World Bank HD Forum 2006

Multi-Sectoral Perspective on the Contribution of

Tertiary Education to Innovation and Competitiveness

World Bank,Washington DC, 30 October 2006

KNOWLEDGE ECONOMY STRATEGIES -

EXPERIENCES IN FINLAND

Professor Jorma Routti

CIM Creative Industries Management & Helsinki University of Technology

jorma.routti@cimfunds.com jorma.routti@hut.fi

Former President of Sitra & Director General of Research DG of European Commision

Fundamental changes taking place

GlobalizationTransportation and communications costs downGlobal information and mediaRegional integration (NAFTA, EU, ASEAN+3)Trade liberalization and increased competitionValue added by MNCs is 27% of global GDP in 2002

Digital revolution

Knowledge-based economies

World Bank Studies, Korea, China, Japan, India, Finland

Stages of Industrial and Economic Development

FOREST-BASED INDUSTRIES

MACHINERY, ENGIN. IND.

FOREST-BASED IND

ICT, ELECTRONICSMACHINERY, ENG.FOREST-BASED INDCHEMICALS

The Four Pillars of the Knowledge Economy

Education

InnovationInformation

Infrastructure

Interconnected

Interdependent

Interconnected

Interdependent

Economic and Institutional

Regime

Education and Innovation Challences

Education is the fundamental enabler of the knowledge economy and a key to competitiveness and growth

Critical no longer basic or even secondary but higher education and the constant upgrading of skills

Increasing competition for people with high level skills

Education couples with research and innovation

New division of labor, First and Second Unbundling

R&D input in some OECD countries

Sources: OECD, Main Science and Technology Indicators database, Statistics Finland (Finland 2002) and Statistiska centralbyrån (Sweden 2001, estimate). Docs 36109

02-2003

USA

Japan

Germany

Sweden

Great Britain

France

Austria

FINLAND

Denmark

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02

OECD total

3.5

3.0

2.5

2.0

1.5

1.0

4.0

Percentage of GDP

est.

Canada

Israel4.5

0.5

Iceland

South Korea

Singapore

China

Norway

Exports of Finnish high tech products totalled9.9 billion euros in 2001, i.e. 21 % of total exports of goods.

Exports of Finnish high tech products totalled9.9 billion euros in 2001, i.e. 21 % of total exports of goods.

Source: Statistics Finland, according to the OECD product catalogue defined in 1995

The share of high tech exportsin some OECD countries 1988-2001

Norway

USAJapanUnitedKingdomNetherlandsFINLANDSwitzerlandFranceSwedenGermanyDenmark

Docs 32187B 03 /02-03

0

5

10

15

20

25

30

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

% of total exports of goods

EU

MARKETS quality

competitiveness price

competitiveness environmental

expertise

F O R E S T I N D U S T R Y

Pulp and paper technology

Wood products industry

Machines, machinery and processes

A11/ 99-08

Securing competitiveness inthe Forest Industry

FORESTRY

CONSTRUCTION AND WOOD TECHNOLOGY modification of wood construction

technology andarchitecture

logistics, assembly

MANUFACTURING TECHNOLOGY forestry machines process and production machinery material technology

BIOTECHNOLOGY enzymes rot prevention gene technology

ENERGY AND ENVIRON-MENTAL TECHNOLOGY biofuels, combustion technology ecobalances closed cycles energy-saving and

emissions

CHEMICAL TECHNOLOGY paper and bleaching chemicals surface treatment

substances pigments, adhesives

INFORMATIONTECHNOLOGY sensors, measuring

and control computational

intelligence,simulation andmachine vision

multimedia and telecommunication tomography

Forest Industry Cluster

Brasil, South Africa, China, Indonesia

Manufacturing and Operations

Valmet Paper Machines• Design, manufacturing

and remote operations

Production • Focus on specific market

segments and products

World wide marketing

Paper, cardboard, packaging material

Poyry Design and Consulting

Pulp Mills Sunds

Design, manufacting and maintenance

Timberjack Forest Harvestors

Composition of Regional Economies United States, 2001

Traded ClustersTraded ClustersTraded ClustersTraded Clusters Local ClustersLocal ClustersLocal ClustersLocal Clusters Natural Resource-Natural Resource-Driven IndustriesDriven Industries

Natural Resource-Natural Resource-Driven IndustriesDriven Industries

31.6%31.6%

1.7%1.7%

$44,956$44,956

133.8133.8

4.5%4.5%

144.1144.1

21.721.7

590590

31.6%31.6%

1.7%1.7%

$44,956$44,956

133.8133.8

4.5%4.5%

144.1144.1

21.721.7

590590

67.6%67.6%

2.8%2.8%

$28,288$28,288

84.284.2

3.7%3.7%

79.379.3

1.31.3

241241

67.6%67.6%

2.8%2.8%

$28,288$28,288

84.284.2

3.7%3.7%

79.379.3

1.31.3

241241

0.8%0.8%

-1.0%-1.0%

$33,245$33,245

99.099.0

2.0%2.0%

140.1140.1

7.27.2

4848

0.8%0.8%

-1.0%-1.0%

$33,245$33,245

99.099.0

2.0%2.0%

140.1140.1

7.27.2

4848

Share of Employment

Employment Growth, 1990 to 2001

Average Wage

Relative Wage

Wage Growth

Relative Productivity

Patents per 10,000 Employees

Number of SIC Industries

Note: 2001 data, except relative productivity which is 1997 data.Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School

