untitled
Science policy and research in Finland
KAI HUSSO AND PAULIINA RAENTO
Husso, Kai & Pauliina Raento (2002). Science policy and research in Finland.
Fennia 180: 1–2, pp. 261–274. Helsinki. ISSN 0015-0010.
We investigate the evolution of Finnish science policy and its impact on uni-
versities and scientific research. Finnish research is currently enjoying far great-
er international visibility, impact, and esteem than previously. The role of uni-
versities in society has broadened. Apart from their traditional tasks of research
and teaching, universities have established closer links with business and re-
sponded to regional needs. A number of national reforms carried out in the
1990s launched a heated debate between universities and public authorities.
Contested topics include the ‘centre of excellence’ policy, large-scale research
programmes, and graduate schools. These reforms injected new dynamism into
Finnish universities, but created new challenges as well. The structure of uni-
versity research funding changed significantly during the 1990s. In real terms,
research expenditure covered from Government budget sources increased by
17 percent, while external, often competitive funding increased by twofold.
We believe that this dependency on outside funding may make research more
short-sighted and vulnerable over the long run. In order to maintain the quali-
ty of Finnish research, science policy ought to be anchored to the needs of
universities and scientific research more firmly than during the 1990s and budg-
et funding ought to be increased. These actions would guarantee a more sta-
ble development of scientific enterprise and thus strenghten the positive so-
cio-economic impact of research on regions and on society as a whole.
Kai Husso, Academy of Finland, P. O. Box 99, FIN-00501 Helsinki, Finland.
E-mail: kai.husso@cec.eu.int
Pauliina Raento, Department of Geography, P. O. Box 64, FIN-00014 Univer-
sity of Helsinki, Finland. E-mail: pauliina.raento@helsinki.fi
Introduction
The contributions of universities and scientific re-
search to the welfare of a nation and to its com-
petitiveness have attracted growing attention in all
OECD countries since the 1960s (e.g., Govern-
ment… 1966; General… 1971). This interest
reached completely new heights in the 1990s. It
is now widely agreed in Western industrialised
countries that a highly trained workforce, re-
search, and technological development are the
key conditions for innovation and economic suc-
cess of a country or a region (e.g., Technology…
1998; OECD… 2000). The role of universities and
scientific research has thus taken on new politi-
cal and economic emphases. For example, ac-
cording to the OECD, there is a “growing demand
for economic relevance” of research and “univer-
sities are under pressure to contribute more di-
rectly to the innovation systems of their national
economies” (University… 1998: 8). In the OECD
countries, universities have seen this kind of views
as a threat to their traditional principal task, i.e.,
long-term basic research. The Finnish debate re-
garding the role of scientific research and univer-
sities in the country’s (regional) economic devel-
opment has been very lively since the mid-1990s
(e.g., Allardt 1997, 1998; Raivio 1998; Häyrinen-
Alestalo et al. 2000).
Knowledge and know-how are vital to the pro-
duction of goods and services. During the past ten
years, production has become increasingly based
on the efficient use and application of scientific
knowledge, on the extensive utilisation of new
technologies, and on the command of complex
production processes. This trend is evident in the
national and international statistics on research
and development (R&D), technology, and inno-
262 FENNIA 180: 1–2 (2002)Kai Husso and Pauliina Raento
vation (see Main… 2001; Science… 2001; To-
wards… 2001). These statistics show that in most
of the OECD countries, R&D expenditures, the
production volume of high technology products,
the turnover and employment of R&D-intensive
companies, and the volume of foreign trade in
high technology products have increased signifi-
cantly. According to these statistics, Finland has
done well from the early 1990s onwards. The im-
age of Finland as an R&D-intensive hi-tech coun-
try is nevertheless quite recent.
In this article we investigate how Finnish sci-
ence policy and conditions for scientific research
have changed over the past twenty years. The aim
is to answer two questions: »What are the current
problems and immediate future prospects of uni-
versities and scientific research in Finland?» and
»How does Finland rank among the world’s top
research countries?» We will place these ques-
tions in the context of public debates on science
policy and universities. Our material consists of
recent domestic and international statistics on
R&D investments and data on the outputs and
impacts of scientific research on society. The vol-
ume of investment in R&D can be considered an
indirect measure of a society’s innovation poten-
tial and of the status and prestige of research in
general. These figures also reflect the R&D- and
technology-related economic potential in individ-
ual countries and regions.
Science, technology, and economic
development
The role of R&D and high technology in national
and regional economic development has been
studied through the concept of techno-economic
paradigm (e.g., Freeman 1987, 1992; Freeman &
Soete 1987; Dosi et al. 1988). The paradigm re-
fers to the technological changes in industrial and
service sectors over time and at different geo-
graphical scales. Currently, the focus is especial-
ly on hi-tech industries and fields of research that
specialise in electronics, information technology
and biotechnology, and on production and pro-
duction process innovations based on these tech-
nologies. From the viewpoint of regional devel-
opment, a novel feature is the mushrooming of
new centres of expertise, each with its own area
of specialisation. These centres are typically lo-
cated near universities, public research institutes,
and industrial and service businesses that rely on
new research and technologies. There exist also
various kinds of spin-off companies whose busi-
ness concepts are based on current technologi-
cal solutions. The changes in economic activities
in regions and the co-operative relations inside
and between regions are partly the outcome of
the dynamics of technological change.
