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RIO Country Report Norway 2015

The RIO Country Report offers an analysis of the R&I system in Norway, including relevant policies and funding, with particular focus on topics critical for EU policies. The report identifies the main challenges of the Norwegian research and innovation system and assesses the policy response. 



1. Overview of the R&I system

Norway’s economic development has been strongly influenced by the petroleum industry during the last 40 years. As of 2015, Norway ranks as the world’s seventh largest oil exporter. Another important feature of the country's economic structure is the significant share of service industries, including wholesale and retail trade, banking, insurance, engineering, transport and communications and public services which accounts for close to 60% of GDP.

Thanks to a hitherto favourable economic situation and solid public finances, Norway has experienced a steady increase in R&D investments during recent years. Except a short period of stagnation following the financial crisis, both public and private R&D expenditures have increased substantially in the years after 2011. Estimates for 2016 indicate that public allocations to R&D for the first time will reach 1% of GDP, a target originally set to be reached by 2019-20.

On the other hand, total R&D expenditure only accounts for 1.71% of GDP (2014), a level which has been rather stable during the last 25 years. This is primarily due to a high level of GDP and a high share of value creation in resource based industries, such as fisheries and oil and gas. Reaching the long term target of raising total R&D expenditure to 3% of GDP will require both a substantial increase in private R&D expenditure and a significant change of industry structure. The latter seems to have gained momentum as the recent decline in oil prices clearly demonstrates the need to develop alternative industries for ensuring future value creation.

The Norwegian research and innovation system is relatively dispersed at the political level as well as on the performing level, while at the strategic/intermediary level R&D and innovation funding is concentrated in a few central funding organisations.

2. Recent developments in research and innovation policy and systems

The Government long-term plan for research and higher education (LTP) adopted in 2014 constitutes the most important strategic document in the area of Norwegian research policy. The plan has set out three primary objectives; i) strengthening competitiveness and innovation capacity, ii) solving major challenges to society and iii) developing research groups of outstanding quality. Furthermore, the plan announces increased allocations to R&D-activity in six priority areas (oceans, climate change, public sector renewal, enabling technologies, spurring innovation in the business enterprise sector and developing world-class research groups).

Another important priority is to strengthen Norwegian participation in the European framework programmes. The government’s “Strategy for research and innovation cooperation with the EU” from 2013 has set the goal of increasing Norway’s total economic return from Horizon 2020 to 2% of total competitive funding in the programme, up from 1.69% in the previous 7th framework programme.

Furthermore, the Government has initiated a process for structural reform in the higher education system. During 2014, all universities and university colleges were invited to consider how they would position themselves in a landscape with fewer institutions and higher academic standards. Based on this process a White paper on the future university structure was presented by the Ministry of Education and Research in March 2015. The paper outlines a new institutional map, where 14 individual institutions will be merged to 5, starting from January 2016.

3. Public and private funding of R&I and expenditure

Public R&D spending in Norway is almost exclusively a central state matter. Regional funding plays a minor role in this picture. In principle, public R&D funding is widely dispersed as virtually all 16 ministries are responsible for funding R&D within and for their own sectors. This so-called sector principle implies that both the level and orientation of funding to a large degree depends on the needs and priorities of each ministry. In practice, R&D budgets are fairly concentrated, as five ministries stand for 85% of all R&D funding, with the Ministry of Education and Research (MER) allocating approximately half of all funding. The two main funding streams consist of 1) the R&D component integrated in the basic funding to universities and university colleges and 2) funds allocated via the Research Council of Norway (RCN). Other significant streams are R&D funds to health trusts, the portfolio of allocations from the Ministry of Trade and Fisheries and the annual contribution to the European framework programmes/Horizon 2020.

The present Government has made public support to spur business R&D a key priority, partly justified by the relatively low R&D intensity in Norwegian industry as well as an increasing awareness of the need to develop new knowledge intensive companies and prepare for “life after oil”. A study conducted by Norsk Industri in 2014 concludes that direct business oriented R&D support accounts for around 20% of total R&D expenditure. Amongst the most important measures are the User-driven Research based Innovation scheme (BIA), Centres for Research-based Innovation (SFI), Centres for Environment-friendly Energy Research (FME) and a number of thematically oriented large programmes. The portfolio of industry oriented R&D-support also comprises a few programmes under Innovation Norway, in particular the Environmental technology scheme and the Research and development contracts.

In 2002 Norway introduced a tax incentive scheme for business R&D, the so-called Skattefunn scheme. The Skattefunn scheme is an open mechanism where all businesses and enterprises that are subject to taxation in Norway are eligible. During the last couple of years the support allocated through tax incentives stabilised around €150m, while direct support mechanisms have been substantially increased, especially from 2014 and onwards. In its budget proposal for 2016, the government has proposed to further increase the support through tax incentives by raising the maximum amount for eligible tax deduction. However, since most companies that benefit from the scheme are SMEs, it is rather uncertain whether the maximum amount really represents an obstacle.

