RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND Research and Innovation Policy Council of Finland Mr. Kai Husso, Chief Planning Officer Finnish Research and Innovation Policy Tomorrow I N N O V A T I O N D Y N A M I C S C H A L L E N G E D B Y R E C E S S I O N

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND - Performance of the Finnish innovation system: high quality environment in turbulence Financing issues - Financing issues - Structure of the Innovation System - R&I policy programmes by Gov. and RIC - What next, where to? Main topics of the presentation

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND Various challenges taking effect at the same time Recent developments in the Finnish economy …and 2015 could be the fourth consecutive year in Finland when GDP is shrinking. + EU-Russia export sanctions + Refugee crisis

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND Exports of Finnish goods have decreased with poor recovery as a result of the global crisis 2005=100 Exports of goods by country Value index, US Dollars, seasonal adjusted, quarterly. Source: OECD Main Economic Indicators 2015

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND As a knowledge-based economy, there is no chance for Finland to compete in the global market on the basis of: instead, find market niches, more narrow comparative edges - m ass production (instead, find market niches, more narrow comparative edges) instead, being a frontrunner, use of KETs - mature fields of industry or technology (instead, being a frontrunner, use of KETs) instead, - levels of wage, taxation, and price of the factors of production (instead, specialise in high added value products, intangibles, cutting-edge skills specialise in high added value products, intangibles, cutting-edge skills) Reasons for increasing public funding: Direct public R&D support for enterprises is effective 1) Direct public R&D support for enterprises is effective; it supplements the enterprises’ own funding and increases their investment in research. PPPs in R&D requires mutual commitment 2) Intensification of PPPs in R&D requires mutual commitment to funding. significant economic and social impacts, externalities 3) Publicly funded R&D have significant economic and social impacts, externalities. Impacts are biggest in the early stage of innovation process (e.g. basic research) and in fields where the market mechanisms does not fully work (e.g. education, defence, social care). easy to get small amount, difficult to get large inv.) 4) Short supply of patient money for knowledge- and research-intensive young companies (i.e. easy to get small amount, difficult to get large inv.). What’s the story we believe in? Why to inject public funds to R&D?

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND Impacts of public R&D funding growth of employment Public innovation support has a positive impact on the growth of employment in companies. increases companies’ own investment Public R&D funding increases companies’ own investment in R&D. additionality of public funding is € € of public R&D funding increases private R&D investment by € Thus, the overall additionality of public funding is € positive impact on Public R&D funding has a positive impact on: risk leveltechnological level - the risk level and technological level of the project networkingco-operationdiffusion of knowledge - networking, co-operation and diffusion of knowledge commercialisation - commercialisation prospects.

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND Strengths of innovation system Political stability; a safe environment for people and enterprises Reliable public sector, good governance; a well-functioning regulatory environment Effective educational system, lifelong learning, plenty of R&D personnel Equality in education and working life High volume of R&D investments Public-private partnerships High quality research; international patenting

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND Scientific impact in FIN and selected OECD countries Source: Thomson Reuters Web of Science based custom data, Bibliometric computing CSC, 2014.

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND Finland is the leading country regarding innovation cooperation between companies and academia % Share of all innovating companies 2010–2012 Innovation cooperation between companies, universities and R&D institutes Source: Eurostat, Community Innovation Survey

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND R&I Policy Challenges Downward trend in (public) R&D financing and productivity Share of high technology in exports has dropped from 23% in the early 2000s to some 6% today Need of growth-oriented innovative firms Volume of inward FDIs and numbers of foreign experts, researchers and students are low More efficient exploitation of R&D results Lack of vision, fail to notice opportunities for growth Fragmented activities: resources allocated to a large number of small units -> prioritised pooling of limited resources is needed

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND Higher education & research landscape – institutions Higher education institution and research institution network covers the populated parts of the country –14 universities student enrolments of which doctoral students –24 polytechnics/ Universities of Applied Sciences student enrolments –14 government research institutes

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND R&D expenditure by sector in * Since 2011, R&D volume has declined by 16% (in real terms) Since 2011, R&D volume has declined by 16% (in real terms). For manufacturing industry, the figure is -27%, for ICT field -36%, but for the service sector +14%! Continuous growth of the volume since 1971 until 2009 Continuous growth of the volume since 1971 until 2009… * Figures for 2014 are estimates by Statistics Finland

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND GOVERNMENT * R &D funding 2015: €2.003bn -10% *GOVERNMENT Research and Innovation Policy Council Research and Innovation Policy Council Ministry of Education and Culture €1090m +7% Ministry of Education and Culture €1090m +7% Ministry of Employment and the Economy 618 €618m -23% Ministry of Employment and the Economy 618 €618m -23% Other ministries €295m -26% Other ministries €295m -26% Technology and Innovation Funding Agency TEKES Agency TEKES €488m -24% Academy of Finland €416m +10% SITRA VTT VTT €87m -6% Universities: 578m €578m -3% Other govern- ment R&D labs: 169m €169m -26% Structure and funding of the Finnish public innovation system Polytecnics: >60m €>60m +6% University hospitals: m -50 €22 m -50% * Volume of government R&D funding in 2015 and the development of funding in in real terms

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND Finnish Research and Innovation Policy Review 2015–2020 (November 5, 2014) New government-level policy outlines adopted by the RIC