According to Freeman and Perez (1988: 47–49,
58–59), the concept of techno-economic para-
digm refers also to a combination of interrelated
technological, organisational, and managerial in-
novations that embody an increase in productivi-
ty for all or most of the economy. This opens up a
new range of investment and profit opportunities.
Such a change implies a new combination of
technological and economic advantages. One
needs to bear in mind, however, that a full con-
stellation of the current paradigm’s characteristics
goes far beyond the technological change itself.
The paradigm brings along a restructuring of the
productive system and new forms of interplay be-
tween the actors of the economy. Thus, at stake
are also social and cultural changes, and new
types of market behaviour adopted by private and
public organisations. In addition, the current par-
adigm involves (a) new ‘best-practice’ forms of
organisational structure in firms and research es-
tablishments; (b) increasing demand of high qual-
ity labour force in the knowledge-intensive sec-
tors of economy; (c) new patterns in the location
of investment both nationally and international-
ly; (d) increasing public and private funding de-
voted to activities which enhance the capacity to
create, introduce, and apply new knowledge in
the private sector; and (e) new waves of invest-
ment designated to facilitate the wide use of the
new products and processes in the economy
(Freeman & Perez 1988: 59; Freeman 1992).
The described developments have led to a sit-
uation where information has become a highly
valued commodity and know-how an important
production factor. This has highlighted the impor-
tance of investment in technological development
in business firms and scientific research conduct-
ed in universities. Given the key role of research
and high technology as engines of industry, gov-
ernments have naturally wanted to develop their
political measures. Indeed, most of the OECD
countries (including Finland) made a conscious
effort in the 1990s to enhance their science and
technology policy measures and integrate them in
industrial and regional policies more closely.
Governments have increased their own R&D fi-
FENNIA 180: 1–2 (2002) 263Science policy and research in Finland
nancing, supported development work conduct-
ed by business companies, and promoted co-op-
eration between companies, universities, and
public research institutes (Technology… 1998;
OECD… 1999, 2001). The development of Finn-
ish science system illustrates the benefits and
threats that these changes in the economic and
political environment have presented to universi-
ties. Especially in recent years, both policy-mak-
ers and the end-users of R&D findings and new
knowledge have begun to underline the impor-
tance of applicable research results.
The development of the Finnish
science system
The relationship of Finnish universities and sci-
entific research with the surrounding society has
faced almost constant pressure of change since
the late 1950s (see Paavolainen 1975; Skyttä
1975: 267–280). The current pressures are there-
fore nothing new. The emphasis of the debate has
fluctuated over time, but some of the themes and
issues have remained constant, as we will dem-
onstrate later. Table 1 describes the main periods
and events in the development of science policy
and operational environment of universities in
Finland.
The systematic development of the national sci-
ence system was launched during the late 1960s
and early 1970s, following an extensive debate in
the 1960s regarding science policy, the social sig-
nificance of scientific research, and the importance
of industrial R&D. It was believed that research and
technology could help to alleviate social problems
and increase welfare in society. The public sector
began to support industrial R&D by investing more
in research and promoting industrially-oriented
applied research. Budget funding for universities
was increased significantly. In 1966–1970, expan-
sion of the university system was initiated, the sci-
ence administration was reorganised and the Acad-
emy of Finland was established (1970)1 . With in-
creasing funds at its disposal, the Academy began
to support university research.
R&D in Finland was still fairly limited in the
early 1970s in comparison with most other OECD
countries. The development of the national sci-
ence policy and universities was continued un-
der favourable atmosphere until the mid-1970s,
however. The oil crises then sent the economy to
a long-term recession causing the Government to
cut back its budget funding to universities. Dur-
ing that period, balanced and ‘experimental’ de-
velopment of the science system was severely dis-
turbed, as were the conditions for conducting ba-
sic research.
The 1980s: a decade of growth
Economic stagnation in the late 1970s and early
1980s caused serious problems for traditional in-
dustrial production in most of the OECD coun-
tries. At that time, industrial countries started to
turn to new high technology and other fields of
special expertise. It was believed that economic
up-swings and future market growth would be
based on knowledge and products of information
and communication technologies. In Finland, the
decision to favour research-oriented economic
and political strategies was supported by the rel-
atively high standard of the country’s education
system and by the development of the national
science system in the 1960s and 1970s.
R&D expenditure increased favourably
throughout the 1980s (Fig. 1 & CD-Fig. 1). Over-
all, this decade was a period of stable develop-
ment of the science system and its infrastructure.
In a drive to increase welfare and affluence in Fin-
land and to strengthen the competitiveness of the
national economy, the Government pursued a
consistent policy of promoting R&D, investing in
the production of hi-tech products and increas-
ing the share of these products in the country’s
exports. The same priorities formed the basis of
the science and technology policy of the 1990s
and continue to be highlighted today.