4. Quality of science base and priorities of the European Research Area

Norway performs well in terms of the number of scientific articles per thousand inhabitants, only surpassed by Switzerland, Denmark, Australia and Sweden. The total number of articles has increased by 69% from 2006-2014. Among comparable European countries only Denmark has a higher growth rate (77%) in the same period. On the other hand, natural benchmark countries such as Denmark, Netherlands and Switzerland are still ahead of Norway in terms of traditional quality measures, such as the share of top 10% most cited publications and the share of public-private co-publications. Other quality measures and evaluations give a similar picture of Norwegian research as highly productive, but more average in terms of the ability to develop cutting edge research.

After a strong and steady increase in the number of awarded doctorate degrees the last decades, the number seems to have stabilized around 1500 for the last two years. A significant contribution to the recent increase has been that more women gain doctorates. From a gender perspective, 2014 was a milestone as this was the first year when the majority of degrees (51%) were awarded to women.

Attracting foreign research talents to Norwegian R&D institutions has been a declared priority in Norwegian R&D policies. While persons with non-Norwegian citizenship accounted for less than 10% of doctoral degrees at the start of the 1990s, the proportion of foreigners has now risen to more than a third. It also appears that Norway is among the countries which receive most foreigners with higher education. How to integrate and exploit this additional labour force is both a challenge and a great opportunity for Norway.

5. Framework conditions for R&I and science-business cooperation

In general, and contrary to its traditional image, Norway seems to provide rather favourable framework conditions for entrepreneurship and doing business. According to the 2014 edition of the Word Bank’s index “Ease of doing business”, Norway ranks as number 6, up from number 9 in 2013 (World Bank, 2014). On the other hand, Norway has a relatively low share of self-employed in total population, partially due to the fact that unemployment has remained low for more than three decades. Several actions have been taken to improve the culture for entrepreneurship in general, and among women in particular. As part of the main strategy for structural change and response to the reduced activity in the petroleum and offshore sectors, the Government presented an “Entrepreneurship plan” in October 2015.

The Norwegian R&D and innovation system is characterised by a relatively high degree of cooperation. Previous studies have characterised the Norwegian system as a collaborative system, with a strong tradition for knowledge sharing and cross-sectoral links.  The policy mix and measures for commercialisation of public R&D was subject to an evaluation which was finalised in 2015. The main conclusion was that the infrastructure and support mechanisms are well in place, but there are still few indications of substantial increase in commercialisation activities, measured in terms of patenting, licensing and share of academic researchers engaging in these activities.

6. Conclusions

Despite a long period of economic growth and increased R&D investments, there is broad political agreement that Norway needs to develop more knowledge and R&D intensive companies in order to prepare for “life after oil”. The Norwegian higher education sector has been characterized by a large number of institutions, many of which with small number of students and low R&D capacity. This has raised concerns regarding the quality of higher education and research at some of the smallest institutions and a general risk of too much overlap within the national system. Another recurrent issue of debate is the role of research institutes and the need for consolidation within this sector. This relates to a larger discussion of the division of labor in the entire R&D and innovation system. Some argue that the large institute sector constitutes a strength and a bridge between R&D activities and users in industry and public sector. Others are worried that research institutes create a barrier between academia and the same users. Much attention is also devoted to Norwegian participation and success in the Horizon 2020 programme. As an associate EEA-EFTA country, Norway’s annual contribution appears as a specific budget allocation to Brussels, amounting to almost €250 mill. or 7% of the total public R&D budget. Hence, achieving a satisfactory knowledge and financial return has high priority. This raises in turn a question of how far national priorities should go in aligning national strategies with EU priorities. Finally, the sector principle has long been an issue of debate. The principle implies that virtually all 15 ministries are involved in steering and funding of R&D for their own sectors. Although most funding is concentrated around a handful of ministries, this constitutes a considerable challenge in terms of governance and coordination.

The structural challenges mentioned above have all been met with various forms of policy action:

Norway has established a broad portfolio of both direct and indirect measures to increase R&D in Norwegian firms. In 2014, the Government initiated a process for structural reform in the higher education system. The reforms were part of a broader agenda of which the overarching goal is to achieve higher quality in research and education. The consolidation process in the higher education sector also opens up for strategic cooperation and mergers with research institutes. A new support mechanism has been introduced to provide financial support to research institutes which engage in concrete processes of mergers or strategic alliances with other institutes. Furthermore, the Research Council of Norway has initiated a systematic evaluation process, where all four groups of institutes receiving public basic funding (in total close to 50 entities) will be evaluated during the period 2015-2017. There is reason to expect that possible broad systemic changes affecting research institutes will be seen on the background of the whole evaluation process. As for the participation in the EU framework programmes/Horizon 2020, the government has set the goal of increasing Norway’s total economic return from Horizon 2020 to 2% of total competitive funding in the programme, up from 1.67% in the previous 7th framework programme.

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Official publication date
Thursday, 8 September, 2016
Country Report file
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