NATIONAL INNOVATION SYSTEMS: PILOT CASE STUDY OF THE … · 2016. 3. 29. · NATIONAL INNOVATION...

NATIONAL INNOVATION SYSTEMS:PILOT CASE STUDY OF THE KNOWLEDGE DISTRIBUTION

POWER OF FINLAND

Report of the first phase of the work for the OECD andfor the Ministry of Trade and Industry of Finland

January 1996

by

Sirkka Numminen

Group for Technology Studies

TABLE OF CONTENTS

TIIVISTELMÄ

1 INTRODUCTION 11.1 Background 11.2 Introduction to the Finnish pilot study 3

2 GENERAL OVERVIEW OF THE FINNISH NATIONAL SYSTEM OF INNOVATION 52.1 Overview of the science and technology policy framework in Finland 52.2 Innovation supporting services: notes on the funding system 72.3 General features 72.4 General structure of the industry 82.5 Employment trends in manufacturing 102.6 Industrial clusters 12

3 STRUCTURE OF THE FINNISH R&D 143.1 Total R&D funding 153.2 Business sector R&D 163.3 Government sector R&D 183.4 Higher education sector R&D 18

4 RESEARCH COOPERATION IN THE INDUSTRY 224.1 R&D cooperation by industry 234.2 Significance of R&D cooperation with universities and research institutes to the firms' innovative activities 264.3 Contribution of universities and research institutes to publicly-supported

industrial R&D projects 28

5 UNIVERSITIES IN THE INNOVATION SYSTEM 315.1 Recent trends 315.2 Outside funding for university sector R&D 325.3 R&D output indicators in the higher education sector 33

6 HUMAN RESOURCES: Ph.D.S AND LICENTIATES 366.1 General trends and employment by field of science 366.2 Human capital in the private enterprise sector 406.3 Human capital in the largest firms 426.4 Human capital in the higher education sector 436.4 Problem areas 446.6 Human capital and mobility at VTT 46

7 TECHNOLOGY FLOWS 507.1 Total technology intensity 507.2 Technology sources in the manufacturing sector 51

8 PATENTING SYSTEM 548 .1 General trends in patenting 548.2 Importance of property rights system for the firms 578.3 Foundation for Finnish Inventions 58

9 NEW TECHNOLOGY-BASED FIRMS IN FINLAND 609.1 Introduction 609.2 Science parks 619.3 Technology transfer from universities and research institutes to the industry 639.4 Business incubators 659.5 Centres of expertise 669.6 Programme for reindustrialization 679.7 Importance of university knowledge base for the creation of new research-

oriented and technology-based firms 68

10 CASE STUDY OF FINLAND'S FOREST CLUSTER 7010.1 Significance of the forest cluster in Finland 7010.2 Technology sources and the nature of R&D in the forest cluster 7210.3 Total technology intensity, technology content and sources in the forest cluster

7510.4 Knowledge sharing and transfer in the forest cluster 7810.5 Patenting 8210.6 Participation in stadardization activities 8410.7 Main actors in the cluster in knowledge generation and distribution 8410.8 Research programs within the forest cluster in Finland 89

11 CONCLUSIONS 9111.1 Tentative assessment of the availability of the proposed indicators in the Finnish pilot study 9111.2 Tentative assessment of the knowledge distribution power in the Finnish

National System of Innovation 93

STATISTICAL APPENDIX Review of the availabililty of empirical data according tothe(APPENDIX 1) proposed indicators (21 pages)

APPENDIX 2 List of the proposed indicators (3 pages)

1

1 Introduction

1.1 Background

Under the auspices of the OECD's Working Group on Innovation and Technology Policy

in the Directorate for Science, Technology and Industry, a programme of exploratory

studies for the creation of a new indicator framework is underway involving experts from

various countries. The project, National Systems of Innovation, aims at developing and

testing a new conceptual framework for analyzing the system for knowledge creation,

distribution and use in the national systems of innovation. With pilot case studies being

conducted in several countries, the common purpose is to assess the availability of data to

compare and measure the distribution power of national innovation systems.

According to the theoretical framework developed by Paul A. David and Dominique

Foray, the concept of distribution power of a system is linked to a conception of

economically relevant knowledge, which is conceived as a three-dimensional knowledge-

product space (see Figure below). The corresponding three characteristics of knowledge-

products are the degree of codification (completely tacit vs. fully codifiable), completeness

of disclosure (restricted access vs. fully disclosed), and the ownership status (privately

owned vs. public). These dimensions define the space within which various types of

knowledge and agencies creating them operate. Furthermore, David and Foray argue that

the location of each characteristic along a continuum is not intrinsic but dependent on the

social organization and incentive structure of the institutions which support the knowledge

creation. Consequently, critical to the distribution of knowledge is the prevailing

configuration of norms, rules, regulations and cooperation arrangements governing the

transactions of information (pp. 33, 46 in David & Foray 1995).

Fullycodifiable

Completelytacit

Privatelyowned

Public

Restrictedaccess

Fullydisclosed

Trade secrets

Shared expertise

Patents & copyrights

Scientific papers

Figure 1. The knowledge-product space(from David & Foray (1995), p.33.)

2

A system with a high distribution power would be the one exemplified by the

"predominance of the norm of disclosure (versus secrecy and access restriction), strong

incentives towards codification (versus keeping a great deal of tacitness in the knowledge

stock), intellectual property rights system enhancing the disclosure and coordination

functions (such as systems maintaining free access to new findings for research use)" (p.

46-47). In such a system, e.g. the mechanisms promoting cooperation and coordination

between the various actors are emphasized, "universities act as opened nodes in global

information networks" and, in the private enterprise sector, the diffusion rate of new

products and processes is high (p.47).

According to David and Foray, the comparison between the traditional input and output

measures, such as R&D expenditures, patents, bibliometrics, and high tech products does

not adequately describe the distribution aspect of the innovation system. According to the

usual indicators, it is difficult to answer, for instance, the following questions:

"- What is the proportion of scientific knowledge discoveries that are accessible to

industrial innovators?

- What is the extent and rate of diffusion of specific new technologies in particular

branches of industry?

- What is the comparative importance of additions to stocks of tacit knowledge

requiring transfers through movements of personnel, knowledge kept secret, knowledge

as joint-product of expertise and consulting services?

- What is the rate of obsolescence of the stock of codified knowledge?" (p. 61)

Instead, they propose that innovation systems be assessed by reference to some measures

of the actual use of the knowledge. One set of the suggested indicators would e.g. reflect

the ratios between what is produced and what is used by recombination, diffusion, joint

development, and change of form within the national system of innovation. With the

development of such new measures, national systems of innovation could be characterised

by their distribution power or by the relative distribution-orientation of their institutional

infrastructures. Ultimately, the development of new quantitative and qualitative indicators

or the creative use of the existing ones is circumscribed by the need to formulate more

efficient science and technology policies.

A framework containing a number of new quantitative and qualitative indicators has been

developed by the OECD (DSTI/STP/TIP(94)16/REV1; also the Appendices of this paper

list the proposed indicators and their availability in the Finnish case). The objective of the

project National Innovation Systems is to map the knowledge distribution processes by

3

testing this framework through a series of coordinated national case studies. The aim is to

quantify the knowledge carriers (human resources, tools and equipment; written

knowledge), transfer mechanisms (market, hierarchy, network), the principal mechanisms

carrying out the flows; and the principal bridging institutions. The studies should also

entail an initial attempt to measure the effectiveness of such distribution.

1.2 Introduction to the Finnish pilot study

This paper is a report of the first phase of the work conducted in Finland under the OECD

project National Innovation Systems as of January, 1995. The compilation of available

indicators and empirical data for the assessment of the distribution power of the national

system of innovation has been largely completed. Following the framework developed by

D. Foray and J. Guinet, this paper aims to study the structures, the stocks and flows of the

knowledge distribution system within the Finnish national system of innovation. In the

main body of the document, the available empirical data is arranged and presented under

the following topical issues:

- General overview of the Finnish National System of Innovation

- Structure of the Finnish R&D

- Research cooperation in the industry

- Universities in the innovation system

- Human resources: Ph.D.s and Licentiates

- Technology flows

- Patenting system

- New technology-based firms in Finland

- Case study of Finland's Forest Cluster

With the exception of the overview chapter, a review of the main findings with regard to

the distribution power of the NIS is presented in the box preceding each chapter.

In addition, the report, also contains a tentative assessment of the Finnish data with respect

to the model proposed by OECD.

The second part of the document, Statistical Appendix, gives an overview of the

availability of the proposed indicators for this project.

4

The empirical data presented here originates from surveys conducted in recent years, and

reflects in most cases the situation in the early 1990s. When appropriate, references are

made to up-to-date figures.

The ultimate objective of the work is to discuss the central issues on this project (linkages,

interaction, mobility, nodal points, etc.) and to describe the Finnish national system of

innovation from the knowledge distribution aspect point of view. The presentation is

largely limited by the existing studies by the Statistics Finland, by the Research Institute of

the Finnish Economy, ETLA, and other available empirical data. It also follows similar

work being conducted under this OECD project in countries such as the Netherlands,

Norway, Sweden and Austria. The approach, format and the contents of the draft pilot

study conducted by the STEP Group in Norway (Smith et al. 1995), in particular, have

been considered in the selection of issues to be discussed. It is envisioned that during the

next phase of the project inter-country comparisons between different national innovation

systems would be done.

5

2 General overview of the Finnish National System of Innovation

2.1.Overview of the science and technology policy framework in Finland1

The structure of the S&T policy by the public sector is presented in Figure 2. The two

most important ministries are the Ministry of Education and the Ministry of Trade and

Industry. Within the higher education system, the development of the knowledge-based

society, education and basic research are the focus of the activities of the Ministry of

Education. A major part of the research funds of the Ministry are expended to the

universities and other institutions of higher education and to the Academy of Finland. The

Academy is the central financing and planning body for basic research.

The higher education system in Finland consists of 21 institutions, ten of which are

multidisciplinary universities, three universities of technology, three schools of economics

and business administration, four universities of arts and one univeristy of veterinary

medicine. Two of the multidisciplinary universities, namely the University of Oulu and

Åbo Akademi, have engineering faculties. By internation comparison, the university

system in Finland is characterized by the large number and small size of institutions. The

main thrust for the foundation of small provincial universities in the 1960s and 1970s has

been accredited to the need to achieve a greater regional equity. (Leppälahti 1992)

Within the domain of the Ministry of Trade and Industry, the main concerns are in the

promotion of technological innovation and applied technical research, addressing the

development issues related to the needs of the SMEs, including the availability of risk

financing, support for the national technology programmes and for the international

cooperation projects.

1 Main source for the first part of the chapter: Tarmo Lemola (ed.) (1995) Finland: National Innovation Policy Reportfor the EIMS Innovation Policy Network, VTT Group for Technology Studies.

6

Parliament

Council of State

Science and Technology Policy Council

Ministry of Agriculture and Forestry

Other Ministries

Council for Higher Education

Academy of Finland

Technology Development Centre

SITRA (Finnish National Fund for Research and Development)

Universities (20)

Research institutes (4)




Ministry of Education

Department for Higher Education and Research

Other departments

Ministry of Trade and Industry

Department for Industry

Other departments

Figure 2. The structure of public sector R&D in Finland.(from Tarmo Lemola (ed.) (1995) Finland: National Innovation Policy Report for the EIMS InnovationPolicy Network. VTT Group for Technology Studies,

The Technology Development Centre (TEKES), subordinate to the Ministry of Trade and

Industry, has a central role in the planning and financing of technical research and

development. It was founded in 1982 as the main element of reform that covered the

reorganization of technology policy within the administration of the Ministry of Trade and

Industry. The mission of TEKES has been to promote the wellbeing and steady

development of the society by improving the industry's ability to renew its technology and

to improve its technological standard by generating internationally competitive products,

production processes and services. Selective funding of industrial product development

projects has since the beginning been the largest sector of activities of TEKES. The annual

funding for TEKES has risen from FIM 209 million in 1983 to over 1,4 billion in 1994.

During the same time period, the number of employees has risen from 25 to 200. TEKES'

share of Finland's total private and public R&D funding was 10 percent in 1994.

Subordinate to the Ministry is also the Technical Research Centre of Finland (VTT) which

was founded in 1942 and is the largest technical research centre in the Nordic countries

with 2 600 employees.

Other ministries bear the responsibility for research to serve the development of their

respective fields. Most of this research is done by institutes subordinate to the ministries.

A ministry may also finance research undertaken by universities, business enterprises and

research institutes subordinate to other ministries.

7

The Science and Technology Policy Council is the highest S&T policy body in Finland. It

is chaired by the prime minister and has a membership consisting of several ministers,

S&T policy representatives and the employers' and employees' organizations. The Council

draws up a three-year science and technology policy review. The latest, dating from 1993,

outlines the strategy for a knowledge-based society.

2.2 Innovation supporting services: notes on the funding system

The Finnish National Fund for Research and Development (SITRA) is an independent

public fund which is supervised by the Parliamentary Trustees of the Bank of Finland.

SITRA is financed by investment income of about USD 100 million and returns from

successful investments. SITRA is to a large extent a "venture capital company" which

invests in technology-intensive companies and technology projects.

To complement the other existing financing organizations for starting SMEs, namely the

Regional Development Fund, KERA Oy, and the Start Fund of KERA, a new company,

Suomen teollisuussijoitus Oy (Finnish Industrial Fund), was established with the equity of

FIM 320 million during 1995 under the auspices of the Ministry of Trade and Industry.

With funds originating from the proceeds of the privatization of state-owned enterprises, it

is likely that its activites will include offering equity capital for new technology-based

firms.

2.3 General features

The key features of the Finnish system of innovation include the traditionally important

status of the forest cluster industries for the economy as well as the emphasized role of

large corporations in economy, exports, and R&D.

- Forest industry products account for almost 40 percent of total exports of the

country and the products originating from the most important supporting and related

industries contribute another 20 percent.

- Moreover, the industrial structure has moved toward greater concentration since

the 1980s. In 1985, the five largest exporting firms accounted for about one-fourth

of the country 's exports. In 1994 their share was 39 %; due to recent mergers in the

forest cluster, it has been estimated that the five largest exporters' share will total to

8

almost one-half of Finland's total exports in 1995 (Talouselämä 39, Dec.1 1995).

Three of the five largest exporting firms belong to the forest cluster.

- In 1993, large firms with over 500 employees accounted for two-thirds of the R&D

expenditures. The ten largest firms' share of these expenditures was 46 %.

2.4 General structure of the industry

When the industrial output is analyzed by respective classes of high and low technology

intensity2 (see table below), it can be seen that the share of high tech industries of

manufacturing output has increased from 4 % in 1989 to 7 % in 1993.

Table 1. Manufacturing output by technology intensity in 1989 and 1993

Industry Share of manufacturingoutput (%) in 1989

Share of manufacturingoutput (%) 1993

High tech....................................Medium-high...............................Medium-low.................................Low tech.....................................

Total ..........................................

4,120,415,959,6

100

7,119,214,159,6

100

Source: Statistics Finland: Science & Technology1995:3

The figure below shows the value added in Finnish manufacturing in 1992 by total

technology intensity (high, medium-high, medium-low and low tech). The industries with

low to medium-low technology intensity dominate the Finnish manufacturing sector when

measured by the value added of the industrial production. The industry of food &

beverages (low technology) account for 14 %, and pulp and paper (medium-low

technology) another 14 % of the total value added of the industry. The share of high tech

industries is over one-tenth of the total value added. On the other hand, for a number

industries where the final output is classified as low or medium-low technology, the

manufacturing process represents "higher" technology. A prime example is the chemical

2 The concept of total technology intensity has been used in recent publications by Statistics Finland. For definitions,see e.g. Virtaharju & Åkerblom (1993). Classification of industries by total technology intensity is presented onTable 2.

9

forest industry where the pulp and paper making machines represent medium-high

technology intensity. (see Chapter on the Forest Cluster).

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Textiles, leather3% Publishing, printing

8%Furniture 2%Basic metals

6%

Electrical products &instruments

10%

Drugs, medicines 1%Chemicals, chem. products

6%Machinery, eqpmnt manuf.

11%Rubber, plastics

3%Petroleum

2%

Transport eqpmnt5%

Fabricated metal 5%

Glass, clay, stone products 4%

Pulp and paper 14%

Other manuf.1%

Food, beverages14%

Wood, wood products 5%

Value added in Finnish manufacturing in 1992 by total technology intensity

Low tech 38%

High tech11%

Medium-high tech 20%

Medium-low tech 31%

Figure 3. Value added in Finnish manufacturing in 1992 by total technology intensity(Data to this figure is contained in Table 2)

10

Table 2. Value added in Finnish manufacturing in 1992 by technology intensity

Industry Value addedFIM million

Share of value-addedof the total manu-facturing output (%)

High tech.....................................................................

Electrical products and instruments manufacture..................- Computing and office machinery manufacture ..................- Entertainment electronics products and telecommunicationsequipment manufacture ................................................- Electrical machinery and equipment and domestic appliancemanufacture ..............................................................- Instruments and fine-mechanical apparatus manufacture ......Drugs and medicines (under chemicals) .............................

Medium-high...............................................................

Chemicals and chemical products manufacture (excl. drugsand medicines) ...............................................................Machinery and equipment manufacture ............................Rubber and plastic products ..........................................

Medium-low.................................................................

Petroleum and coal products and nuclear fuel manufacture........Transport equipment.....................................................Fabricated metal products manufacture...............................Glass, clay and stone products manufacture.........................Pulp, paper and paper products manufacture.........................Other manufacturing.....................................................

Low tech......................................................................

Food, beverages, tobacco..............................................Wood and wood products manufacture................................Textiles, leather, footwear.............................................Publishing and printing................................................Furniture manufacture....................................................Basic metals industry....................................................

Total manufacturing....................................................

10 201

8 959912

2 981

3 6331 4331 242

18 054

55439 6792 832

28 506

2 0584 5354 2093 15013 3601 194

34 263

13 0724 5442 8706 8461 5075 424

91 024

11.2

9.81.0

3.3

4.01.61.4

19.8

6.110.63.1

31.3

2.35.04.63.514.71.3

37.6

14.45.03.17.51.65.9

100

Tilastokeskus: Statistical Yearbook of Finland 1994

2.5 Employment trends in manufacturing

The employment trends in manufacturing firms are presented in table below. Between

1989 and 1993, the number of manufacturing sector jobs has decreased by almost 26 %.

Except for the medium-sized firms with 100 to 199 employees and the large firms

employing between 500 to 1000 employees all firm size categories have lost employees in

1989 - 1992. In small firms with 5 to 9 employees, the number employed has remained

11

more or less the same. The decrease in jobs has been largest in the firms with over 1000

employees, in which the number of employees decreased by over 41 % in four years.

Table 3. Employment in manufacturing firms by firm size

1989 1992 1993

Firm size No. of employees No. of employees No. of employees

0 - 4 .................................5 - 9 .................................10 - 19 ..............................20 - 49 ..............................50 - 99 ..............................100 - 199 ..........................200 - 499 ...........................500 - 999 ...........................over 1000 ...........................

Total No. of personsemployed in manufacturingfirms ........

22 82816 31726 39347 13436 01140 03460 69539 550216 016

504 978

23 77414 36519 10735 55629 07634 85558 63743 135143 138

401 643

19 30516 33819 12633 03130 12045 72042 26942 261126 513

374 683

Source: Statistics Finland: Statistical Yearbook of Finland 1995, and Statistics Finland: Enterprises1995:4

Following the recession of the early 1990s the small and medium-sized enterprise sector in

Finland has received increased attention both in public debate and in the policy making

arena, as the sector has been perceived as vital in addressing some of the grave economic

problems, e.g. the mass unemployment and lagging domestic demand. The creation of

new, technology-based firms, in particular, has also been seen instrumental in the strategic

industrial restructuring process from a resource-based to a knowledge-based economy.

These will be discussed in more detail in Chapter 9.

The structure of the industry by technology intensity is presented in Table 4 below. The

number of all manufacturing firms decreased by almost 13 % between 1989 and 1993. At

the same time, the manufacturing sector employment dimished by one-fourth, marking a

decrease of over 130 000 employees in four years. During the same time period, due to

increases in productivity, the total turnover of the industry has increased by 5 %.