Budget funding for universities and resources
allocated to public research institutes increased
steadily during the 1980s. The status of research
and researcher training were strengthened. These
favourable developments were in large part made
possible by legislation aimed at the development
of the universities. For example, the 1986 Act on
the development of universities guaranteed a
steady increase in the amount of appropriations
to universities until 1996. The resources made
available to the Academy of Finland also contin-
ued to increase.
Measures introduced to encourage research
and development in business companies includ-
ed tax concessions. Another significant measure
was the founding of the National Technology
Agency2 (Tekes) in 1983. The Agency began to
264 FENNIA 180: 1–2 (2002)Kai Husso and Pauliina Raento
Table 1. Main periods of the development of science policy in Finland (see Paavolainen 1975; Häikiö & Hänninen-Salmelin
1979; Kaukonen 1987; Suomen… 1988; Raatikainen & Tunkkari 1991; Häyrinen-Alestalo et al. 2000; A forward… 1993;
Husso & Raento 1999; The graduate… 2000; Husso 2001).
FENNIA 180: 1–2 (2002) 265Science policy and research in Finland
fund R&D primarily in business firms but also in
universities. The decade’s other main administra-
tive and organisational reform was the founding
of the Science and Technology Policy Council in
1987. This was a novel experiment in the West-
ern world, and it was thus unknown how this kind
of governmental body would impact science and
technology policies and their institutional status.
One of the factors behind the creation of the
Council was the OECD country study on science
and technology policy in Finland (Reviews…
1987). The study stated that science policy and
technology policy planning and co-ordination
should be enhanced to guarantee the efficient use
of the existing research know-how and technolog-
ical potential in the country. The report under-
scored some of the problems associated with tra-
ditional sectoral policy: co-operation between
science and technology policies were seen as in-
sufficient (Reviews… 1987: 8, 22–23; see Raa-
tikainen & Tunkkari 1991: 26–28).
Towards the end of the decade, the emphasis
of science and technology policy started to shift
slowly towards stressing the importance of co-op-
eration between universities, public research in-
stitutes, and business companies. The aim was to
encourage closer interaction and exchange be-
tween basic and applied research and develop-
ment. At the same time, attitudes regarding re-
search were changing. The new primary objec-
tives in both public and private sector were to
strengthen technological development in indus-
try and to develop research-intensive products,
i.e., to maintain the industry’s strategic competi-
tiveness. Research was required to show greater
efficiency, productivity, and impact. This new way
of thinking was captured in such slogans as »Re-
search and know-how: the foundation of compet-
itiveness» and »Product development and tech-
nological know-how: key conditions for industri-
al success.»
The 1990s: conflicting trends
The economic recession in the beginning of the
1990s halted the real growth of R&D expenditure.
In the private sector R&D expenditure began to
decline in 1991. In universities this happened two
years later, in the public sector, four years later.
The overall impacts of the recession (1991–1996)
on the total volume of R&D were not very dra-
matic or very long-lived, however. Since the mid-
1990s, the Government guaranteed continuity by
considering investment in R&D and technologi-
cal innovation the key to competitiveness in the
future (see Finland... 1996). It was believed that
this investment would eventually help to heal the
national economy. The recession did leave its
mark, however: the funding structure of R&D
changed and caused significant diversification
within the national science system in terms of the
conditions for conducting research (Fig. 1 & CD-
Fig. 1).
In recent years, R&D expenditure has grown
due to private sector investment in the develop-
Fig. 1. Finland’s R&D ex-
penditure in real terms, in
1971–1999 (index 100 =
1985, prices in 1985) (Source:
Statistics Finland R&D data-
base).
266 FENNIA 180: 1–2 (2002)Kai Husso and Pauliina Raento
ment of high technology. During the recession,
government investment in research was cut back,
which reduced the amount of core funding avail-
able to public research institutes and universities.
The balanced development of the entire R&D sys-
tem was seriously disturbed. On the one hand,
universities found themselves struggling with a
lack of resources that threatened the continuity
of their long-term basic research. On the other
hand, since 1993, private business invested more
money than ever before in applied research and
development that was aimed at creating new
products and upgrading production processes.
Business firms were not interested in conducting
basic research, however. Throughout the 1990s,
only five percent of all R&D expenditure in the
private sector was spent on basic research type
activities, i.e., on work that was not directly aimed
at new products or processes (Tutkimus- ja…
1997, 2000).
Universities felt immediately the effects of eco-
nomic recession, the cutbacks in government re-
search appropriations and the neo-liberal policy
in the early 1990s (see Alestalo 1991, 1993). The
situation was quite desperate, especially if mir-
rored against the 1986 Act on the development
of universities. As Saarinen (1997: 16) observes,
the third section of the Act guaranteed to univer-
sities an increase in their appropriations equiva-
lent at least to the rise in cost levels in 1987–
1996. Paradoxically, the Government decided in
1993 that this section should no longer be applied
– in precisely the kind of situation for which it
had been originally designed. Government offi-
cials began to emphasise efficiency, performance,
productivity, and impacts of R&D. The way of
thinking evident in these catchwords was entire-
ly alien to the universities, and the simultaneous
cutbacks in their budget funding further compli-
cated the pursuit of positive development. It was
unfortunate that the management by results and
efficiency indicators were introduced on a broad-
er scale in universities at the very same time in
the early 1990s as political measures were intro-
duced to reduce budget funding.
