RIO Country Report Finland 2014

The RIO Country Reports, co-authored by JRC policy analysts and independent experts, give an update on the performance of the national research and innovation systems, and examine policies to address key R&I challenges, assessing their effectiveness. They serve as a tool to inform EU and national policy-makers, and support policy learning in Member States (MS).

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The annual RIO Country Report analyses and assesses the development and performance of the Finnish national research and innovation system and related policies in the perspective of EU strategy and goals.

The report highlights recent national policy and system developments occurring and assesses the match between national policy priorities and the structural challenges of the research and innovation system. It addresses among others:

  • The progress of Finland towards achieving the Innovation Union, focusing on areas where action is needed.
  • Progress in responding to the ERA actions, particularly in light of the ERA progress report findings published in September 2014.
  • Country specific R&D and innovation recommendations as indicated in COM(2014) 400 final '2014 European Semester: Country specific recommendations, Building Growth' adopted by the Commission on 2 June 2014 and endorsed by the Council on 27 June 2014.
  • Progress in tackling research and innovation system challenges beyond those outlined above.
  • Areas highlighted by the Commission's Communication on 'Research and innovation as sources of renewed growth' (COM(2014) 339 final) and its accompanying Staff Working Document 'State of the Innovation Union, taking stock 2010-2014' (SWD(2014 181 final).

The RIO Country Report 2014 builds on the experience of the ERAWATCH project. The ERAWATCH Country Reports from previous years are also available for download on this page.

Report year
2014
Official publication date
03/09/2015
Geo coverage
Document type
EU Report or Publication

Country Report file

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National economic and political context

Resent developments in Research and Innovations policy and systems have been: a new university act, a reform of research institutes and research funding (in Finnish), a revision of the university funding model, a polytechnic reform, a reform of public services for internationalisation (Team Finland), a reform of the structural fund allocation system (SF 2014 -2020, in Finnish), a new strategy and roadmap for research infrastructures 2014–2020, a reform of early stage VC funding (Vigo-program, Tekes funding for YICs, Tekes Venture Capital, SLUSH), improvement of the financing tools for growth (Finnvera 2014), and new Tekes programmes. These changes address the challenges facing the Finnish economy and will have a positive impact on the R&I system performance as well as the national economy but further measures are needed, e.g. as defined by the Research and Innovation Policy Council (RIC) in 2014.

Regarding the development of the national economy, Finland is facing the effects of the global and European recession and will also be strongly affected by the ageing population. Productivity and living standards still rank high but previously strong industries such as electronics and forestry are now in experiencing difficulties. In terms of the political context, the Government has made important policy initiatives on structural reforms to improve the sustainability of the public finances. However there is still a need to return the Finnish economy to a sustainable growth trajectory. including to address broader policy areas affecting the innovation system. The most important political event in Finland was the election of the new parliament on 19 April 2015.

ERA priority 2: Optimal transnational co-operation and competition

There is no overarching legislation governing Finland’s participation in European research. However, the strategies of the main actors (funding organisations, HEI’s, PRO’s) support selectively joint projects with partners in the other Member States. Given that Finland is a relatively small country, participating in cross-border joint initiatives has typically ranked high on the R&I agenda. Anyhow, the new recommendation by the RIC recognises that Finland has not utilised the opportunities offered by European and other international research funding to a sufficient degree. It recommends increasing the participation in the EU Framework Program by 50% and creating a special funding instrument for planning international projects and preparing for FP projects.

National R&I strategies and policies

The Programme of the current Government includes several measures for improving the efficiency and impact of the Finnish R&I system. The new Government's R&I policies will be decided after the election of the new parliament on 19 April 2015. The new recommendations of the Research and Innovation Policy Council (RIC), aim at continuing to intensify the R&I system.  The RIC recommendations (Reformative Finland: Research and innovation policy review 2015–2020) emphasise performance, quality and impacts, renewing of the HEI system, continuing the reform of the public research system, entrepreneurship, interaction and cooperation between different stakeholders, internationalisation, and increasing funding in R&D.

