1. Funding of Finnish R&D&I-policies 3.7.2008 Juha Majanen, Ministerial Adviser, Budget department

2. 03/07/2008 Budget Department 03/07/2008 2 R&D&I-expenditure, overview  Total R&D&I-expenditure 2008 is estimated to amount about 6,3 billion euros of which:  Private enterprises 4,26 billoin euros (71%)  Public funding 1,80 billion euros (29%)  Public R&D&I –expenditure is about 4,4 % of government spending in 2008 (exclusive interest payments on debt)

3. 03/07/2008 Budget Department 03/07/2008 3 Central government budget expenditure by administrative branches in 2008, billion euros

4. 03/07/2008 Budget Department 03/07/2008 4 R&D&I-expenditure, overview  Both private and public R&D&I- expenditure have remained at relatively high level for years  Growth of the R&D&I-funding has been about 4 to 5% each year  However, due to very rapidly grown GDP, the GDP-ratio has decreased since 2005

5. 03/07/2008 Budget Department 03/07/2008 5 Source: Statistics Finland

6. 03/07/2008 Budget Department 03/07/2008 6 Source: Statistics Finland

7. 03/07/2008 Budget Department 03/07/2008 7 Main actors in R&D&I-funding  Several actors are funding and executing R&D&I-programmes and -projects  Tekes – Finnish Funding agency for Technology and Innovation  Academy of Finland  Sitra - the Finnish Innovation Fund  Science and Technology Policy Council  Ministry of Employment and the Economy  Ministry of Education  Universities  Employment and Economic Development Centres (Regional TE- centres)  Government research institutes  Finnvera Oyj  Industry Investment  Other institutions  Private enterprises

8. 03/07/2008 Budget Department 03/07/2008 8 Main actors in public sector DM 25736 01-2008 Copyright © Tekes Academy of Finland Universities Ministry of Emloyment and the Economy Other ministries and Research institutes Parliament Government Ministry of Education VTT Technical Research Centre of Finland Tekes TE-centres Science and Technolygy Policy Council Sitra Finnvera Oyj Finpro Industry Investment

9. 03/07/2008 Budget Department 03/07/2008 9 DM 25736 02-2008 Copyright © Tekes Overview of innovation environment Private Basic researchApplied researchDevelopment Development of companies Marketin Internationalization R&D&I activities of Private enterprises 4 109 Business- Angels noin 380** Public Finnvera 406* Universities 1 079* Academy of Finland 239 Ministries, TE-centres Research institutes 357 Tekes 465 VTT 217 Private funding from abroad 409 Foundation for Finnish Inventions 6 Finpro 31 Investors: Private301 Industry Invesment: 82 Sitra 29 Year 2006, Million euros (*) year 2005 (**) old estimate 2002

10. 03/07/2008 Budget Department 03/07/2008 10 Public R&D&I-funding, main actors (Budget 2008, MEUR) Tekes and Academy of Finland (Total 823 MEUR) offer funding on a competetive basis Basic R&D&I funding allocated in central government budget Source: Statistics Finland

11. 03/07/2008 Budget Department 03/07/2008 11 R&D&I expenditure, main actors (2006, MEUR) Source: Statistics Finland

12. 03/07/2008 Budget Department 03/07/2008 12 R&D&I-expenditure and funding, main actors (2006, MEUR) Source: Statistics Finland

13. 03/07/2008 Budget Department 03/07/2008 13 Public R&D&I-allocation Source: Statistics Finland

14. 03/07/2008 Budget Department 03/07/2008 14 Public R&D&I-allocation, Socio-political targets (2008, MEUR; %) Source: Statistics Finland

15. 03/07/2008 Budget Department 03/07/2008 15 Socio-political targets 2000 – 2008 (MEUR) Source: Statistics Finland

16. 03/07/2008 Budget Department 03/07/2008 16 Top ten R&D&I-lines of industry (2006, MEUR) Source: Statistics Finland

17. 03/07/2008 Budget Department 03/07/2008 17 R&D&I-expenditure in private enterprises Source: Statistics Finland

18. 03/07/2008 Budget Department 03/07/2008 18 Competitive funding programs  Tekes and Academy of Finland Programmes, public funding about 550 Meur, 2008  Sitra programmes  Researcher groups from both public sector (incl. universities) and private enterprises can compete and participate