$15,000

$25,000

$35,000

$45,000

$55,000

50 100 150 200 250 300

Average Regional Wage, 2001

Share of Traded Employment in Strong Clusters (LQ > .8), 2001

y = 96.736x + 16218R2 = 0.377

New York, NYBay Area, CA

Boston, MA

Determinants of Regional Prosperity Cluster Strength and Wage Levels

Source: County Business Patterns; Michael E. Porter, The Economic Performance of Regions”, Regional Studies, Vol. 37, 2003

Co-operation between companies and universities and research institutes

Norway

UK

Sweden

FINLAND

Portugal

Austria

Netherlands

Ireland

Italy

France

Denmark

Germany

Belgium

EU

Norway

UK

Sweden

FINLAND

Portugal

Austria

Netherlands

Ireland

Italy

France

Denmark

Germany

Belgium

EU

0 20 40 60 %

Share of innovative companieshaving co-operation agreements

with universities (1994-1996)

Share of innovative companies havingco-operation agreements with public

research institutes (1994-1996)

Source: Eurostat, Enterprise DG, 2nd Community Innovation Survey

J05/ 00-06

0 20 40 60 %

Telecommunications and Nokia's Change

1988 1998

Mobile Phones 60% Infrastructure 33% Other 7%

Floorings 1%

Chemicals 2%

Machinery 4%

Electrical Wholesale 4%

Rubber 6%

Information Systems 23%

Cables 9%

Paper 10%

Consumer Electronics 31%

Mobile Telephones 5%Telecommunications 5%

Mobile Telephones 5%Telecommunications 5%

2000

Net sales USD 5.2 billion 1988 Market capitalization USD 1.4 billion at year end 1988

Net sales USD 19.9 billion 1999Market capitalization USD 236.5 billion, as of February 28th 2000

Services in the Mobile Information Society

Information

Entertainment

e-shoppingand banking

Voice

Corporate access and e-mail

e-education

Video

FOCUS IN THE VALUE CHAIN

CONSUMERCONTENTCREATORS

CONTENTPRODUCERS

CONTENTDISTRIBUTORS

CREATES IDEA

HOLDS IPRs

TECHNOLOGY DRIVEN IDEAS

DEVELOPSCOPYRIGHTS

PACKAGES IPRs

PROGRAMMINGCONTENT

DISTRIBUTESCOPYRIGHTS

MARKETS / BRANDS IPRs

DISTRIBUTIONPLATFORMS

TICKETSMAGAZINESBOOKS, CD,VIDEO, DVD,RADIO, TV

NET, WAP/3G

s

SOCIAL & HUMAN CAPITAL

TECHNOLOGY & INNOVATION

RE

SE

AR

CH

CA

PA

CI

TY A

BS

OR

TIO

N C

AP

AC

ITY

SUPPLY USERS

CREATORS DEMAND

s

SOCIAL & HUMAN CAPITAL

TECHNOLOGY & INNOVATION

RE

SE

AR

CH

CA

PA

CI

TY

AB

SO

RT

ION

CA

PA

CIT

Y

SUPPLY USERS

CREATORS DEMAND

JAPAN

USA

IRL

ITA

SWE

DE

FR

UK

FIN

DM 3219004-2004 Copyright © Tekes

Innovation environment in FinlandResources and funding

Pri

vate

Basic research Applied research Business R&D

Business developmentMarketingInternationalisation

R&Dat companies

3,375

The figures represent the total extent of each organisation in million euros in 2002. In parenthesis the share thatis funded from the State budget. The funds of Tekes, the Academy of Finland and Innofin are funded entirely

from the State budget.

BusinessAngels

387

Pu

blic

Finnvera352 (34)

Universities926 (402)

Academyof Finland

177Ministries,

TE-Centres,sectorial research

311 (227)

Tekes386

VTT219 (68)

From abroad152

Innofin5 (4)

Finpro35 (20)

Venture capitalists:Private 349

Industry Investment Ltd 63 (42, additional state investment)

Sitra 48

CONSENSUS PROGRAMS IN FINLAND ECONOMIC POLICY AND NATIONAL STRATEGIES

Participants: Members of Parliament, Media Leaders, Civil Servants Labour Movement, Industry Organizations, Academia

Objectives: Growth, Employment, Balance, Low Inflation

Instruments: Fiscal Policy, Taxation, Incentives, Echange Rates, Interest Rates

Topics: Globalization, Integration, Trade, Social Policy, Regional Policy, Education, Research,

Industry, Agriculture, Banking, Environment, etc.

Government: Consencus Building, Trade-offsSimulation Models, Economic Advisors

Adoption: Baltic Countries, New EU Members, Latin America, WB

TIME – ENERGY - INFORMATION

E = 0

I = 0 T = 0

I = maxT = max

E = max Jorma.Routti@cimfunds.com