Finland’s research and innovation policy needs to be revised with a broad brush – Emeritus Professor Antti Hautamäki

An interesting Finnish-Swedish meeting about research and innovation policy was organized in Helsinki on 31.8.- 1.9.2017. The aim of the visit was to benchmark recent developments and practices in Finnish research and innovation policies and also give a briefing from Swedish policies.

Participants from Sweden were from Lund University, KTH and Vinnova, and the Finnnish participants were from MEE, Ministry of Education and Culture (MEC), Tekes and University of Helsinki and Aalto University.

The timing of meeting was excellent, because major changes are ongoing in the universities and innovation systems of both countries. In Sweden, a Research and Innovation Bill was passed in 2016 with major changes in the research system. In Finland, the Research and Innovation Council launched the “New Vision and Roadmap” and “Vision for Higher Education and Research in 2030” was published in October.

The merger of Tekes and Finpro into Business Finland will take place in the beginning of the next year 2018.

The parallel of these reforms in Finland and Sweden is not accidental. The global economy is going through deep changes, when China and other emerging economies are becoming stronger and even surpassing many industrial countries. The world will have many new politically and economically powerful centres compared to USA and EU that have been the dominant system of past decades.

New technologies, especially artificial intelligence and robotics are transforming industries and destroying the traditional work places of the middle classes. Platforms based on cloud computing, big data and internet of things are new forms in our economies, where the owners of platforms like Amazon, Facebook, Google etc. are in the best position for value capturing. Many past strengths of national economies have disappeared, and new strengths must be created. The big issue is how societies and their institutions are able to restructure and reinvent themselves to meet the future challenges.

In this changing environment, the role and functions of universities must change, too. The question is how well are research universities serving society in these new conditions.

It is recognized that it is not enough to increase the impact of universities in society by providing better public funding for research and educational activities. The societal interaction of universities must be more systematic than today. It has been difficult, however, to invent new tools and channels to improve this societal interaction that are in balance with the demand to be globally competitive in research and education.

The standard indicators of societal interaction like patents and the numbers of projects with industry are too narrow. Beside this, the discussion about commercialisation of research results is often interpreted by the scientific community as a sign of market logic which is said to be in contradiction with scientific logic.

Fortunately, in last years the atmosphere in universities has become more open to collaboration with industry and the broad-based interaction with society is understood to be a necessary condition for the funding of universities. Still forms and tools of societal collaboration are in the process of being invented.

Universities have been considered to be parts of national innovation system. The concept of national innovation system was invented by the 1980’s and adopted in the 1990s in R&I policy in many industrial societies, including Finland and Sweden. In this concept, the creation and utilization of knowledge in society was analysed in terms of a systematic interaction and networking inside a nation. Later in 2000’s, the global networking of business broke “national clusters of industry” (M. Porter) giving space to new concepts of international collaboration and optimisation of contributions in global value chains.

However, in the 2000’s the concept of ecosystem started to emerge in describing the dynamic business environment in Silicon Valley and in other hubs of high tech industry. The concept of ecosystem is borrowed from biology, referring to milieus where different entities are adapted themselves to roles supporting and feeding each other (cf. rain forests). The concept of ecosystem has taken different versions in last years: innovation ecosystem, business ecosystem, platform ecosystem and growth ecosystem. See more  http://tem.fi/en/ecosystems.

For universities, the transition from national innovation systems to ecosystems means that the traditional technology transfer is no longer working well. In innovation systems, the industrial structure was quite stable with well-defined problems and traditional products. Now companies face complex problems and operate in new markets, even creating new markets. It is no longer possible to define “knowledge packages” and sell them to companies.

Universities must be partners in ecosystems and participate to knowledge creation with companies. For that new skills and competencies have to be developed in universities. Open platforms for co-creation must be present in ecosystems. Platforms are enabling collaboration. The task to provide platforms belongs to public authorities rather than to universities as such (e.g. Vinnova, Tekes, Business Finland, local innovation authorities, private incubators etc.)