19. 03/07/2008 Budget Department 03/07/2008 19 Tekes’ programmes  Ongoing Tekes programmes  BioRefine 2007-2012 - New Biomass Products BioRefine 2007-2012 - New Biomass Products  ClimBus - Business Opportunities in the Mitigation of Climate Change 2004-2008 ClimBus - Business Opportunities in the Mitigation of Climate Change 2004-2008  Concepts of Operations 2007-2011 Concepts of Operations 2007-2011  Digital Product Process 2008-2012 Digital Product Process 2008-2012  FinNano - Nanotechnology Programme 2005-2010 FinNano - Nanotechnology Programme 2005-2010  FinnWell - Future Healthcare 2004-2009 FinnWell - Future Healthcare 2004-2009  Fuel Cell 2007-2013 Fuel Cell 2007-2013  Functional Materials 2007-2013 Functional Materials 2007-2013  GIGA - Converging Networks 2005-2010 GIGA - Converging Networks 2005-2010  Liito - Innovative Business Competence and Management 2006-2010 Liito - Innovative Business Competence and Management 2006-2010  MASI - Modeling and Simulation 2005-2009 MASI - Modeling and Simulation 2005-2009  NORDITE 2005-2010 NORDITE 2005-2010  NewPro - Advanced Metals Technology - New Products 2004-2009 NewPro - Advanced Metals Technology - New Products 2004-2009  Pharma - Building Competitive Edge 2008-2011 Pharma - Building Competitive Edge 2008-2011  Safety and security 2007-2013 Safety and security 2007-2013  Serve - Innovative Services 2006-2010 Serve - Innovative Services 2006-2010  SISU 2010 - Innovative Manufacture 2005-2009 SISU 2010 - Innovative Manufacture 2005-2009  Sustainable community 2007-2012 Sustainable community 2007-2012  SymBio - Industrial Biotechnology 2006-2011 SymBio - Industrial Biotechnology 2006-2011  Tourism and Leisure Services 2006-2009 Tourism and Leisure Services 2006-2009  Ubicom - Embedded ICT 2007-2013 Ubicom - Embedded ICT 2007-2013  VAMOS - Value Added Mobile Solutions 2005-2010 VAMOS - Value Added Mobile Solutions 2005-2010  Verso - Vertical Software Solutions 2006-2010 Verso - Vertical Software Solutions 2006-2010  Workplace Development Programme Tykes Workplace Development Programme Tykes

20. 03/07/2008 Budget Department 03/07/2008 20 Tekes’ evaluation criteria for applications  High-quality, advanced technology and effective networking  Project’s long-term effects, such as employment and potential turnover and exports  The enterprise projects to be funded are selected by evaluating  the business to be generated  the technology, innovation and competence to be developed  the resources available  the cooperation to be developed and used  the social and environmental well-being factors to be promoted  the impact of Tekes funding and expert services  The public research projects to be funded are selected by evaluating  the technology and competence to be developed  the cooperation to be developed and used  the utilisation of results  the resources available  the social and environmental well-being factors to be promoted  the impact of Tekes funding and expert services

21. 03/07/2008 Budget Department 03/07/2008 21 Academy of Finland programmes  Ongoing Finnish Academy programmes  Environment and Law, ENVLAW (2005-2008) Environment and Law, ENVLAW (2005-2008)  Information Technology in Mechanical and Automation Engineering, KITARA (2005-2009) Information Technology in Mechanical and Automation Engineering, KITARA (2005-2009)  Business Know-how, LIIKE2 (2006-2009) Business Know-how, LIIKE2 (2006-2009)  Neuroscience, NEURO (2006-2009) Neuroscience, NEURO (2006-2009)  Nanoscience, FinNano (2006-2010) Nanoscience, FinNano (2006-2010)  Sustainable Production and Products, KETJU (2006-2010) Sustainable Production and Products, KETJU (2006-2010)  Nutrition, Food and Health, ELVIRA (2006-2010) Nutrition, Food and Health, ELVIRA (2006-2010)  Power in Finland, VALTA (2007-2010) Power in Finland, VALTA (2007-2010)  Substance Abuse and Addictions, ADDIKTIO (2007-2010) Substance Abuse and Addictions, ADDIKTIO (2007-2010)  The Future of Work and Well-being, WORK (2008-2011) The Future of Work and Well-being, WORK (2008-2011)  Sustainable Energ, SusEn (2008-2011) Sustainable Energ, SusEn (2008-2011)  Open for application  Responding to Public Health Challenges (SALVE) Responding to Public Health Challenges (SALVE)  Ubiquitous computing and diversity of communication (MOTIVE) Ubiquitous computing and diversity of communication (MOTIVE)

22. 03/07/2008 Budget Department 03/07/2008 22 Academy of Finland’s evaluation criteria for applications  Scientific quality and innovativeness of the research plan  Competence of the applicant/research team  Feasibility of the research plan  Cooperation contacts for the research  Significance of the research project for the promotion of professional careers in research and for researcher training  Depending on the research project, the significance of the research project is also assessed in terms of society and business and industry. A starting point is that the project to be funded will benefit Finnish research, society or international cooperation.  The Academy also pays attention to that research projects aiming at a high target level and new breakthroughs involve a risk of failure. The aim is to be fully aware of the risks involved and, nevertheless, to provide an opportunity for scientific breakthroughs as well as to increase the renewal of science and research.

