Transformation of Innovation system in a Small Country elements of - PowerPoint PPT Presentation

Transformation of Innovation system in a Small Country – elements of Success in Finland Pekka Ylä-Anttila ETLA – The Research Institute of the Finnish Economy AND Tarmo Lemola Ministry of Trade and Industry & Advansis Ltd/Oy The First Globelics Conference, 3-6 November Rio de Janeiro

Contents • Growth performance – Long term view – The most competitive country in the world? • Crisis and structural change of the1990s • Finnish miracle/Finnish model of the information society – The most ICT specialized country – Nokia – A big company in a small country • Role of science and technology policies – Phases of development • Building the basic structures – 1960s and 1970s • Technology orientation phase – 1980s • Era of building the knowledge-based economy and NSI – 1990s – How do we explain the Finnish miracle? • Creative destruction – Lessons to be learned?

GDP/capita in Finland and OECD Europe (at 2002 prices – PPP) 25000 Finland 20000 OECD Europe 15000 10000 5000 0 1950 1960 1970 1980 1990 2000 Sources: OECD, Penn World Tables. pekka_ya/esitelmä15092003/k01

Manufacturing output in Finland by industries (at 2002 prices) 10000 Electronics & electrical eq. Metal & engineering 8000 Pulp & paper Chemicals 6000 Textiles & apparel 4000 2000 0 1948 1958 1968 1978 1988 1998 Sources: Hjerppe-Hjerppe-Mannermaa-Niitamo-Siltari (1976), Statistics Finland, ETLA. pekka_ya/esitelmä15092003/k02

Share of manufacturing in GDP (%) 40 Finland Germany 35 Sweden Japan 30 UK 25 20 15 1950 1960 1970 1980 1990 2000 Sources: OECD, Statistics Finland, ETLA. pekka_ya/esitelmä15092003/k21

Finnish exports of goods by industry 1960-2002 (%) % of total exports of goods 100 % 6 Wood products 8 15 16 27 20 Pulp and paper 80 % 31 30 Machines, machinery 40 20 and vehicles 60 % 42 24 18 Electronics and electro- 40 % 28 mechanical products 17 4 11 7 2 Basic metals and metal products 15 7 8 6 11 20 % 4 1 Chemicals and chemical products 9 12 15 15 15 Other goods 9 7 0 % 1960 1970 1980 1990 2002* Source: National Board of Customs. pekka_ya/esitelmä15092003/k29

Export/import ratio of high-tech products 2.0 1.6 1.2 0.8 Ireland Finland 0.4 Sweden OECD EU 0.0 1980 1985 1990 1995 2000 Source: OECD. pekka_ya/esitelmä15092003/k26

ICT sector’s share in value added, employment and R&D ICT value added ICT employment R&D in ICT (% of business sector tot., 2000) (% of business sector tot., 2000) (Selected ICT ind., % of GDP, 2000) Ireland Finland Finland Finland Sweden Korea Korea Canada Sweden USA Japan Japan New Zealand UK USA Sweden Netherlands Canada Hungary Belgium Ireland UK France Netherlands Netherlands Norway Germany Belgium Denmark France Japan Austria Belgium Czech Rep. USA UK Norway Korea Denmark Canada Italy Norway Denmark Australia Italy France Czech Rep. Australia Portugal Spain Spain Austria Mexico Czech Rep. Australia Germany Poland Spain Portugal Italy Germany Mexico Slovak Rep. Greece 0 4 8 12 16 0 2 4 6 8 10 0 1 2 Total Communic. & other eq. Manufacturing Communic. & other eq. Computer & office eq. Services (for those avail.) Computer & office eq. Services Services pekka_ya/esitelmä15092003/k16

Manufacturing productivity in selected countries (USA = 100) 120 Finland 100 Belgium Netherlands 80 Sweden 60 France 40 West-Germany 20 Japan Canada 0 1975 1978 1981 1984 1987 1990 1993 1996 1999 Sources: Maliranta (1996), ICOP database, Groningen University. pekka_ya/esitelmä15092003/k04

Nokia’s contribution to GDP growth in Finland 2.5 Nokia's contribution (percentage points) 2.0 Electro-technical industry's contribution 1.5 1.0 0.5 0.0 -0.5 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Sources: Aliyrkkö et al., updated. pekka_ya/esitelmä15092003/k03

NOKIA - a big company in a small country Nokia’s share (2002) in: GDP 2.7 % Contribution to GDP growth 0.57 % R&D expenditure 40 % Exports 21 % Total employment 1 % Manufacturing employment 5 % Market value of Helsinki Stock Exchange 60 % pekka_ya/esitelmä15092003/k20

S&T Policies – Phases of development • No ”Master Plan” in the 1990s – roots in the 1970s and 1980s – designing of policie and creating competitive advantages take time – complementarities between policies, financial market liberalization, and institutional changes • Phases of development – The building phase of the 1960s and 1970s • imitating, learning from others • building institutions & organizations – Technology phase - 1980s • technology policy more target-oriented – National Technology Agency (Tekes) established • commercialization of technologies – Era of national innovation system – 1990s • Finland the first country to adopt the concept • collaboration nationally and internationally, including industry/university collaboration • Interplay between education, science, technology, and commercialization • concrete target: increase in R&D expenditure

Innovation supporting organizations The system in the 1980s Services Finpro Venture capital (Sitra) Equity Kera & Guarantee Board Loans Tekes FFI Academy of Finland Grants Research Universities institutes Basic research Applied research Product development Commercialization Source: Evaluation of the Finnish Innovation Support System. pekka_ya/esitelmä15092003/k14

Innovation supporting organizations The current system Services Finpro Venture capital (FII, Sitra) Equity Finnvera Loans Tekes FFI Academy of Finland Grants TE-Centers Research Universities institutes Basic research Applied research Product development Commercialization Source: Evaluation of the Finnish Innovation Support System. pekka_ya/esitelmä15092003/k15

R&D expenditure, % of GDP 5 4 3 2 Sweden Finland 1 Japan USA EU 0 1980 1985 1990 1995 2000 Sources: OECD, Statistics Finland. pekka_ya/esitelmä15092003/k25

Share of GERD performed by the business sector (%) 80 75 70 65 Finland 60 Sweden USA 55 Japan (adj.) EU 50 1980 1985 1990 1995 2000 pekka_ya/esitelmä15092003/k08

Share of GERD financed by government (%) 50 40 30 20 Finland Sweden 10 USA Japan (adj.) EU 0 1980 1985 1990 1995 2000 pekka_ya/esitelmä15092003/k07

Post-graduate degrees granted in natural sciences and engineering (1951-2001) 800 600 400 200 0 1950 1960 1970 1980 1990 2000 pekka_ya/esitelmä15092003/k10

Share of tertiary type of graduates in engineering, natural sciences, mathematics and statistics, and computing, % of all graduates 10 20 30 40 50 0 Korea Germany Finland Switzerland France Ireland Sweden Czech Rep. Austria UK Japan Italy Turkey Mexico Spain Belgium Slovak Rep. Canada Denmark Australia Israel New Portugal Iceland Poland USA pekka_ya/esitelmä15092003/k11 Netherlands Norway Hungary

Lessons to be learned? • Finnish miracle? – policies played a role, but it is not the whole story – business driven process • Models come and go – Japan ranked the most competitive country in 1993(!) by IMD • Small country advantage? • Institutions matter – Openness to the external world has to be combined with dense interaction (collaboration & networking) internally • Consistency of policies & long-term view – Stability in the rules of the game