12

Table 4. Structure of the manufacturing sector by technology intensity

1989 1993

Level of technology intensity % offirms

% ofemployees

% ofturnover

% offirms

% ofemployees

% ofturnover

High .......................................Medium-high ............................Medium-low .............................Low ........................................

Totals .....................................

Total No. of manufacturingfirms..- No. of persons employed...........- their total turnover, million FIM

2,014,930,153,0

100

23 373

4,221,518,356,0

100

504 978

3,527,013,955,6

100

305 558

2,417,030,150,4

100

20 393

6,821,918,852,5

100

374 683

6,531,213,049,3

100

321 685

Source: Statistics Finland: Science & Technology 1995:3

Table 4 also shows that the relative share of the number of firms, employees and of the

turnover of the high tech firms increased in the same time period. In 1989, high tech firms

employed some 4 % of all manufacturing sector employees and their turnover was 3,5 %

of the turnover of the industry. In 1993 their share of employment had grown to almost 7

% and their turnover represented 6,5 % of the industry total.

The proportion of high technology products of exports increased from 8,2 % in 1989 to to

13,8 % in 1993 and to 15 % in 1994. The export / import ratio in high technology products

increased from 0,6 in 1989 to 1,1 in 1993.

2.6 Industrial clusters

In 1993-1994 a large research project called "Competitive advantage and future of Finnish

industry" was carried out by the Research Institute of the Finnish Economy (ETLA). The

studies carried out within the project also served as background studies for the National

Industrial Strategy for Finland (1993), prepared by the Ministry of Trade and Industry of

Finland (MTI). In 1995, the report by Hermesniemi, Lammi and Ylä-Anttila (1995)

summarized the main findings of ETLA's research project and presented the conclusions

of the project for policy makers.

13

The approach used in the project was based on Michael E. Porter's theory of the

competitive advantage of nations. The emphasis of the cluster studies was on the

assessment of the competitive factors and of the determinants specific to the creation of

competitive advantage. The study identified eight industrial clusters classified as strong

(forest), semi-strong (basic metals and energy technology), and potential or emerging

(telecommunications, welfare and environment). Two of the clusters are characterized as

defensive or latent (construction and foodstuffs).

The study summarizes the results of 60 reports on the development and prospects of the

eight clusters. The comparative advantage of Finnish industries has been moving from

capital and resource-intensive branches to those driven by know-how and technology.

However, close to two thirds of the export revenues are generated by the two traditionally

strong clusters - forest and basic metals. The fastest growing industrial clusters are

telecommunications, welfare and environment.

14

3. Structure of the Finnish R&D

This chapter reviews the research and development conducted in the three main sectorsof the Finnish National System of Innovation: the private enterprise sector, thegovernment sector (public research institutes) and the higher education sector.Statistical data is presented regarding the funding structure in each sector.

According to the model specified by OECD, R&D expenditures and the volume ofresearch conducted are indicative of the stocks of knowledge cumulated within thesystem. They reflect the ability to generate new knowledge in various parts of thesystem via learning by doing -type of mechanisms. The funding structure of the R&Dconducted within the university sector, in particular, is useful in the assessment of theaccessibility of the knowledge stocks generated within the universities by theirpotential users. The level of funding provided by the private sector enterprises foruniversity sector research can also be used to measure the propensity to appropriate theuniversity R&D results by their potential industrial users.

Based on the empirical data contained in the chapter it seems that large firms, inparticular, are at the focal point in the generation of new knowledge. But, on the otherhand, there exists another, although small concentration of knowledge achieved viaresearch conducted among the smallest firms with less than 20 employees. Of theindustries, the industry of electrical products and instruments has a large concentrationof knowledge when measured by direct R&D inputs.

In the government research sector VTT is an important center of technologicalknowledge and expertise. It mostly acts as a bridging institution between the universitysector and the industry. Considering that some 60 % of its budget comes from externalsources or from contract research, it is a significant node of interaction in terms of theflow and diffusion of knowledge within the system.

Large and old universities, in general, seem to be important to the knowledgegeneration process since they conduct significant amounts of research. From thediffusion aspect point of view, the role of technical universities is underscored in theinnovation system as receive proportionately more funding from industry than othertype of institutes of higher learning. Among the disciplines in the university sector,both engineering and natural sciences seem to contain a major stock on knowledgewhen measured by the volume of R&D expenditures.

15

3.1 Total R&D funding3

In 1993, R&D expenditures totalled to FIM 10 700 million in Finland. This accounted for

2,2 % of the GNP. Some 58 % of these were expended in the business sector, over 21 % in

the government sector and almost 21 % in the HEI sector. Share of public funding on all

R&D performed in Finland has increased to 43 %. The overall R&D funding situation by

performing and financing sectors is presented in Table 4 and Figure 4 below.

Table 5. R&D expenditures by sector in 1993

Sector 1993% of total

Business enterprise expenditure on R&D (FIM 6 234 million) ............................Government sector expenditure on R&D (FIM 2 258 million) ............................HEI (incl.universities) expenditure on R&D (FIM 2 185 million) .......................

58 %21 %21%

Sources . Statistics Finland: Science and Technology Statistics 1995:1, andStatistics Finland: Science & Technology 1995:3.






















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Government sector(excl.TEKES) 83 %

Firms' own funding 83 %

Government sector 6 %

Abroad 1,5 %

TEKES 6 %

TEKES 6 %

Other public funding 7 %

Other 9,5 %

Abroad2,5 % Business sector

8,5 %

Government budget funds 59 %

Academy of Finland 14 %

Business sector 5 %

Other funding 7 %

Abroad 2 %

Government sector (research institutes) 21 %

HEI sector 21 %

Business sector 58 %

Figure 4. Finnish R&D by performing and financing sectors in 1993

3 Unless otherwise mentioned, main source of data for the whole chapter is Statistics Finland: Science & Technology1995:3.

16

3.2 Business sector R&D

During the 1980s the R&D expenditures in the Finnish industry increased rapidly. The

R&D inputs grew at an annual rate of almost 10 percent, which was higher than the OECD

average for the same period. In 1993, the R&D expenditures of the business sector were

over FIM 6,2 billion (58 % of the total), of which the manufacturing sector accounted for

85 %. Approximately 83 % of the Business enterprise R&D (BERD) was funded by the

the firms themselves. In 1993, outside funding to the business sector provided by the EU

was FIM 6,5 million (0.1 % of the BERD total). The share of government sector funding

to business sector R&D has been lower in Finland than in other Nordic countries or in the

larger industrial nations, 6 %. The median for the OECD countries in the beginning of the

1990s has been some 13 %. Other domestic funding sources, however, include a number

of public funding sources (see items under "Other outside funding from somestic sources"

in Table below).

Table 6. Funding for business enterprise R&D by financing source in 1993, million FIM

Funding source million FIM % of fundingtotal

Firms' own funding total ....................................................... 5 198 83Government sector funding total .............................................

- TEKES.................................................................- Other funding from Ministry of Trade & Industry ..........- Funding from other Ministries ...................................

370310528

6

Other outside funding from domestic sources..............................Public:- Local governments ..................................................- Sitra ....................................................................- Kera .....................................................................- Other public funding sources......................................Private:- Domestic funds ......................................................- Other domestic units of the firm ................................- Other domestic firms ...............................................- Associations serving the industry ...............................Loans:- Kera......................................................................- TEKES ...............................................................- Other borrower ......................................................

573

3513

41511767

4316119

9,5

Funding from abroad ............................................................- Foreign units of the firm...........................................- Other foreign firms...................................................- EU........................................................................- International organizations.........................................- Other foreign sources ...............................................

944737721

1,5

BERD total.......................................................................... 6 234 100

Source: Statistics Finland, Science & technology 1995:1, Table 12.

17

According to Statistics Finland, the number of business units performing R&D was 1 545

in 1993. Large firms with over 500 employees accounted for two-thirds of the R&D

expenditures. The ten largest firms alone accounted for 46 % of these expenditures.

Interestingly, the smallest firms with less than 20 employees accounted for almost 8 % of

the BERD, compared to other small firms' (firms with No. of employees varying from 20

to 49) share of about 4 % and to medium-sized firms' (firms with No. of employees from

50 to 99) share of 3 %. It seems then that the smallest firms are, on the average, more

research intensive than the other two firm size groups.

Table 7. Business sector expenditures on R&D (BERD) in 1993 by firm size

Firm size(No. of employees)

R&DExpenditures

FIM million % of total

0 - 19 ...............................................................................20 - 49 .............................................................................50 - 99 .............................................................................100 - 499 ..........................................................................over 500 ..........................................................................

Total ...............................................................................

4872331951 2594 060

6 234

7,83,73,120,265,1

100

Sources . Statistics Finland: Science and Technology Statistics 1995:1

FIM 1 181 million or 19 % of the BERD comprised of contract research done by others

and R&D purchased from outside (Statistics Finland, 1995:1 Table 9). About three-fourths

of BERD was directed at product development and little over one-fifth at process

development (Statistics Finland: 1995:1 Table 13).

When examined by industry sectors, the industry of electrical products and instruments

used 35 % of the BERD, the industry of chemicals and chemical products 15 %,

machinery and equipment manufacture 11 %, metals 5 %, food, beverages and tobacco 5

%, pulp, paper and paper products 4 % and the rest of the manufacturing industries 10 %

of the BERD. Sectors other than manufacturing accounted for some 15 % of the BERD

total.

According to a Statistics Finland study on the internationalization of the R&D activities of

the business sector (Åkerblom 1994), the Finnish medium-sized and large firms had nearly

600 R&D units, of which 190 abroad. One-half of these had been founded after 1987.

Based on the study it was estimated that, of the business sector expenditures on R&D,

almost one-fourth is performed in foreign units. According to a study conducted by ETLA

18

(Puhakka 1994, Säynevirta & Ylä-Anttila 1994) among 45 multinational Finnish

enterprises, this figure was as high as 32 % .

3.3 Government sector R&D (excluding higher education sector)

In 1993, over 44 % of the R&D by the government sector was performed in organizations

and establishments under the Ministry of Trade and Industry. Almost 28 % was performed

under the Ministry of Agriculture and Forestry. Respectively, some 39 % of the research

man-years in the government sector were conducted in the field of engineering sciences

and 26 % in agricultural and forestry sciences.

Table 8. Government sector expenditure on R&D by financing source

Financing source 1993% of total

Government sector (excl.TEKES)...................................................................TEKES .....................................................................................................Business sector ...........................................................................................Abroad ......................................................................................................

836

8,52,5


The Technical Research Centre of Finland, VTT, is the most important technical research

institute in Finland. It has a staff of 2 600 employees and a total budget of FIM one

billion. The proportion of direct government funding is around 40 %, with the rest coming

from external sources or from contract research. Of the external financing, 60 % comes

from work commisioned by companies, and 40 % from public sources, mostly from

TEKES. As a result of the evaluation process VTT was reorganized at the beginning of

1993. The primary aims of the reorganization were greater customer-orientation and

improved internal and external interaction, as well as functional and economic

rationalization benefits.

3.4 Higher education sector R&D

The R&D activities of the universities increased significantly in the 1980s: in 1983-1991

the real average growth rate in R&D expenditures was 7 % annually. Simultaneously, the

share of commissioned funding (contract research performed for the private sector firms)

19

increased (see Chapter on university - industry and research institute - industry

cooperation).

Some 59 % of the research activities at the university sector were funded by the

government budget. Another 27 % were provided by public funding sources: 14 % by the

Academy of Finland, 6 % by TEKES and 7 % by other government sources. In addition,

other public sources (counties, domestic funds etc.) accounted for over 7 % of the research

activities. Almost 5 % of the research activities were funded by the private business sector

and 2 % came from foreign sources. The share of government appropriations varies by

field of science. In engineering sciences, some 73 % of the research was funded by outside

funds, i.e. funds other than those provided by the government budget. In medical and

social sciences and liberal arts, the majority of the research is funded by government

appropriations.

Table 9. Higher education sector expenditure on R&D by financing source

Financing source 1993% of total

Government budget......................................................................................Academy of Finland ....................................................................................TEKES .....................................................................................................Other public funding (excl. Academy of Finland and TEKES) ..............................Other funding sources ..................................................................................Business sector ...........................................................................................Abroad .....................................................................................................

591467752


In general, engineering and natural sciences dominate the university sector R&D. Of the

higher education sector R&D expenditures in 1993, over one-fourth was directed at

engineering sciences and almost another one-fourth at natural sciences. Table below shows

that within the university system, the engineering sciences have the largest share of outside

research funding, as some 63% of their research in 1993 was funded by outside sources.4

4Engineering sciences also receive over 63 % (FIM 63 million) of the total funding of FIM 99,6 million by domesticfirms to higher education institutes. This is discussed in more detail in chapter 5.

20

Table 10. Higher institutes of learning: R&D expenditures in the main fields of scienceby source of funding in 1993, million FIM

R&D expenditure of whichField of science

Totalmill.FIM

Own fundingTotalmill.FIM (%)

Outside fundingTotalmill.FIM (%)

Total R&D exp. by source ..............................

Natural sciences.............................................Engineering...................................................Medical & nursing sciences..............................Agriculture & forestry sciences..........................Social sciences...............................................Liberal arts....................................................

2 100.3

465.8547.8374.190.5403.8218.2

1 206.4(57%)

264.1(57%)204.1(37%)255.9(68%)42.4(47%)278.6(69%)161.3(74%)

893.9 (43%)

201.7(43%)343.7(63%)118.3(32%)48.1(53%)125.2(31%)56.9(26%)

Source: Statistics Finland, Science & technology 1995:1, Table 27

Within the higher education sector, technical universities had the highest proportions of

outside R&D funding in 1993. The list is headed by the Tampere University of

Technology with 67 % and the Helsinki University of Technology with 63 % (see Table

11).

Table 11. Higher institutes of learning: R&D expenditures in universities by source offunding in 1993, million FIM

R&D expenditures

Universities(universities of arts not included)

Total

million FIM

of which outsidefunding%

21

Total R&D expenditures...................................

University of Helsinki ....................................Helsinki University of Technology.....................University of Oulu .........................................University of Turku ........................................University of Jyväskylä ...................................Tampere University of Technology ....................University of Tampere ....................................University of Kuopio ......................................Åbo Akademi ................................................University of Joensuu .....................................Lappeenranta University of Technology ..............Helsinki School of Economics .........................University of Lapland .....................................University of Vaasa ........................................Turku School of Economics .............................Svenska Handelshögskolan ..............................University of Veterinary Medicine .....................

2 085,2

514,7282,2237,6215,6137,8131,7119,899,694,084,049,128,922,421,317,515,113,8

43%

41%63%37%36%35%67%29%47%51%33%43%17%15%22%31%4%4%


Under "outside R&D funding" are a number of government and other public funding

sources. When these are excluded, the actual share of funding by the private enterprise

sector firms of the university sector R&D expenditures is relatively low, on an average

only 13 % of the university sector R&D expenditures. Technical universities, however,

receive a larger than average portion of funding by the industry. For instance, in Tampere

University of Technology, the private sector funding accounts for almost one-fourth of all

outside R&D funding and in Helsinki University of Technology 18 %. In Åbo Akademi

this figure is 19 %.

22

Table 12. Higher institutes of learning: Outside R&D funding in universities by source in1993

Outside R&D funding

Universities(universities of arts not included)

Outside R&D funding byGovernment sources

(Academy of Finland,TEKES, ministries)

%

Outside funding byFinnish and foreign

private firms

%

Other outside funding (Otherpublic funding, counties, funds,

international organizations,other foreign funding (EU),

universities' own funds)%

Total R&D expenditures...................

University of Helsinki ....................Helsinki University of Technology....University of Oulu..........................University of Turku........................University of Jyväskylä..................Tampere University of Technology.....University of Tampere.....................University of Kuopio......................Åbo Akademi................................University of Joensuu.....................Lappeenranta University of TechnologyHelsinki School of Economics..........University of Lapland.....................University of Vaasa........................Turku School of Economics..............Svenska Handelshögskolan..............University of Veterinary Medicine......

65%

73%56%73%74%69%46%76%53%62%96%56%52%73%83%42%83%

(100%)

13%

7%18%12%13%10%23%7%17%19%1%15%6%6%2%7%--

22%

20%26%14%12%21%31%17%31%18%3%29%40%21%14%52%17%

(17%)


23

4. Research cooperation in the industry

This chapter discusses the cooperation aspect of the Finnish R&D from the industry's viewmainly based on Statistics Finland innovation surveys.

In the innovation system, the various forms of knowledge sharing and transfer measure theeffectiveness of the knowledge distribution system. What is used and developed by jointdevelopment and recombination. Indicators of the effectiveness of knowledge sharing andtransfer measure e.g. the importance of the technical knowledge obtained from universitiesto the innovatiove activities of firms. A key point in the analysis of the distribution power ofthe system is to assess the degree to which knowledge stocks are actually used and exploitedby the various actors.

R&D cooperation is a significant aspect of innovative activities of the firms because itreflects the ability to receive and exchange information and knowledge and to accesscomplementary and additional sources of expertise and knowledge.The interesting thingabout the Finnish system is that the industries which conduct the most R&D are notnecessarily the most cooperative ones. Most cooperative is the industry of pulp, paper andpaper products, which has a high level of indirect technology embodied in capital inputs inits technology content.

Cooperation with research institutes or with universities is not a very likely form ofcooperation, only some 13-15 % of the firms reported it. Variations by industry exist. Forsome engineering industries, the knowledge sharing process seems to occur only withcustomers or with other firms.

A common feature for industries with a high cooperation rate (pulp, paper and paperproducts, metals, chemicals and electrical products & instruments) is that cooperationseemed to occur at least as frequently if not more so with research institutes and universitiesas with other units of the same firm or with other firms.

The intensity of the use of the university knowledge-base by firms in the form of joint R&Dor as a source of innovative ideas does not seem particularly high. Only one fourth of thefirms regarded universities as relatively significant as a source for innovative ideas. Market-related impulses or those coming from within the firms themselves seem far moreimportant. Cooperation with universities was also considered as a significant factorpromoting innovation by only one-fifth of the firms in the Statistics Finland survey.

The contribution of the universities to industrial R&D seems, however, somewhat moresignificant in publicly-supported research projects. According to empirical evidence overone-third of the firms had interactions with universities in these projects. Almost one-half ofthe firms with interactions with the universities in their R&D projects reported that thecontribution of the university had been significant to industrial R&D.

From policy making point of view, then, it seems that public funding to industrial R&Dcontributes a higher distribution power of the national innovation system by promotingindustry - university cooperation and by enhancing a better access to the universityknowledge base by innovating firms.

24

4.1 R&D cooperation by industry

The figure below shows the results of the innovation survey conducted among all

industrial firms in 1991 by Statistics Finland (Åkerblom 1992). The number of surveyed

manufacturing firms was 2509. According to the survey results, the industry of electrical

products & instruments appears to be the most research-intensive. Almost 72 % of its

innovative activities are performed by own R&D. The industry of pulp, paper and paper

products represents an industry at the other end, with over 73 % of innovative activities

being covered by the acquisition of new production capability.


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Figure 5.Total innovation costs by industry and cost type in Finland, 1991. (figures arescaled to national totals.) 5

5 Data for this figure is in the Appendix under the indicator I.2a - cumulative R&D expenditures: Table A.11. Totalcost of innovation activities by industry in 1991, million FIM

25

R&D cooperation is a significant aspect of innovative activities of the firms because it

reflects the ability to receive and exchange information and knowledge and to access

complementary and additional sources of expertise and knowledge. It can be seen from

figure below that cooperation occurs most frequently within the manufacture of pulp,

paper and paper products. Over 80 % of firms of the sector were engaged in research

cooperation. Also over 60 % of firms within the industries of metals, chemicals and

electrical products & instruments reported R&D cooperation. In industries such as

machinery and equipment manufacture and metal products research cooperation was

reported less often, by 38 % of the firms. In the transport equipment industry the figure

was 22 %.