National Reform Programmes 2013 and 2014

The Government has initiated major structural and instrument specific changes to address the challenges facing the Finnish economy. The Finnish National Reform Programme (NRP) is based on the Europe 2020 Strategy (Ministry of Finance 2012). The programme has recently been updated (Europe 2020 Strategy, Finland's National Programme, Spring 2014 ). Even though investments in research, development and innovation continue to be high, they are declining, and a critical issue of innovation efficiency remains. That is, how research is translated into innovations and new high-growth companies, and how the growth companies can penetrate fast growing export markets and strengthen international competitiveness.

ERA priority 3: An open labour market for researchers

The main trend in this ERA priority in Finland is that institutional autonomy is common but funding incentives are used for facilitating researcher mobility. The outward flow of researchers is a bit above the EU average, the inward flow is clearly below the EU average. Most of the foreign researchers come from the EU countries, and the inter-sectorial mobility is about at the average level of the EU countries. Grants are by and large open to foreign researchers and portable to other EU countries (e.g. Academy of Finland grants and fellowships), and the Academy of Finland has signed up to the Money Follows Researcher (MFR) agreement, the initiative of the European Heads of Research Councils (EUROHORCs).

Open, transparent and merit-based recruitment of researchers:

High institutional autonomy affects recruitment and awarding positions of trust in Finland. The Strategy for the Internationalisation of Higher Education Institutions in Finland (2009-2015) calls for the principles of open, transparent and merit-based recruitment as laid down in the Charter and Code. UNIFI (the Rectors’ Council of the Finnish universities) and the Academy of Finland have signed up to the Charter and Code.

Access to and portability of grants:

Grants are by and large open to foreign researchers and portable to other EU countries (e.g. Academy of Finland grants and fellowships), and the Academy of Finland has signed up to the Money Follows Researcher (MFR) agreement, the initiative of the European Heads of Research Councils (EUROHORCs). The Academy of Finland has a commitment to promote the internationalisation of Finnish science and research by establishing bilateral agreements with countries and regions.

EURAXESS:

The Academy of Finland acts as the national EURAXESS bridgehead organisation and host the EURAXESS Finland Portal. The portal provides basic information for foreign researchers planning to come to Finland or those already staying there, as well as for outgoing researchers. Five Finnish universities have organised services for incoming researchers.

Doctoral training:

The ‘National Guidelines for the Development of Doctoral Training’ (2011) outlines the principles for doctoral training in universities. Until 2010 the Academy of Finland was running and funding Graduate Schools for doctoral training. These responsibilities and funds were transferred to the universities. Since 2011, all Finnish universities have started the reform of the doctoral training system in line with the principles of innovative doctoral training. The Strategy for the Internationalisation of Higher Education Institutions in Finland (2009-2015) aims at improving the entry of foreign researchers and their access to research positions in Finland.

HR strategy for researchers (HRS4R) incorporating the Charter and Code:

Twelve Finnish organisations are actively engaged in the Commission’s Human Resources Strategy for Researchers (HRS4R) of which at least six have received the ‘HR Excellence in Research’ logo for their progress in implementing the Charter and Code although according to the HR managers of some universities special added value from the audits is not clear.

Education and training systems:

Tertiary educational attainment in 2012 was 39.7% (EU28 average 27.6; Eurostat 2013). Finland used to be top ranked on educational attainment which is no longer the case. In 2014 there still are strengths in the knowledge base of the Finnish society but the corresponding development  has been faster in many other countries (Ministry of Education and Culture, 2014, Educational structure of Finns in international comparison, in Finnish).

Policy developments related to Council Country Specific Recommendations

The Council Country Specific Recommendations support Member States and the Commission in coordinating their economic and budgetary policies. In relation to research and innovation policy in Finland, the Council stated in 2014 that some measures have been taken and/or progress made on policy initiatives to promote growth and innovation. However, there still are remaining challenges. The Council recommends continuing to boost Finland's capacity to deliver innovative products, services and high-growth companies in a rapidly changing environment, and continue the diversification of industry, in particular by improving the business environment to strengthen investment in Finland and further facilitating smaller firms' entry into export markets. The Government has ensured an adequate level of research, development and innovation funding and clarified the division of responsibilities of actors that distribute public financing. Several reforms and changes have been made for developing the R&I system.