Finnish universities have resorted increasingly
often to outside sources in order to meet the short-
fall of funding caused by budget cutbacks. Re-
search funding by the Academy of Finland almost
doubled from 1995 to 2000. Simultaneously, the
Academy introduced new measures in order to
support the science system. The most important
measures were the foundation of the graduate
school system, introduction of the programme on
‘centres of excellence’ in research, and the de-
velopment of large-scale research programmes
(see Husso et al. 2000: 20–32, 94–98, 106–107).
The general aims of these measures have been (a)
to help Finnish research to reach the internation-
al forefront and (b) to increase co-operation be-
tween research groups, between disciplines, be-
tween universities, and between business firms
and universities. These favourable developments
have not, however, eliminated the problems that
resulted from decreasing total budget funding for
universities.
Indeed, universities’ total R&D expenditure may
have shown fairly strong growth, but their total
budget funding (i.e., the general grant received
from the Ministry of Education in support of all
university activities) in 1998 was still at a lower
level than at the beginning of the decade (Tut-
kimusedellytystyöryhmä… 1998: 26). Also the
budget funding for scientific research showed
poor development. From 1991 to 1999, in real
terms, research expenditure covered from govern-
ment budget sources increased by 17 percent,
while external funding increased by twofold (for
a detailed analysis, see Husso 2001). In some ac-
ademic fields or departments the scarcity of budg-
et funding meant an absolute decrease in research
funding even when outside sources of support
were available. According to Nenola (2000: 4),
those who argued that external funding compen-
sates for the lack of core resources did not appre-
ciate this. In many university departments, the
small tenured teaching and research staff had to
redirect most of their time and capacity away from
research and towards securing that as large a
number of students as possible would get their
undergraduate or graduate degree.
Another legacy of the 1990s is that scientists
are now expected to work increasingly on practi-
cal questions. According to this line of thinking,
the emphasis of research should be on fulfilling
industrial and societal needs and on technologi-
cal development aimed at new products and pro-
duction processes. Already in the 1990s, this en-
dangered the sufficiency of resources allocated to
the real engine of applied research and develop-
ment, i.e., basic research. As a response, univer-
sities began to call for a science policy that would
safeguard the diversity of domestic research and
its capacity for regeneration. From the perspec-
tive of the social sciences and humanities, the
stressing of economic benefits was seen as prob-
FENNIA 180: 1–2 (2002) 267Science policy and research in Finland
lematic – more resources were poured into re-
search in such fields as biotechnology and in-
formation technology or, more generally, into
research that was expected to produce results
with immediate application and innovative po-
tential.
In the latter part of the 1990s, a key booster of
R&D funding in Finland was the decision by the
Cabinet Committee on Economic Policy in 1996
to raise the level of Government financing by a
further 1.5 billion marks (EUR 250 million) by
1999 (compared to 1997 budget appropriations).
The total additional R&D funding increased by
some FIM 3.2 billion (EUR 540 million) from
1997 to 1999 (Prihti et al. 2000). The aim was to
strengthen the entire R&D system, to enhance co-
operational networks and clusters, and to support
the national economy, business, and employment.
Most of the funds (55%) were allocated through
the National Technology Agency. Thus, the em-
phasis of use of additional appropriation was on
applied research and development. The total share
of universities and the Academy of Finland on the
additional appropriation was some 40 percent.
With the help of this new investment, the gradu-
ate school system was extended, and universities’
equipment and other research facilities were up-
dated, among other improvements. These meas-
ures did not help universities in their difficult eco-
nomic situation.
An international comparison
R&D intensity, i.e., research expenditure’s share
of the GDP, is commonly used in international
comparisons of R&D investment. It is not an en-
tirely accurate and reliable measure, however,
because the exact measurement of GDP and R&D
expenditure is extremely difficult. Nonetheless,
R&D intensity provides a relatively useful gener-
al-level measure of how much a country invests
in R&D and technological development in rela-
tion to the value of its total production.
Table 2. R&D intensity, the government’s share of total R&D financing, and the share of universities of total R&D expendi-
ture in selected OECD countries, in 1999, 1994, and 1989 (or the closest year available) (Main… 1995: 16, 20, 22, 1998:
16, 20, 22; OECD… 1999: 126, 128, 2001: 147, 149, 151).
