'Finland- nation of innovation'

24 November 2011

Irina Blomqvist, Timo Antikainen, and Jari Tielinen, of Invest in Finland, give an overview of why Finland is a true nation of innovation

A strong commitment to innovation and R&D by both the public and private sectors has played a crucial role in Finland's development into one of the leading knowledge-based economies in the world. Finland's R&D expenditure has consistently been above 3% of GDP since the turn of the millennium. As a result, Finland is now ranked among the most R&D-intensive countries globally.

In 2008, total R&D expenditure in Finland was €6.871bn – or 3.72% of GDP – in 2008, according to Statistics Finland. The share of business enterprises from the total expenditure was 71.4%, or €4.847bn, while the share of the university sector was 18.9% and the public sector 9.7%.

Finland and Sweden are the only countries that have reached the 3% target for research intensity set by the EU. In 2009 and 2010, Finland's R&D expenditure has been around 4% of GDP, which is also Finland's target rate for the year 2020. The private sector takes the lead in financing domestic R&D activities; in 2009, Finland had the highest gross domestic expenditure on R&D financed by business enterprises at 2.7% of GDP. Private sources contributed 68.1% of the gross R&D expenditure in Finland, compared to the EU average of 54.8%.

Finland's innovation environment has often been judged to be among the best in the world by the World Economic Forum (WEF), IMD, OECD, Economist Intelligence Unit and others. Recently, the Global Innovation Index published by INSEAD ranked Finland fifth overall, and among the top 10 in many of the 'pillars' on which the index scores are based, including institutions, human capital and research, infrastructure, business sophistication, and scientific outputs. Specific strengths identified in the index include Finland's political stability and government effectiveness, education system, the number of researchers and expenditure on R&D, knowledge workers, collaboration between universities and industry, cluster development, and patent applications.

Attractive innovation ecosystem
Finland has established strong institutions that promote a transparent innovation ecosystem involving companies, research institutes and the public sector. Finland's new innovation university – named Aalto University after renowned Finnish architect and academician Alvar Aalto – has opened up new possibilities for strong multidisciplinary education and research. The knowledge transfer between business and universities has been one of the key factors in Finland's track record of innovation and economic success. The Finns also recognise good design as one important aspect of innovation, and are very proud that Helsinki has been chosen as the World Design Capital for 2012.

Although Finland's innovation record stands up well to international comparison, one area where Finns would like to see improvement is the level of foreign direct investment in Finland, especially in R&D. Finland's dynamic innovation environment has a great deal to offer to international companies who are interested in boosting their R&D operations. For example, they can benefit from Finland's advanced 'Living Lab' environment, where users, companies, researchers and public institutions are joining forces to form problem-solving communities.

Researchers and engineers galore
One of the crucial resources Finland can offer the world of R&D is its highly educated workforce. According to the EU's Innovation Union Competitiveness report 2011, Finland has maintained significant growth in the number of its science and engineering graduates. In 2008, Finland had the highest penetration of researchers in the workforce in the EU.

About a third of Finland's working population has a degree or higher qualification and Finland is a leader in the EU in the number of new doctoral graduates relative to the population aged 25-34. In 2009, the rate of participation in Adult Lifelong Learning in Finland was 22.1% of the population aged 25-64, while the EU average was 9.3%.

WEF has ranked Finland as the best in the world for its education system and the availability of scientists and engineers. Nokia's recent strategic shift, resulting in staff reductions in Finland, has also temporarily increased the availability of software engineering talent in the labour market, providing a good opportunity to hire highly qualified and experienced staff.

Finnish ICT and R&D
The ICT sector has grown into one of the cornerstones of the Finnish economy, with Nokia making a major contribution in this regard. R&D intensity has been especially strong in Finland's ICT manufacturing sector, with the country leading the EU in terms of investment in ICT Business Enterprise Research and Development (BERD) in relation to GDP.

WEF ranked Finland third for ICT readiness and utilisation in the Networked Readiness Index of its Global Information Technology Report 2010-2011. According to the report, Finland has conducive market and regulatory environments, as well as excellent soft and hard infrastructures for ICT utilisation.

Nokia's emergence as a global leader in mobile communications has driven the development of a uniquely strong mobile technology cluster in Finland. The Finns love new gadgets and many services and technologies have been introduced in Finland much earlier than in other countries. Major international companies are using Finland as a test laboratory for experimental launches of new products and services.

According to Tekes – the Finnish Funding Agency for Technology and Innovation – companies and research groups working in Finland have world-class competence in a wide range of ICT fields: wireless and mobile communications and networks, radio technologies, future internet, embedded and adaptive systems, signal processing, software technologies and games, algorithms and architectures, security and trust, e-banking, machine vision, positioning and navigation, wireless sensor networks, printable electronics, optical component technologies, and Micro-Electro-Mechanical Systems (MEMS).

Future prospects in ICT
A report published in 2010 by the Federation of Finnish Technology Industries identifies many areas where Finnish ICT companies can play a key role in the business activities of the future. For example, their ICT expertise is central in the development of energy and environmental solutions such as smart grids, smart transport, energy efficiency, environmental monitoring, clean water production and waste processing. As the economies of the developing countries grow and the process of urbanisation continues, there will also be increasing demand for new ICT infrastructures, products and services.

Demographic changes also call for new ICT solutions, particularly in Finland where the population is ageing faster than in the rest of Europe. Finns are already developing new technologies that support wellbeing, independent living and better healthcare for our senior citizens.

Finland is well placed to utilise its mobile expertise in creating smart environments and systems, for example in industrial automation, information systems for construction, buildings and the built environment. The Finnish Ubiquitous Computing Cluster aims to be a leader in the development and commercialisation of embedded intelligence in human-centred, distributed, mobile and constructed environments. The competitiveness of important Finnish exports like machinery, industrial processing equipment, automation systems and ships is greatly dependent on the creative application of innovative ICT solutions.

The rapidly growing importance of digital media in our lives is creating new business opportunities based on the internet and the mobile internet, including games and virtual reality applications. Finnish game developers are already making their mark on the global scene with success stories like Angry Birds, Alan Wake and Habbo. Online services that are more user-friendly, secure and ready to meet the needs of everyday life will also be a key area of growth for the Finnish ICT sector.

Key objectives of the Government of Finland regarding the development of the Information Society in the next 10 years include the opening up of access to public data and their efficient use, promoting user-oriented service development, securing the position of ageing people as active citizens, and supporting sustainable development solutions by adopting new technologies. The government also aims to make high-speed, 100Mb broadband connections available to nearly all permanent residences, businesses and public administration bodies by the end of 2015.

Growing strong with cleantech
The global demand for cleaner technology, energy and processes is constantly increasing. Finland's innovative and fast-growing cleantech sector now includes about 2,000 enterprises, and the national objective is to develop the sector into a new cornerstone industry. Finnish cleantech companies are already global leaders in energy efficiency, clean industrial processes and bioenergy. Other key areas are measuring, analysis and automation, renewable energy, waste management, air protection, as well as water and wastewater treatment.

In 2010, the Finnish Cleantech Cluster was ranked among the world's top three Green Tech Clusters by the Cleantech Group. Finland currently has nine centres of expertise focusing on environmental and clean energy technology, and several ongoing R&D programmes with a total budget of more than €500m. Finland is a great source of advanced technologies and best practices, as well as an ideal test laboratory with its demanding Arctic conditions. International companies can also benefit from the dynamism of the Finnish cleantech sector and cooperate with its ongoing programmes by establishing an R&D unit in Finland.