ERA priority 5: Optimal circulation and access to scientific knowledge

Led by the Ministry of Finance, the Open Data Programme 2013 - 2015 has been put forward, aiming at eliminating obstacles in the re-use of public data and creating the preconditions for making public administration data open. Ministries, government agencies, municipalities, enterprises, NGO’s, various organisations developing the sector and citizen bodies are collaborating in the implementation of the programme. The MEC launched 2014 an Open science and research roadmap 2014–2017. It is a cross-administrative initiative with the goal of promoting open science and the availability of information. Concerning e-identity, no overarching policy on electronic identity for researchers in Finland has been identified, although electronic identity is being largely implemented. Finland is participating in the main international initiatives related to e-identity. Services related to e-Infrastructures and researchers’ electronic identity are supplied by a specialized company under the MEE (CSC - IT Center for Science).

Framework conditions

The framework conditions conducive to business investments in research and innovation are well in place in Finland. The Finnish policy is balanced between scientific research and innovation activities. Beyond legislation, other important frameworks like the RIC recommendations, the Government Program, the MEE guidelines, strategies and roadmaps all emphasize the idea of broad innovation policy including growth entrepreneurship, the start-up and VC ecosystem, lead market initiative, demand and user driven innovations, innovative environments, and innovative public procurement. Especially the start-up - VC -ecosystem and early stage VC investments are developing well. Still there are challenges to continue the development.

Science-based entrepreneurship

Regarding science based entrepreneurship, many measures have been introduced during the past years, like the funding schemes targeted at young innovative companies, knowledge transfer schemes, programs to develop university and research institute structures, innovation services and methods for research organisations to manage IPR, create start-ups and enhance the commercialisation of research results. For example, Innovation Mill was launched in 2009 and enlarged in 2012 for commercializing “non-core” corporate IPR from large companies by spinning off start-ups and new business lines, Team Finland concept was developed aiming at helping companies go global, Growth Track  is integrating services of several service providers for SMEs’ rapid growth and internationalization, Vigo accelerator program was  enlarged in 2012 boosting start-up birth and private VC investments. The progress of the science based entrepreneurship is visible in many Venture Cups, in which Finnish start-ups have reached top positions in the rankings (Impacts of innovation activities and Tekes 2014, in Finnish).

Funding trends

Funding Flows:

The target for Finland is to have 4 % expenditure to R&D as a proportion of GDP by 2020. However, R&D investments declined between 2009 and 2013 from 3.75% to 3.32% of GDP. The Government funded around 29% of all R&D activity. From this amount 63% was directed to the higher education sector, around 25% went to the public research organisations and approximately 12% to the private sector. The public funding of private sector’s expenses on R&D was low, about 3% of private R&D expenses. The share of the funding from abroad increased from 9% to 12% of all R&D investments. The ratio between institutional and project funding for R&D has remained at about the same level (46%/54%). After a minor last years’ decrease in the share of project funding the share will increase in coming years due to the reform of the research institutes and funding, and also due to the recommendations of the RIC if the recommendations will be followed. The new funding model for universities also increased competitive elements in institutional funding.

Project vs. institutional allocation of public funding:

The legal framework for the allocation of R&D project and institutional funds has been stable for many years in Finland. Within the framework, the share of competitive funding increased until 2009 and then decreased until 2013, the decrease in 2009 - 2013 being 2 %. Starting in 2013 changes have been made to the framework itself, including the reform of research institutes and research funding, and new funding models for universities and polytechnics.

R&I funding:

The public innovation ecosystem, i.e. the funding streams to cover the entire R&D&I process from fundamental research to market innovation are in Finland organized as cooperative services of funding organisations and as public private partnerships. The concepts are based on the experience that innovation process is not a linear chain from basic research to commercialisation but an interactive process where activities are concurrent and parallel.

