funding of finnish r&d&i-policies 3.7.2008 juha majanen, ministerial adviser, budget...

Funding of Finnish R&D&I-policies

3.7.2008Juha Majanen, Ministerial Adviser, Budget department

03/07/2008Budget DepartmentBudget Department 03/07/2008 2

R&D&I-expenditure, overview

Total R&D&I-expenditure 2008 is estimated to amount about 6,3 billion euros of which:

Private enterprises 4,26 billoin euros (71%) Public funding 1,80 billion euros (29%) Public R&D&I –expenditure is about 4,4 % of

government spending in 2008 (exclusive interest payments on debt)


Central government budget expenditure by administrative branches in 2008, billion euros

2.4

0.3

13.92.4

2.1

2.8

6.9

6.7

2.4

1.1

0.7

1.1

0.2

0,0 5,0 10,0 15,0

Interest payments on debt

Environment

Social Affairs and Health

Labour and Industry

Transport and Communication

Agriculture and Forestry

Education

Finance

Defence

Interior

Justice

Foreign Affairs

President, Parliament, Council of State

Source: MoF May 14, 2008/VM/TaE


R&D&I-expenditure, overview

Both private and public R&D&I-expenditure have remained at relatively high level for years

Growth of the R&D&I-funding has been about 4 to 5% each year

However, due to very rapidly grown GDP, the GDP-ratio has decreased since 2005


Private and Public R&D&I-expenditure, Finland 2000 - 2008 (2007 and 2008 are estimates, Billion euros)

3,34 %3,30 %

3,35 %3,43 % 3,45 % 3,48 % 3,45 %

3,36 %3,30 %

0,00

0,50

1,00

1,50

2,00

2,50

3,00

3,50

4,00

4,50

5,00

2000 2001 2002 2003 2004 2005 2006 2007 2008

Bil

lio

n e

uro

s

2,50 %

2,70 %

2,90 %

3,10 %

3,30 %

3,50 %

3,70 %

% o

f G

DP

Private sector Public sector Total, % of GDP

Source: Statistics Finland


Public R&D&I -expenditure, Finland 2000 - 2008(2007 and 2008 are estimates)

1,296

1,3521,389

1,453

1,535

1,614

1,6941,730

1,798

0,98 % 0,97 % 0,96 %

1,00 % 1,01 %1,03 %

1,00 % 0,99 %

0,95 %

1,20

1,40

1,60

1,80

2,00

2000 2001 2002 2003 2004 2005 2006 2007 2008

Bil

lio

n e

uro

s

0,50 %

0,60 %

0,70 %

0,80 %

0,90 %

1,00 %

% o

f G

DP



Main actors in R&D&I-funding Several actors are funding and executing R&D&I-programmes

and -projects Tekes – Finnish Funding agency for Technology and Innovation Academy of Finland Sitra - the Finnish Innovation Fund Science and Technology Policy Council Ministry of Employment and the Economy Ministry of Education Universities Employment and Economic Development Centres (Regional TE-

centres) Government research institutes Finnvera Oyj Industry Investment Other institutions Private enterprises


Main actors in public sector

DM 25736 01-2008 Copyright © Tekes

Academyof Finland

Universities

Ministry ofEmloyment

andthe Economy

Other ministriesand

Researchinstitutes

Parliament

Government

Ministry of Education

VTTTechnical

Research Centre of Finland

Tekes

TE-centres

Science and Technolygy

PolicyCouncil

SitraFinnvera Oyj

FinproIndustry

Investment

03/07/2008Budget DepartmentBudget Department 03/07/2008 9DM 25736

02-2008 Copyright © Tekes

Overview of innovation environmentP

riva

te

Basic research Applied research Development

Development of companiesMarketinInternationalization

R&D&I activitiesof Private enterprises

4 109

Business-Angels

noin 380**

Pu

blic

Finnvera406*

Universities1 079*

Academyof

Finland239 Ministries,

TE-centresResearch institutes

357

Tekes465

VTT217

Private funding from abroad

409

Foundationfor

Finnish Inventions6

Finpro31

Investors:Private301

Industry Invesment: 82

Sitra29

Year 2006, Million euros

(*) year 2005(**) old estimate 2002


Public R&D&I-funding, main actors(Budget 2008, MEUR)

Academy of Finland

297 Meur16 %

Tekes – Finnish Funding agency for Technology

and Innovation

526 Meur30 %

Universities

452 Meur25 %

Government research

institutes

282 Meur16 %

Other R&D&I Funding

241 Meur13 %

Tekes and Academy of Finland(Total 823 MEUR)offer funding on a competetive basis

Basic R&D&I funding allocatedin central government budget



R&D&I expenditure, main actors(2006, MEUR)