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Percent

0 10 20 30 40 50 60 70 80 90

Furniture

Transport equipment

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Printing and publishing

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Petroleum, coal

Metal products

Machinery, equipment

Wearing apparel, leather,footwear

Rubber, plastic products

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Other manufacturing

Textiles

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Metals

Pulp and paper, paper products

Figure 6. Share of firms with R&D cooperation among innovative firms, by industry, in1991. 6

Customers were most often mentioned as cooperation partners (Figure 7), by almost one-

fourth of all firms reporting research cooperation. They were followed by other industrial

firms and other units of the same firm. Cooperation with research institutes was mentioned

by 15 %, with universities by 13 % and with consulting firms by 12 % of the firms. When

examined by industry, there were, however, large variations (see Table A.19. in

Appendix).

6 Data for this figure is in the Appendix under the indicator II.2.1 Producer/ user interactions: Table A.19. Firmsconducting research cooperation by partner in 1991.

26








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0 10 20 30 40

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Other industrial firms

Customers

Figure 7. Share of firms with R&D cooperation among innovative firms according topartner

A common feature for some industries with a lower cooperation rate (machinery and

equipment manufacture, metal products, transport equipment) is that only in relatively few

cases they were cooperating with research institutes or universities (Table A.19. in

Appendix). If R&D cooperation occurred, it was conducted most often with customers

(machinery and equipment manufacture, metal products) or with other firms (transport

equipment). A common feature for industries with a high cooperation rate (pulp, paper and

paper products, metals, chemicals and electrical products & instruments) is that

cooperation seemed to occur at least as frequently if not more so with research institutes

and universities as with other units of the same firm or with other firms.

The figure below shows that the industry of electrical products and instruments was also

the most active in introducing new products to the markets. Within the industries of metal

products, machinery and equipment and transport equipment, the proportion of turnover

from the improvements made to existing products is more significant than that coming

from the development of new products.

27


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Figure 8. New products and product improvements as share of sales by industry in 1991. 7

4.2 Significance of R&D cooperation with universities and research institutes to the

firms' innovative activities

The significance of the various sources and impulses for the firms' innovative activities

were also surveyed in the Statistics Finland 1989 survey (Leppälahti - Åkerblom 1991).

The main ideas for innovative activities originated from direct interaction with the markets

(customers, competition, marketing) or from within the firm (own R&D and top

management). Almost 24 % of the firms reported that cooperation with domestic

universities and research institutes was an important source of innovative ideas for the

firm. For small research-intensive firms the figure was 28 %, for small firms 24 %, for

medium-sized 18 % and for large firms 32 %. When the firms were classified by their

R&D intensity8, cooperation with universities and research institutes was mentioned as an

important source of innovative ideas by 34 % of the firms with high R&D intensity, by 13

% of the firms with medium R&D intensity and by 28 % of the firms with low R&D

intensity.

7 Data for this figure is in the Appendix under the indicator III.1.4a - diffusion rate of new products and processes:Table A.24. New products and substantial improvements of old products in proportion to turnover in 1991.8 Classes of R&D intensity were the ff.: low intensity R&D was less than 1 % in sales, medium intensity 1 - 4 % andhigh intensity over 4 %.

28

The corresponding figure reflecting VTT's importance for the firms' innovative ideas was

lower, as some 12 % of the respondent firms reported that cooperation with VTT had been

an important source of innovative ideas for the firm. The corresponding ratings for VTT's

significance by small research-intensive firms, small firms, medium-sized firms and large

firms were 12 %, 15 %, 6 % and 18 %, respectively, and by R&D intensity of the

respondents, 14 % (high R&D intensity), 8 % (medium R&D intensity) and 16 % (low

R&D intensity).









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0 10 20 30 40 50 60 70 80 90 100

Immaterial technology

Universities & research institutes

Subcontractors

Fairs

Production

Material technology

Top management

Internal R&D

Marketing

Competition

Customers

VTT

Figure 9. Share of firms regarding an innovation source as important 9

When the factors promoting innovation were inquired (Leppälahti - Åkerblom 1991),

cooperation with universities and research institutes other than the VTT was rated as

important by little over 20 % of respondents. As expected, it was more important to large

firms than to small firms. VTT was rated as an important contributor to innovation

activitiy in the firm by some 15 % of the respondents.

Characteristically, the R&D cooperation with universities is largely concentrated with

large firms. According to a Statistics Finland survey conducted in 1989 among the firms

with R&D activities (Leppälahti - Åkerblom 1991), the proportion of all firms engaging in

R&D cooperation with the universities was 34 %. When examined by firm type, the share

for small firms was 12 %, for small research-intensive firms 37 %, for medium-sized firms

9 Source: Leppälahti & Åkerblom (1991) Industrial Innovation in Finland, p. 41.

29

41 %, and for large firms 67 %. The survey was conducted in 1989 by using a sampling

procedure. Representative samples on each of the above-mentioned four firm types in

Statistics Finland's register on firms with R&D activities were formed. The total sample of

firms was 355, of which 255 responded.

The results of the more recent Statistics Finland survey conducted among all industrial

firms in 1991 (Åkerblom 1992) yielded lower rates for industry - university cooperation.

Of all 2509 manufacturing firms in the survey, R&D cooperation, in general, was reported

by 41 %. Of all of these firms, only 13 % reported R&D cooperation with the universities.

When examined by firm type, the share of small firms with HEI cooperation was 7 % , the

share of medium-sized firms 30 %, and the share of large firms 60 %. Cooperation with

research institutes (probably including VTT) was reported by 15 % of the respondents.

The distiribution of respondents by firm size was similar to that reporting cooperation with

universities.

4.3 Contribution of universities and research institutes to publicly-supported

industrial R&D projects

TEKES is the most important funding provider and partner in joint university - industry

R&D. TEKES' technology programmes are thus an important tool in channeling public

research funding into national national develoment projects and in getting the universities

involved in industrial R&D projects. Universities occupy a central role in these

programmes. In 1993 TEKES funded 511 projects in the amount of FIM 139 million in

universities and in 1994 499 projects with FIM 192 million (The 1995 Report of the

Council for Higher Education).

Aside from funding technology programmes, TEKES also provides financing support in

the form of grants and loans to industrial R&D projects. In a recent study of 601 industrial

R&D projects supported by TEKES (Numminen & Hämäläinen 1995), the role of

universities and VTT for the firms' R&D was rated rather positively. The respondent firms

were asked to rate the contribution of possible participants to their TEKES projects. The

figure below ows the rating of participants when projects carried out by consortiums were

deleted. In terms of their contribution to the project, universities as well as other units of

the firms and other industrial firms were rated highest, followed by the Technical

Research Centre of Finland (VTT), consulting and service firms and foreign industrial

firms. Private research institutes and public research institutes other than VTT were rated

least often as significant to the project.

30
































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*) Numbers following a possible participant's name indicate the number of respondents who have rated a participant

in terms of contribution to the TEKES project

0 10 20 30 40 50 60

Universities (231)

Other Finnish industrial

companies (253)

Other firms/units of the

same parent company (222)

Technical research centre of

Finland, VTT (223)

Consulting and service

firms (213)

Foreign industrial

companies (198)

Other participants (92)

Other public research

institutes (163)

Private research institutes

(153)*)

46

45

42

34

32

32

22

11

8 AAAAAAAAAAAA

% of respondents reporting apositive or a very positive

impact by a participant to theirTEKES project

Figure 10. Contribution of possible participants to publicly supported industrial R&Dprojects in Finland.

For instance, the contribution of the universities was assessed by 231 firms, of whom 46

% regarded it as positive to very positive to their TEKES project. VTT was assessed by

223 respondent firms, of whom 34 % considered VTT's contribution as very positive or

positive. Since the definition of the the configuration, intensity and duration of the

cooperative effort were left open in the survey question, the answers probably reflect a

variety of cases ranging from ad hoc type, unofficial contacts to subcontracting and

contract research arrangements. Nevertheless, the high number of responses seems to

imply that there exists a network among different participants to TEKES-funded industrial

R&D projects.

31

A further examination of the significance of different co-operation partners in this study

was done using factor analysis. Co-operation with domestic and foreign industry, with

consulting firms and with the Technical Research Centre of Finland, VTT were loaded on

the first, most important factor. Co-operation with other research institutions were loaded

on the second factor. The third factor contained the loadings of co-operation with other

operating units of the same company as well as co-operation with universities. This means

that the cooperation profile of a project may effectively be described by three independent

dimensions corresponding to the factors. One interpretation is that the first factor describes

cooperation in the area of applied research and practical know-how. The second factor

would describe the cooperation in terms of more theoretical research. An interesting thing

is that the role of VTT is similar to that of industry and consulting firms, while other

research institutions operate in a dimension of their own.

32

5. Universities in the innovation system

This chapter reviews some available indicators (aside from those related to their traditionaleducational function) reflecting the impact and interaction of the universities to theinnovation system. Such indicators would ideally measure the knowledge-products of theuniversity research which are delivered in suitable form for industrial use. The humanresources (persons with researcher training) aspect is discussed separately in Chapter 6 andthe spin-off firms in Chapter 9.

The data is mainly based on the 1995 Report of the Council for Higher Education on theuniversity - society cooperation, Statistics Finland data on the funding structure of universityR&D as well as written reports and publications obtained directly from three universities.

Among disciplines in the university sector, engineering sciences as a whole contain a majorstock on new knowledge when measured by the volume of R&D. The knowledgedistiribution system works most efficiently for them based on R&D funding amounts fromoutside sources, and from the private enteprise sector, in particular. The propensity to turnthe research results into tangible products is highest in the disciplines of electricalengineering and engineering physics.

Yet, the fact that funding by Finnish firms accounts only some 5 % of all research activitiesconducted within the higher education sector, seems to point to the conclusion that the levelof industry - university cooperation is very low indeed.

Moreover, it is difficult to directly measure university sector R&D outputs leave alone theresults of joint R&D between university and industry. The way of reporting bibliometricdata has not been uniform in the Finnish universities in the past. Also indicators on patentingactivity, otherwise often considered as relevant output indicators for applied technicalsciences, are problematic due to intellectual property rights legislation limiting universities'patenting activities.

5.1 Recent trends

In addition to teaching and research, other service functions have emerged within the

higher education sector in the past years. These include activities such as continuing

education, commissioned R&D and contract research. A number of science and

technology parks and business incubators have been established next to universities and

higher academic institutions.

In recent years, adult education (continuing education and open university) has been one

of the fastest growing areas of activity in the HEI sector ( see table below). The number of

33

students pursuing continuing education has increased from 28 000 in 1986 (Leppälahti

1993) to 97 00 in 1994.

Table 13. Adult education in Finland.

Adult education 1990 1993 1994

Continuting eduation, incl. education provided byemployment authorities:- Educational courses.................................................- of which courses with a longer duration......................- Students................................................................

Open university education:- Students ...............................................................

Total No. of students attending university adulteducation

1 827714

63 607

38 752

102 359

2 7631 49978 480

59 429

138 429

3 3391 83796 945

67 971

164 916

Source: The 1995 Report of The Council for Higher Education on university - society cooperation

5.2 Outside funding for university sector R&D (including funding by Finnish firms)

The share of outside funding on university R&D has increased by 5 % annually since 1989

(Statistics Finland). The value of outside funding in higher education institutes was in

1983 FIM 173 million (Leppälahti 1992), whereas in 1993 it had grown to FIM 894

million (see table below). It is noteworthy, however, that about two-thirds of all outside

funding originated from various public sources and only little over one-tenth from Finnish

firms in 1993. Yet, the volume of the commissioned R&D by firms in universities has

grown in the past years, but is still modest. In 1991 it was FIM 80 million and in 1993

some FIM 100 million, representing less than 5 % of the total R&D funding for the higher

education sector; in the same year all outside funding represented a total of 43 % of the

higher education sector R&D.

Engineering sciences as a whole received over 63 % (FIM 63 million) of the total funding

of FIM 99,6 million by domestic firms to higher education institutes in 1993. The second

largest recipient of R&D funding from Finnish firms was the discipline of natural sciences

with FIM 18,2 million. Together engineering and natural sciences thus received a lion's

share, over 81 %, of the firms' funding to R&D in the university sector.

Within the field of engineering, electrical engineering and engineering physics were the

most research-intensive disciplines in 1993 as their share of the total research expenditures

34

in the field of engineering was over one-third. Over 70 percent of the research conducted

under the disciplines of electrical engineering and engineering physics was covered by

outside funds. Moreover, research conducted in universities in the fields of electrical

engineering and engineering physics received both proportionately and absolutely the

largest amount of funding from private sector compared to any other field of science. Of

the total research funding to universities by domestic firms (FIM 99,6 million in 1993)

over one-fourth or FIM 26 million was expended in the field of electrical engineering and

engineering physics alone.

Table 14. R&D expenditures, share of outside funding and funding by Finnsh firms inmajor fields of science in 1993

Field of science Total R&Dexpenditures

mill.FIM

Outsidefunding total

mill.FIM (% oftotal R&D exp. )

Funding byFinnish firms

mill.FIM

Total R&D expenditures..................................

Natural sciences.............................................Engineering...................................................- electrical engineering and engineeringphysics..Medical & nursing sciences..............................Agriculture & forestry sciences..........................Social sciences...............................................Liberal arts....................................................

2 100.3

465.8547.8209.8374.190.5403.8218.2

893.9 (43%)

201.7(43%)343.7(63%)147,1(70%)118.3(32%)48.1(53%)125.2(31%)56.9(26%)

99,6

18,263,026,09,42,16,20,8


In general, the nature of the joint university - industry R&D projects has changed

somewhat from testing type of activities to long-term cooperative research projects often

involving continuing education (The 1995 Report of the Council for Higher Education).

Still, the main conclusion of the 1995 Report of the Council for Higher Education

regarding the issue of cooperation was that the volume of joint university - industry R&D

was surprisingly modest considering the public interest on the subject in the media and

recent public discussion.

TEKES' national technology programmes have been a rather significant policy tool for

creating strategic knowledge within industry and in the university sector and for enhancing

the industry - university linkages as their additional impact (these were briefly mentioned

in the previous chapter). To date, no systematic evaluations have been conducted

regarding the possible achievement of their cooperation effects.

35

5.3 R&D output indicators in the higher education sector

Bibliometric indicators, in general, have often been considered problematic as output

indicators in engineering sciences due varying publishing traditions from those e.g. in

medical and natural sciences. Moreover, the classification by the type of publications to be

included in the statistics reported by the higher education sector has not been uniform in

the past, which in general has undermined the reliability and comparability of the

previously reported bibliometric indicators in the case of Finnish universities10. Indicators

such as the number of patents and funding volume for joint university - industry research

projects have often been considered more relevant in measuring the output for applied

technical sciences.

The following output indicators on the R&D conducted at the university are available for

the Helsinki University of Technology, Tampere University of Technology and for the

Engineering Faculty of the Oulu University . It can be seen from tables below that e.g. the

number of reported patents by university staff appears to be rather modest for these

universities. The assessment of actual statistics is difficult due to the fact that in most cases

the funding firms or organizations appear as patent applicants. Individual inventors are not

identified in patent applications by university affiliation.

Table 15. Research output indicators at the Helsinki University of Technology in 1992 -1994

Finnish / in Finland International

Research output indicator 1992 1993 1994 1992 1993 1994

Articles in scientific journals................Articles & papers in serial publicationsand conferenceproceedings....................Scientific publications (Books)..............Other scientific publications.................Computer software..............................Patents ............................................

32

159435393918

105

276456415011

98

37246537388

477

4004861717

428

560687117

447

75986799

Source: Helsinki University of Technology Annual Yearbook 1994

Table 16. Research output indicators at the Tampere University of Technology in 1990 -1994

10 Discussion with T. Räty of the Academy of Finland.

36

Research output indicator 1990 1992 1993 1994

Publications- international.......................................- Finnish.............................................New research contracts...........................Patents................................................

260386144

-

427523130

-

4496431350

4826452289

Source: Tampere University of Technology Statistics for 1994

Table 17. Research output indicators at the Engineering Faculty of the University ofOulu in 1993.

Research output indicator Finnish / in Finland International

Scientific monographs.......................................................Articles in scientific journals (referee-publications)..................Articles & papers in serial publications and conferenceproceedings......................................................................Patents*) and articles in other than referee-publications............Videos, radio programmes or computer software madeavailable for thepublic...................................................................

*) No. of new patents for the whole university (incl. allfaculties) was 15 in 1993.

826

37212

4

-58

13112

Source: Kallinen (1995) The Regional Impact of the University of Oulu, Publications of theAdministrative Department No.8, University of Oulu.

Exploitation of the results of university research are in most technical universities linked

to the commercialization of R&D via science and technology park operations and by

various technology transfer companies established by the universities. These are reviewed

in the Chapter on New technology-based firms.

37

6. Human resources: Ph.D.s and Licentiates

Within the national innovation system, an important portion of knowledge is carried outby human resources. Stocks of tacit knowledge are contained in researchers and,respectively, movements of researchers between institutions and organizations involvealso flows of knowledge between these parts of the system. In mapping the knowledgedistribution processes within the national innovation system, occupational mobility fromuniversities to industry forms an important element of university - industry interactions.

Actual mobility statistics are practically non-existent in Finland. The Ministry ofEducation has a database containing basic educational statistics on university sectorpersonnel. It is in principle possible to combine this data with general employment data atthe Statistics Finland in order to construct some mobility statistics. This will be done laterduring the next phase of the pilot. Until then, it is somewhat difficult to make finalconclusions on the mobility of researchers without a mobility survey similar to the onecarried out by Nutek in Sweden under this OECD pilot project.11

For this project, general statistics on human capital have been compiled from variousavailable sources.The main conclusion to be drawn based on the data are the Finnishprivate enterprise sector has not been very active in employing persons with researchertraining. According to the 1995 report of the Council for Higher Education, in 1992, therewere a total of 270 Ph.D.'s employed within the 200 largest Finnish firms. These wereplaced in 113 firms which means that there were almost 90 firms among the 200 largestfirms without a single Ph.D.

It is also of suspect that the mobility of researchers from universities to industry is verysmall. The mobility rate from VTT to the industry, is, according to some evidence,probably higher than that from universities to industry.

6.1 General trends and employment by field of science

The educational level of the Finnish population has improved steadily. In the 1990's the

number of Ph.D. degrees has increased by six per cent annually and that of higher

university degrees by four per cent. In 1993 there were 16 300 Finns with research

qualifications, of whom 7 900 had completed a doctoral degree (Statistics Finland:

Science & Technology 1995:3).

11In the Nutek study, the group of the Swedish Ph.D's and Licentiates in engineering and natural sciences was tracedin 1985 and 1992 by type of employing organization.

38

In 1985, the number receiving a Finnish Ph.D. or Licentiate Degree12 was 667, while in

1993 it was 1378. At the same time, the relative share of degreeholders in natural sciences

and engineering diminished from 50,5 % in 1985 to 41,6 % in 1993 (see table below).

Table 18 .Number of doctorates and licentiate degrees earned in 1985-1993.

Field of Science 1985 1990 1991 1992 1993

All Ph.D.'s & Lic.degrees(Ph.D's)........................

Ph.D.'s & Lic. degrees in:- Natural sciences............- Engineering.................

667(290)

196141

1025(484)

272199

1122(520)

259246

1182(516)

271268

1378(650)

299275

Statistics Finland: Science & Technology 1995:3

In the study by Neittaanmäki (1995) on the placement of Ph.D.s who graduated in 1973-

1992, a stock of 6 438 Ph.D. degreeholders was analyzed. There has only been a slight

increase in the relative share of Ph.D.'s in natural sciences and engineering in 1973-1992

despite a sharp increase in the total number of P.D.'s during the same time period (See

table below).

Table 19. Number of Ph.D. graduates in 1973-1992.

Ph.D.'s graduating in

Field of science 1973-1977No. (%)

1978-1982No. (%)

1983-1987No. (%)

1988-1992No. (%)

Ph.D.'s in- Natural sciences............- Engineering.................

All Ph.D.'s....................

270 (23%)152 (13%)

1184 (100%)

384 (26%)177 (12%)

1493 (100%)

383 (25%)197 (13%)

1523 (100%)

528 (24%)321 (14%)

2238 (100%)

Source: Neittaanmäki 1995

A closer examination of the Ph.D. graduates in natural sciences and engineering is

presented in table below. The general conclusion can be made that the stock of recent

graduates is relatively large, since, with the exception Ph.D.s in mathematics & computer

science and geology & geography, over 30 % of all Ph.D.'s have earned their degrees

12 In the Finnish graduate school system, a Licentiate degree is an advanced academic degree which is usuallyawarded in the intermediate phase during the pursuit of doctoral studies.