Smart Specialisation

The principles of Smart Specialisation have traditionally been applied in Finland both on national and regional level, and a process is going on to further strengthen the specialisation. Although the need for specialisation is obvious, the processes to implement it have to combine both top down and bottom up approaches in order to avoid the risks involved in making wrong choices in the top down policy. Smart specialisation in Finland is especially focused on the creating of knowledge base, lead markets initiatives and ecosystems development. At the same time, business R&I funding is flexible allowing risks in order to pursue good business ideas. This does not depend on the predominant field of strategic agendas. The goal in the big picture in the Finnish research policy is to further increase specialisation of universities and PROs, which means making stronger strategic choices. Smart specialisation is also strongly supported by competitive funding.

Knowledge markets

Finnish Patent and Registration Office (PRH) is the organization responsible for services connected with protecting IPR in Finland. Centres for Economic Development, Transport and the Environment (ELY centres) are the regional providers of IPR related services. PRH and ELY centres promote innovation and the technical and commercial exploitation of inventions related to IPRs. The ELY innovation advisors are contact persons for the Product Track service. Also Tekes funding for enterprises allows the services purchased externally for the acquisition of IPR to be included on the eligible costs for SMEs.

Evaluations, consultations, foresight exercises

Governmental reviews, studies, evaluations and guidelines act as the instruments that guide and inform the science policy makers at the national level. Starting in 2015, the Prime Minister's Office is playing an active role in national foresight cooperation. Once during each electoral period, the Government submits to the Parliament a foresight report on long term perspectives. The foresight report gives the Government’s view on the chosen issues and associated policies. In 2013, the Government Report on the Future 2013: Well-being through sustainable growth was issued by the Government.

Regarding evaluations, they are used extensively to assess the operation of individual organisations. Finland was ranked 1st in the World in terms of evaluation culture by evaluation experts. All main actors of the R&I system have been evaluated since 2009. In 2013, the MEE ordered a Study on the Impacts of the Evaluations Made in 2009-2014 (in Finnish). In these evaluations a total of 157 recommendations were made. According to the study, 80% of the recommendations have exceeded to an operational execution phase. Therefore, the culture of evaluations supporting evidence based decision making seems to be working.

Knowledge transfer and open innovation

The innovation environment in Finland has been built especially on the idea that knowledge transfer is the most effective when it occurs during the execution of cooperative innovation. The public-private partnerships (PPP) are mainly facilitated through Tekes and SHOK programs. Open innovation is also on the agenda but how the concept is applied depends on the sector and the occasions. Semi open innovation is more common. The cooperation between research organisations and companies can be and has been measured by the amount of money: i.e. how much companies fund research in universities and research institutes. Finland used to perform well by this measure. However, the forms of intensive cooperation have changed. Companies and research organisations plan and execute cooperative projects with common goals and shared disciplines. Both give their resources, knowledge and efforts to the project without any money flows from an organisation to another. This can’t be seen in the statistics.

Performance of the National Research and Innovation system

Finland ranks among the innovation leaders in the Innovation Union Scoreboard 2014 along with Sweden, Germany and Denmark, performing well above the EU average. Finland performs very well in terms of scientific and technological excellence. The Finnish economy is knowledge-intensive, and has achieved a state of continuous change towards a high and medium-high-tech specialisation.

Structural challenges of the national R&I system

Although Finland performs well in R&I rankings, the development has not been as prompt as in many other countries. It can be concluded that the major challenges in the Finnish research and innovation system are 1) Weak internationalisation, 2) Quality of scientific research, 3) A fragmented university and research institute system with dispersed resources, 4) An undiversified business structure and 5) Poor productivity development during the last years.