Ecosystems are more related to collaboration with business than to general development of society. It’s clear that societal collaboration is not exhausted in working with companies. The third task of universities was first associated with economic growth in USA in the 1970’s and the 1980’s. Universities was started to see “growth engines” of economy. Paul Romer and the representatives of so called “new growth theory” showed how new knowledge and innovations based on it explicate a major part of economic growth. This new growth theory is still valid and referred often when looking for arguments for more active role of universities in society.

But the new growth theory points out also the role of institutions in economic growth. Elhanan Helpman writes in his book The Mystery of Economic Growth (Harvard 2004) that “institutions are more fundamental determinants of economic growth than R&D or capital accumulation, human or physical” (p. 139). But he adds that “institutions too have to change on order to promote growth” (p. 140). Especially “the mismatch between institutions and technology is particularly severe during periods of rapid technological change” (p. 140-141). I have referred to these words because the mismatch is now bigger than in previous decades and therefore the gap is threatening the future of our countries.

How must we react to the inadequacy of some of our institutions in comparison to new technology, e.g. digitalisation?

First of all, we must increase productivity and enhance the impact of public institutions is an immediate strategy. The other, complementary strategy is to adopt the concept of entrepreneurial state proposed by Mariana Mazzucato (The Entrepreneurial State, 2013). There state is taking an active role in developing technology and first of all in promoting the adoption of new technology in industry and society in general. The state is not only enabler, but takes also risks and decreases risks of enterprises. For that public RDI-policy will be in central place. It is well known that companies are not investing in research and radical innovation, because risks are too big and results are seen only later, after a long period.

The renewing of society and industry must be conducted in the spirit of “creative destruction”. This means that governments have to avoid protecting industries, technologies or institutions that are not viable. Therefore, competition is a necessary and very effective way to show which companies and technologies can survive and which are not worth to support. Politically this strategy is difficult to follow consistently, because the lobbying is strong to protect vested interests. Fortunately, there is also another strategy to support renewing old structures, and that is experimentation. Experimental development allows testing ideas before political decisions and legislation. This approach is now reaching a stronger position in public governance, in Finland too.

If we consider the whole picture of Finnish RDI-policy, we see that the clear influence of OECD’s analysis of global economy and its development. There is also a consensus among researchers and civil servants about the challenges and lines to follow. Finland is a quite future oriented country, and accordingly, we are good at writing visions and roadmaps. At the practical level, ministries are developing their own strategies and visions, but they are stuck in their own silos. In this situation, the new vision and roadmap of the Research and Innovation Council must have highest priority.

The vision Finland is the most attractive and competent environment for experiment and in innovation in 2030 is ambiguous and difficult to reach. In fact, the Finnish innovation environment has been one of the best, alongside Sweden.

Now we face a RDI-paradox that beside our records in innovation environment, our economy has lost its competitiveness, and accordingly jobs. We see in all visions and reforms a transition towards closer collaboration between universities and businesses. Look at Flagship Programme of the Academy of Finland, or Co-creation and Co-innovation funding of Business Finland.

Still in the Vision for Higher Education and Research in 2030, there is no clear statement to enhance the collaboration of universities with companies. What is needed is a new incentive system for collaboration between academia and industry. For that we need new structures for co-creation. Note that universities already have well-developed structures for research and education (tenure tracks, management, internal allocation of resources etc.). What is needed now is a real “impact turn”, where universities are evaluated and managed form the point of view of societal impact and interaction.

Antti Hautamäki, PhD, now a professor emeritus, was in years 2009-2013 a research professor of service innovation and the director of Agora Center at the University of Jyväskylä. Before that he was in years 1996-2008 the research director and the executive director of innovation program at the Finnish Innovation Fund Sitra. He has been an adjunct professor of philosophy at the University of Helsinki from the year 1987.  Hautamäki has published and edited about thirty books and published over two hundred articles about philosophy, cognitive science, innovation ecosystems and innovation. Hautamäki has developed a new concept of sustainable innovation in his book Sustainable Innovation, A New Age of Innovation and Finland’s Innovation Policy, 2010.

Currently he is working at his firm Consulting Sustainable Innovation providing services related to innovation, sustainability, regional development, innovation ecosystems, societal change and renewing of universities.

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