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The state’s crucial role in stimulating innovation in Finland and Sweden Part 2

Public research funding has played an important role for Swedish and Finish innovation. What the state does matters. Part 2 of this article discusses why public stimulation is more significant in Finland than in Sweden and to what extent the different organisation of the  allocation of public R&D funding in the two countries has had an effect.

BySara Torregrosa-Hetland, Post Doc Lund University, Antti Pelkonen, Science Specialist at Prime Minister’s Office of Finland, Juha Oksanen, Senior Scientist VTT, Astrid Kander, Professor Lund University

Read Part 1 here!

Public stimulation is more significant in Finland than in Sweden

The share of innovations with public support has been constantly higher in Finland than in Sweden during this period. The difference is strikingly large, and especially between 1990 and 2000 when it lay at 40 percentage points.  What could explain such large differences? Concerning differences in innovations developed with public funding three aspects seem to be important.

First, in Sweden companies own R&D investments per capita have been substantially higher and therefore the role of public R&D support may not have been as significant as in Finland.

The second source of explanation could be the level of public R&D funding. Direct public funding to company R&D has been higher in Sweden, which may seem to be in contradiction with our findings. Yet, in Sweden a large share of public R&D funding goes to the defence sector. If the defence sector is excluded, we find that the share of public funding of companies’ R&D investments has been substantially higher in Finland than in Sweden.

This implies that in Sweden a quite large share of public R&D funding goes to large defence sector companies. Overall, this means that in Sweden public R&D funding is probably concentrated to a smaller group of (large) companies while in Finland a larger number of companies have, over time, been able to receive public R&D funding. This may be reflected in the share of innovations with public funding support.

Furthermore, we also assume that the defence sector innovations are more prone to be kept secret and hence do not show up in our database to a considerable degree.

Different sets of policy instruments

The third aspect concerns the way the allocation of public R&D funding to companies has been organised in the two countries.

Over the years, the Swedish public R&D funding landscape has been populated by a relatively complex web of actors (Vinnova, 2015) which has resulted in a highly fragmented system (OECD, 2013). Finland has followed a different approach, and public funding to company R&D has been channelled almost uniquely through Tekes/Business Finland since its establishment in 1983.

Public/private research collaboration

As regards differences in the share of innovations developed in collaboration with public research, it is probable that the different ways of organising the public research systems play a role. In Sweden pre-competitive research has been concentrated to universites, while in Finland public research institutes have had a significant role in producing applied research and some of the institutes collaborate widely with companies.

Similarly, with respect to collaboration between universities and industry, it has been pointed out that in Sweden the links between universities and industry, especially SMEs, are weak and insufficient (OECD, 2013). In Finland, in contrast, a strong culture of cooperation has been regarded as a key strength of the national innovation system (OECD, 2017).


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Photo of the Finish parliament by Benedek.