Meeting structural challenges

Finland’s innovation policy and national measures are geared towards speeding up the development, commercialisation and take–up of new technologies and businesses. Overall, the number and scale of reforms taking place signal the continuous commitment to a broad and ambitious R&I policy. In addition to the efforts in enhancing the efficiency and improving the internationalisation of the innovation system, the policy reforms are targeted at increasing the number of high growth innovative companies as they are considered to be major contributors to diversifying the business structure and employment of the country. The innovative high growth companies are also considered as a means to diversify the Finnish economic structure. Recent developments in Research and Innovation policy and systems have been: a new university act, a reform of research institutes and research funding (in Finnish), a revision of the university funding model, a polytechnic reform, adoption of tenure track system in universities, a reform of public services for internationalisation (Team Finland), a reform of the structural fund allocation system (SF 2014 -2020, in Finnish), a new strategy and roadmap for research infrastructures 2014–2020, a reform of early stage VC funding (Vigo-program, Tekes funding for YICs, Tekes Venture Capital, SLUSH), improvement of the financing tools for growth (Finnvera 2014), and new Tekes programmes. These changes address the challenges facing the Finnish economy and will have a positive impact on the R&I system performance as well as the national economy. However, further means are needed to increase the multifactor and the labour productivity of the whole economy by implementing the planned R&I measures suggested by the new recommendations of the RIC (2014).

Innovation framework for SMEs

Small Business Act (SBA) profile continues to be one of the strongest of all the EU-28 Member States. In seven out of ten SBA areas, Finland performs above the EU average, the areas being: responsive administration, second change, internationalisation, entrepreneurship, access to finance, and skills and finance. Secondly, Finland performs averagely in two areas: state aid and public procurement, and environment. Thirdly, Finland performs below the EU average in the area of Single market. Finally, over the past six years, most SBA areas have not improved, the exception being responsive administration and skills, and innovation. The areas that improved the most in 2013 were access to finance and internationalisation. Although the basic environment for SMEs and entrepreneurship is good, the low birth rate of start-ups and the large number of businesses that stay small remain a challenge. The challenges concern mainly indirectly R&I policy related aspects. The challenges are related especially to attitudes, cost competitiveness, tax rates and regulations, restrictive labour regulations and access to finance.

Venture capital markets

Start-ups and young growth companies are crucial for renewing the structure of the national economy and increasing productivity through reallocation of resources (creative destruction). Priorities of the Finnish innovation policy have changed more towards start-ups, growth companies and commercialisation of research. VC investments play an important role in these priorities. According to the VC market statistics of the private equity (PE) industry, VC investments in Finland were 0.067% of GDP (2013) which is the highest value among European countries. In connection with VC investments, it is beneficial to consider the functionality of start-up ecosystem as a whole. It seems to work well thanks to a good cooperation between all actors in the ecosystem. However, it is difficult to say if the situation is a longer term trend or just a momentary improvement. At the moment, the consensus in Finland seems to be that the major challenges are more related to the later stage PE investments.

Innovative public procurement

Prior to 2009 the role of innovation oriented public procurement was quite modest in Finland but the development of public procurement in research and innovation policies is underway and high on the political agenda. The MEE Action plan states that innovation can be promoted through public procurements, especially in young, growing sectors. The action plan also refers to the reform of the Act on Public Procurement. The reform is based on the revision of the public procurement Directives announced in 2013. Tekes had 2008-2013 a program for piloting public procurement of innovation. The aim of the new Smart Procurement program (2013 - 2016) is to create smart demand, which will provide the prerequisites for new market creation and growth. Furthermore, smart procurement is integrated as a theme in some other programs, too. Moreover, Growth agreement between the state and the 12 largest cities include commitments of these cities to implementing innovative and precompetitive procurement. In Finland, 8% of companies have been involved in the public procurement of innovative solutions.

The country in the European R&I landscape

Finland ranks among the countries with the highest R&D intensity, 3.32 % of GDP (Gross Domestic Product) in 2013. The role of private sector in the Finnish R&I system is strong: the share of private funding is 69 % of GERD (Gross Domestic Expenditure on R&D), (Statistics Finland 2014). The Finnish governance system is centralised in terms of national guidelines, strategies and funding. On the other hand funding agencies, universities and research institutes have a substantial freedom of creating their strategies and implement them.

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