39

within the last 5 years of the examined time period of 20 years. The large proportions of

recent graduates can also partly be explained by the expansion and growth of the

university system in Finland since the 1970s. Among the disciplines, information

technology has proportionately the largest stock of recent doctorates (49 %), but it is also a

relatively new discipline in the universities of technology.

Table 20. Number of Ph.D. graduates in 1973-1992 in engineering and natural sciences,by discipline.

Ph.D.'s graduating inDiscipline 1973-1992

No.

1988-1992No. (% of 1988-92 graduates of

all 1972-1993 graduates)

Engineering- Mechanical & energy engineering.................- Electrical engineering & engineeringphysics..- Building & civil engineering, surveying........- Chemical & process technology...................- Information technology..............................

Natural sciences- Mathematics & computer science.................- Physics, astronomy & meteorology..............- Chemistry................................................- Geology & geography................................- Biology...................................................

9428292220107

250326430119433

40 (43%)106 (37%)33 (36%)74 (34%)52 (49%)

70 (28%)102 (31%)157 (37%)32 (27%)165 (38%)

Source: Neittaanmäki 1995

By field of science, the Ph.D.'s in engineering and natural sciences were the largest group

who had moved abroad in Neittaanmäki's study. They accounted for a half (121) of all 244

Ph.D.'s residing outside Finland in 1992.

The placement of the Ph.D.'s by type of professional activity in 1992 is presented in table

below. Of the 6438 Ph.D.'s who graduated in 1973-92, 5765 were placed in various

sectors. The majority were active in the fields of education and research or within health

and social services. Only 259 (4,5 %) worked within industry.

Table 21. The placement of the Ph.D.'s by type of professional activity in 1992 (Ph.D.'sgraduating in 1973-92)

40

Sctor of professional activity %

Associations, non.profit-organizations......................................................Public administration, defence..................................................................Service sector.......................................................................................Industry...............................................................................................Education & research..............................................................................Health & social services.........................................................................Other...................................................................................................Unknown.............................................................................................

Total (N=5765).....................................................................................

293

4,554

23,541

100

Source: Neittaanmäki.

Table 22. The Ph.D.'s by type of employment in 1992 (Ph.D.'s graduating in 1973-92)

Employer No. %

Private sector enterprise.................................................Government................................................................Local governments ......................................................Foreign firms..............................................................

Total..........................................................................

9463665110833

5752

1664191

100

Source: Neittaanmäki

The employment trends among the Ph.D.'s in engineering and natural sciences have only

sligthly changed within the past 20 years. On an average, of the stock of the 1973 - 1992

Ph.D. graduates, 13 % were employed within the private enterprise sector in 1992. Of the

more recent 1983-92 graduates, however, almost 15 % (187) were employed within the

firms, whereas for the 1973-82 graduates this figure was only 12 % (98).

41

Table 23. Ph.D.'s in engineering and natural sciences by type of employment in 1992

Employer in 1992

Private sectorenterprise

%

Government

%

Local go-vernments

%

Foreignfirms

%

Total

%(N)

Ph.D.'s in engineering andnatural sciences graduatingin:- 1973-92...........................

- 1973-82...........................- 1983-92...........................

13,4

11,614,7

80,5

81,180,0

5,1

6,24,1

1,9

1,00,9

100 (2119)

100 (847)100 (1272)


Table below contains the results of a survey by conducted by Halinen (1989) on the place

of employment of the 1988 Ph.D.'s one year after graduation. The majority, 51 %,

remained in the higher education sector. Only 8 % worked in the private enterprise sector.

Table 24. Employment of the Ph.D.'s who graduated in 1988 one year later

Employment after one year from receiving doctorate %

Professor.............................................................................................Associate professor................................................................................Lecturer...............................................................................................Senior assistant.....................................................................................Assistant teacher...................................................................................Assistant.............................................................................................Researcher in higher education sector.........................................................Researcher or teacher in other institution...................................................Academy of Finland post........................................................................Researcher in foreign higher education sector..............................................

Higher education sector subtotal...............................................................

State research institute...........................................................................University hospital................................................................................Other public administration.....................................................................Health care sector..................................................................................Association or foundation.......................................................................Private enterprise or private entrepreneur...................................................Work abroad........................................................................................Unemployed or voluntarily out of work.....................................................

Total...................................................................................................

2,73,75,32,72,314,66,05,66,02,3

51,2

5,613,36,98,32,78,32,01,7

100

Source: Halinen 1989

42

6.2 Human capital in the private enterprise sector

Of all 13 900 persons with researcher training, 83 % were employed within the public

sector in 1993 and only 17 % within the private sector (table 25).

Table 25 . Employment of persons w/ researcher training by sectors in 1993

Government%

Local governments%

Private%

Persons w/ researchertraining........................(Total N = 13 900)

57 26 17

Statistics Finland: Science & Technology 1995:3

Employment of persons with researcher training by firm size is presented in the table

below. Every fifth Ph.D. in the enterprise sector is employed in a small firm with less than

20 employees. Almost one-half is employed by large firm with over 500 employees.

Table 26. Employment of persons with researcher trainig by firm size

Firm size(No. of employees)

Total researchpersonnelNo. (%)

Ph.D.'s

No. (%)

Licentiates

No. (%)

0 - 19.......................................................20 - 49.....................................................50 - 99.....................................................100 - 499..................................................over 500...................................................

Total........................................................

2 278 (11,6)1 144 (5,8)981 (5,0)

4 242 (21,6)11 034 (56,1)

19 678 (100)

88 (19,9)23 (5,2)26 (5,9)88 (19,9)216 (48,9)

442 (100)

56 (11,8)21 (4,4)23 (4,9)

101 (21,4)273 (57,7)

473 (100)

Sources. Statistics Finland, Science and Technology Statistics 1995:1

In 1992, of the 946 private sector Ph.D.'s, 290 were employed within the member firms of

the Confederation of the Finnish Industry and Employers (Neittaanmäki 1995). 50 % of

them represented engineering sciences, 29 % natural sciences and 10 % medical sciences.

According to Statistics Finland employment register of 1992, there were 314 Ph.D.'s

employed within the 200 largest firms (Neittaanmäki 1995). Chemical and pharmaceutical

industry were the among the industries employing the largest number of Ph.D.'s in 1992.

43

The mechanical engineering and metals industry employed a relatively modest number

(36) of Ph.D.s. The "backbone" of the economy, paper and forestry industries altogether

employed only 20 Ph.D.'s.

Table 27. Ph.D's employed within the 200 largest firms by industry sector in 1992

Ph.D.'sIndustry sector % Total No. No. of Ph.D's

whograduated in1988-1992

No. of Ph.D'swho graduatedin 1987-1983

Chemical industy.............................Pharmaceutical industry.....................Financial & service sector .................Mech. engineering & metalsindustry...Industries w/ diversified activities(monialateollisuus)...........................Paper and forestry industries...............Energy production............................Food industry..................................Other.............................................

Total.............................................

24,220,014,011,5

8,36,46,44,15,1

100

76634436

2620201316

314

13251318

74

(87)*)

2111146

118

(78)*)


*) 7 unaccounted for in both 1988-92 and 1987-1983 graduates.

Almost 28 % of the 314 Ph.D.'s employed within the 200 largest firms had received their

doctorate as recently as in 1988-1992, another 25 % in 1983-1987. Almost 14 % had

received their degree in 1973 or earlier.

The last two columns on the right on Table 27 above indicate the placement of the two

most recent group of Ph.D.'s in the industry sectors. It can be seen that the mechanical

engineering and metals industry, pharmaceutical industry and financial and service sector

have been most active in recruiting the most recent Ph.D.'s.

Thus, it seems that the Finnish private enterprise sector has not been very active in

recruiting persons with researcher training. The Council for Higher Education reported

similar figures in their 1995 report. In 1992, there were a total of 270 Ph.D.'s employed

within the 200 largest Finnish firms. These were placed in 113 firms. Among the 200

largest firms there were almost 90 firms without a single Ph.D. degree holder in their

ranks of employers.

44

6.3 Human capital in the largest firms

In her study, the human capital in Finnish corporations (Leiponen 1995) Leiponen

analyzed the human capital in large Finnish corporations by level of education. The stock

of persons with a researcher training (Ph.D.'s and Licentiates) was examined in 1980, 1985

and 1990 in the 33 largest firms in 1980. In 1990, the combined turnover of these firms

accounted for 74 % of the whole industry turnover. Leiponen concluded that the number

of employees with research training had increased rapidly from less than 400 in 1980 to

over 600 in 1990. The share of persons with a researcher training of all salaried employees

had grown by 66 % in 1980 - 1990, but it still remained rather low, 1,2 % of salaried

employees in 1990.

As expected, the largest share of persons with researcher training of all salaried employees

were in chemical and pharmaceutical industry firms. Also firms in food industry, basic

metals industry, and construction materials manufacture had a relative large share of them.

The state-owned firms, in particular, had increased their share of persons with researcher

training during 1980 - 1990. Absent in the list of the 10 firms with the largest share of

Ph.D.'s and Licentiates of salaried employees were the forest cluster firms as well as the

Nokia company.13

Leiponen also found that the relative share of employees with educational background

(middle level, high level or researcher training) in either engineering or natural sciences in

the 33 largest firms had grown rapidly during the early 1980s. After 1985, over half of the

salaried employees in these firms had background in engineering or natural sciences.

There have also been in-house researcher training programmes at least in Nokia and

Kemira. Academy of Finland had a programme promoting Ph.D. training in industry in the

1980s. Some references to these exist in the 1995 report of Council for Higher Education

and in Ekberg's report on researcher training in Finland in the 1995 OECD report.

13 Nokia, the IT giant of today, was still during the last decade rather a diversified company. In 1988, Nokia researchcentre employed a staff of over 140, out of which 20 had a Ph.D. or a Licentiate Degree. In 1995 (November), thestaff of the research centre had grown to approximately 500, 70 % of whom had an academic degree. Of these, one-fourth or almost 90 had a Ph.D. or a Licentiate Degree.

45

6.4 Human capital in the higher education sector

Leppälahti of Statistics Finland carried out a study "University teachers and researchers in

1992" during 1991-92, where the target population was all academic post holders with

teaching and/or research duties financed with the general university resarch funds in the

government budget. The study includes statistics on university teachers' and researchers'

mobility between universities (i.e. from the university of matriculation to another

university).

In the study, the aging problem was discussed as the median age of university teachers

and researchers was 42 years , four years higher than a decade earlier. This can be

explained by the fact that in the beginning of 1980s the university teachers and researchers

were relatively young following the rapid expansion of the university system in the 1960s

and 1970s. In the three technical universities, the teachers were 3 - 5 years younger that

the overall average age for all teachers. The share of Ph.D.'s had increased by 2 % to 40

%, whereas the share of personnel without an advanced university degree had declined to

by 3 % to 4 % in 1992. In the three technical universities the proportions of Ph.D.'s of all

teachers were 26 - 30 % lower compared to the average for the university system. Only 68

% of the university professors in engineering had a Ph.D., which was significantly lower

than the overall average for all professors, 90 %.

The proportion of teachers and researchers who had matriculated in an other university

was found to be highest in smaller universities (Leppälahti 1992). Vice versa, large and

old universities, such as the University of Helsinki, the University of Turku, Åbo

Akademi and the Helsinki University of Technology, had educated almost all of their

teachers in their ranks. The results were not surprising considering that small universities

were also usually relatively young institutions.

Geographical concentration of the Ph.D.'s in university regions was obvious also in

Neittaanmäki's study. The Ph.D. graduates tended to remain employed in the same region

where they had graduated. Some 80 % of the graduates of the University of Helsinki and

Helsinki University of Technology remained in the Uusimaa region. Approximately 58 %

of overseas Ph.D. graduates also found employment in the Uusimaa region. Some 10 - 15

% of graduates from universities outside the Uusimaa region were employed in Uusimaa.

46

6.5 Problem areas

In a 1995 OECD report, Research Training: Present and Future (OECD, the section on

Finland is written by Ekberg), the following central problems regarding researcher

training in Finland14 are mentioned based on criticisms mentioned in several evaluation

reports by international experts:

- small university institutions which do not offer enough researcher training and

possibilities for postgraduate study (posts)

- too few international contacts

- too few researchers seeking training abroad

- excessive length of researcher training

- age of doctorate recipients

- uncertain entry into research career

- lack of university posts between researcher training posts and professorships

- too much publishing in Finnish and in Finnish scientific journals

- too little inter-university mobility among researchers

The 1995 OECD report also draws attention to the fact that few holders of doctorate work

in industry. According to a number of studies, one reason to this is the low prestige

attached to researcher training by business and industry (OECD 1995, p.97). Similar

conclusion is made by Neittaanmäki, who refers to the "general attitudes" in Finnish firms

against recruiting Ph.D.s'. He holds that the private enterprise sector has not come to fully

realize that a doctorate is an indication of a person's ability to absorb information and

develop new knowledge (Neittaanmäki 1995, p. 41). On the other hand, he points out that

in future researcher training programmes more attention shold be devoted to developing

the professional capabilities and skills required for employment outside the university

sector.

Another observation to be made based on recent technological trends is that in some new,

emerging critical technologies the number of Ph.D. degreeholders in Finland hardly

correlates with the knowledge base of that industry sector. For instance, in

microelectronics, the propensity to pursue advanced studies is offset by the fact that fresh

engineering graduates are in great demand in the industry where they tend to get

immediately absorbed to work in projects critical to the competitiveness of the industry.

(Ref. the Alumni magazine of the Helsinki University of Technology, Polysteekki 5/95,

14 The newly established system of graduate schools seeks to address a number of the problems mentioned above.

47

ran a series of articles on microelectronics research in a recent issue with a subtitle "The

most competitive industries will remain without Ph.D.s".)

Unemployment rate for persons with researcher training was in 1993 less than 2 %.

However, the absolute number of unemployed persons with researcher training has

increased from 273 in 1993 to 409 in 1994 (Statistics Finland: Science & Technology

1995:3). The number of unemployed Ph.D.s has increased from 110 in 1992 to 146 in

1994. As of September 1995, there were 168 unemployed Ph.D.s, of which 58 were

foreigners. The number of unemployed engineering Ph.D.s was 15 (Sept.1995).15

6.6 Human capital and mobility at VTT

In general, for the staff (including, but not limited to researchers) at VTT the following

mobility rates16 have been recorded since the mid-1980s:

Table. 28. Percentual development in the mobility of personnel at VTT

Year Mobility of personnelat VTT (%)

1985......1986......1987......1988......1989......1990......1991......1992......1993......1994......

15,38,88,88,910,07,55,65,06,37,8

Source: VTT

15Data compiled and provided by M. Räty of the Academy of Finland based on the Ministry of Labour employmentregister.16Mobility (%) is calculated as follows:

Mobility (%) = 100 x b / (a+b) + (a+b+c) 2

a = No. of persons employed during the whole yearb = No. of employed at the beginning of the year but who left during the yearc = No. of persons who joined VTT during the year and remained employed at the end of the year

In the above formula, the number of persons who left VTT dominates while the significance of the number of newrecruits is marginal for the mobility rate. Thus, the formula reflects more the outward mobility (from an institution)rather than the inward mobility.

48

Table 29. Percentual development in the mobility of research personnel at VTT

Mobility of research personnel atVTT by personnel group type(%)

Mobility-% (No.employed in 1990)

1990


1992


1994

Research professors....................Leading research scientists...........Senior research scientists.............Research scientists.....................

Average mobility-% for researchpersonnel.................................

` 2,1 (25+23)´ 5,1 (504) 6,9 (778)

4,7

3,3 (29)2,8 (incl.in fig.below)

2,2 (590)4,9 (824)

3,3

6,3 (31)5,7 (31)4,6 (548)11,7 (833)

7,1

Source: VTT

In general, the mobility rate has decreased since the mid-1980s. This may be partly due to

the economic recession of the early 1990s, resulting in declining hiring rates by private

sector firms. Also, during times of economic turmoil, those employed in the public sector

are probably inclined to remain there due to better job security. However, there has been a

marked increase in mobility since 1992. One explanation for this increase could be the

organizational restructuring of VTT which took place after the 1992-1993 international

evaluation of VTT. The average duration of employment at the VTT for the group of

persons who left VTT was 7,8 years in 1990 and 9,4 years in 1994.

On the other hand, increase in mobility appears to vary by sectors of technological

knowledge at VTT. (See Table A.26."Percentual development in the mobility of research

personnel at VTT" in the end of the Statistical Appendix. In the table, the mobility

statistics for each division also include the mobility for administrative personnel.) In the

IT division, the overall mobility of personnel was 20,1 % in 1994, while in other divisions

it remained at a rate of 10 % or less. When compared to respective figures from earlier

years, the mobility rates are generally below 10 % in almost all units, including those

related to information technology. Unfortunately, direct comparisons are not feasible to

make due to the organizational restructuring which altered the make-up of divisions and

even that of some individual research units to some extent. The high mobility rate of 20 %

in 1994 for VTT's IT division could be explained by the private sector industry's need of

information technology specialists.

In the study by Miettinen and Joensuu (1992) the career paths of individual researchers

were traced case by case, e.g. by soliciting placement information by mail and by phone.

The following figure can be constructed reflecting available mobility data from the 1980s:

49

VTT Technical Research Centre of Finland

No previous work experience

Research trainee at VTT

Academic background: previous scientific experience in university

Some research experience in firms or government organizations

Some engineering experience in firms or government organizations

Wide experience in engineering and research in different organizations

Experience in development and general management in buiness life

Other

Firms, their research institutions

Public sector research institutes

Engineering firm

Own firm/ share holder

Associations, their research institutes

Banks and insurance companies

16%(16%)

29%(30%)

21%(17%)

10%(5%)

14%(14%)

3%(9%)

2%(7%)

5%(1%)

57%

23%

1%

11%

3%

5%

Left: Previous work experience of research scientists who joined VTT in 1979-1980 (N=283), and in 1983-1984 (N=344), (in parenthesis), % of total

Right: Next employer of the research scientists after leaving VTT (year of coming to VTT 1979-1980), % ot total (N=125)

Figure 11. Mobility of research scientists to and from VTT (%)

Source: A study by Miettinen & Joensuu (1992)

It can be seen from the above figure that for almost half of the surveyed research

scientists, VTT was the first employer: they had been recruited as research trainees or they

were fresh university graduates with no previous work experience. Another large group

had also academic background with some previous scientific experience the higher

education sector. According to the survey, 31 % of the research scientists who had joined

VTT in 1979-1980 stayed with VTT for 3 - 6 years. When leaving, they majority

transferred to the private sector. The authors concluded that the survey would indicate that

VTT is an important source of trained and knowledgeable research scientists for the

private sector.

More recent figures are presented in the table below, which lists the researchers who left

VTT in 1994 by the next employment or destination.

50

Table 30 . Destination (reason for leaving) of the researchers who left VTT in 1994

Division of employment at VTT Reason for leaving VTT: new employment / other reasons

Privatesector

employer

Self-employed(own firm)

Public sectoremployer

(incl.county)

Otherreason*)

End offixed-termemployeecontract

Totals

VTT Electronics.............................VTT Information technology............VTT Automation...........................VTT Chemical engineering ..............VTT Biotechnology & Food research..VTT Energy...................................VTT Manufacturing technology.........VTT Building technology.................VTT Communies & Infrastructure .....

Other divisions: VTT Management,VTT Supporting services, VTTInformation service, Reorganizationunit

All researchers who left VTT in1994...

11234823522

1

61

2

2

23214412

19

2314

2172

13

35

4164238121

41

1930151781215235

14

158

Source:VTT

*) Other reasons for leaving VTT included e.g. the following: continuation of studies, retirement, theresearcher deceased, other non-specified reason for leaving, or reason unknown.

Direct comparisons with the above data and the results of the study by Miettinen and

Joensuu (1992) (see data in the Figure 11) can not be made because of varying contexts

for the two surveys. In the study of 1992, the whereabouts of a specific group of

researchers were traced. The above data for 1994 was obtained through a routine inquiry

for all researchers leaving the VTT for the reason of leaving VTT at the moment of

leaving. The answer categories "End of fixed-term employee contract" and "Other

reasons" may well include respondents who actually relocated e.g. in private or public

sector.

