Innopolis Final Conference Henrik Lönnqvist & Markus Laine City of Helsinki Urban Facts

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1 Innopolis Final Conference Henrik Lönnqvist & Markus Laine City of Helsinki Urban Facts

2 Helsinki, Espoo and Vantaa 0,25% of land area 19 % of population 30% of GDP

3 Historical perspectives to Finnish economy Logic of innovations Finnish model Helsinki SWOT What next?

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5 Capital control by state, regional investment policy and war reparation industrial growth (pulp and paper and machinery) Urbanization from behind but fast Emerging welfare state following Swedish model Favourable demographics birth rate peak after war

6 Depression after depression, oil crises Devaluation cycles competitiveness restored Bilateral trade with Soviet Union worked well In the end 1980s, liberalisation of financial markets and huge credit expansion (house price infl.) Collapse of Soviet Union 1991 (trade dried out) and global economic downturn The great depression in early 1990s

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9 ICT sector started to grow: mobile phone industry (Nokia and its sub contractors) Globalisation started to erode industrial competitiveness and eventually it eroded also (large scale) high tech production Still 39% of added value of Nokia mobile phone produced in China and sold in USA returned to Finland (2000 on)

10 Roughly speaking new paradigm globalisation differs from the old in that it is occurring at a much finer level of disaggregation. Due to radical reductions in international communication and coordination costs, EU firms can offshore many tasks that were previously considered nontraded. This means that international competition which used to be primarily between firms and sectors in different nations now occurs between individual workers performing similar tasks in different nations. Baldwin 2006

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12 While the agglomeration costs that were based on reducing transport costs for goods have disappeared, the agglomeration costs that are based on producing transport cost for people and ideas remain. The most succesfull cities of today seem to be particularly concentrated in idea producing industries, like finance, new technology and the media. Edward L. Glaeser: Cities, Agglomeration and Spatial Eduillibrium (2008)

13 Localisation vs. urbanisation economies Marshall Arrow Romer : clusters (industry specific) Jacobs : diversity Porter: clusters + competition

14 Innovation benefits from a more diverse environment but that specialization then takes over as the engine of growth as the product matures. Beaudry & Schiffauerova 2009

15 Arvonlisäystiheys log/(euroa/km²) Seutukunnat Helsinki Tampere Turku Oulu Jyväskylä Mikkeli Rovaniemi Kehys-Kainuu Itä-Lappi Pohjois-Lappi Muut seutukunnat Asukastiheys log(asukasta/km²) Lähde: Ilkka Susiluoto. Helsingin kaupungin tietokeskus. Tieke/Markus Laine/pl/

16 Arvonlisäys/ km² (logaritminen) Seutukunnat Helsinki Tampere Turku Oulu Rovaniemi Kotka-Hamina Äänekoski Tunturi-Lappi Pohjois-Lappi Muut seutukunnat 10 1 Lähde: Ilkka Susiluoto. 5 Helsingin kaupungin 10 tietokeskus. Tieke/Markus 15 Laine/pl/

17 Pietari Berliini Tukholm a Hampuri Varsova Kööpenham ina Helsinki Oslo Vilna Riika Tallinna Milj. asukasta Kaupungin kuumat lähteet. Helsingin metropolialueen innovaatioympäristöt. Toimittajat Harry Schulman ja Pasi Mäenpää. Helsingin kaupungin tietokeskus. (Lähde: Helsinki Tieke ERP-2009) Markus Laine/pl/

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19 Tukholma Hampuri Berliini Kööpenham ina Oslo H elsinki Varsova Pietari Riika Vilna Tallinna Kaupungin kuumat lähteet. Helsingin metropolialueen innovaatioympäristöt. Toimittajat Harry Schulman ja Pasi Mäenpää. Miljardia Helsingin kaupungin tietokeskus. euroa (Lähde: Helsinki Tieke ERP-2009) Markus Laine/pl/

20 The focused factory: only few selected products / industries (Denmark) Brute force: massproduction of ideas (China) Hollyworld: creative class and quality of life approach (Silicon Valley, Helsinki to some extent) Large scale ecosystems: national innovation systems and strategies (Finnish model generally)

21 Education, R&D and technology are the driving forces of economy Limitless growth of knowledge Knowledge is transformed to innovations Innovations are tools to boost productivity and economic growth Hautamäki 2007

22 New economic growth theory needs some additional elements in order to able to explain economic growth and the effects that innovation acitivities has on economics growth: The role of competition General purporse technologies Global knowledge networks Institutions Helpman 2004, Maliranta & Ylä Anttila 2007

23 Knowledge intensive economy applying latest scientific and technological discoveries to product development Knowledge based innovation requires trust (organisational level, between organisations) Trust is an essential ingredient of innovation process Hautamäki 2008

24 First, and perhaps most fundamentally, is the fact alluded to earlier knowledge is a public good. The properties of dynamic processes driven by knowledge seem to ultimately derive from the scarcity defying expansiveness or nonrivalrious aspect of knowledge. Once knowledge is discovered and made public, there is essentially zero marginal cost to adding more users. Stiglitz 1999

25 there are extensive externalities (spillovers) associated with innovations. This opens the question of public policy because market solution, when externalities are present, is most probably inefficient. and too strong intellectual property rights may inhibit the pace of innovation.

26 Expert interviews (Miika Norppa) In a book Hot springs in city innovation environments in Helsinki metropolitan area

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28 Education and R&D hub Strong ICT cluster (still?), KIBS and services Educated and relatively young population Quality of life: clean air, safety, public services and transportation, recreational opportunities Accountability & stability

29 Very few private risk investors & weak FDI Fragmented public risk investment structures Weak collaboration between municipalities Housing affordability

30 % OF GDP US FDI TO NORDIC COUNTRIES 2010 Source: UNCTAD/INVEST IN FINLAND Source: US BUREAU OF ECONOMIC ANALYSES

31 Growing population, immigration New generations with more education replace previous generations Geographical position (+/ ) The quality of environment University & enterprise cluster co operation

32 Even stronger international competition Economic recession implications to public economy Vicious demographics (ageing) Remoulding organisations and processes without clear vision in panic Stronger social segregation

33 Competitiveness paradox : high competitiveness doesn t imply (1:1) high standard of living and wealth (Sitra 2005, Himanen 2007). Management of innovation processes needs further development, business models must be clarified and still more networking and cooperation is needed (FinnSight 2015). Efforts to develop service sector R&D, public sector innovations and exports, developing service culture (FinnSight 2015). More efficient use of globally produced knowledge and information (FinnSight 2015)..

34 Competitiveness needs more specialisation, gathering scattered research and larger research units (Sitra 2005, VNK 2006). More foreign researchers and experts (FinnSight 2015, VNK 2006, Himanen 2007). Limited size of home market for innovative products (Aho 2006, VNK 2006). Lacking entrepreunerial mindset: the number of growth oriented enterprises is still low. Ability and willingness to take risk after the initial phase is quite weak (VNK 2006, Tekes 2006).

35 Richard Florida: The World Is Spiky. The Atlantic Monthly 2005

36 Henrik Lönnqvist, Markus Laine, City of Helsinki Urban Facts, Finland