268 FENNIA 180: 1–2 (2002)Kai Husso and Pauliina Raento
The highest figures for R&D intensity in 1999
were recorded in Sweden, Finland, and Japan (Ta-
ble 2). Finland’s R&D intensity grew very rapidly
in the 1990s. In 1989–1999, Finland ranked
among the top five OECD countries in terms of
R&D intensity growth (together with Iceland, Ire-
land, South Korea, and Sweden). Finland’s R&D
intensity was still below the OECD and EU aver-
ages in the late 1980s, but by 1994 it was 0.19
percentage points above the OECD average and
0.46 percentage points above the EU average. In
1999, Finland showed an R&D intensity of 3.2
percent, while the average for all OECD countries
was 2.2 percent and for EU countries, less than
1.9 percent (Main… 1995, 1998, 2000; OECD…
1999). In general, the level of research intensity
in almost all EU countries has always been much
lower than in the Union’s toughest rivals, Japan
and the United States. In the late 1990s, some in-
dividual countries (Belgium, Denmark) have man-
aged to narrow down the gap, but only slightly
(Main… 2001: 18).
From the viewpoint of the ratio between re-
search intensity and per capita GDP, the top
OECD countries in 1997 were Sweden, Finland,
and Japan (see Husso 2001: 32). On this meas-
ure, investment in research is also higher than av-
erage in France, Switzerland, and Germany. The
results indicate that countries with a high per cap-
ita GDP generally invest more in research than
others.
One of the distinctive features of research in the
EU countries in comparison with Japan and the
United States is to be found in private sector re-
search: measured in terms of research expendi-
ture, private business in the EU (with the excep-
tion of Sweden) accounts for a smaller proportion
of R&D than is the case in Japan and the United
States. In 1991, the private sector accounted for
(on average) 64 percent of total research expend-
iture in the EU countries, while this figure was 71
percent in Japan and 73 percent in the United
States. The situation remained largely unchanged
throughout the 1990s (Main… 1995: 22, 2001:
22).
In Finland, business investment in R&D ac-
counted for roughly 57 percent of total R&D ex-
penditure in 1991. The sectoral breakdown of re-
search expenditure changed considerably in the
late 1990s, however. For instance: The business
sector accounted for 60 percent of the total Finn-
ish R&D expenditure from 1985 to 1995, while
the shares of public sector and universities were
some 20 percent each. The share of the business
sector increased rapidly from 1995 onwards,
while that of universities and the public sector
(mainly research institutes) declined. In 1999, the
business sector already accounted for some 69
percent of total R&D expenditure. With the ex-
ception of the late 1990s, both the nominal and
real trends for public sector research expenditure
were declining. The balance of the entire R&D
system was thus threatened. The same applied to
most other OECD countries. The Government’s
share of total R&D financing and the universities’
share of total R&D expenditure both declined
through the 1990s (Table 2). According to the es-
timates by Statistics Finland (Science… 2001), the
share of business probably continues to rise over
the next few years unless the Government invests
additional funds into R&D as it has done in re-
cent years.
The OECD has given a very positive assessment
of the sharp increase in R&D investment by the
business sector and of its growing share of the to-
tal R&D expenditure in Finland. These have been
interpreted as positive developments that will help
to improve the competitiveness of the national
economy in the global markets (Technology…
1998; OECD… 2000, 2001). At the same time,
however, Finnish universities have repeatedly
been anxious about the risk of unbalanced devel-
opment of the R&D system. We fear that in the
future, the emphasis in R&D may shift too heavi-
ly towards business companies. This may distort
the balance of the entire R&D system, seriously
undermine the position of universities and scien-
tific research in that system, and reduce the se-
cured resources available for long-term research.
In terms of the role of universities in R&D co-
operation and the output of scientific research,
Finnish universities showed internationally
healthy development in the 1990s. Innovation
studies from EU countries indicate that in the mid-
1990s Finland and Sweden were the two coun-
tries with the highest frequency of contract-based
co-operation between business firms and univer-
sities and public research institutes. According to
the survey results (OECD… 1999), some 45 per-
cent of Swedish and 38 percent of Finnish inno-
vative business firms had contractual co-operation
with universities or government research institutes
in the mid-1990s. In other countries, the propor-
tion of firms working closely with public research
institutes varied from 9 to 19 percent. According
to an innovation survey (for the period 1994–
FENNIA 180: 1–2 (2002) 269Science policy and research in Finland
1996) by Statistics Finland (Leppälahti 1998), al-
most 30 percent of Finnish industrial companies
regarded universities as important sources of in-
formation for innovation. Over 19 percent thought
the same of public research institutes. These re-
sults lead us to conclude that in Finland public
research organisations are important partners to
a large number of firms and that there has been
close and extensive collaboration at least since
the early 1990s.
Scientific research produces results whose im-
pacts on society and economy are most typically
of an indirect nature and therefore difficult to
measure. The main outputs of research appear in
the form of publications. According to the ISI da-
tabase (see Husso & Miettinen 2000), a total of
some 7,000 articles authored by Finns were pub-
lished in international scientific series in 1999.
The number of publications increased on average
by more than six percent per year during 1991–
1999. The figure was the ninth highest in the
OECD. Of all publications, Finland accounted for
roughly one percent in 1999. Since the early
1990s, this figure has increased considerably. In
addition, relative to population and GDP, Finland
is currently one of the world’s biggest publishers.