It is however, worth noting from the above table that a majority, 56 % of the VTT's

researchers who in 1992 relocated within the private sector represented the technological

fields of IT or electronics. The main conclusion could well be that the researchers in

electronics and IT are drawn to the private sector more vigorously and are maybe in

greater demand in the industry than researchers representing VTT's other technology

areas.

51

7 Technology flows

This chapter discusses the technology sources, technology content and technology flowsin the Finnish manufacturing. A study on the inter-industry flows of R&D embodied inintermediate and capital goods allow e.g. for the identification of specific generic keyindustries in the technological infrastructure which are critical in providing embodiedknowledge inputs to other industries. Inter-industry and intra-cluster type of analyses ontechnology flows are also important in the assessment of the linkages and origins(domestic / foreign) as well as the high tech content of the technology inputs in thesystem.

The Statistics Finland study "Technology Intensity of the Finnish ManufacturingIndustries" (Virtaharju and Åkerblom 1993) and a study by S.Vuori (1995) of ETLA,"The Technology Sources of Finnish Manufacturing" are briefly introduced in thischapter. Based on the data in the study, e.g. high tech inputs to forest cluster industrieshave been calculated (see chapter on forest cluster).

According to Vuori's study, the key industries in providing technological inputs inFinland were in 1989 some engineering industries such as pulp and paper makingmachines, aircraft, and machine tools, when estimated by the proportionate shares oftechnology sent to other industries. In particular, over 55 % of the technology producedby pulp and paper making machines was used by other domestic industries.

In monetary terms, the most important industries producing technology (excludingspillovers) for other industries were basic industrial machinery and pulp and papermaking machines.

In addition, chemicals, metals and electrical equipment for the industry were also amongthe most important source industries for other industries according to either criteria.

When spillovers were accounted for, the most important source industry was radio, TVand telecommunications equipment industry. It was followed by electrical equipment forindustry, pulp, paper and paper products, and instruments and optical equipmentindustries.

The general conclusion then seems to be that the knowledge stocks originating fromwithin the forest cluster as well as from the telecommunications cluster are critical for thefunctioning of the whole innovation system.

7.1 Total techology intensity

The report by Virtaharju and Åkerblom "Technology intensity of Finnish manufacturing

industries" (Virtaharju and Åkerblom 1993) presents the results of a study on the

technology content of the industry. The technology content (direct vs. indirect,

intermediate vs. capital inputs, domestic vs. foreign technology) of the industry was

52

studied using R&D statistical data at the Statistics Finland and input - output tables. The

foreign R&D-data from the OECD-STAN data base was employed for estimating the

technology embodied in imported goods used in production. In the study, a new indicator

of technological advancement was introduced: total technology intensity. It was defined as

the ratio of the estimated direct and indirect technology inputs to the gross output value of

industry. Development of the total technology intensity of output and exports was

surveyed in the 1980s. The composition of technology sources, direct vs. indirect domestic

vs. foreign, was presented. Technology diffusion and interdependence of industries were

described by input-output like matrices of technology flows. The classification of Finnish

manufacturing industries by total technology intensity was also presented (Similar

classification is presented on Table 2 in Chapter 2).

One of the main findings of the study was that indirect technology, i.e. technology

acquisitions via capital and intermediate inputs proved to be, in general, important as a

source of technology for the industry. For the wood processing industries (including wood

products and furniture, pulp and paper manufacture) the share of indirect technology was

74 %, while the share of own R&D was only 26 % in 1989. For some industries, though,

the situation was reverse: the main source of technology for electrical products was own

R&D , as the share of direct technology was 80 % (Virtaharju and Åkerblom 1993, p.58).

7.2 Technology sources in the manufacturing sector

At the ETLA, a series of studies have been conducted over the past years focusing on

measuring productivity and the effects of R&D investments on productivity development.

Following this research tradition, the most recent study by S. Vuori of ETLA,

"Technology sources in Finnish manufacturing" (1995) analysed the importance of various

technology sources and technology flows in the manufacturing sector. Aside from the

direct inputs and the technology embodied in capital goods and intermediate goods used in

production, the domestic technology spillovers were included in the study. Vuori also

studied the direct technology inputs, i.e. cumulated R&D expenditures were divided into a

product development component and a process development component. The study

contained an econometric analysis of the use of various technology sources on

productivity (TFP).

Vuori studied the inter-industry technology flows in the most important clusters of the

manufacturing sector. Aside from domestic technology flows, flows embodied in imported

investment and intermediary goods were also included. Also spillovers were accounted

for. The domestic inter-industry technology spillovers to and from the core industries and

53

the related industries in different clusters were estimated. The core of the forest cluster

proved to be "the most strongly inter-linked entity" among the clusters studied by Vuori.

The cluster was also more dependent on foreign technology than the other clusters. In the

forest cluster, technology flows coming from foreign sources almost equalled those

originating from own R&D activities, whereas e.g. in the telecommunications cluster the

flows from own R&D were over five times as large than the flows coming from abroad.

Based on Vuori's data, the following table and figure presenting the technology sources in

the manufacturing sector can be constructed:

Table 31. Technology produced for other domestic industries as percent of technologyproduced by domestic industries in 1989

Industry 1989

Manufacturing sector average .........................

Food, beverages, tobacco ..............................Textiles and clothing.....................................Leather, footwear .........................................Wood and wood products ..............................Furniture ...................................................Pulp and paper, paper products .......................Printing and publishing ................................Chemicals ..................................................Drugs .......................................................Other chemical products.................................Petroleum, coal products................................Rubber, plastic products................................Glass, clay, stone products.............................Metals.......................................................Metal products.............................................Machine tools..............................................Pulp and paper making machines.....................Computers, office machines...........................Basic industrial machinery.............................Electrical equipment for the industry................Radio, TV, telecomm. equipment....................Other electrical equipment .............................Ships ........................................................Railway transport equipment..........................Aircraft.......................................................Automobiles, other transport eqpmt. ...............Instruments, optical equipment ......................Other manufacturing ....................................

32,1

13,116,316,928,714,423,235,349,912,518,341,242,821,846,540,250,155,55,246,544,210,235,610,532,552,24,614,027,3

Source: Table 3 on pg. 9 on Vuori 1995

54

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Technology produced for other domestic industries

0 10 20 30 40 50 60

Pulp and paper making machines

Aircraft

Machine tools

Chemicals

Metals

Basic industrial machinery

Electrical equipment for the industry

Rubber, plastic products

Petroleum, coal products

Metal products

Other electrical equipment

Printing and publishing

Railway transport equipment

Wood and wood products

Pulp and paper, paper products

Glass, clay, stone products

Other chemical products

Leather, footwear

Textiles and clothing

Furniture

Instruments, optical equipment

Food, beverages, tobacco

Drugs

Ships

Radio, TV, telecomm. equipment

Computers, office machines

Automobiles, other transport eqpmt.

Figure 12. Technology produced for other domestic industries as percent of technologyproduced by domestic industries in 1989 (Delivering industry on the left)

It can be seen from the figure above that industries such as pulp and paper making

machines, aircraft, machine tools, chemicals, metals and electrical equipment for the

industry were the most important source industries for other industries. For instance, over

55 % of the technology produced by pulp and paper making machines was used by other

domestic industries.

In monetary terms, the most important industries producing technology (excluding

spillovers) for other industries in 1989 were basic industrial machinery, pulp and paper

making machines, electrical equipment for industry, chemicals and metals. They

accounted for nearly a third of the indirect technology used by total manufacturing (Vuori

1995, pp.9-10). When spillovers are accounted for, however, the most important source

industry was radio, TV and telecommunications equipment industry. It was followed by

electrical equipment for industry, pulp, paper and paper products, and instruments and

optical equipment industries (Vuori 1995, pg. 12).

55

8. Patenting system

The intellectual property right system occupies a central role in the knowledge distributionsystem. Codification of the knowledge-product can significantly improve access to theknowledge stock by various actors in the innovation system. It thus contributes to theimproved distribution of knowledge.

In this chapter, some general issues and trends on patenting are discussed. Patentingactivities seem to have concentrated on a few technological areas, mainlytelecommunications, and on large firms. In 1994, ten firms accounted for 40 % of allpatent applications. When combined by some data from the forest cluster, i.e. that somemajor firms are not active in patenting nor in standardization activities, it is obvious thatthere are firm-specific variations with regard to prevailing norms of disclosure of criticalknowledge.

It seem that although general patenting statistics are available (Statistics Finland), thespecific co-patenting indicators (i.e. patenting activity reflecting the output of cooperativeR&D between universities and industry) proposed by the OECD are practically non-existent. Some indication is provided by a recent study commissioned by the Ministry ofTrade and Industry study, according to which half of the surveyed 39 firms reported tohave been engaged in the funding of at least one patent for an invention made at auniversity or at a research institute.

The activities of the Foundation for Finnish Inventions are highlighted. Although, whenmeasured by funding volume, it occupies a modest role in the innovation system, it is animportant channel for the promotion and commercialization of innovations originatingfrom within the system. It has also documented indicators such as the economic effects(commercialized products and spin-offs etc.) arising from patenting activities. Accordingto project follow-up extending over the period of several years the commercialization ratesare approximately 30 - 50 %. It is estimated that the average diffusion rate of newinnovations to the market ranges from 4 to 8 years in projects supported by theFoundation.

Patenting statistics available for some universities have been presented in Chapter 5.

8.1. General trends in patenting

According to Vuori & Vuorinen (1994), the general observation that small countries are

more narrowly specialized in particular technological fields than large ones holds true for

Finland. This is largely supported by the results of the Forest Cluster study : in the field of

chemical forestry technology the patenting activity of the Finnish firms is high. In the U.S.

the Finnish firms were the second most active patentholders after the Amercian firms in

the field of pulp and paper manufacture. Moreover, about one-third of all Finnish patents

56

in the U.S. were related to the process or machinery of the forest sector (Valkonen &

Lovio 1991).

The success of research and development activities is measured also by the data on the

number of patent applications. The number of Finnish patent applications has increased at

a fairly steady pace. A total of 500 enterprises applied for 1 400 patents in 1994. The

number of persons applying for patents was over 900. Foreign applications totaled to over

3 800 (Statistics Finland).17

The Finnish patenting activities have increased significantly since the beginning of 1980s.

The growth in the most important patenting country, the U.S., has been even more

marked. In 1994, almost one-third (31 %) of all foreign patents granted to Finnish

applicants were in the U.S.

Table 32. Patenting applications of Finnish applicants in 1980 - 1994

Year Patents applied in Finland byFinnish applicants

Patents granted in the U.S.to Finnish applicants

1980 ..............................................1985................................................1990................................................1994................................................

1354171920682342

140227320312

Source: Vuori & Vuorinen 1994, Statistics Finland: Science & Technology 1995:3

Of the patent applications in Finland in 1994, some one-fourth represented working

methods and transport technology (IPC classification). Electronics accounted for 18 % of

applications.

When all the patent applications are examined according a more detailed technology

classification, few technology fields seem to dominate in patent applications in recent

years, namely organic chemistry, biotechnology and genetic engineering, mining, civil

engineering, construction materials, telecommunications, paper manufacture, printing and

processing, handling and moving equipment (see table below). Of these, the share of

foreign applicants is high in the field of chemical technology and genetic engineering. The

number of patents granted to foreign applicants sligthly decreased in 1994 from the

17According to recent information by the National Board of Patents and Registration (Tekniikka & Talous Dec.21,1995) there has been a marked decrease in the number of patent applications during 1995 in Finland. This may bepartly due to Finland's forthcoming membership with the EPO. There have been similar trends in other Europeancountries. Some industry observers maintain that this may reflect a growing awareness of the risks associated with thedisclosure of critical information to competitors in the form of patents.

57

previous year. The single largest product group in patents granted to foreign applicants

was drugs (24 % of all foreign patents). 32 % of all these patent holders were from the

U.S.

The Finnish applicants are concentrated more in telecommunications and construction

technology (Statistics Finland, Science & Technology 1995:3, see also Table 34). It can be

further seen from Table 33 below that the largest increase in recent years, both in absolute

and proportionate terms, has occurred in the number of telecommunications patents. Their

share of all patent applications has increased from 5 % in 1991 to almost 9 % in 1994.

Table 33 Patent applications in Finland in 1994: six largest technology groups

Field of technology (technologyclassification according to Engelsman &van Raan, 1991)

1991No. (%)

1992No. (%)

1993No. (%)

1994No. (%)

Organic chemistry ................................Biotechnology & genetic engineering,manufacture of drugs ............................Mining, civil engineering, constructionmaterials, air conditioning, wastetreatment ............................................Telecommunications ............................Paper manufacture, printing ...................Processing & handling, moving eqpt.,robots .......................................

No. of all applications ..........................

651 (10,5%)

519 (8,4%)

784 (12,7%)311 (5%)

383 (6,2%)

330 (5,3%)

6 194 (100%)

752 (12,5%)

577 (9,6%)

675 (11,2%)3561 (5,8%)372 (6,2%)

310 (5,2%)

6 005 (100%)

717 (12%)

534 (8,9%)

6389 (10,7%)416 (7%)

365 (6,1%)

336 (5,6%)

5 968 (100%)

677 (10,9%)

601 (9,7%)

583 (9,4%)539 (8,7%)349 (5,6%)

338 (5,4%)

6 213 (100%)


Table 34 Patent statistics in Finland in 1994 by main product groups

Product group Patent applications byFinnish firms in

Finland (%)

Patents granted toforeign applicants in

Finland (%)

Electronics industry products ..............................Machinery .......................................................Metal products .................................................Chemical products ............................................Pulp and paper .................................................Other products .................................................

Total ..............................................................

39,426,77,36,04,116,5

100

13,819,68,037,74,116,8

100


58

Patenting activities are concentrated among relatively few Finnish firms. Of the 490 firms

applying for patents in 1994, ten firms accounted for some 40 % of all applications

(Statistics Finland). The largest product groups in terms of Finnish firms' patent

applications were electronics industry products (39 %) and machinery (27 %). While the

growth in patent applications in different product groups has been mainly incremental

since the mid-1980s, within the product group of electronics industry products, the number

of patent applications in the field of electronic circuits, in particular, has increased from 22

in 1985 to 135 in 1990 and to 289 in 1994 (Statistics Finland).

The ten most active Finnish firms who applied for patents in 1994 are listed in table

below. The list is headed by the Nokia Company (information technology &

telecommunications equipment) and by Valmet Corporation, state-owned manufacturer of

paper machinery. The Technical Research Centre of Finland, VTT, is the third most active

patenting organization.

Table 35. Main Finnish patent applicants in 1994

Firm No. of patentapplications in 1994

Nokia ..............................Valmet ............................VTT ...............................Kone ...............................Ahlström..........................Instrumentarium ................Kemira ............................Neste ...............................ABB ................................Telecom Finland ................

267945150402322222020

Source: VTT

8.2 Importance of property rights system for the firms

Acquisition of technology in the form of patents and licenses is more common for large

firms than for small ones. According to the Statistics Finland survey (Leppälahti &

Åkerblom 1991), 39 % of all large firms had acquired patents or licenses. Only 17 % of all

medium-sized and 10 % of all small firms in the survey reported these intellectual

property purchases. Sale of technology in the form of patents and licenses appears to take

place far less frequently as only 20 % of all large firms, 10 % of the medium-sized and 4

% of all small firms in the survey reported such transactions.

59

The relative importance of technology purchases for the innovative activities of the whole

manufacturing sector is low, when measured by the breakdown of all innovation-related

expenses in the sector. In the Statistics Finland 1991 survey (Åkerblom 1992),

expenditures related to acquisition of technology accounted for only less than 4 % (FIM

206 million) of all reported R&D expenditures (FIM 5 553 million) and some 2 % of all

innovation-related expenditures (FIM 11 501 million).

A 1992 publication by the Ministry of Trade & Industry, "The significance of the patent

system for the national economy and the industrial policy", includes a study conducted by

A. Wallenius on the patenting activities of a representative sample of 39 Finnish firms.

The patenting activities of these firms represented 14 % of all patent applications in

Finland in 1986-1990. The major part of the patents had their origins inside the firm, as 33

of the surveyed firms reported that some 80 to 100 percent of all their patents were

employee inventions. Some 51 % (20 firms) of the firms reported that they had also been

engaged in the funding of at least one patent for an invention made at a university or at a

research institute.

Three-fourths of the firms (29 firms) reported that there existed patents in their portfolio

which had not been commercialized. The number of such patents varied from a few to

most of the patents in a firm's patent portfolio. Yet, almost all firms (36) reported that they

had exploited their patented innovations in their own production. 17 firms had licensed out

a patent. Mostly large firms in the survey had engaged in licensing activities.

8.3 Foundation for Finnish Inventions

The Foundation for Finnish Inventions promotes and supports the development and

exploitation of Finnish inventions through financing and counselling. The Foundation

finances promising inventions of private persons and entrepreneurs at the development

stage and during the initial phases of commercial exploitation. Established in 1971, it

employs a staff of 15 (1994). Some 95 % of its budget comes from the government. Total

figure for income and costs in 1994 was FIM 14,5 million, of which some 70 % has been

used directly or indirectly to support invention activities.

Statistics on the activities of the Foundation for Finnish Inventions in 1993 and 1994 are

presented in table below. In 1994, the Foundation and its nine regional representatives

were approached by some 7000 persons and innovative firms asking for advice and

guidance. The actual number of applications for funding received by the Foundation was

1351. Funding was provided for 209 projects, of which 163 were new and 46 were further

60

development projects. Of the supported projects, 20 gained licensing or other utilization

contracts during 1994 and a record number of 55 projects led to the manufacture and

marketing in innovator's own firm. Thus, some 36 % of the 1994 supported projects had

been commercialized during 1994. According to project follow-up extending over the

period of several years the commercialization rates are approximately 30 - 50 %. It is

estimated that the average diffusion rate of new innovations to the market ranges from 4 to

8 years in projects supported by the Foundation.

Table 36. Statistics on the activities of the Foundation for Finnish Inventions.1993 1994

No. of funding applications ...........................No. of funding decisions ...............................

of which commercialized projects ....................- via licensing or other utilization contracts......- by inventor's own firm ...............................

Commercialization rate (%) ...........................

924202

702842

35 %

1351209

752055

36 %

Source: Foundation for Finnish Inventions

Almost one-fourth of the supported projects represent such high-tech fields as electronics

and physics. (see table below). A major part, some 43 % of the supported projects are

located in Uusimaa region, 14 % in Häme region and 9 % in Turun ja Porin region. These

three regions cover the area where the largest cities, most of the population and most the

economic activities of the country are located.

Table 37. Funding by the Foundation for Finnish Inventions by field of technology*)

Field of technology 1994%

Transport technology (transportation vehicles, packaging, storage) .................Electronics............................................................................................Health care............................................................................................Physics ...............................................................................................Engineering (machine) construction, heating, lightning ................................Agriculture, forestry, food industry ...........................................................Working methods ..................................................................................Consumer & household goods .................................................................Construction (building) engineering ..........................................................Chemistry and metallurgy .......................................................................Textiles, paper & paper products ..............................................................Leisure (sporting goods, games, toys) .......................................................

16,113,811,911,08,17,97,86,76,55,52,82,1

Source: Foundation for Finnish Inventions

*) Fields of technology follow patent classification.

61

The profile of the average inventor supported by the Foundation

According to 1971-1994 statistics, the educational background of all supported inventors

is the following: 35 % had university education, 31 % college-level education, 15 %

vocational school education, and the remaining one-fifth was classified as with "other

education". 32 % were 40 years old or younger, 32 % between the ages 41 - 50, and 36 %

over 50 years old. 62 % were private inventors and 38 % represented an enterprise.

62

9. New technology-based firms in Finland18

An important aspect regarding the intensity of use of university knowledge-base is linkedto the knowledge sharing and transfer in the form of spin-offs: firms created by academicresearchers and/or firms based on direct technology transfer from the universities andresearch instititues. Thus, the assessment of the distiribution power of the nationalinnovation system is related to some of the most pressing economic problems of today, thegeneration of new entrepreneurial activity and employment. The key questions to be askedare then: What is the role of universities in supplying personnel to these new knowledge-intensive business enterprises? What is the importance of the knowledge obtained fromuniversitites and research institutes in the creation of new knowledge-intensive firms?What is the conversion rate from research results into successful business ventures?

