sectors continues to be positive until the year According to various reports, doctoral graduates have a high rate of employability; the share of those who are unemployed after taking a degree is small. The share of doctoral graduates who are employed by companies and organisations is increasing. At the start of the new millennium, 2,100 doctors were employed in the private sector. The figure at the end of 2007 was nearly 4,500. Mobility between sectors must be enhanced by increasing the resources allocated to mobility and by creating incentives for this. Higher education institutions and public research 46 Research and Innovation Policy Guidelines for

49 Satisfying the need for skills in business requires the close participation of companies in research and education carried out in postgraduate education as well as in developing adult education. The availability of skills and mobility can be improved in many ways that are still underutilised in Finland, such as: the long-term commitment of companies to the activities undertaken by universities and polytechnics and to educational cooperation increasing the amount of education in HEIs given by those working in companies a support programme for employing those who have graduated from a HEI in R&D work in (SME) enterprises tailored postgraduate and research programmes at HEIs and research institutes for those working in industry Agreements by companies, universities, polytechnics and research institutes on fixed-term research exchanges, for example, measures aimed at employees in industry in public R&D organisations. sabbaticals for researchers to work in companies institutes should build strategic, long-term partnerships and come up with funding solutions that support this together with steering, funding and cooperation parties. In Finland, there is a shortage of labour in certain sectors and high structural unemployment dating from the past. In addition, work and jobs have been lost in the global recession. Attempts to eliminate the barriers to using the skills of those with a foreign background have not been successful. The key development target is improving mobility of highly educated people, and especially doctoral graduates, between (research) organisations and sectors in Finland and internationally. While we need more intellectual resources and domestic researcher and expert interaction, working and visibility abroad must be increased. Improving the quality of higher education institutions requires measures that aim in particular at identifying and attracting promising young researchers and ensuring they stay in Finland, and at developing the international scope of graduate schools and the research career system and their mechanisms. For example, the FiDiPro programme (Finland Distinguished Professor Programme) has achieved good results, although the scope of the programme does not extend more broadly to recruiting foreign experts to Finland. The support services of national and local authorities as well as higher education institutions should be developed and provided resources as a joint service package. Research and Innovation Policy Guidelines for

50 The recruitment practices of education, research and innovation organisations will be made more transparent to attract international students, researchers and experts. Research places should be allocated to foreigners under flexible terms, and, where necessary, quickly. Residence and work permits, social security and the student financial aid scheme will be developed so that they support the recruitment of students, researchers and experts to Finland. The internationalisation of higher education institutions and research institutes needs to be accelerated through the implementation of steering and agreements that incorporate funding criteria which reward networking and risk-taking in Finland and internationally. Internationalisation objectives should be specified in concrete terms, including performance objectives in the form of indicators, and the means must be clearly specified. The internationalisation of higher education institutions and public research institutes must be enhanced through effective incentives that are linked to steering and funding models. Global competition for skilled workers is becoming more intense. Talented young people need to be kept in Finland and foreign workers recruited permanently to Finland. Finland s attractiveness and visibility must be enhanced through the national operating environment s factors of strength. Women have good opportunities to establish a research career in Finland. Practices must be changed to enable new kinds of recruitment models for researcher couples and families, as well as other people. The need to recruit more foreign workers in higher education institutions and companies will be met through work-based, skills-oriented immigration. Equality, irrespective of an individual s background, is an important competitive and attractiveness factor; multicultural environments act as favourable growth platforms for innovativeness. An active employment and skills-oriented immigration policy will be formulated along with the legislation to support it. More comprehensive implementation of the integration policy requires considerably increased resources. The comprehensive preparatory work on a policy for multiculturalism will be started by the Government in International competitiveness of the taxation of key, non-finnish individuals and experts will be ensured. The Government issued a resolution in spring 2010 on the strategic policy guidelines for exporting education. The aim is that the share of education of Finland s total exports should grow considerably by the year Trade in education is a globally growing market that offers a great many opportunities for Finland. The challenges for Finland include limited resources and legislation that restricts the operations of higher education institutions. The main export product around the world is higher education leading to a degree. A legislative amendment at the start of 2008 enabled Finnish higher education institutions to provide customised fee-based degree education to foreign companies and organisations, but not private individuals. The amendments made to the Universities Act and the Polytechnics Act initiated a temporary trial of tuition fees, whereby students coming from countries outside the EU/EEA can be charged tuition fees in programmes leading to a university degree. However, the main export for polytechnics is the bachelor degree. It has not been possible to meet the demand for education. Getting into the education market requires considerable initial investments and risk-tak- 48 Research and Innovation Policy Guidelines for