Private enterprises4 108 MEUR

Public sector574 MEUR

Universities1 079 MEUR



R&D&I-expenditure and funding, main actors(2006, MEUR)

Expenditure

Year 2006 Total

Domestic Private enterprises Foundations

Foreign funging

Public Funding

Public Funding

Meur Meur Meur Meur Meur %

Total 5 761 3 756 55 409 1 541 27

Private enterprises 4 108 3 616 2 259 232 6- Industry 3 279 3 052 0 88 139 4- Other branches 828 564 2 170 93 11

Public sector 574 70 28 54 423 74- Central Government institutions 522 68 9 52 393 75- Other Public institutions 16 0 16 99- Non-profit organisations 36 1 19 2 14 38

Higher education 1 079 71 26 96 887 82- Universities 891 56 21 62 753 84- University hospitals 81 7 3 6 65 80- Higschools 107 8 2 28 69 64

Funding



Public R&D&I-allocationDisciplines (2006, MEUR)

87

231

71

101

74

9

277

205

261

26

228

83

0

50

100

150

200

250

300

Naturalscience

Technicalscience

Medicine Agricultureand forestry

Socialscience

Humanities

Public sect.

Higher educ.



Public R&D&I-allocation, Socio-political targets (2008, MEUR; %)

Energy88; 5 %

Agriculture, fishery, forestry

94; 5 %

Health care111; 6 %

Enhancing industry

490; 28 %

Ehancing sciences

760; 43 %

Defence51; 3 %

Other socio-political targets (less than 50

MEUR)175; 10 %



Socio-political targets 2000 – 2008(MEUR)

0

100

200

300

400

500

600

700

800

2000 2001 2002 2003 2004 2005 2006 2007 2008

Ehancing sciences Enhancing industry Health care Agriculture, fishery, forestry Energy Defence



Top ten R&D&I-lines of industry (2006, MEUR)

Manufacture of electrical

equipments2 320

Man. of foodproducts and

beverages65

ITC-services365

Man. of machinery and equipments

317

Man. of chemicals and chemical

products238

Man. of basic metals and metal

products74

Wholesale and retail trade

84Technical services

94

Man. of pulp, paper and paper products

86

R&D-services186



R&D&I-expenditure in private enterprises2006, MEURTotal Salaries Services Machines, OtherExpenditure equipments Operational costs

premisesTotal 4 108 2 054 862 249 944Agriculture, fishing, hunting and Forestry 0 0 0 0 0Mining and quarrying 4 1 0 2 0Manufacturing 3 279 1 589 699 200 791Food products beverages and tobacco 65 35 6 8 15Textiles and textile products 12 6 2 2 3Wood and w ood products 6 3 2 0 1Pulp, paper and paper products 86 44 17 5 19Publishing and printing 7 4 2 0 2Oil, plastic and rubber 59 29 4 19 8Chemicals and chemical products 238 120 53 17 48Glass and Stone products 26 12 6 1 7Basic metals and metal Products 74 26 10 2 7Machinery and equipment 317 143 75 16 83Electrical equipments* 2 320 1 121 486 127 585Transport equipment 59 26 24 1 8Recycling 11 5 3 1 2Services 811 455 160 47 150Electricity, gas and w ater supply 22 4 15 0 3Construction 26 16 5 2 3Wholesale and retail trade 84 29 34 1 20Transport and storage 5 2 2 0 1Mail and communication 77 38 8 8 23ITC 288 199 38 14 38R&D-services 186 93 38 17 38Technical services 94 56 15 5 18Other services 29 17 6 1 5Other lines of industy 18 8 3 0 2



Competitive funding programs

Tekes and Academy of Finland Programmes, public funding about 550 Meur, 2008

Sitra programmes Researcher groups from both public

sector (incl. universities) and private enterprises can compete and participate


Tekes’ programmes Ongoing Tekes programmes

BioRefine 2007-2012 - New Biomass Products ClimBus - Business Opportunities in the Mitigation of Climate Change 2004-2008 Concepts of Operations 2007-2011 Digital Product Process 2008-2012 FinNano - Nanotechnology Programme 2005-2010 FinnWell - Future Healthcare 2004-2009 Fuel Cell 2007-2013 Functional Materials 2007-2013 GIGA - Converging Networks 2005-2010 Liito - Innovative Business Competence and Management 2006-2010 MASI - Modeling and Simulation 2005-2009 NORDITE 2005-2010 NewPro - Advanced Metals Technology - New Products 2004-2009 Pharma - Building Competitive Edge 2008-2011 Safety and security 2007-2013 Serve - Innovative Services 2006-2010 SISU 2010 - Innovative Manufacture 2005-2009 Sustainable community 2007-2012 SymBio - Industrial Biotechnology 2006-2011 Tourism and Leisure Services 2006-2009 Ubicom - Embedded ICT 2007-2013 VAMOS - Value Added Mobile Solutions 2005-2010 Verso - Vertical Software Solutions 2006-2010 Workplace Development Programme Tykes