This chapter gives an overview of the national framework concerning the new technology-based firms Finland, including science parks, business incubators, technology transfercompanies and other mechanisms promoting the establishment of spin-offs in Finland.

Based on the data it seems that a network of science parks, business incubator systems,technology transfer companies and other mechanisms with the aim of promoting thecommercializing the research results and encouraging the establishment of new firms hasbeen largely put in place in Finland during the past 10 to 15 years. A relatively largenumber of spin-off firms has been established in science parks. Moreover, these firmsmost often represent knowledge-intensive or high tech fields of industry. The existingstudies indicate that in a significant number of cases, the founders of these type ofenterprises came from the higher education sector or from a research institute and direct orpartial transfer of technological knowledge from a university or a research institute tookplace at the establishment of the firm.

The description of spin-off firms, science parks and technology transfer companies, andother similar mechanisms complements the picture of the universities' and researchinstitutes' role and significance in the national system of innovation. It is envisioned that,in the future, these type of technology transfer activities will be increasingly emphasizedin the national and regional context and that they will provide new qualitative andquantitative indicators for the assessment of the knowledge distribution power of thesystem.

9.1 Introduction

Following a period of economic growth during the 1980s, an infrastructure promoting the

creation of new technology-based firms emerged in Finland. Universities and research

institutes adopted active policies to encourage researchers to commercialize their expertise

18 Main source of information for this chapter: Ahola (1995) unless otherwise specified.

63

via science parks, technology and incubator centres. A network of science parks and the

business incubator systems, was established. The public funding support mechanisms,

many of which had been in place already since the 1970s, developed alongside.

The nine science parks were established in the 1980s and they are located near

universities. The main services provided by science parks are office space and basic

services for new technology-based firms. Additional services are provided, e.g. seed-

money, incubator centers, and innovation centers. Typically, these services are located in

science parks and performed by firms and financed by TEKES, SITRA and/or the

Ministry of Trade and Industry.

Universities and research institutes, VTT in particular, have their own activities in

commercializing the research results and encouraging establishment of new firms. Most

Finnish universities have a liaison office for promoting linkages between research and

industry while some of them use the services of the local innovation center.

9.2 Science parks

The science parks (i.e. technology centers in Finland) aim at creating new linkages

between industry, research institutes and universities. They seek to promote technology

transfer from universities and research institutes to the private enterprise sector and to

encourage the establishment of science and research-based firms. Science parks in Finland

are private firms owned by a consortium of local and regional authorities, firms, regional

universities and research institutes.

The first science park was established in Oulu in 1982. During 1980s six more started

operations in Espoo, Turku, Tampere, Lappeenranta, Kuopio and Jyväskylä. The science

park of Joensuu started in 1993. The science park of Helsinki is scheduled for opening in

1997.

The nine science parks are located nearby universities and research institutes and are

primarily regional technology centers in nature. The basic idea of science park has been

applied also locally as some local technology centers have been established in the vicinity

of colleges of technology and regional branch units of universities. Their business ideas

resemble that of science parks. In respect to new firms the local technology centers

encourage merely new start-up firms using the best "state-of-the-art" -technology, while

science parks are focusing on science and new technology-based firms.

64

The number of firms located in science parks has increased steadily since the 1980s and is

presently about 800. The average annual growth rate in the number of employees has

been 20 - 30 % during the last five years and they employ some 8000 employees at the

moment.

Table 38. The number of firms and their employees in science parks in 1995 and the sizeof the city in the number of inhabitants.

Science park No. firms in thepark

No. of employeesin the park

Adjoining citypopulation

Oulu (Teknopolis,Medipolis)...................Espoo.........................Turku (DataCity,ElectroCity, BioCity)....Tampere (Hermia).........Lappeenranta(Kareltek)..Kuopio (Teknia)...........Jyväskylä....................Joensuu......................(Helsinki)....................

250200

10015050505020-

1 5001 500

2 0001 500500500

1 000100

-

100 000200 000

160 000180 00055 00085 00072 00050 000500 000

Source: Ahola 1995

The technological fields presented by firms in science parks are presented in the table

below. In general, the firms specialize in knowledge-intensive fields of technology or high

technology. They draw on the scientific and technological resource base of their locality.

The Espoo technology park, for instance, is adjacent to the Helsinki University of

Technology and the Technical Research Centre of Finland, VTT. The science park in Oulu

is located near the university of Oulu and the VTT research institute of Electronics. The

science park in Lappeenranta, next to the Russian border, serves as a gateway to Russia

and provides expertise in trade and technology transfer activities. It has a technical

research base at the Lappeenranta University of Technology and at a local VTT unit. The

science park in Tampere is located close to the Tampere University of Technology and to

the local research units of VTT.

65

Table 39. Fields of technology represented by firms located in the Finnish science

parks

Main fields oftechnology

Espoo Hel-sinki

Joensuu

Jyväs-kylä

Kuopio Lappeen-ranta

Oulu Tam-pere

Turku

Automation..............Space technology.......Biotechnology...........Electronics................Energy.....................Informationtechnology................Instrumentationtechnology................Logistics..................Medicalengineering....Material research........Metal structures.........Woods andforestry.....Optoelectronics..........Pulp and paper...........High-energy physics...Telecommunications...Technologies ofsportsEnvironmentaltechnologies..............

xx

x

x

x

xxxx

x

x

x

x

x

x

x

xx

x

x

x

x

x

x

xx

x

x

xx

x

x

x

x

x

x

x

x

x

x

x

xxx

x

x

x

x

x

x

x

x

x

xx

x

xxxx

x

xx

x

Source: Ahola 1995

9.3 Technology transfer from universities and research institutes to the industry

In the early 1990s most of 21 Finnish universities developed links to local business life by

establishing a liaison office. Their main activities encompassed the promotion of contract

research for the industry as well as commercialization of publicly financed research

results. In practice, however, the commercialization aspect was difficult to realize due to

the fact that the intellectual property rights of new inventions belonged to the inventor, not

to the university. In the future, however, it is expected that the general law on employee

inventions will increasingly be applied for inventions made in universities. The liaison

offices also conduct PR activities in order to enhance university - industry linkages and act

as the contact points in incubator and technology transfer activities.

VTT established a technology transfer firm in 1984. Finntech Oy has been the pioneer of

technology transfer in Finland. In 1994 its turnover was some FIM 30 million. The

66

turnover comes mainly from licensing and product selling, patent advisory services and

project management services. The owners are the state of Finland (60 %, VTT and the

University of Technology) and SITRA (40%). TEKES and the Ministry of Trade and

Industry are also represented in the board.

With the example of Finntech (Otatech), new technology transfer firms were established in

cooperation between the universities and SITRA in four universities of technology

(Tampere, Turku and Oulu), and in Helsinki University. These firms are typically located

in science parks and technology centers.

Table 40. Technology transfer companies in 1995

Firm (city and the year ofestablishment)

Owners

Aboatech Oy (Turku, 1993)..........

HU Licencing Oy (Helsinki,1993).

Finntech Oy (Espoo, Otaniemi,(1984 Otatech), 1993)..................

Oulutech Oy (Oulu, 1994) ...........

Tamlink Oy (Tampere, 1986) .......

SITRA, and the foundations of the University ofTurku and ÅboAkademiHelsinki University Holding Oy and SITRA

VTT, Helsinki University of Technology, SITRA

SITRA, the foundation of the University of Oulu and the Science Parkof OuluSITRA, Tampere University of Technology, Foundation of theUniversity of Technology, City of Tampere and KERA.

Source: Ahola 1995

Technology transfer firms offer four types of services: licensing of research results,

services for the commercialization of research results and products developed in

universities, management assistance for new business start-ups and research projects as

well as coordination of monitoring activities for new product ideas.

Both TEKES and SITRA participate in technology transfer operations in universities.

TEKES is the main provider of outside funding for R&D conducted in technical

universities and research institutes. TEKES also funds and manages projects of searching

potential product ideas from research organizations, to be commercialized through spin-

offs or by licensing or selling the property rights to existing firms. SITRA is focused on

technology transfer through licensing and through consortia between research

organizations and existing firms.

Local technology centers also provide technology transfer services. Most colleges of

technology have an office promoting linkages between the institutes and local industry.

67

The Foundation of Finnish Inventions has assigned regional representatives to local

technology centers.

68

9.4 Business incubators

Incubator activities and services are typically part of science park's operations. The main

purpose of incubators is to promote the establishment of new technology and knowledge

based firms. The first business incubator in Finland was established in 1988 and presently

there are about 15 incubators all over Finland, mainly located in science parks and local

technology centers.

Table 41. Business incubators in Finland in 1995.

City Parent organization No. of firms inincubator

No. of employeesin incubator firms

Espoo.....................Turku.....................Kuopio...................Lappeenranta............Tampere..................Jyväskylä................Kajaani...................Vaasa.....................Lahti......................Kemi......................Oulu......................Kokkola.................Kotka.....................Kontiolahti..............

Technology Center of Otaniemi, SpinnoIncubator DIOTechnology Center Teknia OyTechnology Center KareltekTechnology Center HermiaTechnology Center of JyväskyläKainuu Incubator centerMerinovaNeopoliIncubator of KemiTOL -collegeIncubator of YTOL - collegeDevelopment company of KokkolaKotkan Portti OyTietopesäke Oy

251583153034485255

8530863010054720821012

Source: Ahola 1995

There are some variations with regard to the business concept of the incubators. Some

incubators provide mainly office space and basic services for start-up firms. Courses and

consulting services on how to manage a business are also often offered. Incubators located

in science parks and technology centers usually provide access to funding and venture

capital. Basically, there exist three main types of incubators:

- Each science park and regional technology center offer, in principle, incubator

services, although these may not necessarily be organized as independent firms (e.g. in

Oulu the technology transfer firm Oulutech Oy provides incubator services.

- Local technology centers, located nearby colleges of technology, have also incubator

services for promoting the commercialization of the specific fields of expertise offered

by the colleges. The services are often limited to offering office space.

69

- In addition, there exist a number of local incubators with the mission to promote all

kinds of spinn-offs, particularly in regions with high unemployment and declining

manufacturing base.

Incubator Spinno in Espoo has been as a model for many incubators in Finland. Spinno

was developed in 1990 by VTT. Presently, its activities cover most of the universities and

research units in the capital region. Most of its client spinn-offs have actually been located

outside the Technology Center of Otaniemi during their incubator phase. Funding support

for the first 6 to 12 months of operations is available from the Ministry of Trade and

Industry.

9.5 Centres of expertise

With the initiative of the Ministry of the Interior of Finland, the Centres of Expertise

Programme was launched in 1994. The objective of the programme is to facilitate the

prerequisites for the location and development of internationally competitive enterprises

which require a high degree of expertise. The programme supports regional specialization

and assignment of tasks to appropriate centres of expertise. The aim is to enhance the

development of the knowledge base by promoting collaboration between new technology

based firms and the higher education institutes, research centres and the government sector

authorities. In the fiscal budget for 1995, a sum of FIM 15 million was reserved to fund

the programme. Eleven centres of excellence were nominated in different parts of Finland.

Eight of these were regional and three sector-based, the latter covering wood and forestry

industry, food industry and tourism. The foci of the regional centres of excellence is in

areas such as biotechnology, automation, information technology, paper manufacturing,

energy technology, environmental technologies, electronics and medical technologies. The

regional programmes are planned and organized by the regions. Projects are typically

performed by technology centers and local consultants.

70

Table 42. The centers of expertise and their areas of specialization

Region Area of specialization Funding in 1995FIM million

Uusimaa........................Varsinais-Suomi..............Tampere region...............

Kaakkois-Suomi..............Länsi-Suomi...................Jyväskylä region..............

Kuopio region.................Oulu region....................Woods and forestry...........Foods industry................Tourism.........................

InternationalizationBiotechnology, material researchEngineering, automation, information technology,health care technologiesHigh technology steel structuresEnergy technology and applicationsPaper manufacturing, energy- and environmentaltechnologiesMedical technology, biotechnology of animalsElectronics, medical technologiesForestry economics, wood processingNetwork of education, R&D and firmsNetwork

1,51,61

10,9

1,51,51,61,61,51,3

Source: Ahola 1995.

9.6 Programme for reindustrialization

In 1993 the Ministry of Education and the Ministry of Trade and Industry launched a joint

Programme for Reindustrialization. The programme was conducted as a stand-alone

project with a fixed duration. In 1993-1994, under the programme a total of FIM 115

million was granted to 94 knowledge-intensive R&D projects with prospects of generating

new industrial activities. The focus of the programme was on the development of high-

tech products, creation of new firms, and the promotion of university-industry

collaboration in R&D. According to the evaluation, the basic idea and the set-up of the

programme were perceived, in principle, good, but the funding mechanisms were

criticized for their short time focus; in programmes such as this, the funding support needs

to be allocated over the period of several years. It was recommended e.g. that for such

programmes in the future, the possibilities for cooperation with the centres of excellence

be assessed (The 1995 Report of the Council for Higher Education).

71

9.7 Importance of university knowledge base for the creation of new research-

oriented and technology-based firms

In the case of small research-intensive firms, a number of the indicators proposed by

OECD reflecting the interactions between the higher education sector knowledge base and

industry are available. The main source of information is Leppälahti's 1994 study on

research-oriented small enterprises.

Leppälahti (1994) studied 193 new, technology-based small firms, of which 90 % were

located in technology centers around the country. Of these, 84 firms were classified as

"research-oriented", i.e. they were spin-offs (51 firms) for research conducted at a

university or at a research institute and/or were engaged in contract research activities with

a university or with a public research institute (49 firms). The remaining 109 firms were

classified as "other technology-based firms". According to the survey, of the founders of

all 193 firms, 43 % came from the higher education sector or from a research institute (i.e.

43 % had been working at a university or at a research institute or had been conducting

graduate or post-graduate studies in a university immediately prior to the establishment of

the firm.) In research-oriented firms, the founders had background in the higher education

sector or at a research institute in two-thirds of the cases.

As expected, the various forms of cooperation with universities or research institutes were

rated as very significant more often in the research-oriented firms than in other

technology-based firms (see table below). Informal discussions and joint R&D, in

particular, were considered as very significant by almost one-half of the respondents

representing the research-oriented firms.

72

Table 43. Proportions of respondents rating different forms of cooperation with auniversity or a research institute as very significant for their firm.

All new technology-based firms

Forms of cooperation(N=193)

%

Research-orientedfirms (N=84)

%

Other technology-based firms

(N=109)%

Contract R&D performed byuniversity/ research institute...............................Consultations by university/ researchinstitute in the firm ...........................Informal discussions..........................Joint R&D ......................................Exchange of research results &documents .......................................Use of equipment owned by university/research institute ...............................Recruitment of personnel ...................

15

63425

12

1428

25

124748

21

1836

7

2236

6

1022

Source: Leppälahti 1994

The research-oriented firms were also more active in patenting than other technology-

based firms. During 1985-1993 the firms in Leppälahti's survey submitted altogether 79

patent applications. Of these, 66 were submitted by 13 research-oriented firms and 13 by 8

other technology-based firms.

In a study conducted by SITRA (Lumme 1994) the technology transfer mechanisms of

potential technology-based small firms were surveyed. Some 41 % of the service-oriented

firms and 28 % of the production-oriented firms in the survey indicated that direct or

partial transfer of technological knowledge from a university or a research institute took

place at the establishment of the firm (Almost all of the respondent 400 firms of the

surveyed 1 445 firms responded to this question).

Estimates of the innovation potential of technical research centres and universities of

technology have been presented in a study by Autio, Kauranne & Halme (1991). They

interviewed 30 employees of VTT with varying level of education who were engaged in

research activities. Some 70 % of these reported to have obtained new ideas for

prospective innovations related to their research activities during the past five years. The

total number of ideas reported was 73. One of these ideas actually led to the establishment

of a spin-off firm. By extrapolating the results to apply to the whole VTT, they estimated

that VTT would generate, on an average, 10 new enterprises a year.

73

10. Case study of Finland's Forest Cluster

In this chapter, a sub-group of the national innovation system, the forest cluster inFinland is reviewed in terms of knowledge creation, distribution and use.

A study on the knowledge distribution process in the forest cluster was completed as anadditional case study for this project. A draft report was prepared and presented in theThird Informal Meeting of the OECD project in Vienna in October 1995. A rather short,concise version of the forest cluster case study is presented here.

The main sources for the case study were the cluster analyses conducted by the ResearchInstitute of the Finnish Economy (ETLA), studies on the technology intensity conductedby Statistics Finland and studies on technology sources of the Finnish manufacturingindustries by ETLA, R&D statistics provided by Statistics Finland and other recentsurveys and studies.

According to a tentative analysis, the available empirical data on the forest cluster can bewell interpreted from the knowledge distribution point of view. There is evidence of arelatively high distribution power within the cluster. This high knowledge distributionpower of the forest cluster seems to be primarily linked to industry's ability to use theexisting supply of the highly specialized knowledge and expertise at the university andresearch institute sector.

10.1 Significance of the forest cluster in Finland

The forest cluster19 is the most important and significant cluster in Finland. Forest industry

products account for almost 40 percent of total exports of the country and the products

originating from its most important related industries contribute another 20 percent.

Finland is also the world's second largest exporter of pulp and paper. Among the

industrialized countries Finland is more dependent on pulp and paper industry than any

other country in the world. The forest cluster has developed around the key products of

pulp, paper, paperboard and the mechanical forest industry products. Close links exist with

the supporting and related industries, engineering workshops, specialty input producers

19Products from the following industry groups (ISIC Rev. 1979) belong to the forest cluster in ETLA's clusterstudies:- 32193, 331, 33201, 33202, 341, 342011, 342019, 34203, 35132, 35402, 38232,38241 .Following the ISIC Rev. 1988 the corresponding industries are:- Felt and feltproducts 1239, Wood and wood products 14, Furniture 17, Pulp and paper, paper products 15,Publishing and printing 16, Synthetic fibre products 1850, Roofing felt 1922, Woodworking machines 2522, Pulp andpapermaking machines 2525.

74

and chemical firms. The different areas of the cluster are closely linked together and

mutually competitive (Ministry of Trade and Industry 1993, Lammi 1994).

The table below presents some key economic figures on the cluster in the context of the

national economy. Even though its share of exports of the country has dimished during the

past decades, forest cluster is still the single most important provider of export income.

Moreover, the forest cluster industry uses less imported intermediate inputs in production

than other industries. The share of net exports in the cluster is 90 %.

Table 44. Industrial statistics on the forest cluster: forest cluster as part of the industry:share of the cluster from the whole industry

1974%

1993%

Gross value of production .............................................Value added.................................................................Exports ....................................................................Investments ................................................................Employees .................................................................Salary earners .............................................................Labour compensation ...................................................Establishments ...........................................................

3232603428233024

2928404527222824

Source: Lammi 1994, Figure 7

During the 1980s, although the absolute value of the exports of Finland's forest cluster

increased from over FIM 20 000 million in 1980 to about FIM 43 000 million in 1992, its

share of the forest sector total exports within the OECD countries dimished from 41 % in

1980 to 5 % in 1992. This is due to the poor price competitiveness of the Finnish products

in the turn of the decade as well as to the increasing trend to locate production units

outside Finland. In the beginning of the 1980s 10 % of the production units were located

overseas compared to almost one-third presently (Lammi 1994).

Specialization profile of the cluster in Finland is reflected by the RCA (Revealed

competitive advantage) index, which is about 7 to Finland. Compared to lower indexes in

Sweden (over 4), Canada, (3) and U.S.A. (1), it seems that the degree of specialization in

exports is far higher to Finland than to other countries, and the share of the exports of the

forest cluster products in Finland is higher than in other countries (Hermesniemi 1995).

75

10.2 Technology sources and the nature of R&D in the forest cluster

It is estimated that the annual R&D expenditures of the forest industries total to FIM 400-

450 million presently. When the R&D outlays of the main supporting industries,

engineering and chemical industry, are added, total annual R&D expenditures rise to

approximately FIM 900 million (Talouselämä 41/1995).