51 ing. Forms of support aimed at educational exports do not currently exist. Cooperation between higher education institutions, research institutes, financiers and export promotion organisations is inadequate. Legislation on higher education will be amended to support the export of education. In addition to domestic and foreign organisations, non-eu/eea students should have the opportunity to pay for education leading to a degree. communities guided by values and goals emerge through dialogue. What is needed is the ability to understand different opinions and commit to common development. Reforming management and the work culture in this direction is one of Finland s most important challenges and potential success factors in the 2010s. Effective structures for cooperation between the private and public sectors will be created. The establishment of business clusters will be promoted and new business opportunities actively sought. The Ministry of Education and Culture together with Tekes and Finpro will examine opportunities to create a funding instrument to support the initial stage in exporting education. Organisations and companies dependent on trust and high-quality education can introduce new models promoting the interaction and management of employees. New means to produce innovations require changes in the ways in which companies and organisations make use of people s initiative, creativity and commitment. In successful companies and organisations, new ideas are developed by getting employees to participate and by highlighting individual creativity. A good education system and skills potential must be transformed in working life into prosperity and productivity. The application of knoeledge and know-how is realised most successfully when individuals excel in flexible structures. Changes require motivated individuals and organisations. Trust between the employer and employees is ultimately created in each company and organisation. The continuous critical evaluation of activities by emplyees themselves is essential. Working Research and Innovation Policy Guidelines for

52 APPENDIX 1. Strengths, opportunities and challenges of Finland s ERI system (application from the source Internationalisation of education, research and innovation, Research and Innovation Council, 2009) Strengths: ERI policies implemented over the long term; high-quality ERI systems; structures and activities of public education and research organisations are being reformed; public sector and administration work efficiently and trustworthy; financing of R&D has been developing favourably for a long time; good educational level of the population; large number of R&D employees; quality and impact of research is of a fairly good standard; high volume of international patenting; close partnerships between public and private actors, active cooperation between the business community and public research; economy and business life have specialised in knowledge-intensive growth areas; knowledge-intensive businesses have remained in Finland; Foresight-oriented approach to major social and environmental changes (e.g. challenges to social and healthcare services, energy supply); sustainable development important: environmental issues prioritised; competence in environmental and energy technology globally among the best; strong evaluation culture and tradition; rich social capital: openness, trust, interaction, networking; Finland s good reputation as a country: trustworthy, safe (incl. stability of the business environment). 50 Research and Innovation Policy Guidelines for

53 Opportunities and Challenges: internationalisation of the ERI system; increasing the participation rate of research organisations and companies in international R&I programmes; active, strategically solid global cooperation policy: the best partners and competence are acquired irrespective of their location; in order to obtain foreign intellectual capital and investments, the attractiveness of Finland is increased in cooperation between various organisations; strengthening the quality and effectiveness of research: developing postgraduate education; creation of a genuine research career system; enhancing mobility; creation of internationally competitive infrastructures; pooling and prioritising resources that are too scattered; selective decision-making; more accurate quantitative planning and distribution of education and expertise in a manner responding well in demand (actors at various regional levels cooperating); strengthening the integrated development of social and technological innovations < > new operational models and forms are created, introduced and commercialised; demand and user orientation: shared goals and operational models are being structured; qualitative development and internationalisation of the service sector; increasing and merging business and marketing competence in education, research and innovation; enhancing IPR competence in a way that meets the demands of operating in a global economy; promoting growth entrepreneurship: the availability of venture capital will be improved through PPPs; the internationalisation of companies will be supported in a coordinated way; increasing the number of innovative enterprises and their R&D expenditure; strengthening the exploitation of expertise and technology; encouraging risk-taking and taking advantage of new opportunities; a more enterprise-friendly atmosphere. Research and Innovation Policy Guidelines for