Tekes’ evaluation criteria for applications

High-quality, advanced technology and effective networking Project’s long-term effects, such as employment and potential

turnover and exports The enterprise projects to be funded are selected by evaluating

the business to be generated the technology, innovation and competence to be developed the resources available the cooperation to be developed and used the social and environmental well-being factors to be promoted the impact of Tekes funding and expert services

The public research projects to be funded are selected by evaluating

the technology and competence to be developed the cooperation to be developed and used the utilisation of results the resources available the social and environmental well-being factors to be promoted the impact of Tekes funding and expert services


Academy of Finland programmes Ongoing Finnish Academy programmes

Environment and Law, ENVLAW (2005-2008) Information Technology in Mechanical and Automation Engineering,

KITARA (2005-2009) Business Know-how, LIIKE2 (2006-2009) Neuroscience, NEURO (2006-2009) Nanoscience, FinNano (2006-2010) Sustainable Production and Products, KETJU (2006-2010) Nutrition, Food and Health, ELVIRA (2006-2010) Power in Finland, VALTA (2007-2010) Substance Abuse and Addictions, ADDIKTIO (2007-2010) The Future of Work and Well-being, WORK (2008-2011) Sustainable Energ, SusEn (2008-2011)

Open for application Responding to Public Health Challenges (SALVE) Ubiquitous computing and diversity of communication (MOTIVE)


Academy of Finland’s evaluation criteria for applications

Scientific quality and innovativeness of the research plan Competence of the applicant/research team Feasibility of the research plan Cooperation contacts for the research Significance of the research project for the promotion of

professional careers in research and for researcher training Depending on the research project, the significance of the research

project is also assessed in terms of society and business and industry. A starting point is that the project to be funded will benefit Finnish research, society or international cooperation.

The Academy also pays attention to that research projects aiming at a high target level and new breakthroughs involve a risk of failure. The aim is to be fully aware of the risks involved and, nevertheless, to provide an opportunity for scientific breakthroughs as well as to increase the renewal of science and research.


Sitra’s Programmes

Sitra currently focuses actively on five programmes:

Health Care Programme Food and Nutrition Programme ERA Energy Programme Growth Programme for the Mechanical

Industry


Strategic centres for science, technology and innovation I

Strategic centres for science, technology and innovation are new instruments

Coordinating research resources in Fields that are important to the future of Finnish society and business and industry.

The aim is to create a new, more efficient framework for collaboration between companies, universities, research organisations and sources of funding.

Companies, universities and research institutes will agree on a joint research plan. The plan will aim to meet the application needs for practical application by companies within a 5 to 10 year period.

In addition to shareholders, public funding organisations will commit themselves to providing funding for the centres in the long term. Strategic centres for science, technology and innovation


Strategic centres for science, technology and innovation II

Five strategic centres energy and the environment metal products and mechanical engineering the forest cluster health and well-being information and communication industry and services.

Tekes did bear the main responsibility for organising the establishment of the centres.

However, the actual establishment of the strategic centres has been the responsibility of the partners of the centre, i.e. companies, universities and research institutes.


Incentives for partnership

Finnish innovation framework: A strong emphasis on long term cooperation

and partnership between companies, researchers and funding organisations

Transition towards demand- and end-user-driven innovation

Renewal of innovation concepts

Evaluation criteria of Tekes and Academy of Finland for applications


Example: Regional networking with partners from Oulu in electronics and telecommunications programmes

DM 5862003-2004 Copyright © Tekes

Includes partners who participated in at least three projects in Tekes Electronics and Telecommunications technology programmes.