23. 03/07/2008 Budget Department 03/07/2008 23 Sitra’s Programmes  Sitra currently focuses actively on five programmes:  Health Care Programme  Food and Nutrition Programme ERA  Energy Programme  Growth Programme for the Mechanical Industry

24. 03/07/2008 Budget Department 03/07/2008 24 Strategic centres for science, technology and innovation I  Strategic centres for science, technology and innovation are new instruments  Coordinating research resources in Fields that are important to the future of Finnish society and business and industry.  The aim is to create a new, more efficient framework for collaboration between companies, universities, research organisations and sources of funding.  Companies, universities and research institutes will agree on a joint research plan. The plan will aim to meet the application needs for practical application by companies within a 5 to 10 year period.  In addition to shareholders, public funding organisations will commit themselves to providing funding for the centres in the long term. Strategic centres for science, technology and innovation

25. 03/07/2008 Budget Department 03/07/2008 25 Strategic centres for science, technology and innovation II  Five strategic centres  energy and the environment  metal products and mechanical engineering  the forest cluster  health and well-being  information and communication industry and services.  Tekes did bear the main responsibility for organising the establishment of the centres.  However, the actual establishment of the strategic centres has been the responsibility of the partners of the centre, i.e. companies, universities and research institutes.

26. 03/07/2008 Budget Department 03/07/2008 26 Incentives for partnership  Finnish innovation framework:  A strong emphasis on long term cooperation and partnership between companies, researchers and funding organisations  Transition towards demand- and end-user- driven innovation  Renewal of innovation concepts  Evaluation criteria of Tekes and Academy of Finland for applications

27. 03/07/2008 Budget Department 03/07/2008 27 Example: Regional networking with partners from Oulu in electronics and telecommunications programmes DM 58620 03-2004 Copyright © Tekes Includes partners who participated in at least three projects in Tekes Electronics and Telecommunications technology programmes. Lappeenranta University of Technology (Lappeenranta) Salcomp Oy (Kemijärvi) CCC (Oulu) Sonera (Helsinki) Nokia Mobile Phones (Oulu) National Semiconductor Finland Oy, former Fincitec Oy (Kemi) University of Oulu (Oulu) Efore Oy (Helsinki) Projekti-Insinöörit Oy (Helsinki) Cybelius Software Oy (Oulu) Teleste (Turku) Tampere University of Technology (Tampere) Nokia Networks (Oulu) ADC Telecommunications Oy (Oulu) VTT, Technical Research Centre of Finland (Helsinki) Helsinki University of Technology (Espoo) JOT Automation Oy (Oulu) Nokia Research Center (Helsinki) VTT, Technical Research Centre of Finland (Oulu) Extrabit Oy (Oulu) ABB (Helsinki) NetHawk Oy (Oulu) Elektrobit Oy (Oulu) Vaisala Oyj (Helsinki) Polar Electro Oy (Oulu) Filtronic LK Oy (Oulu) Aspocomp Oy (Helsinki) Elcoteq Network Oyj (Lohja) Planar Systems Oy (Helsinki) Ultraprint Oy (Oulu) Suunto Oy (Helsinki) Picopak (Lohja) Nokia Mobile Phones (Salo)

28. 03/07/2008 Budget Department 03/07/2008 28 Example: Regional networking with partners from Turku in electronics and telecommunications programmes DM 58620 03-2004 Copyright © Tekes Includes partners who participated in at least three projects in Tekes Electronics and Telecommunications technology programmes. Miratel Oy (Turku) Nokia Multimedia Terminals (Turku) Finnish Broadcasting Company (Helsinki) Sonera (Helsinki) Elisa Communications (Helsinki) University of Oulu (Oulu) Nokia Research Center (Helsinki) Tampere University of Technology (Tampere) Helsinki University of Technology (Espoo) Teleste (Turku) Wallac Oy (Turku) Satel Oy (Salo) VTT (Helsinki) ADC Telecommunications Oy (Oulu) Filtronic LK Oy (Oulu) Mariachi Oy (Turku) VTT (Oulu) ABB (Helsinki) Nokia Mobile Phones (Tampere) Nokia Networks (Tampere)

29. 03/07/2008 Budget Department 03/07/2008 29 Regional Criteria and R&D&I  Not used for funding offered on an competitive basis  However R&D&I-activity seems to be important from the standpoint of regional development  SMEs are encouraged to develop their capability to apply and utilize R&D&I funding (special funding for pre-R&D&I projects)  decisions on allocation of funding are taken at the regional level  Significant part of EU structural funds funding is used to R&D&I-purposes  decisions at the regional level  Universities have certain tasks in enhancing for example regional development  Regional universities of applied sciences/Polytechnics  decisions at the regional level  Locating goverment research institutes or their functions