54 APPENDIX 2. Trends in the funding for research and development The volume of Finland s R&D expenditure has developed especially positively in the 21st century. The level of over EUR 3.9 billion in 1999 rose to almost EUR 6.8 billion in 2009 (Table 1). Growth averaged 5 per cent per year. However, the trend has not been steady; the strongest growth was in the years (over 8%). The figure for 2010 according to Statistics Finland is EUR million, which means a modest 2 per cent nominal increase on the previous year (+ EUR 139 million). In 2009, the share of R&D expenditure accounted for business enterprises was over 71 per cent, the higher education sector 19 per cent, and the public sector 10 per cent. In recent years, the business sector s share of expenditure has risen and the other sectors have correspondingly declined. Besides R&D, the intensity figure was affected most of all over the last decade by two diverging economic trends. GDP grew very favourably in the years and , while the volume dropped dramatically in The share of GDP of R&D expenditure remained in between per cent for almost the entire first decade of the new millennium. In spring 2007, the Government decided to increase public R&D funding so that R&D intensity would rise to 4 per cent by the year The recession enabled the 4 per cent objective to be realised in The goal was achieved earlier than planned, even if for a different reason than was intended. When reviewing the overall development of R&D expenditure in the 2000s, it can be observed that the trend in expenditure in real terms was just slightly slower at the end of the decade (+21% ) than in the beginning (+23% ) (Table 2). Expenditure in the private sector grew fastest at the start of the decade. Growth was slower in the other sectors. During the latter half of the decade, business R&D expenditure decreased slightly, and the growth in the expenditure of higher education institutions slowed. This can also be seen in the division of R&D expenditure between the actors. Only business enterprises and polytechnics have increased their share of expenditure in the 2000s. The development of R&D expenditure by research institutes was moderate throughout the entire decade, though their share of the total expenditure dropped by two percentage points. According to Statistics Finland, business R&D expenditure in 2009 was EUR 4.9 billion (industry EUR 3.9 billion). This was EUR 255 million less (-6.5%) than the previous year. The statistics on business R&D have never previously dropped. All in all, the recession has affected R&D less than fixed investments, the reduction in which has been significant. Last year, R&D expenditure exceeded the volume of fixed investments. This raises more concerns about the weak development of fixed investments. In 2010, business enterprise expenditure on R&D expenditure increased nominally by 1.5 per cent (+ EUR 72 million) according to estimates, which if realised means a slight reduction in R&D expenditure in real terms. It is still unclear as to what extent the slowness in the economic recovery, problems in the financial markets and factors relating to changes in the division of labour in the global economy and sustainability of public finances will be reflected in the potential for the business enterprise sector to strengthen its activities through research and innovation. 52 Research and Innovation Policy Guidelines for

55 What is noteworthy is that R&D expenditure of Finnish business enterprises operating abroad increased in 2009 by nearly EUR 50 million (EUR 3.5 billion, +1.4%). The foreign volume has, however, increased moderately and not affected the relative share of R&D done within Finland. In 2009, 55 per cent of corporate R&D expenditure was spent in Finland, and in 2010, one percentage point less. Changes in R&D work and in the global division of labour can be seen in the trend for the number of employees. The number of R&D employees in industry decreased in Finland by over 10 per cent in Although the number of R&D personnel reduced in Finland, the number working in R&D abroad increased (+2.5%). Hence R&D employees abroad have tripled in recent years (9,000 in 2006; over 26,000 in 2010, i.e., 51 per cent of the total R&D employees of domestic companies). Development recommendations on public R&D funding have been given in connection with the development programme of this policy report. However, in terms of innovation activities by the public and private sector and projects for an experimental economy and society, it is not possible to give guiding recommendations. This is because of the lack of data collected on funding innovation as well as on other data on innovation activities, and the fact there is no established operational and statistical definition of innovation. The compilation of statistics on innovation must be improved so that the development of the activities can be better directed and assessed, and the political focus sharpened. It is positive that Statistics Finland has recently initiated the development of statistics on innovation in the public sector through domestic and international cooperation. The trend in government R&D funding in real terms was similar in both the beginning and end of the 2000s (Tables 3 and 4). Funding increased significantly in the 2000s, by over ¾ billion euro. The volume increased in 2010 for the first time to over EUR 2 billion. Almost 60 per cent (EUR 451 million) of the growth in the 2000s was allocated as competitive funding. The growth in real terms of the Academy of Finland has been more rapid than that of Tekes. With respect to universities and research institutes, the growth was more favourable at the start of the 2000s than in It can be observed when reviewing the allocation of R&D funding by each organisation that during the 2000s, only the Academy of Finland has increased its share. The shares of the universities, research institutes and university hospitals have decreased by 2 3 percentage points. Research and Innovation Policy Guidelines for