In the following, the technology sources and the nature of the R&D conducted by the main

industries of the cluster are reviewed.20

Chemical forest industry

A major part of the technology in pulp and paper originates via capital inputs from the

engineering industry which develops its own technology. The manufacture of pulp and

paper is in itself not particularly research-intensive because of the long life-cycle of the

products and the large investments required to start new production lines. The fact that

pulp and paper products and their production processes tend to develop simultaneously,

hand in hand, necessitates close links with the suppliers of machinery and equipment. By

the same token, the pulp and paper companies are significant providers of development

impulses for the supporting and related industries that regularly transact with them.

A key characteristic of the technological development of the pulp and paper industry has

been in the past decades been the need to continuously invest in building up the most

advanced production capacity. The Finnish chemical forest industry has traditionally

aimed at a very high level of domestic input production, which has resulted in close

relationships between pulp and paper producers and their suppliers. The pulp and paper

producers have historically aimed at controlling the supply capabilities, i.e. energy, raw

materials, chemicals, by integrating backwards to the mechanical forest industry and

engineering industries (Ojainmaa p.63).

Lately, the main thrust in the development work regarding pulp and paper products has

been minimized processing, the need to achieve greater efficiency in the use of raw

materials, energy and capital inputs. The requirements to minimize capital are reflected in

increasingly simplified manufacturing processes, e.g. fewer pulp bleaching phases and

faster paper production machines. R&D processes as well as product development take

place in a fastened time phase. Increasingly, the various development phases from basic

research to development and commercialization of new products take place parallel rather 20The main sources for this section are Lammi (1994) and Ojainmaa (1994).

76

than sequentially. Intensified product development processes, on the other hand, require

close cooperation between research, production and marketing departments as well as

between engineering and machinery suppliers, raw material suppliers and chemical

industry (Talouselämä 41/1995).

The forest cluster consulting firms, i.e. Jaakko Pöyry Oy, have developed special know-

how in planning large new pulp and paper integrates. They have also participated actively

in the research and development of new competitive production processes for the pulp and

paper industry.

Close relationships between various actors within the cluster have contributed to the rapid

diffusion of technological innovations despite the attempts to keep improvements

proprietary. The effective sharing of knowledge and information within the cluster can be

accredited to factors such as "consortative business operations, geographical closeness of

the mills to each other, joint R&D activities, equipment suppliers, professional societies

and career paths from one forest industry corporation to another". "Industry observers",

such as consultants and the trade press have also contributed to the diffusion of new

technologies (Ojainmaa 1994).

The chemical pulping process is very energy intensive. The low price of energy has been a

source of competitive advantage for the industry for a long time. The forest cluster uses

one-third of the total energy in Finland, of which it, in turn, generates one-third in

cellulose production plants. The domestic content of the energy used by the cluster is 60 %

and energy accounts for 6 % of the costs of production.

Mechanical forest industry

The R&D funds available within the sawmill industry for R&D have traditionally been

modest and relatively little basic research is conducted within the field. In recent years the

number of students in the wood processing technology has diminished as well. An

important push to promote development was the founding of the Finnish Wood Research

Ltd. in 1986. It coordinates the R&D and the funding in the sawmill and board industry. In

the wood working industry respective coordination of R&D inputs does not exist.

Larger forest companies cooperate with each other as well as with the machinery

suppliers. Still, the role of the machery suppliers is less significant as a source of new

innovations than in the chemical forest industry. Local networks exist, though: there is an

77

emerging network in the eastern Finland with vocational schools and institutes

participating.

TEKES and the mechanical forest industry started in 1992 extensive programmes in the

wood processing technology and in wood board technology (see section on research

programmes.)

Machinery suppliers

Until the 1950s the Finnish forestry industry was dominated by imported technology. In

the 1950s and the 1960s machinery was manufactured mainly with foreign licenses. Own

R&D developed alongside rapidly with small improvements and incremental innovations

made to the imported machinery, and in the 1990s domestic machinery accounted for over

80 % of the papermaking capacity.

Engineering workshops form the most important supporting industry in the forest cluster

and represent the core technological know-how and competence area of Finland. The level

of networking is high. The engineering workshops are increasingly cooperating with the

universities, e.g. with the Helsinki University of Technology, University of Oulu,

Lappeenranta University of Technology and Åbo Akademi. The relationships between the

pulp and paper industry and the machinery suppliers are close e.g. due to joint marketing

organizations and joint research. Also close producer - user relationships exist, with joint

technology development. The machinery suppliers have benefited from chemical industry

research programs coordinated by the KCL.

Also the tightened environmental standards set for the pulping industry have led to

research cooperation with the chemical industry. With support from TEKES alternative

bleaching methods have been studied in the firms. Some research cooperation exists

between the machinery suppliers and the VTT as well as with the Finnish consulting firms,

i.e. Jaakko Pöyry Oy.

As a whole, machinery suppliers are a major source for technological development, as the

development of products and production processes often proceed simultaneously and the

technological edge of the Finnish chemical forest industry is largely due to the cooperation

with the machine suppliers.

78

10.3 Total technology intensity, technology content and sources in the forest cluster

The table below summarizes the results of study by Virtaharju and Åkerblom (1993)

regarding the forest cluster industries.21 It can be seen, that, in general, the total

technology intensities in the forest cluster industries are relatively low, whereas the share

of indirect technology in total technology is significant. The exception is the pulp and

paper making machine industry; both direct and total technology intensities are higher

than the respective total manufacturing sector averages.

Table 45. Total technology intensities of manufacturing output to final demand by sourcein 1989 (%)

IndustryTotal technology intensities of manufacturing outputto final demand by source in 1989 (%)Direct Domesti

c inter-mediate

Imported inter-mediate

Domestic capital

Imported capital

Totaltechnologyintensity

Wood (excl. furniture) ...........................Furniture (also of metal and plastics) ........Pulp and paper, paper products ................Publishing and printing .........................Pulp and paper making machines .............

Total manufacturing ..............................

0.752.023.130.2012.01

6.72

1.431.452.001.461.25

1.77

0.050.410.180.160.25

0.80

0.590.542.011.030.72

0.97

1.591.443.272.171.04

1.90

4.415.8410.605.0215.27

12.15

Source: Virtaharju & Åkerblom (1993) Appendix Table 5, p. 101-103.

In the study by Virtaharju and Åkerblom, the industries were divided into four categories

on the basis of the estimated total technology intensity of the industries22: industries of

high and medium-high technology and industries of medium-low and low technology. The

pulp and paper making machines were classified in to the medium-high technology, pulp

21The studies by Virtaharju and Åkerblom were conducted for the manufacturing industries, with much of theempirical data reported for the following core industrial subgroups of the forest cluster (in the parenthesis is the ISICclassification Rev. 1988):- Wood (excl.furniture) (14)- Furniture (also vai excl.of metal and plastics? alaluokkaa ei ole olemassa) (17)- Pulp and paper, paper products (15)- Publishing and printing (16)- Pulp and paper making machinery (2525)

22As a classification criterion the weighed average of the total technology intensity of the industry was used. Theindustries were first divided into two groups according to the median of the weighed average of the total technologyintensity: 1) Industries of high and medium-high technology and 2) industries of medium-low and low technology.The industries which had clearly the highest total technology intensities were classified as high tech industries.Thelow technology group consisted of the seven industries with the lowest technological level (25-% fractile)

79

and paper to the medium-low technology and wood, printing and furniture to the low

technology group.

The authors referred to an OECD study of 1993, according to which pulp and paper

industry have been classified into the low-tech class. In the low-tech class, the R&D

intensity of the Finnish pulp and paper industry (incl.publishing) is about double (0.5 %)

to that in other countries (0.2 %). This has been the basis for ranking of the industry into

the medium-low group in Finland in the study Virtaharju & Åkerblom. The forest cluster

in Finland thus provides an example of an industry where the manufacturing process

represents medium-high technology but the product itself is of low technology. It also

illustrates general definitional problems encountered in the classification of the industries

where direct R&D inputs are more geared towards development of processes than

products.23

Using statistics on technology flows between source and user industries presented in study

by Virtaharju & Åkerblom, high tech inputs to the individual industries in the forest

cluster were compiled (see Table 46). The results showed that the industry of pulp and

paper making machines received a smaller portion of outside high tech flows than the

other industries, although it ranked highest among the cluster industries by its total

technology intensity, belonging to the group of medium-high industries. Still, the share of

intramural R&D was far higer in the industry of pulp and paper making machines than in

other forest cluster industries, as about 76 % of its total technology originated from within

the industry itself (see Table 47).

23A larger proportion of R&D expenditures in the forest cluster are devoted to process development instead of toproduct development than in the manufacturing sector on the average.

80

Table 46. High tech flows to forest cluster in 1989, percentage shares of total technology

High tech source industryUser industry (forest cluster industries) (%)

Wood Furniture Pulp, paperproducts

Publishingand

printing

Pulp and papermaking machines

Drugs........................................Computers, office machines..........Electrical equipment forindustry.....Radio, TV, telecomm. equipment..Instruments, optical equipment .....

Total.........................................

Average % of high tech inputs oftotal technology in the forestcluster: 7 %

1.91.02.31.50.9

7.6

0.60.82.93.81.4

9.5

0.61.12.80.80.7

6.0

0.91.04.91.50.7

9.0

0.10.21.60.50.5

2.9

Source: Virtaharju & Åkerblom (1993): Total technology flows in 1989(matrix of source by user industry), Appendix Table 6, pp. 104-105.

The following analysis has been made regarding the data on Table 47 below: "The pulp

and paper industries have benefited from the increased technology intensity of the industry

making pulp and paper making machines in the last decade. In the 1980s the importance of

own (direct) technology in pulp and paper industries diminished whereas technology

acquisitions via capital and intermediate inputs increased. At the same time period the

significance of own R&D increased in the pulp and paper making machine industry. Thus

the domestic technology inputs / sources of pulp and paper industry have increased.

Technology is acquired via investment into machinery and equipment" (Direct translation

from Lammi 1994, pp. 86-87).

81

Table 47. Technology intensity in the forest cluster in 1981 and 1989

R&Dexpendi-

Totaltechno-

Sources of total technology intensityas % of total

Industrytures as %of totaloutput ofproduction

logyintensity%

Directtechnology (ownR&D)

Domesticinter-mediate

Domesticcapital

Importedintermediated

Imported capital

In 1981

Wood and wood products ........

Pulp and paper, paper products..

Pulp and paper makingmachines

0.4

0.1

1.5

6.3

4.0

9.5

39

11

60

17

29

18

11

10

2

3

2

13

30

38

8

In 1989

Wood and wood products ........

Pulp and paper, paper products..

Pulp and paper makingmachines

0.7

0.2

4.1

11.3

5.9

15.7

28

13

76

23

49

11

29

27

7

2

1

2

18

10

5

Source: Lammi 94, Table 13.

(Note: when actual figures are calculated, they are slightly different from those byVirtaharju & Åkerblom (1993), which is probably due to slightly different industryclassifications.)

Domestic inter-industry technology spillovers to and from the core industries and the

related industries in different clusters have been analyzed by Vuori (1995). The spillovers

between the core industries in the cluster were more important than those coming from

related industries, leading to the conclusion that the core of the forest cluster was "the

most strongly inter-linked entity" among the clusters in Finland (Table 48).

82

Table 48. Spillovers received in the forest cluster in 1989

Spillovers received by

Receiving industries andsource industries

Core industries Related industries

million FIM % million FIM %

Forest cluster, total .............- from core industries ...........- from related industries ........- from other industries ..........

Total spillovers in businesssector: 5568.7 million FIM

735.3299.029.9406.5

100.040.74.155.3

1417.7153.973.3

1190.5

100.010.95.284.0

Source: Vuori (1995), Table 9, p.27

The forest cluster was also more dependent on foreign technology than the other clusters,

i.e. the telecommunications cluster in particular. According to the study, in the forest

cluster, technology flows coming from foreign sources almost equalled those originating

from own R&D activities, whereas e.g. in the telecommunications cluster the flows from

own R&D were over five times as large than the flows coming from abroad.

10.4 Knowledge sharing and transfer in the forest cluster

According to the Statistics Finland innovation survey conducted in 1991 (Åkerblom 1992)

among 2509 Finnish manufacturing firms, the level of R&D cooperation among firms

representing the industry of pulp, paper and paper products was very high when compared

to the corresponding manufacturing sector average rates.(Table 47). Intra-firm and vertical

(with customers) collaboration was reported particularly high, but also cooperation with

other firms, consultants, research organizations and universities occurred very often. Thus,

within the cluster, knowledge sharing and transfer between various firms and between

producers and users seems to be intense. The same applies to university - industry and

research institute - industry relations.

83

Table 48. Firms conducting research cooperation by partner in 1991

All firms Firms conducting R&D cooperationIndustry with

innovationactivities

TotalNo.

TotalNo.

% w/ otherunits ofthe firm%

w/custo-mers%

w/ otherindustrialfirms%

w/consulting firms%

w/researchorgani-zations%

w/univer-sities%(2)

Wood and woodproducts ............Pulp and paper,paper products ....Printing andpublishing .........Furniture ...........

Manufacturingsector ...............

168

40

154168

2509

39

33

4633

1022

23.0

81.3

29.919.3

40.7

6.1

66.9

7.33.0

17.8

16.7

59.7

10.014.3

23.6

15.0

48.5

15.54.5

19.5

7.9

38.6

3.41.5

12.4

11.7

48.0

8.40.6

14.8

4.6

42.0

7.3

0.6

12.9

Source: Statistics Finland, Innovation survey of 1991 (Åkerblom 1992), Table 5A

The sources of technology in terms of various forms of transfer as well as by partner

providing technology appear to be more diversified for pulp, paper and paper product

industries than for the industry in general (Tables 49 and 50). Technology acquisition via

extramural R&D such as commissioned R&D and contract research, in particular, is very

common. Acquisition of intellectual property rights in the form of patents and licenses

occurs also somewhat more often than in the industry.

84

Table 49. Acquisition of technology in firms with innovative activity in 1991

All firms Firms with technology acquisitionsIndustry with


TotalNo.

TotalNo.

% w/extra-muralR&D%

w/acqui-sition ofpatentsand li-censes%

w/ acqui-sition oftrade-marks%

w/ acquisi-tion ofother firmsor units togettechno-logy%

w/ otherforms ofacquisi-tions%

Wood and woodproducts ...............Pulp and paper,paper products .......Printing andpublishing ............Furniture ..............

Manufacturingsector

168

40

154168

2509

45

19

3962

782

26.7

48.5

25.536.7

31.2

9.9

45.5

17.87.7

17.4

11.8

18.2

3.98.6

12.3

1.0

3.0

2.15.0

4.3

1.5

0

0.80

2.6

6.4

0

3.616.9

3.9


Table 50 shows that in pulp, paper and paper product industries technology acquisitions

originating from within the firm are more common than for the manufacturing sector firms

on the average. A part of this can probabaly be explained by the fact that the firms in the

pulp and paper industry form usually relatively large complexes. It can also be seen that

the likely partners in these technology acquisitions can be found overseas, in Europe and

in the U.S. more often than in the industry in general.

85

Table 50. Firms with acquisition of technology by partner in 1991

All firms Firms with technology acquisitionsIndustry with


TotalNo.

TotalNo.

% w/counter-partsfromw/n thefirm %

w/ otherFinnishfirms ascounter-parts %

w/ coun-terpartsfromNordiccountries%

w/ coun-terpartsfrom EU%

w/ otherEuropeancounter-parts%

w/ U.S.counter-parts%


Manufacturingsector

168

40

154168

2509

45

19

3962

782

26.7

48.5

25.536.7

31.2

0

33.6

4.18.0

7.6

19.5

20.9

16.517.7

18.8

4.3

0

4.15.6

4.4

6.0

14.7

3.816.9

6.2

1.7

3.0

1.10

0.9

0

9.2

1.90

3.1

Source: Statistics Finland, Innovation survey of 1991 (Åkerblom 1992), Table 6B (2nd part of a 2-tierquestion)

The Statistics Finland survey also included questions on the various forms of the sale of

technology. Both pulp and paper industry and wood and wood product industry firms were

more effective than the average industry firms in knowledge distribution in the form of

conducting contract R&D to other firms and in selling patents and licenses (Tables 51).

The sale of technology occurred most often within the innovation system, as intra-firm

counterparts and other Finnish firms were most frequently reported as counterparts in

these technology transfer operations.

86

Table 51. Sale of technology by firms with innovative activity in 1991

All firmswith

Firms with sale of technology

Industry innovationactivities

TotalNo.

TotalNo.

% w/contractR&D tootherfirms%

w/ saleofpatentsand li-censes%

w/ sale oftrade-marks%

w/ sale ofown tech-nologyintensiveunits toother firms%

w/ otherforms ofsale oftech-nology %


Manufacturingsector totals..................

168

40

154168

2509

24

9

147

239

14.3

21.1

8.73.9

9.5

5.2

9.2

3.82.4

4.8

12.0

14.9

5.80.6

5.5

0.6

0

00

1.0

0.6

0

00

1.1

1.0

0

01.5

0.3


Table 52. Firms with sale of technology by partner in 1991

All firmswith

Firms with sale of technology

Industry innovationactivities

TotalNo.

TotalNo.

% w/counter-partsfromw/n thefirm %

w/ otherFinnishfirms ascounter-parts %

w/ coun-terpartsfromNordiccountries%

w/ coun-terpartsfrom EU%

w/ otherEuropeancounter-parts%

w/ U.S.counter-parts%

Wood andwood products.........Pulp and paper,paper productsPrinting andpublishing ......Furniture ........

Manufacturingsector totals ....

168

40

154168

2509

24

9

147

239

14.3

21.1

8.73.9

9.5

11.4

9.2

3.20.9

4.1

5.0

9.0

5.80

3.9

3.8

3.0

0.80

1.8

3.8

3.0

0.80.6

2.1

0.6

3.0

0.81.5

1.3

0

0

0.80

1.3

Source: Statistics Finland, Innovation survey of 1991 (Åkerblom 1992), Table 7B (2nd part of a 2-tierquestion)

87

10.5 Patenting24

In the field of chemical forestry technology the patenting activity of the Finnish firms

appears high. In 1986-93 in the U.S every fifth patent published on paper making

machines and methods to manufacture paper on paper machines was by Finnish firms. In

Germany the share was slightly lower.

In the U.S. the Finnish firms were the second most active patentholders after the Amercian

fimrs in the field of pulp and paper manufacture (technology classes D21B - D21G). The

Finnish firms' share of U.S. patents on pulp and paper manufacture was 15 % during

1986-93. Compared to the time period 1979-85 there was a 50 % increase. The figures

were approximately the same for German patents.

The patents in the forest cluster account for a major part of all patents by Finnish firms.

One third of all patents by the 23 most active Finnish firms (in terms of patenting activity)

in the U.S. dealt with forest cluster technologies in 1985 - 90. Of all Finnish patents in

Germany and in the U.S. in 1986 - 93 every tenth was on pulp and paper manufacture. The

share of these patents of all Finnish patents is 30 times larger than the respective figure in

U.S. or Germany.

Table 53. Patent applications by Finnish firms by product groups in 1992 and 1994

Product group 1992 1994

Wood & wood products........................................................Pulp and paper, paper products ..............................................Publishing and printing .......................................................Furniture ...........................................................................Pulp and paper making machines ...........................................

Total manufacturing ............................................................

6664857

1171

65651063

1334

Source: Statistics Finland, Science & Technology 1995:3

List of Finnish patent holders in the U.S. in the forest cluster technologies in 1985-90 is

presented below:

24Source: Lammi 1994

88

Table 54 Finnish patent holders in the U.S. in the forest cluster technologies in 1985-90

Firm No. of patent applicationsin 1992

Valmet...........................................................Ahlström........................................................Tampella........................................................Wärtsilä..........................................................Kone..............................................................Enso-Gutzeit...................................................Rauma-Repola.................................................Tamfelt..........................................................Ekono............................................................UPM.............................................................

1539689736823221655

Source: Lammi 1994, Box on pgs. 91-92

Patent applications by forest cluster firms in Finland in the field of pulp and paper

manufacture (technology classes D21B - D21G) in 1992 are presented in the following

table. It seems that patenting is not commonplace for some of the largest forest cluster

firms, e.g. for the Kymmene corporation (UPM-Kymmene after the 1995 merger).