On these indicators Finland ranks among the top
four countries in the world. Also the results of ci-
tation analysis are favourable for Finland. Finnish
publications were cited more often than ever be-
fore in 1995–1999: they received 15 percent more
citations than world publications on average. This
was the ninth highest ranking in the OECD group.
If analysed by bibliometric indicators, Finland
ranks among the top ten countries in the OECD
area. The leading research countries in the OECD
are Switzerland, Sweden, the Netherlands, and
the United States (for more, see Husso et al. 2000:
72–93).
Regional analysis of research
Spatially uneven development is arguably an un-
avoidable feature of the process of technological
change and capital accumulation (Dicken 1992).
Research- and innovation-related activities play
an important role in these processes. It has been
shown that research, innovations inspired by
R&D, and their various spin-off effects have a
major beneficial effect on the regional economy
(e.g., Florida & Smith 1993; Feldman & Florida
1994; Regional competitiveness… 1997). Of
course, technological and economic development
in the regions depends not only on R&D, but on
a number of closely interrelated factors, such as
the local industry’s capacity for regeneration, level
of education and social capital, and intellectual
capacity to generate new business and to adapt
to technological, economic, and social change
(e.g., Temple 2000; Sotarauta & Mustikkamäki
2001). The interplay between the involved factors
is highly complex and difficult to demonstrate.
The theoretical approaches and models adopted
in the fields of economics and geography regard-
ing the regional economics, R&D, innovation, ag-
glomeration tendency, and local milieus has been
discussed recently in an article by Husso (2001).
The following analysis of the breakdown of
R&D by regions provides an overall view of the
current potential of R&D- and high-technology-
dependent regional economic development in
Finland. Finland had an R&D intensity of 3.19
percent in 1999. The regions above this figure
were Uusimaa, Pirkanmaa, North Ostrobothnia,
and Varsinais-Suomi. The figure exceeded one
percent in Central Finland, Ostrobothnia, South
Karelia, North Savo, North Karelia, Kanta-Häme,
and Satakunta. The figures for R&D expenditure
per capita show similar results (CD-Fig. 2). In sum,
a regional analysis of the value of GDP and R&D
expenditure shows that the two sets of figures cor-
relate with one another.
The highest figures for R&D expenditure in
1999 were recorded for Uusimaa, which account-
ed for 47 percent of all R&D (Table 3). The share
of Uusimaa thus declined (51% in 1995). The oth-
er regional centres of R&D, Pirkanmaa (14%),
North Ostrobothnia (11%), and Varsinais-Suomi
(10%), together accounted for 82 percent of the
country’s total R&D expenditure. The figure for
1995 was 79 percent, which suggests that regional
concentration continued in the late 1990s.
The location of such public institutions as state-
owned companies, research institutes, and univer-
sities has shaped regional development and re-
gional division of R&D. The tendency of regional
concentration is strongest for research in the pub-
lic sector. Two-thirds (65%) of the work is done
in Uusimaa. In the private sector, the correspond-
ing figure for Uusimaa is 42 percent, for the uni-
versities, 44 percent. The Metropolitan Helsinki
district alone accounts for two-fifths of R&D by
private business in Finland (Tutkimus- ja… 2000).
Only in Häme the public sector accounted for
most of the R&D expenses (56%) in 1999. Private
270 FENNIA 180: 1–2 (2002)Kai Husso and Pauliina Raento
R&D-intensive firms and universities were appar-
ently few in this region. The universities held the
largest share of total R&D expenditure in North
Karelia (41%; University of Joensuu) and North
Savo (36%; University of Kuopio). The private sec-
tor accounted for the majority of R&D in all oth-
er regions. Most of the research by private busi-
ness was concentrated in large firms with a per-
sonnel of over 500. They were responsible for
over 70 percent of private sector research, while
the figure for small business with a staff of less
than 50 people was only about ten percent.
All in all, the most notable changes during the
1990s at the regional level were the decrease in
the share of Uusimaa and the increase in that of
Pirkanmaa and North Ostrobothnia. In absolute
terms, R&D investments increased most signifi-
cantly in Uusimaa. The R&D expenditure in ab-
solute terms increased favourably also in Pirkan-
maa, North Ostrobothnia and Varsinais-Suomi,
and in Central Finland, North Savo, Ostrobothnia,
and North Karelia (especially due to growth in
business firms) (cf. Table 3).
R&D is heavily concentrated within the regions,
most notably in their principal urban centres. For
instance, the Metropolitan Helsinki district ac-
counted for 99 percent of Uusimaa’s R&D ex-
penditure in 1999. Oulu and its surroundings (in
North Ostrobothnia) were responsible for 96 per-
cent and Tampere district (in Pirkanmaa) for 94
percent of the region’s R&D expenditure. In Cen-
tral Finland, Jyväskylä district recorded 80 percent
of the region’s R&D expenditure, and in Varsinais-
Suomi, the districts of Turku and Salo, 62 and 32
percent, respectively (Tutkimus- ja… 2000: 31–
33). The success of the relatively small Salo dis-
trict (of 51,000 inhabitants) draws from the No-
kia Corporation’s notable presence in the area.