56 Table 1. R&D expenditure in the 2000s (EURO mill.) (estimate) Business enterprises Manufacturing Service sector Higher education sector Universities Polytechnics University hospitals Public sector Research institutes Public administration Other public sector Total Table 2. Trend in R&D expenditure in 2000s (in real terms; reference year 2000). Growth in real terms Share of R&D expenditure change %-point Business enterprises 26.1 % 22.8 % 68.2 % 71.4 % 3.3 % Manufacturing 22.9 % 23.3 % 55.7 % 57.2 % 1.4 % Service sector 36.7 % 24.0 % 12.4 % 14.3 % 1.8 % Higher education sector 23.0 % 15.1 % 19.7 % 18.9 % -0.8 % Universities 18.8 % 15.6 % 17.2 % 16.0 % -1.2 % Polytechnics % 29.8 % 0.7 % 1.8 % 1.1 % University hospitals -4.6 % -8.4 % 1.8 % 1.1 % -0.7 % Public sector 2.0 % 15.6 % 12.1 % 9.7 % -2.4 % Research institutes 3.0 % 14.4 % 9.8 % 7.8 % -2.0 % Public administration -7.2 % -3.6 % 1.2 % 0.7 % -0.5 % Other public sector 3.1 % 44.8 % 1.1 % 1.1 % 0.0 % Total 22.5 % 20.6 % % % 0.0 % 54 Research and Innovation Policy Guidelines for

57 Table 3. Goverment R&D funding in (EURO mill.) Academy of Finland Deduction of the technical increase in the Academy s figures Tekes Academy and Tekes total Universities University hospitals Research Institutes Other research funding Total Table 4. Growth in government R&D funding by organisation in Growth in real terms Share of R&D funding change %-point Universities % % 26.7 % 24.6 % -2.1 % Academy of Finland % % 11.9 % 18.7 % +6.8 % Corrected figure for Academy % 15.5 % +3.6 % Tekes % % 30.2 % 29.7 % -0.5 % Research institutes % % 16.7 % 14.4 % -2.3 % University hospitals % % 4.6 % 1.9 % -2.7 % Other funding % % 10.0 % 10.6 % +0.6 % Total % % 100 % 100 % Research and Innovation Policy Guidelines for

58 APPENDIX 3. Government Decree on the Research and Innovation Council of Finland 1043/2008 Section 1. Research and Innovation Council of Finland 1. For addressing important matters relating to the targeting, follow-up, evaluation and coordination of research, technology and innovation policy there shall be a Research and Innovation Council of Finland. The Council shall assist the Government and its ministries in matters within the purview of the Council. Section 2. The remit of the Council 1. The remit of the Council shall be to: (1) follow national and international developments in research, technology and innovation; (2) evaluate the state and developments within the sphere of its authority; (3) address major matters relating to the development of science, technology and innovation policy and the human resources they entail and prepare proposals and plans concerning these for the Government; (4) address matters relating to the development and allocation of public research and innovation funding on a preparatory basis for the Government; (5) coordinate Government activities in the field of science, technology and innovation policy; and (6) execute other tasks assigned to it by the Government. Section 3. Composition 1. The Council shall consist of the Prime Minister as chair, the Minister of Education and Science and the Minister of Economic Affairs as vice-chairs, the Minister of Finance and a maximum of four other ministers appointed by the Government. In the appointment of the ministerial members, care shall be taken to ensure that the administrative sectors of major relevance to research and innovation are represented on the Council. 2. In addition to the ministerial members, the Council shall comprise ten other members appointed by the Government for the parliamentary term. The members must comprehensively represent expertise in research and innovation. The Council shall have representation of the financing organisations in its domain and the performers and users of research and development. 3. If a Council member resigns or becomes incapable of executing his or her duties during the term of office, the Ministry of Education, after having heard the Ministry of Employment and the Economy, shall appoint a new member in his or her place for the remainder of the term. Section 4. Subcommittees 1. For the preparation of matters, the Council shall have a science and education subcommittee and a technology and innovation subcommittee. The Council may delegate the power of decision to a subcommittee in an expressly specified matter. 2. The science and education subcommittee shall be chaired by the Minister of Education and Science and the technology and innovation subcommittee by the Minister of Economic Affairs. The Ministry of Education shall appoint one member to the science and education subcommittee and the Ministry of Employment and the Economy one member to the technology and innovation subcommittee. Both shall serve as vice-chairs of their subcommittees. The other members of the subcommittees shall be appointed by the Council from amongst its members. 56 Research and Innovation Policy Guidelines for

