“Telephones are almost as common as kitchenware here,” Ganivet reported to his Spanish friends over a century ago.

Since his trip, Finland has gained a reputation as a model country for the use of information and communication technologies. One reason might be the Finns’ enduring fascination in all things technical. Today, eight out of 10 Finns own a mobile phone, and every fourth household has broadband Internet. These numbers are quickly rising. Little has changed in over 100 years when it comes to the insatiable Finnish desire to innovate.

Rising productivity

Information technology also plays a big role in raising the productivity of Finland’s industry, and on-line services offered by Finnish banks may be the best in the world.

An important factor in Finland’s fame has been Finnish mobile phone giant Nokia, which has a more than 30 percent market share in the global mobile telecommunications market. Nordic mobile phone companies, such as Nokia and Ericsson, got an early start in mobile technology because early on, Finland and Sweden (home to Ericsson) agreed on the NMT mobile network, the first commercially operated public mobile phone network. Mobile telephony was launched in 1981, when NMT began operating in Scandinavia. Nokia introduced the first car phones for the network. The high technology sector forms an essential part of Finland’s industrial policy and is acknowledged at the highest levels of the Finnish government as priority. Key issues concerning technology are regularly discussed at the country’s Science and Technology Policy Council, chaired by Finland’s prime minister.

Private and public sector involvement

Finland’s ever-increasing investment into research and technological development now totals EUR 4.9 billion, and represented 3.4 percent of the Gross Domestic Product (GDP) in 2003. The private sector's share was just as significant, accounting for EUR 3.4 billion.

The role of the public sector is as a facilitator and not an active agent, says Jari Romanainen, executive director responsible for strategy at Tekes, the National Technology Agency.

“The duty of the state is to arrange the statutory and institutional framework and incentives so that companies can develop their products and business profitably,” he says.

Tekes was formed in 1983 primarily to assist Finland’s struggling economy after a recession in the 1970s. The Finnish government realised that continuous technological improvement would play a key role in economic resurgence.

Cooperation a key

One of the reasons behind Finland becoming a hi-tech country is cooperation. “The Finnish public policy has long been to develop a culture of cooperation between companies, universities and research institutes,” says Romanainen.

Tekes is the main public financing and expert organisation for research and technological development in Finland and finances projects in both industrial R&D as well as in research institutes.

An important function of Tekes is to arrange and steer various technology programs. These are planned in cooperation between companies, research institutes, universities, Tekes and other key stakeholders. Technology programs are used to promote development in specific sectors of technology or industry, and to pass on the results of research to business in an efficient way. This year 24 extensive national technology programs are underway, while in 2003 Tekes provided EUR 180 million to finance such programs.

What is unique about Tekes is that it promotes specially innovative, risk-intensive projects. It provides grants and soft loans for companies' R&D projects aimed at developing marketable products, typically in five-to-10 years. Teams of Tekes experts assess applications submitted by companies and research organisations with key funding criteria being future business potential, innovativeness, resources, cooperation and networking and wider socioeconomic impacts that add value to Tekes funding.

New and old challenges

Many Finnish companies expanded to international markets in Nokia’s wake since the mobile company uses many subcontractors and partners specialising in different fields of the mobile industry. However, some critics have wondered if Finland and Finnish firms have become too dependent on the giant.

“I don’t think that this is true anymore, because Nokia’s partners have now gained other international customers besides Nokia,” says Romanainen. In his opinion, too few small and medium-sized enterprises (SMEs) operating in Finland is a bigger challenge for the country’s future development. SMEs are usually seen as seeds for new innovation and growth to new business areas.

The bubble bursts

One reason for this low interest in entrepreneurship might be the lack of funding for new companies. After the Internet bubble burst, venture capitalists almost totally stopped investing in small, high-risk firms. While Tekes and other public organisations have founded new funding instruments and other ways of support, it is not a venture capitalist in the truest sense because it does not own shares in any company.

Finland’s relatively small size is also a challenge for Finnish companies. ”High technology firms don’t really have a notable domestic market at all, so they have to reach for international markets right from the start,” says Romanainen. Tekes encourages and advises companies that are seeking markets abroad to start international cooperation at early stages of product development. Although Finland is mostly known for Nokia and advanced use of information technology, they are not the only options for industrial growth.

In the future, Finland’s industrial growth need not be dependent on the traditional wood-processing industry, metal industry or high technology companies. For example bio and material technologies offer many interesting possibilities. The service sector has been growing for many years, especially knowledge-intensive services. There is clear room for development for companies outside the ICT sector that still use and develop technology to enhance and support their main products.

Tekes collaborates with several organizations
Tekes works in collaboration with several partners within the Finnish innovation environment.

The Academy of Finland is the main agency of implementation for basic research. Tekes’ technology programs are often in cooperation with Academyfunded projects at universities and research institutes.
www.aka.fi

T&E centers (Employment and Economic Development Centers) countrywide, they provide a range of advisory and development services for businesses, entrepreneurs and private individuals. T&E Centers are funded jointly by the Ministry of Trade and Industry, the Ministry of Agriculture and Forestry and the Ministry of Labor. www.te-keskus.fi

Sitra (the Finnish National Fund for Research and Development) is an independent public foundation under supervision of the Finnish Parliament. It grants funding for research and training and makes venture capital investments in companies in early stages of their existence. Tekes has launched venture capital programs for starting companies with Sitra.
www.sitra.fi/eng/index.asp

Finnvera plc (Export Credit Agency) is a specialized financing company offering financing services to promote the domestic operations of Finnish businesses and to further exports and the internationalization of enterprises. Finnvera is owned by the Finnish state.
www.finnvera.fi/

Finpro (Association for internationalization services) is an expert and service organization whose mission is to speed up the internationalization of Finnish businesses. Finpro promotes Finnish business solutions worldwide.
www.finpro.fi

Invest in Finland is a national organization promoting foreign direct investment in Finland. It is funded by the Ministry of Trade and Industry and the aim is to have more foreign companies operating in Finland.
www.investinfinland.fi

Finnish Industry Investment Ltd is a government-owned investment company. It engages in equity capital investment and invests in venture capital funds, private equity funds and directly in selected target companies.
www.industryinvestment.com