The combined R&D expenditure of the above-
mentioned six districts (out of 85 districts in all
in Finland) was FIM 18.7 billion (EUR 3.14 bil-
lion), or 81 percent of the country’s total R&D
expenditure. From the viewpoint of regional de-
velopment, it is noteworthy that the same six dis-
tricts were the only ones to receive clear migra-
tion gain during the latter part of the 1990s (Re-
gional development… 2001: 2).
The regional concentration of R&D has shown
no signs of decreasing. The Government has thus
introduced new measures in order to avoid the
Table 3. R&D expenditure by region and by sector of performance, in 1995 and in 1999 (Tutkimus- ja… 1997: 18, 2000:
31). FIM 5.94573 = EUR 1.
FENNIA 180: 1–2 (2002) 271Science policy and research in Finland
situation where know-how, research, and innova-
tion are heavily concentrated in very few growth
centres. For example, the second phase of the
National Centre of Expertise programme (1999–
2006) aims to create a dense nationwide network
of R&D-intensive regional knowledge centres
(CD-Fig. 2). In addition to the fourteen centres of
expertise included in the map, there are two re-
gionally dispersed national centres – or networks
– of expertise that focus on wood products and
on food technologies. The two entities bring to-
gether numerous universities, research institutes,
and business companies from various parts of the
country.
The first phase of the Centre of Expertise pro-
gramme (1994–1998) provided rather encourag-
ing results: 8,000 new jobs were created, 300
new high-technology firms were established, and
130 firms moved to the knowledge centres (see
Hämäläinen et al. 2000). The current programme
seeks, i.e., to
(1) identify regional strengths and create eco-
nomic growth
(2) increase the number of competitive prod-
ucts, services, enterprises, and jobs based
on the highest standard of expertise
(3) reinforce and regenerate regional expertise
(4) create conditions for innovation and com-
mercialisation
(5) make the latest knowledge and expertise
readily available
(6) promote regional, national and internation-
al networking and collaboration between
and within Centres of Expertise and fields
of expertise
(7) improve co-ordination between local, re-
gional, and national development meas-
ures (Centre… 1999).
In sum, the nodes are generally expected to of-
fer know-how services, funding, and social and
human capital throughout their own area of in-
fluence.
The links between regional policy and the lo-
cation of high-tech industries and universities are
strong. New initiatives and programmes do not
therefore change the impression that the Govern-
ment’s policies favour the regions that are already
advanced and have (economically) the best
chances to be successful in the global market.
The current link between regional and indus-
trial policies seems to be strong as well. Accord-
ing to the Office of the Prime Minister’s expert
group, “promoting competition and raising real
competitiveness have meant replacing traditional
business subsidies with support for research and
development. [T]his has shifted the main focus [of
the policies] to the big university cities” (Region-
al development… 2001: 5). Due to this change,
it is possible that the above-mentioned pro-
grammes fail to decrease the regional imbalance
in the future. We do not contest the Government’s
support of the potential ‘winner cities’ – quite the
contrary. We do suggest, however, that more at-
tention should perhaps be directed to those re-
gions that are located near the knowledge cen-
tres and to those areas that lag behind socio-eco-
nomically. In order to safeguard the favoura-
ble development of regional economies and pro-
mote general welfare, policy-makers should make
every effort to remove those barriers that hinder
spatially widespread diffusion and utilization of
new knowledge and research findings. The author-
ities need to address such problems as the short-
age of co-operative links and the lack of resourc-
es and (communication) channels that facilitate
regionally extensive transfers of codified and tac-
it knowledge between business firms, universities,
and the government sector.
Discussion
The general conditions for R&D in Finland devel-
oped very favourably during the latter half of the
1990s and the national strategic significance of
research continued to increase. In order to break
loose from economic recession (1991–1996) and
to inspire growth, the Government decided to start
investing more in education, know-how, research,
and technology (see Finland… 1996). This deci-
sion deviated clearly from the OECD mainstream
policy-lines.
The Government’s additional funding pro-
gramme (1997–1999) wanted to raise the level of
research intensity in Finland to 2.9 percent by
1999. This goal was reached ahead of schedule.
The findings of evaluation reports published in
2000 (Husso et al. 2000; Prihti et al. 2000) indi-
cate that the increase in R&D expenditure had a
beneficial impact on employment and the econ-
omy. The diversity and comparatively high quali-
ty of the educational infrastructure and universi-
ties in Finland, on the one hand, and the strong
growth of the national economy since the mid-
272 FENNIA 180: 1–2 (2002)Kai Husso and Pauliina Raento
1990s, on the other hand, supported the positive
assessment.
The relationship between science and technol-
ogy, and between universities and business, grew
closer and more interactive than ever before in
the 1990s. The development and production of
goods and services currently relies heavily on the
use and application of scientific research and on
new knowledge. Consequently, the importance of
developing new tools for science and technology
policies has been recognised widely. In the future,
one of the most critical tasks is to maintain a bal-
ance in the relationships between universities and
business firms. Increased co-operation is in the
interests of both parties, provided that there is a
proper division of labour and that academics are
given the opportunity to focus on long-term ba-
sic research. Enough space for the independent
development of the science system should be
guaranteed. Universities’ own internal objectives
that are not at least primarily constructed through
co-operation with industry or activities aimed at
innovations should be respected more.