59 3. The Council may also set up other subcommittees to prepare matters. 4. The Council and its subcommittees may consult permanent and ad hoc experts. Section 5. Operation of the Council 1. The Council and its subcommittees shall meet at the invitation of the chairman or, if he or she is indisposed, at the invitation of a vice-chair. 2. The Council is quorate when the chair or one of the vice-chairs and at least six other members are present. A subcommittee is quorate when at least half the members of the subcommittee, including the chair or the vice-chair, are present. 3. Matters shall be decided by simple majority. If the votes are equal, the chairman has the casting vote. Section 6. Secretariat 1. For the preparation of matters, the Council shall have a secretariat comprising a full-time secretary general and at least two full-time chief planning officers within the scope of the state budget. The secretary general shall lead the work of the secretariat. The secretary general shall be appointed by the Government after having heard the Council. The chief planning officer acting as secretary to the science and education subcommittee shall be appointed by the Ministry of Education and the chief planning officer acting as secretary to the technology and innovation subcommittee by the Ministry of Employment and the Economy after having heard the Council. 2. The qualification requirement for the secretary general shall be a Master s degree, proficiency required for the post and proven leadership skills. The qualification requirement for the chief planning officers shall be a Master s degree and proficiency required for the post. 3. In addition, other persons may take part in the Council s preparatory tasks. They shall be appointed by the ministries in a manner decided by the Council. 4. The Council s clerical work shall be performed at the Ministry of Education. Section 7. Fees 1. The amount of remuneration for attendance at meetings relating to the Council s work shall be confirmed by the Ministry of Education. The cost of travel shall be recompensed in accordance with the terms of the state collective bargaining agreement. Section 8. Entry into force 1. This Decree comes into force on 1 January This Decree repeals the Government Decree on the Science and Technology Policy Council of Finland (847/2005) of 27 October The Science and Technology Policy Council appointed under the Decree to be repealed shall function as the Research and Innovation Council referred to in this Decree until the new members are appointed after the next parliamentary election held after the entry into force of this Decree. 3. At the entry into force of this Decree, the secretariat of the Science and Technology Policy Council of Finland shall carry on as the secretariat referred to in Section 6.1 of this Decree. 4. Measures needed to implement this Decree may be taken before the Decree comes into force. 18 December 2008 Minister of Education Sari Sarkomaa Counsellor for Higher Education Juhani Hakkarainen Research and Innovation Policy Guidelines for

