How Finland develops its national plan for investment in innovation

In 2021, Finland set a goal of raising its expenditure on research, development and innovation (RDI) to 4% of GDP by 2030. The government plan includes basic principles for allocating funding and stipulates that a third of RDI funding will come from public funds and the other two-thirds from private funding. But the specifics of where to spend that money are still subject to debate. 

The general view of the government and the research community is that the country should direct its effort towards areas that already have state-of-the-art research and where there is the potential to produce sustainable, scalable and commercially viable solutions. 

One of the best perspectives on where Finland should invest comes from VTT, the Finnish research and technology organisation. VTT’s role is to help bring the fruits of research to industry. The organisation is funded by the Finnish government and is the largest recipient of European Union (EU) research funding in Finland. Researchers at VTT are very well placed to describe Finland’s strengths and to provide a well-founded opinion on where the country should be heading. 

The authors of the report reinforce the idea that two-thirds of the increase in RDI investment should come from private companies. The report also echoes the ambient view that funding for research and development should focus on areas in which Finland already has strengths and where the country would benefit from a stronger position in the future.  

A history of strategic technology in Finland 

One of the members of the report’s steering group, Laura Juvonen, sat down with Computer Weekly to discuss the vision paper. She started out by providing a history of Finland’s thinking on its national advantages and how some of those areas will continue to push the country into industries of the future. Juvonen is senior vice-president of strategy at VTT. 

She tells Computer Weekly that at certain points in history, Finland made conscious decisions to invest in technologies in a strategic way. The first time was after World War Two, when Finland was required to pay the Soviet Union wartime reparations, as stipulated in the Moscow Armistice signed on 19 September 1944. The treaty, signed between Finland on one side and the UK and the Soviet Union on the other, called for Finland to pay the Soviet Union $300m in gold (equivalent to around $5.78bn now). 

Subsequently, both sides agreed for the payment to be made in the form of ships and machinery, instead of gold, and that the payment would be made over a period of several years. Finland would need to ramp up its manufacturing capacity to fulfil this obligation, and forward-thinking members of the government saw this as an opportunity to build a more competitive manufacturing industry.  

With investment in equipment and training, Finland made the promised deliveries and came out a winner in the process. As a result of this agreement, the country developed a world-class manufacturing industry, proving once again that necessity is the mother of invention. Thanks to continuous investment in new technology, manufacturing is still big in Finland. The industry is now undergoing digital transformation to make it more efficient and to reduce CO2 emissions. 

The second wave of strategic investment came in information and communications technology (ICT) in the 1980s and 1990s, when Finland recognised the importance of electronics. There was a conscious decision to invest in ICT, and the move in this direction created a big community of digital experts. It also helped Nokia grow – so much so that, during the late 1990s and early 2000s, on several occasions, Nokia was the biggest company in Europe by market cap. 

After 2008, times were difficult for Finland. Nokia was huge, compared with the size of the country, and that had an adverse impact on the national labour market. Seeking to minimise vulnerability, the government made major changes in the industrial infrastructure as Nokia’s revenue declined. 

Historically, one of Finland’s strengths was the cooperation between researchers and companies. Now, many other countries in the world have built strong ecosystems to encourage communication between researchers and industrial players. To avoid being left behind, Finland would like to put more effort into such ecosystems in the future. 

“Finland is now ready to make more conscious decisions on strategic technologies,” says Juvonen. “There is a big change going on now globally, with green and digital transitions. We need to invest in these areas. We have the skills to contribute to these global challenges. We see moving in this direction as good business as well.”

She adds: “We want to offer solutions that are high quality, but also sustainable. A good example is in steel production. There is a big effort to cut up to 90% of CO2 emissions from steel production, which is a huge generator. New technologies are being piloted, and there is a plan to scale it up. This promises to revolutionise steel production, making it more efficient and more environmentally friendly at the same time. We can make a difference in this area, and we are in the process of making investment decisions that could allow us to really push forward.”

Areas of focus 

Juvonen goes on to describe the 11 most promising areas of technology expertise that VTT proposes as key areas of investment in the vision paper. 

Wireless networks: Finland is already a leader in mobile technology, thanks in part to Nokia. But beyond Nokia, the country also has an extensive ecosystem around wireless information networks, consisting of research institutions and companies that export their technologies – and the fruits of their research – globally. 

New networks, based on 5G and 6G standards, will replace Wi-Fi, providing services in restricted environments, such as factories, airports and ports. Finland is well positioned to help in the resulting transformation. Thanks to new data communications services, industrial processes in remote locations will be more automated, minimising the unnecessary movement of resources, including people. 