Everything should look generally good: during
the latter part of the 1990s, the total funding of
R&D was increased, new science policy measures
that aimed at upgrading the conditions for con-
ducting research were introduced, and co-opera-
tion within the science system and between uni-
versities and business firms increased favourably.
Finnish research reached the international fore-
front in many fields of science. Unfortunately,
however, this is not the entire picture – at least
not from the viewpoint of universities and scien-
tific research. The insufficient level of budget
funding for research is clearly one of the current
defects in the science system. The problem is not
only the level of funding, but also the allocation
of these funds. According to Husso et al. (2000:
110),
Funding for scientific research is increasingly allo-
cated on a competitive basis; to an extent one could
argue that there is too much competition for fund-
ing. Core funding to universities as well as financ-
ing between the faculties are frequently allocated on
the basis of quantitative measures and repeated peer
reviews and evaluations. [This development ties] in
closely with the adoption […] of management by
results, the aim of which is to raise the quality stand-
ards of research and to give closer attention to per-
formance and productivity in the allocation of re-
sources. [U]niversities still remain quite divided in
their views on how well the new management phi-
losophy really has worked and on how fair it is. A
common criticism against management by results is
that in a strict application, it gives too much weight
to short-term activities and to quantitative results and
efficiency requirements at the expense of quality and
long-term development.
Government officials have recently drafted
plans to maintain the positive trend in total R&D
funding. Some indications suggest that the in-
crease in R&D expenditure will continue in the
near future (see Review… 2000). This, however,
will require careful planning and co-ordination –
without forgetting the risks of excessive science
policy planning and outside manipulation of sci-
entific research.
A key question […] is the extent to which research
needs to be […] planned and organised; how far can
research be steered […] before it becomes excessive?
The key factors in this regard are the ability and will-
ingness of funding bodies and research scientists to
take risks and to pioneer new fields of research. In
addition, it is important that research funds are al-
ways available that are not tied in advance to any
specific purpose and that free research is given the
space and resources it needs. To make sure that uni-
versities can […] work in a positive and encourag-
ing atmosphere, it is essential that the Government
[…] continues to underline the importance of sci-
entific research and its relevance to well-being in
society. (Husso et al. 2000: 115)
If universities are to make justified calls for ad-
ditional funding in the near future, they have to
provide proof of the benefits and impact of their
work. In order to convince the funding bodies and
decision-makers, universities have to show con-
tinuous improvement in international success and
visibility of scientific research, to make their or-
ganisational structure and administration more
practical and flexible, and to reform their finan-
cial procedures and rules for co-operative agree-
ments with extramural organisations.
In regional policy terms, public funding for
R&D is highly selective. Most of the funds go to
growth centres, further increasing regional imbal-
ances. Investment thus tends to flow especially to
the areas of greatest opportunity and return to in-
vestment. It is difficult, however, to allocate funds
to areas where there is no research or where the
standards of research are not high. In recent years,
the Government’s policy regarding universities
and R&D funding has nonetheless been to em-
phasise regional considerations (e.g., Korkeakou-
lujen… 2001). Also, the aim of the Centre of Ex-
pertise programme has been to enhance regional
FENNIA 180: 1–2 (2002) 273Science policy and research in Finland
strengths in various parts of the country. On the
other hand, the National Technology Agency has
wanted to stress the quality of applications re-
ceived, the viability of proposed projects, and
their potential technical and economic impacts.
About one half of the Agency’s research appro-
priations go to Uusimaa.
Since R&D is risky business, we expect to see
more risks taken in funding decisions as well –
especially now that more and more money is be-
ing invested in research. This would be particu-
larly valuable to small and promising research
teams and to those organisations that work out-
side today’s major research centres. Networking
among these parties and co-operation with re-
searches from the principal urban R&D centres
will help to create new opportunities in less de-
veloped regions.
NOTES
1 The Academy of Finland is the national organisation for
science administration operating under the Ministry of Ed-
ucation. The Academy’s responsibilities include the ad-
vancement of scientific research and the encouragement
of its exploitation, and the enhancement of international
scientific co-operation. The main function of the Academy
is to finance high-quality scientific research conducted in
universities. In 2001, the Academy’s annual funding vol-
ume was FIM 1.1 billion (EUR 184 million). This represent-
ed about 14 percent of the total government R&D financ-
ing (see Research… 2000: 6; Academy... 2002).
2 The National Technology Agency (Tekes), which operates
under the Ministry of Trade and Industry, is the principal
source of public funding for applied technological research
and industrial R&D. In addition, Tekes is the main imple-
menting body of Finland’s national technology policy. In
2001, Tekes’ funding totalled some FIM 2.3 billion (EUR
387 million), of which two-thirds were devoted to indus-
trial R&D and the rest to research by universities and re-
search institutes. This represented almost 30 percent of the
total government R&D financing (see Research… 2000: 7;
Tekes... 2002).
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