60 Appendix 4. Information on the indicators in Figures 3 and 4. INPUT INDICATORS YEAR TOP 5 COUNTRIES (by indicator) SOURCE 1. Government budget appropriations for R&D as % of GDP 2008 Spain, Portugal, United States, Finland, Iceland Eurostat, OECD 2. Average annual increase (%) in government budget appropriations for R&D Luxembourg ( ), Ireland, Spain ( ), Estonia ( ), Korea ( ) 3. Funding for basic research as % of GDP 2008 Switzerland, Israel, Korea, France (2007), Finland 4. Direct and indirect government funding of business R&D and tax incentives for R&D as % of GDP 2008 Korea, Canada, France, United States, Belgium (2007) 5. Share (%) of higher education expenditures on R&D financed by business enterprise sector 2007 Turkey, Germany, Korea, Iceland, Hungary Austria (2006), United Kingdom, 6. Share (%) of business sector R&D financed by abroad 2007 Slovak Republic, Hungary, Canada OECD STI Scoreboard 2009 OECD; RIC Secretariat OECD, Measuring innovation 2010 OECD database OECD STI Scoreboard R&D personnel as % of total employment 2008 Finland, Taiwan, Iceland, Sweden, Denmark OECD database 8. Foreign students as % of all students in higher education 2008 New Zealand, Australia, Switzerland, United Kingdom, Austria 9. Foreign-born researchers as % of total R&D personnel 2006 Luxembourg, Switzerland, Estonia, Cyprus, Ireland Denmark, Luxembourg, Iceland, 10. Expenditure on R&D in the service sector as % of GDP 2007 Sweden, United Kingdom 11. Venture capital investment as % of GDP (incl. seed, start-up and early growth stages) 2006 Israel, United Kingdom, Sweden, Australia, Belgium 12. Share (%) of foreign-owned companies of total turnover of the business enterprise sector 2009 Ireland, Slovak Republic, Hungary, Belgium, Czech Republic OECD, Education at a Glance 2010 Eurostat database Eurostat database OECD STI Outlook 2008 OECD STI Scoreboard 2009 OUTPUT INDICATORS YEAR TOP 5 COUNTRIES (by indicator) SOURCE 1. Scientific articles per million population 2. Citations received by articles 3. Funding received from EU 7th R&D Framework Programme per thousand researchers 4. Accepted projects in EU 7th R&D Framework Programme (number of projects / GDP) , total , total 2010, March 2010, March 5. Triadic patents per million population International co-operation in patenting: patents with foreign co-investors (% of all) Exports of knowledge intensive services as % of all service exports 2005, Share (%) of manufacturing firms undertaking non-technological innovation Share of turnover from product innovations (as a % of total turnover) 2005, Knowledge-intensive sectors as % of total employment (medium-high and high technology manufacturing sectors) Reduced use of materials and energy as a consequence of firms product or process innovation (% of all innovating firms) 2004, 2006 Switzerland, Sweden, Denmark, Iceland, Finland Switzerland, Iceland, Denmark, Netherlands, United States Cyprus, Netherlands, Belgium, Greece, Malta Estonia, Malta, Cyprus, Slovenia, Bulgaria Switzerland, Japan, Sweden, Germany, Netherlands Luxembourg, Romania, Chinese Taipei, Argentina, Iceland Luxembourg, Ireland, Denmark, United Kingdom, Germany Germany, France, Luxembourg, Austria, Belgium Malta, Greece, Finland, Czech Republic, Germany Czech Republic, Germany, Slovak Republic, Hungary, Slovenia Greece, Cyprus, Slovenia, France, Hungary Dansk Forskningsbarometer 2010; data: Thomson Reuters Dansk Forskningsbarometer 2010; data: Thomson Reuters ecorda database; Finnish EU-R&D-secretariat ecorda database; Finnish EU-R&D-secretariat OECD database OECD database European Innovation Scoreboard 2008 OECD STI Scoreboard 2009 European Innovation Scoreboard 2009 European Innovation Scoreboard 2009 European Innovation Scoreboard Research and Innovation Policy Guidelines for

61 Research and Innovation Council Chairman Prime Minister Mari Kiviniemi Deputy Chairmen Minister of Education and Science Henna Virkkunen Minister of Economic Affairs Mauri Pekkarinen Minister Members Minister of Finance Jyrki Katainen Minister of Agriculture and Forestry Sirkka-Liisa Anttila Minister of Health and Social Services Paula Risikko Minister of Labour Anni Sinnemäki Minister of Culture and Sport Stefan Wallin Members appointed by the Government Chairman Olli-Pekka Kallasvuo, Nokia Siemens Networks Director General Erkki KM Leppävuori, VTT Technical Research Centre of Finland Chief Executive Marja Makarow, European Science Foundation President Markku Mattila, Academy of Finland CEO Pekka Mattila, Finnzymes Ltd. Manager Janne Metsämäki, The Central Organization of Finnish Trade Unions SAK Director General Veli-Pekka Saarnivaara, Tekes - the Finnish Funding Agency for Technology and Innovation Rector Marja-Liisa Tenhunen, Central Ostrobothnia University of Applied Sciences Professor Päivi Törmä, Aalto University Rector Keijo Virtanen, University of Turku Permanent Experts State Secretary Mika Rossi, Prime Minister s Office Permanent Secretary Harri Skog, Ministry of Education Permanent Secretary Erkki Virtanen, Ministry of Employment and the Economy Director General Sakari Karjalainen, Ministry of Education Director General Petri Peltonen, Ministry of Employment and the Economy Secretariat Secretary General Ilkka Turunen Chief Planning Officer Kai Husso Chief Planning Officer Tuomas Parkkari Research and Innovation Policy Guidelines for

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