Table 55. Patent applications by forest cluster firms in Finland in the field of pulp andpaper manufacture in 1992 (technology classes D21B - D21G)

Firm No. of patent applicationsin 1992

Valmet...........................................................Ahlström........................................................Tamfelt..........................................................Sunds Defibrator..............................................Tampella........................................................Metsä-Serla.....................................................UPM.............................................................Kemira...........................................................

3121633221

Source: Official Patent Statistics, National Board of Patents andRegistration

89

10.6 Participation in standardization activities

Forest cluster firms are relatively active in stardardization activities. Of all firms applying

for SFS-ISO (EN 29000) system certification in Finland in 1994, about 18 % represented

the industries of pulp, paper and board manufacture. List of firms with certification has

been made available by the SFS. One of the major firms of the cluster, Kymmene

Corporation, is largely absent from these statistics (its subsidiary, Kaukas Oy, has two

certificates, though).

10.7 Main actors of the forest cluster in knowledge generation and distribution

The institutional infrastructure of the forest cluster is reviewed in this section. Both the

chemical and the mechanical forest industry have their own research organization, KCL

and the Finnish Wood Research Ltd. These are presented next. Description of other

relevant actors of the cluster is contained in Table 57. The firms, which form perhaps the

most significant single group of actors in the cluster, are only mentioned briefly, due to the

emphasis on the identification and description of the actors in the university system and

research institutes and on their interaction with the industry.

The Finnish Pulp and Paper Research Institute (KCL)

Founded in 1916, KCL is an independent research institute serving the Finnish pulp, paper

and paperboard industry. It is engaged in scientific and technical research and

development work for the industry. KCL conducts joint R&D projects with the chemical

forestry industries and contract research for the firms. The institute has a staff of 300 one-

third of whom hold academic degrees. About half of the institute's capacity is devoted to

programme research for the shareholders. This type of research often concerns process

development. Almost a third of the research is commissioned by customers aimed at

solving specific problems (contract research.) The remaining 15 % is jointly funded basic

research.

90

Table 56. Resources and funding in forest industry research organizations in 1994

KCLFinland

STFISweden

CTPFrance

PTSGermany

PFINorway

Employees..........................................Budget, million FIM.............................Budget by funding type:- industry, % ......................................- public funding, % ..............................- contract research, % ............................

300104

561331

20599

383824

15065

401149

13566

333333

6020

314821

Source: Lammi 1994, Table 17.

KCL comprises five main divisions concerned with pulping, paper, converting and

research services. KCL's pilot plant is equipped to study the whole paper manufacturing

process from mechanical pulping to the the finishing four-colour printing of coated paper.

The technology used in the pilot plant corresponds with that used in industry. Pilot-scale

paper-making trials are designed to achieve high-quality end products. In the late 1995,

KCL invested FIM 16 million in the world's fastest trial coating machine (Talouselämä

41/1995).

The Paper Science Centre (PSC) is a separate division of the KCL carrying out goal-

oriented basic research. Its work focuses on the physics and chemistry of pulp and paper

production. PSC also supports post-graduate studies by providing advanced training for

researchers in the forest industry.

The Finnish Wood Research Ltd. (Suomen Puututkimus Oy)

The Finnish Wood Research Ltd. was established in 1988 to increase industrial research

collaboration in the mechanical forest industry. Its main activities are the organization and

coordination of research cooperation in the mechanical forest industry. The founder

shareholders include the most major companies active in the mechanical forest industry25

and the State of Finland. Presently, the shareholders account for about 2/3 of all industrial

production in the field. The company usually investigates the needs of the shareholders for

joint research projects, prepare them and control the development of these projects done

by existing research organizations. The research work is contracted out to the most

suitable domestic or foreign research organizations in each case.

25A.Ahlström Oy, Aureskoski Oy, Enso-Gutzeit Oy, Koskisen Oy, Kymmene, Metsäliitto, UPM, VAPO Oy.

91

The company employs 10 persons, 6 in Kuopio and 4 in Helsinki. The emphasis in the

research work is on applied research. Joint research work provides the industry with the

possibility to implement extensive, risky projects for which the resources of the individual

companies would not suffice. The average annual volume of projects is FIM 12-14

million, of which 5 million is provided by The Finnish Wood Research Ltd.

The principal areas of research are: studies on changes on market demand and on the

industrial environment, exploitation of raw material possibilities, development of

production technology, development of new uses for the use of wood and wood products,

in particular in the building sector, and energy and the environment

Other actors

In the following table, the other main actors of the cluster are listed. The sources of data

for the table are from Hermesniemi (1995), Lammi (1994), Ojainmaa (1994), Sipi (1994),

and from brochures by universities, and other organizations.

A significant knowledge base consisting of forest cluster human resources exist in

Otaniemi, Espoo, where approximately one thousand persons work in various research-

related tasks at the Helsinki University of Technology, KCL and VTT (Statistics Finland,

Education 1995:10).

92

Table 57. Main actors of the forest cluster in FinlandActor type / Organization Description / resources

93

UniversitiesHelsinki University ofTechnology:Faculty of Process Engineeringand Materials Science

Faculty of Civil Engineering andSurveying: Department ofStructural Engineering

Faculty of MechanicalEngineering

Lappeenranta University ofTechnology:Forest Products Laboratory

University of Helsinki:Department of Agriculture andForestry Sciences- Faculty of Forest Resources-- Faculty of Forest Economics

University of JoensuuDepartment of Forestry Sciences:Faculty of Forestry Technology

Åbo AkademiUniversity of Oulu

Public & private researchinstitutes (Bridging institutions)

The Finnish Pulp and PaperResearch Institute (KCL)

The Finnish Wood Research Ltd.(Suomen puututkimus Oy)

The Forest Research Institute

Foundation for Forest TreeBreeding

Metsäteho (Research departmentof the Confederation of theFinnish Forest Industries)

- The degree programme in Forest Products Technology offers university-levelteaching and carries out research covering every aspect of forest productstechnology. Specialization areas exist in mechanical wood technology, chemistryof forest products technology, pulping technology, environmental protectiontechnology, paper technology and printing technology. The Department's researchactivities are to a great extent cooperative projects carried out together with theindustry. No. of employees: 15, including 5 full-time researchers

- The wood research team carries out applied and basic research into woodstructures and material properties.

- e.g. Department of Machine Design, and Workshop Engineering, are relevant forthe engineering industry

- No. of employees: about 10, of which half are full-time researchers

-about 45 employees, of which 15 are full-time researchers-about 20 employees, of which about half are full-time researchers

- No. of employees: about 10, of which half are full-time researchers

See description in the text

See description in the text

-Areas of research: Ecology of the forests, silviculture, use of forests.-No. of employees: 800, of which 255 were researchers.

- Main area of research: Forest tree breeding

- Areas of research: harvesting and transport of wood.- About 120 associated member firms.- No. of employees 28, of which 14 were researchers and 4 project researchers.- Budget (1994): FIM 13 million, of which 80 % collected as annual member fees.

94

Table 57 (continuted) . Main actors of the forest cluster in Finland

Actor type / Organization Description / resources

Forestry Department of the TTS-Institute (The Work EfficiencyInsititute,Työtehoseura)

The Technical Research Centre ofFinland (VTT)VTT Forest products laboratory(presently under the VTTBuilding Technology)

VTT Energy

VTT Information technology

Private sector actors

Suppliers ofmachinery&chemicalsThe firmsCustomers- Packaging industry- Printing houses

Consulting firms

New technology-based firms

The Government

- Aims at raising the productivity and profitability of private forestry plus bringingabout improvements in the working conditions.

- Areas of research: building materials and products, and wood technology,including materials technology, manufacture of wood products, wood processingproducts, wooden structures. In 1994, the No. of employees was 78, of which 48were academic researchers. Research budget (1994): FIM 28 million, of which 10million provided by budget funding (Government) and 18 million by outsidesources. Public research accounted for about 65 % of the total volume of activities,basic research about 10 % and contract research for the remainder.

- Research on process technology in pulping and on energy technology in forestindustry

- Research on printing technology

Until the 1990s there existed a number of specialized consulting and engineeringservice firms. The economic downturn in the beginning of the 1990 led to thebankcupcy of a number of these. The leading consulting firm, Jaakko Pöyry Oysurvived along with some other smaller firms.

Forest cluster also seems to support a rather significant amount of smalltechnology-based firms. Empirical evidence of this is provided by the surveyconducted by SITRA (Lumme 1994) among 1 445 potential technology-basedsmall firms. Some 400 firms responded. 29 % of the service-oriented firms and 27% of the production-oriented firms reported to have customers within the forestcluster.

The forest cluster is closely tied up to the structure of the wholesociety.Legislation, educational system, basic structures of the society, capital andfinancing system), labour markets, energy poplicy and agriculture are closelyentwined to the forest cluster. The government has also the role of the owner in theindustry.

95

10.8 Research programs within the forest cluster in Finland

A number of publicly-supported research programmes involving universities, research

institutes and industry have been conducted in the sector. Coordinated by the Technology

Development Centre of Finland, Finland's first technology programme related to pulp and

paper industry research was conducted in 1988-1991. Another programme, the Process

Technology Programme by TEKES is scheduled to run during 1991-1995.

Sipi (1994) surveyed all R&D projects in the mechanical forest sector which had been

either planned, launched, on-going or finished since 1991. Beyond the study were left the

firms' intramural projects as well as the TEKES-funded industrial R&D projects.

According to the study by Sipi, the number of R&D projects in the mechanical forest

sector was 383 and their estimated total cost was FIM 329 million. Of this, funding by the

firms themselves accounted for 35 % and funding by TEKES 23 %. Projects conducted

within the TEKES' Mechanical wood processing and the Wood-based panels programmes

(see text below) accounted for over FIM 85 million of the total cost of 329 million.

In the following are listed the major on-going domestic R&D programmes.

"New Generation Paper Technology", (TEKES)

The "New Generation Paper Technology" programme was launched for the period

1992-1996. The programme is being coordinated by KCL with the assistance of

TEKES. The programme will cost a total of around FIM 90 million, about one-third

of which will be supplied in various forms by industry and research institutes. The

programme covers four areas: raw materials, wet end, coating and surface treatment,

and uniformity of functional characteristics. It includes 32 projects at different

research institutes, five of which have already been completed. KCL and PSC are

conducting seven.

Mechanical wood processing 1992-1996 and Wood-based panels (TEKES) 1992-1996

In 1992, two programmes were started by TEKES in the wood processing

technology and in wood board technology: Mechanical wood processing programme

(1992-1996) and the Wood-based panels programme (1992-1996). The budget for

the two programmes is about FIM 150 million, of which about 15 % is devoted to

research-oriented projects.

96

The "Sustainable Paper" programme (TEKES Energy Dept.) 1993-1998

The "Sustainable Paper" programme is one of the eight national energy technology

research programmes. It is coordinated by the KCL. Its aim is to improve the

economics of energy utilization in pulp, paper and board production. The

programme follows the "Kuitu" (energy-efficient mechanical pulping) and "Raina"

(Energy-efficient paper production) programmes and is planned to run from 1993 to

1998. In 1994, the "Sustainable Paper" programme comprised 30 projects, 15 of

them public research projects, 14 company product development projects and the

coordination project of the programme. In 1994, the programme had a total budget

of FIM 28.5 million, of which the Ministry of Trade and Industry via TEKES

Energy Department contributed FIM 13.1 million. KCL received 1.9 million of this

amount.

The research programme on wood technology (VTT)

Main funding is provided by VTT. The estimated volume of the programme is 23

research man-years.

97

11. Conclusions

11.1 Tentative assessment of the availability of the proposed indicators in the Finnishpilot study

The main purpose of the first phase of this OECD pilot project has been to map the

availability of the empirical data for the framework proposed by OECD for analyzing the

knowledge creation, distribution and use in the national innovation system.The main

sources for the case study have been empirical data generated by surveys and special

studies by Statistics Finland as well as other existing material in Finland which has been

readily available from various organizations relevant to the subject matter. The results of

this task are contained in this report as well as in the data presented in the Statistical

Appendix.

Based on the empirical evidence compiled for this study, the availability of the proposed

indicators (see Statistical Appendix for a complete listing of the indicators) can be briefly

reported as follows:

Indicators of the stocks and flows of knowledge are, in general, available from various

sources. In particular, studies have been conducted on the technology intensity and

technology sources of the Finnish manufacturing industries, including spillovers, which

are higly relevant for the assessment of embodied knowledge within the innovation

system. Also basic patent statistics is available for the assessment of disembodied

knowledge.

As far as the indicators of the forms of knowledge sharing and transfer are concerned, the

innovation surveys conducted by Statistics Finland provide a wealth of material for

analyzing research cooperation aspects and producer / user interactions. Some data

indicative of the importance of joint R&D and methods of learning in university - industry

and research institute - industry relations are also available. A few indicators on university

research output exist, but this data has not been reported in a uniform way, which makes

comparisons difficult. Data on the stocks of researchers, Ph.D.s and Licentiates exist by

main sectors of economic activity and by discipline, but mobility indicators are practically

non-existent.

Some data on the role of market transactions in knowledge transfer (acquisition and sale of

technology by industry) is available, but it seems that the data regarding the patenting

system is, in general, rather insufficient to assess the overall importance of the property

right system in knowledge transfer and distiribution.

98

A set of indicators which is readily available is that related to the assessment of the general

orientation of technology and innovation policy towards diffusion. There is ample data

describing the basic infrastructure and various policy mechanisms promoting the sharing

of information in the innovation system. On the other hand, data measuring on the actual

effectivess of these structures and mechanisms in accomplishing their policy objectives is

still scarce.

The last two types of indicators, those measuring the effectiveness and the economic

impact of knowledge sharing and transfer are most difficult to establish. There is some

indication of the intensity of use of the university knowledge-base by business firms as

well as of the cooperative R&D between university and industry provided by Statistics

Finland surveys, for instance. Still, the proposed key indicators measuring the

effectiveness of use of available knowledge by joint development, e.g. the joint university

- industry R&D, co-patenting and co-publication activities, are not available. The same

applies to indicators of the economic impact of knowledge sharing and transfer.

In conclusion, it seems that existing empirical data for measuring the distribution power is

incomplete and a number of the proposed indicators missing. In particular, the type of

indicators reflecting the use of of available knowledge by joint R&D and recombination

are largely not available which then makes it difficult to fully assess the distribution power

as specified by the model of the knowledge-product space. Other difficulties may arise i.e.

from the fact that data in various available sources is often from different years and from

problems related to the representativeness of survey-based data.

In order to carry out a systematic, in-depth analysis of the knowledge distribution aspect

of the system, specific surveys would have to be undertaken and data searches performed

in various institutions, such as in Statistics Finland, National Board of Patents and

Registration, industry associations, key universities and research organizations. It also

seems that a breakdown of the whole innovation system into smaller sub-systems, clusters

or industries, is beneficial since the ensuing more qualitative approaches contribute to the

in-depth analyses of the knowledge creation and distribution processes within these sub-

systems. In particular, cluster or industry-based approaches help interpret the empirical

data in view of possible structural or other constraints.

99

11.2 Tentative assessment of the knowledge distribution power in the Finnish

National System of Innovation

Although the available data does not suffice to fully measure the knowledge distribution

power of the national innovation system, there is some empirical evidence to assess the

university - industry interactions and the effectiveness of the use of the knowledge base by

the industry. Thus, the assessment of the model proposed by the OECD has, at this stage,

been focused upon the key issue of how much of the knowledge base generated by the

innovation system is actually used and exploited.

The answer is that, in Finland, a considerable portion of knowledge generation and

technology development seems to be entwined directly with industrial production. As far

as the knowledge stocks existing in the university and government sector are concerned,

the effectiveness of their use by the private enterprise sector varies by type of industry.

There is empirical evidence that within the forest cluster the knowledge distribution power

is higher than in the industry in general. Moreover, rather than reflecting the ability of the

industry to use a generic knowledge base, the high knowledge distribution power of the

forest cluster seems to be linked directly to industry's ability to use the existing supply of

the highly specialized knowledge and expertise at the university and research institute

sector. Forest cluster is also the largest and the oldest cluster and among the most

competitive sectors of the economy. Whether the same notion of a high distribution power

applies to the telecommunications cluster which is of growing importance and competitive

as well but supported by a different kind of technological and institutional knowledge

system, would have to be analyzed separately.

Although there has been a marked increase in the various forms of university - industry

interaction in recent years, the effectiveness of the use of the university knowledge base by

the industry continues to be of major concern and a number of policy measures have been

devised and implemented to address the issue. In universities' strategies, the promotion of

technology transfer and interaction with other parts of the innovation system have received

increasing emphasis in the 1990s. The establishment of the system of graduate schools

also seeks to address the knowledge distibution problem on the supply side, i.e. by

increasing the number of Ph.D.s entering the workforce. Nevertheless, it seems that

despite the increased supply of human capital with researcher training, the overwhelming

majority of them still remains employed in the university and government sectors.

In the process of knowledge sharing, TEKES has an active role in the development of new

methods and tools promoting the use of research results in the innovation system. TEKES,

100

and also SITRA to some extent, participate in most programs related to the technology

transfer within the innovation system.

A handful of large research-intensive firms and a few industries, the industry of electrical

products and instruments in particular, are at the focal point of knowledge generation in

the innovation system in general. These are also principal users of university and research

institute knowledge base when measured by level of cooperation. It is plausible, however,

that these large firms mostly rely on their own knowledge base and are not primarily

dependent on the transfer of knowledge and technology from outside sources in their core

operational areas.

Contract research continues to be the main form of knowledge sharing between the

government research institutes, VTT in particular, and the industry. Also the share of

commissioned R&D in the university sector has increased in the past years.

During the past 10 to 15 years the infrastructure promoting technology transfer and the

commercialization of the research results has been developed in Finland. A network of

science parks, business incubator systems, technology transfer companies, regional centres

of expertise and other mechanisms with the aim of encouraging the establishment of new

firms has been largely put in place and is presently functional in various part of the

country. Among the intermediary organizations, TEKES in particular, has been

instrumental in the process of linking the knowledge base and the industry with various

programmes and funding schemes. Thus, on one hand, the existence of the infrastructure

and the other mechanisms provide some indication of the effectiveness of the knowledge

distribution power of the innovation system. Yet, on the other hand, in the absence of

comprehensive assessments and evaluative data on their performance there is not sufficient

evidence to establish this empirically.

Increasingly, the issues concerning the intensity of use of university and research institute

knowledge base are linked to spin-offs: firms created by academic researchers and/or firms

based on direct technology transfer from the universities and research instititues. These

new technology-based firms are also potentially significant in addressing some of the

problems related to the structural change and renewal of the industry.

101

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102

Miettinen, R. and Joensuu, M. (1992) Tutkijan urasta VTT:ssa (On the Career of theResearch Scientist at the VTT). April 28, 1992, VTT, Espoo.

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Neittaanmäki, P. (1995) Raportti vuonna 1973-1992 valmistuneista tohtoreista (A reporton the Ph.D.s who graduated in 1973-1992). Publications of the Administration Office ofthe University of Jyväskylä 46/1995.

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103

Statistics Finland (1994) Statistical yearbook of Finland 1994. SVT (Official Statistics ofFinland).Helsinki: Statistics Finland.

Statistics Finland (1995) Science & Technology 1995:1, Statistical Appendix Tables ofScience & Technology 1994:3. SVT (Official Statistics of Finland).Helsinki: StatisticsFinland.

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Stenberg, L., Marklund, G. & Gustafsson, E. (1995) Mobility of PhDs and other uses ofhuman resources data for quantitative analysis of national innovation systems in the caseof Sweden. Department of Technology Policy Studies, NUTEK, Sweden. Working paperprepared for the OECD NIS Group meeting in Vienna, Oct. 6, 1995.

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Virtaharju, M. and Åkerblom. M. (1993) Technology Intensity of Finnish ManufacturingIndustries., SVT (Official Statistics of Finland), Science and Technology 1993:3.Helsinki: Statistics Finland

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Åkerblom M. (1992), "Innovation survey", Helsinki: Statistics Finland. An unpublishedstudy dated 23.12.1992 with survey data from 1991. Questions somewhat similar to theCIS survey questions.

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