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND Research and Innovation Policy Council CHAIRMAN: Prime Minister DEPUTY CHAIRMEN: Minister of Education and Science Minister of Economic Affairs OTHER MINISTERS : Minister of Finance 0-6 other ministers 10 OTHER MEMBERS : Academy of Finland Tekes (the Finnish Funding Agency for Innovation) Business and Industry Employees’ organisations Universities Polytechnics + other qualified members PERMANENT EXPERTS: (5) COUNCIL SECRETARIAT: (2-3)

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND The Council is a forum for creating and enhancing partnerships between: -decision-makers and experts -basic research, development work and innovation communities -universities, polytechnics, government R&D labs and enterprises -Ministry of Education, Ministry of Employment and the Economy, and other ministries -employers and employees

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND strategic development co- ordination The RIC is responsible for the strategic development and co- ordination of the Finnish STI policy and the NIS as a whole. independent advisory body strategy-shaping multi-stakeholder institution The RIC is not only a classical independent advisory body, but also a strategy-shaping multi-stakeholder institution, where political decision-makers, administration, academics and industrial experts jointly design and formulate major development lines and actions for national STI policy. new government and a new government programmeorganisation and the rules of procedure of government and its ministeries renewal of the RIC Finland has now a new government and a new government programme –> many impacts on the organisation and the rules of procedure of government and its ministeries. Reasoning about the renewal of the RIC is also under way.

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND 1.Raising the quality of research 2.Renew the structures and functions of the public research system 3.Diversify the economic structure and support the continuous regeneration of the enterprise base The document introduces major policy guidelines and the national R&I policy reform programme of 50 recommendations. The main challenges and objectives for R&I policy

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND 6 topics R&I policy reform programme is focused on 6 topics. Key areas are: 1) 1) a radical reform of the higher education system 2) 2) promoting the exploitation and impact of R&I results 3) 3) strengthening new sources of growth, intangible assets and entrepreneurship. Other key targets for development are: 4) 4) improvement of the overall knowledge-base of the population and selective support for cutting-edge skills 5) 5) reform of the public sector and closer cross-administrative cooperation 6) 6) adequacy and targeting of R&D funding. The document introduces major policy guidelines and the national R&I policy reform programme of 50 recommendations. Extensive reform programme

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND  Radical reform of HE system and its structures  Prioritization of fields of strength in each university  (Inter)national mobility and recruitment of the R&D personnel  Exploitation of new knowledge and expertise embedded in the HEI system  Use of public procurement in RDI, open innovation competitions  Opening of public data reserves and archives Some concrete recommendations for action (1/2)

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND  Strengthening new sources of growth, intangibility and entrepreneurship  New funds for transferring R&D results into start-ups  Capital market for seed, start-up and growth companies will be fortified  Reform of the public sector, closer cross-administrative cooperation  Creation of experimentation culture − enabled by legislative renewals  More intense dialogue between the government and business sector Some concrete recommendations for action (2/2)

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND The Government Programme of the New Finnish Government (May 27, 2015) Emerging issues for R&I policy

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND * Enhancing growth and competitiveness * Fortifying education and expertise * Accelerating bio/green economy and clean solutions * Promoting health and wellbeing * New operational models through digitalisation, reducing regulatory burden, experimentation, less bureaucracy The Government Programme (GP): Five strategic objectives

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND GP includes 26 Spearhead Initiatives, some 10 are relevant for R&I policy. Essential R&I policy items include: a)deeper co-operation and more clear division of work between HEIs and government R&D labs b)increasing the economic and social impact of R&D c)decrease of public R&D funding by some 5-10% compared to the level of 2015 GP’s Spearhead Initiatives and R&I policy (1/3)

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND -The quality and the economic and social relevance of R&D. -Co-operation between HEIs and business life. -Exploitation of new knowledge and expertise will be included as a funding criteria of HEIs. The profile building, division of work and co-op between HEIs and gov. R&D labs will be supported. Impact of results derivedfrom public research (incl. commercialisation) will be amplified. -Multilateral collaborative platforms will be significantly reformed -Special actions for the bioeconomy, digitalisation, cleantech and healthcare and for the issues such as arctic expertise and intangible value creation. GP’s Spearhead Initiatives and R&I policy (2/3)

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND -Work-based immigration policy will be updated -Significant budget cutbacks to universities and Tekes -The GDP share of government R&D funding is now 0.97%, but it will decline below the level of 0.90% within the next two years. -Finland's R&D intensity today is 3.11%, but it will sink below the level of 3% in the coming years (cf. 3.75% in 2009). GP’s Spearhead Initiatives and R&I policy (3/3)

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND Competence-based policy Knowledge push Demand-based policy; user-driven innovation Demand pull * public procurements * working life developments * user communities * innovative public services * regulatory framework * PPP platforms traditional (scientific) research (done in public R&D orgs), and support of R&D and technology programmes From From... more towards Redirections in R&D and Innovation: innovation policy expanding into new territory Creation of knowledge Exploitation of knowledge

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND More emphasis on quality and impact issues, not that much on growing volumes and numbers Reallocating public resources from R&D to innovation From creation of knowledge towards exploitation of knowledge More public resources made available to young innovative firms and growth companies Looking for higher leverage effects and additionalities for public RDI investments e.g. through new modes of financing (incl. public procurement, venture capital) and new policy measures (e.g. regulation, standardisation) Redirections in R&D and Innovation

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND

RIC RESEARCH AND INNOVATION COUNCIL OF FINLAND Research and Innovation Policy Council Strategic Programme of Prime Minister Juha Sipilä’s Government, Research.fi − a gateway to Finnish R&I activities For more information Thank you