Artificial intelligence: Finland has some of the world’s best data archives in specific areas, including medicine – and the expertise for using those archives. The country can apply this strength to machine learning in the future. 

However, this is not enough to lead the country into the future. VTT encourages the government to invest more in pure research in artificial intelligence (AI) and in building a strong ecosystem including not only researchers and industrial players, but also users of AI. 

Microelectronics and photonics: Finland has been investing in research in microelectronics and photonics since the 1950s, producing state-of-the-art results. During the years when Nokia was dominant, investment increased to support the production of mobile phones, along with camera components. Finnish expertise in these fields is still among the best in the world. 

Currently, both the price of facilities and lengthy procedures for getting permission are obstacles preventing startups to easily make use of existing research and development infrastructure, which is usually located in or around universities and research institutes. One of VTT’s suggestions in this area is to streamline the time spent on procedures so that ideas can be turned into business more rapidly. 

Quantum technology: Finland has been conducting research on quantum technology for more than 50 years. Several centres of excellence are already in full swing, and some Finnish companies export some of the key platforms used in quantum computing and sensing. For example, Finnish company Bluefors is a global market leader in manufacturing ultra-low temperature refrigeration equipment that enables quantum computing. 

Finland now aims to take a lead in software and algorithm development for quantum computing. The country has recently set up a hybrid quantum supercomputer system to help researchers experiment with new software and algorithms. 

New materials: Finland’s expertise and innovation in materials has been among the best in the world for a long time, focusing on three areas: renewable bio-based materials, the circular economy, and advanced material design. 

The problem is that new material solutions don’t always make it to local industry. To ensure that material expertise is converted into commercially significant solutions more often, VTT calls for public RDI funding to support the creation of long-term cooperation between researchers and companies. It also calls for financial support for new test sites and pilot projects to test new sustainable materials. 

Biotechnology: Finland has been investing in biotechnology for over 30 years – and the effort has paid off. Industrial enzymes are produced in Finland, and traditional industries, such as the forest industry, are becoming increasingly dependent on biotechnology in production. Biotechnology startups have emerged, with particular focus on health technology, such as diagnostics and pharmaceutical development, or new food and material innovations.  

Because biotechnology is evolving so fast, Finland needs long-term funding for research. VTT believes artificial intelligence and biotechnology expertise can be combined to create new biosynthetic materials, among other things. 

Energy technology: Finland has a great deal of land mass, which is exactly what’s needed to produce renewable energy. The country is well suited for wind power, for example. Finland’s strength in manufacturing could be used to produce synthesis reactors, electricity supply devices, energy storage and battery technology. Moreover, the country’s strong process industry offers opportunities for producing and supporting synthetic fuels.  

The potential is there, but new investment is needed. Long-term funding should be increased for basic research and for specific projects. An ecosystem needs to be developed to ensure communication between researchers and businesses. 

Manufacturing technology: Finland is strong in production based on robotics and flexible automation. Many smaller companies have begun to develop technological solutions around robotic manufacturing. However, progress in this area is currently limited by an acute shortage of expertise.  

VTT calls for investment in education and training for manufacturing. It also calls for ecosystem development to encourage cooperation between researchers and companies in the manufacturing industry.  

Health technology: Finland has well-developed health data archives, along with legislative support for the secondary use of that data. Thanks to this data, Finland has developed world-class expertise in measurement technology, to identify and diagnose health risks and monitor treatment and the condition of patients. 

There is potential in data-based innovations to identify risk patients, monitor the effectiveness of treatment or improve the efficiency of healthcare service units.  

Finnish health technology companies have significant international growth and business opportunities, but more funding is needed. It is too hard for startups to obtain the early funding needed to develop commercially viable products and to break into the market. 

Security technology: Finnish research institutes and universities conduct research in cyber security, with particular focus on access and privacy, quantum cryptography and critical communication solutions. Companies are also involved in some of the research. Finland also has both startups and large companies that specialise in security. 

Funding is needed for more academic research to support industry as techniques evolve. VTT believes that, as is the case with many other technological areas, a stronger ecosystem should be developed to include researchers and industrial players. 

Space technology: Finland has developed expertise in the production of small satellites, and in the telecommunications services and know-how needed to operate them. Small satellites are more affordable and can produce valuable data, when built correctly. Finnish space technology operators have recently improved the miniaturisation of the technology that goes into the small satellites. 

VTT calls for public funding and pilot projects to achieve successes and references at the national level. Doing so, it says, would build momentum and attract international investors. 


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