Where is the understanding of innovation-driven economic growth among decision-makers disappearing?

News article

The understanding of the level of Finnish technology among political decision-makers has developed in a negative direction. However, the private sector is bringing some light of hope in the otherwise bleak situation revealed by the Technology Barometer.

The understanding of the level of Finnish technology among political decision-makers has developed in a negative direction. At the same time, investments in research and product development have been cut dramatically. However, the private sector is bringing some light of hope in the otherwise bleak situation revealed by the Technology Barometer. Companies estimate that, in the future, they will invest more on their product development than they have been doing lately. Direct investments in Finland have also increased.

The Technology Barometer, carried out in collaboration between the Academic Engineers and Architects in Finland - TEK and VTT Technical Research Centre of Finland, shows that, measured by several indicators, development in Finland has gone downhill in recent years. The most dramatic drop can be seen in the added value produced by high technology, which in 2009 amounted to almost 14 per cent of the GDP, but is no longer higher than 8.5 per cent.

The results of the questionnaire section of the barometer indicate that, over the past few years, political decision-makers seem to have lost their faith in the possibility that targeting of resources to scientific research would yield a high interest for society.

– Earlier, the understanding of the mechanisms of innovation-driven economic growth has been well established in Finland. The rise from the recession of the 1990's was based solely on leveraging our technological competences. Is this recent backward step based purely and simply on ignorance, wonders Director Pekka Pellinen from TEK.

Finland is currently one of the few OECD countries, where the real value of R&D investments has been dropping for a long time. State investments have been falling for five consecutive years, and also the private sector’s interest to place money on R&D operations has been low. The investments made have been largely directed for further development of products, not for innovations. Many companies have maintained their profitability by means of reducing personnel and cutting costs.

– Finland is falling behind the vanguard of innovation activity, which is already clearly visible in our competitiveness. We should now follow the example of Denmark, which has greatly enhanced its positions specifically by having improved the operating conditions of its innovation field, Pellinen points out.

Some light of hope: product development increasing and ICT services exports growing

Companies’ own estimates that they will increase their R&D operations within the next few years give some hope of a better future. The exports of ICT and communications technology services are also increasing. When comparing the share of ICT services of total service exports, Finland is number one among the countries compared, having even improved her rate of progress.

– Those responsible for making economic policy must understand that Finland is increasingly a service economy. It is not worth pining for the traditional industrial society any more, says research coordinator Torsti Loikkanen from VTT.

There has been clear improvement in internationalisation and networking: the number of direct investments in Finland has increased. In 2013, Finland was among the best between the countries compared in terms of attracting foreign R&D investments.

– The competence created in Finland during the years gone is now appearing so attractive that international investors are prepared to put their money at stake in Finland. This sends a strong message to decision-makers: competence and innovations are worth investing in, Loikkanen points out.

Expenditure research and development activities by sector in Finland 2009–2016.

Finland still leader in technological and scientific competence, but Denmark is catching up

The TEKbaro 2017 shows that Finland is number one among the countries compared in terms of technological and scientific competence. However, Denmark passed us already in 2014 in the number of people employed in R&D tasks, and is now passing us also in lifelong learning.

Finland's position among the countries included in the comparison is weakened by long-term unemployment, which has also spread to include those with higher education. At the same time, there is a mismatch between competent employees and jobs on the labour market.
Denmark serves as a good example also in this respect: the Danish employment measures have evidently been effective.

– We have noticed Finland's downturn. In Korea, positive development has continued, but some signs of a negative turn looming can be observed there as well, said Pilseong Jang, representative of the barometer project's Korean partner, the Korea Institute of Science and Technology, at the publishing of the barometer in Helsinki. He also remarked that various innovation index systems give very different results. The placing of Korea in Technoloybarometer is lowered by the heavy weight of social cohesion index and especially the state of environment index.

– According to our review, public R&D support measures can be used to affect the growth rate of competence-intensive companies in particular. However, the measures seem to have a minor effect on profitability, says SeogWon Hwang, representing the same research institute.

How could we accelerate budding growth?

In Pekka Pellinen's view, the most important thing is that decision-makers would realise once again the importance of innovation-based economic growth.

– In addition, public measures must be used to create additional incentives for the private sector to make new investments and innovations of their own. Furthermore, we must be able to increase investments in instruments applied in the style of Tekes - the Finnish Funding Agency for Innovation. Most of the new jobs are created in the SME sector, so this is where we should target the incentives.

– A clear cross-sectoral innovation policy must be established for the public sector to coordinate the operations between the various administrative sectors. A closer connection must be created between employment and innovation administrations by, for example, including the DigiBoost operating model as part of the employment administration’s toolbox. The productivity of the public sector in general must also be improved through digitalisation. More growth-orientation and improved capacity for risk-taking is also needed in the private sector, Pellinen says, listing goals.


For more information, please contact:

  • Pekka Pellinen, TEK, +358 40 521 9424
  • Torsti Loikkanen, VTT, +358 40 530 2587


What is TEKbaro?

TEKBaro, the Technology Barometer, estimates Finland's financial and social capacity on the basis of the technological and scientific competence and development. The comparison countries are Sweden, Denmark, the Netherlands, Germany, the United Kingdom, the United States, Japan and South Korea.
The barometer also includes a questionnaire section, which studies the values, attitudes and views of various population groups.

The Technology Barometer 2017 is the seventh study in the series; the first one was published in 2004. The study was carried out in collaboration between VTT and the Korean research institute STEPI.