30. 03/07/2008 Budget Department 03/07/2008 30 Network of universities, polytechnics, public research institutes and technology centres in Finland DM 58620 03-2004 Copyright © Tekes University Regional university unit Polytechnic Polytechnic regional unit VTT, Technical Research Centre of Finland or other public research institute Regional unit of public sector research institute Technology centre

31. 03/07/2008 Budget Department 03/07/2008 31 Main financial incentives for the private sector  Directly through:  Grants  Loans  Investment/Venture capital (directly or through Venture Capital companies)  No indirect tax incentives or expenditures

32. 03/07/2008 Budget Department 03/07/2008 32 Example on incentives: Tekes’ funding

33. 03/07/2008 Budget Department 03/07/2008 33 R&D&I-funding and fiscal ceilings  Government spending limits are the ceiling  Spending limits are ceiling for the Budget expenditures over the entire electoral period  Includes about ¾ of budget expenditure, also R&D&I- expenditure  According to the current Spending limits the basic public R&D&I funding increases 80 MEUR during current electoral period (2007 – 2011)  The 4 % GDP-ratio is expressed aim  but no direct mechanical link to scaling of budget appropriations

34. 03/07/2008 Budget Department 03/07/2008 34 Spending limits

35. 03/07/2008 Budget Department 03/07/2008 35 Evaluation and budget process  Strong emphasis on evaluating programmes and pojects, however:  In the budget process evaluation results are usually referred only at the general level (and sometimes to legitimate proposals for additional funding)  Examples of epressis verbis referred evaluations:  Evaluation results of Centre of Expertise programme  Evaluation of Finnish Innovation system  relates to the ongoing preparation of Finnish Innovation Strategy

36. 03/07/2008 Budget Department 03/07/2008 36 How R&D&I-policy targets are set  As a part of performance budgeting  As a part of performance management  Performance management is an agreement-based interactive control model.  Its operational core is in the ability of the agreement parties (ministry and agency) to find the appropriate balance between the available resources and the results to be attained with them.  The basic idea of performance management is to balance resources and targets on the one hand and efficiency and quality on the other as well as possible and to ensure that the desired effects are cost-efficiently achieved.  Achievement of targets are controlled and reported as a part of Accountability

37. 03/07/2008 Budget Department 03/07/2008 37 Basic performance criteria (true and fair information) Policy effectiveness Outputs and quality management -goods and services - service capacity and quality Operational efficiency -economy - productivity - profitability - cost-equivalence Human resource management Outcome targets Operational performance targets Policy effectiveness: outcomes How operations and finances have affected policy effectiveness Operational results: outputs (which can be influenced through management) PERFORMANCE MANAGEMENT ACCOUNTABILITY

38. 03/07/2008 Budget Department 03/07/2008 38 Impacts of evaluation results  Evaluation activities are an integral part of funding R&D&I-operation, however:  evaluation results seem to be under-utilized  evaluation results seldom result to reassesment of allocation of R&D&I-funding, specially at the level of ministries  evaluation results are sometimes even unuseful due to the lack of quality of evaluation or for example due to unclear or incomplete performance targets  Performance audit report 157/2008 of National Audit Office

39. 03/07/2008 Budget Department 03/07/2008 39 Use of performance information in budgeting  Different level of targets are set and examined:  social policy targets: changes in the state of society and the conditions of its members and the extent to which the set targets have been achieved (social effectiveness);  costs of achieving the social policy targets (cost effectiveness);  operating performance  outputs, service capacity and the quality of outputs and processes (outputs and quality management)  economy, productivity and the cost effectiveness and profitability of charged and jointly financed operations (operational efficiency)  personnel and job satisfaction, and information, expertise and renewal.  Above targets are set also for the R&D&I funding, however, there is no direct mechanical link between results achieved and allocation of funds Mainly at the level of Government and ministries Mainly at the level of agencies, e.g. Universities or institutes

40. 03/07/2008 Budget Department 03/07/2008 40 The effect chain of government agencies Policy effectiveness OUTCOMES Operational PROCESSES and their quality RESOURCES Appropriations, staff, intangible assets OUTPUTS Goods an services, service capacity of the agency PERFORMANCE MANAGEMENT ACCOUNTABILITY

41. 03/07/2008 Budget Department 03/07/2008 41 Preliminary conclusions, how to perform better  Inputs are already at a relatively high level  More emphasis on outcomes  Significant amount of actors doesn’t necessarily mean significant results  New challenges (e.g. ageing or energy and climate issues) demand adaptability from the management of R&D&I-funding  Systemic approach  More weight on utilizing evaluation information in decision making, specially at central government level  Widening the innovation concept, more emphasis e.g. on services and social innovations  Adjusting the innovation process to be more demand- and customer-driven (“innovating together”)