Lappeenranta University of Technology (Lappeenranta)

Salcomp Oy (Kemijärvi)

CCC (Oulu)

Sonera (Helsinki)

Nokia Mobile Phones (Oulu)National Semiconductor Finland Oy,former Fincitec Oy (Kemi)

University of Oulu (Oulu)

Efore Oy (Helsinki)

Projekti-Insinöörit Oy (Helsinki)

Cybelius Software Oy (Oulu)

Teleste (Turku)

Tampere University of Technology (Tampere)

Nokia Networks (Oulu)

ADC Telecommunications Oy (Oulu)

VTT, Technical ResearchCentre of Finland (Helsinki)

Helsinki University of Technology (Espoo)

JOT Automation Oy (Oulu)

Nokia Research Center (Helsinki)

VTT, Technical ResearchCentre of Finland (Oulu)

Extrabit Oy (Oulu)

ABB (Helsinki)

NetHawk Oy (Oulu)

Elektrobit Oy (Oulu)

Vaisala Oyj (Helsinki)

Polar Electro Oy (Oulu)

Filtronic LK Oy (Oulu)

Aspocomp Oy (Helsinki)

Elcoteq Network Oyj (Lohja)

Planar Systems Oy (Helsinki)Ultraprint Oy (Oulu)

Suunto Oy (Helsinki)

Picopak (Lohja)Nokia Mobile Phones (Salo)


Example: Regional networking with partners from Turku in electronics and telecommunications programmes


Includes partners who participated in at least three projects in Tekes Electronics and Telecommunications technology programmes.

Miratel Oy (Turku)

Nokia Multimedia Terminals (Turku)

Finnish Broadcasting Company (Helsinki)

Sonera (Helsinki)

Elisa Communications (Helsinki)

University of Oulu (Oulu)Nokia Research Center (Helsinki)

Tampere University of Technology (Tampere)

Helsinki University of Technology (Espoo)

Teleste (Turku)

Wallac Oy (Turku)

Satel Oy (Salo)

VTT (Helsinki)

ADC Telecommunications Oy (Oulu)

Filtronic LK Oy (Oulu)

Mariachi Oy (Turku)

VTT (Oulu)

ABB (Helsinki)

Nokia Mobile Phones (Tampere)

Nokia Networks (Tampere)


Regional Criteria and R&D&I Not used for funding offered on an competitive basis However R&D&I-activity seems to be important from

the standpoint of regional development SMEs are encouraged to develop their capability to apply

and utilize R&D&I funding (special funding for pre-R&D&I projects)

decisions on allocation of funding are taken at the regional level

Significant part of EU structural funds funding is used to R&D&I-purposes

decisions at the regional level Universities have certain tasks in enhancing for example

regional development Regional universities of applied sciences/Polytechnics

decisions at the regional level Locating goverment research institutes or their functions


Network of universities, polytechnics, publicresearch institutes and technology centres

in Finland


UniversityRegional university unit

PolytechnicPolytechnic regional unit

VTT, Technical ResearchCentre of Finland or otherpublic research instituteRegional unit of public sector research institute

Technology centre


Main financial incentives for the private sector

Directly through: Grants Loans Investment/Venture capital (directly or through

Venture Capital companies)

No indirect tax incentives or expenditures


Example on incentives: Tekes’ funding


R&D&I-funding and fiscal ceilings

Government spending limits are the ceiling Spending limits are ceiling for the Budget expenditures

over the entire electoral period Includes about ¾ of budget expenditure, also R&D&I-

expenditure According to the current Spending limits the basic

public R&D&I funding increases 80 MEUR during current electoral period (2007 – 2011)

The 4 % GDP-ratio is expressed aim but no direct mechanical link to scaling of budget

appropriations


Spending limits


Evaluation and budget process

Strong emphasis on evaluating programmes and pojects, however:

In the budget process evaluation results are usually referred only at the general level (and sometimes to legitimate proposals for additional funding)

Examples of epressis verbis referred evaluations:

Evaluation results of Centre of Expertise programme Evaluation of Finnish Innovation system

relates to the ongoing preparation of Finnish Innovation Strategy


How R&D&I-policy targets are set As a part of performance budgeting As a part of performance management

Performance management is an agreement-based interactive control model.

Its operational core is in the ability of the agreement parties (ministry and agency) to find the appropriate balance between the available resources and the results to be attained with them.

The basic idea of performance management is to balance resources and targets on the one hand and efficiency and quality on the other as well as possible and to ensure that the desired effects are cost-efficiently achieved.

Achievement of targets are controlled and reported as a part of Accountability


Basic performance criteria (true and fair information)

Policy effectiveness

Outputs and quality management

-goods and services

- service capacity and quality

Operational efficiency

-economy

- productivity

- profitability

- cost-equivalence

Human resource management

Outcome targets

Operational

performance

targets

Policy effectiveness: outcomes

How operations and finances have affected policy effectiveness

Operational results: outputs (which can be influenced through management) P

ERFO

RM

AN

CE

MANAGEM

ENT

ACCO

UN

TABILIT

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Impacts of evaluation results

Evaluation activities are an integral part of funding R&D&I-operation, however:

evaluation results seem to be under-utilized evaluation results seldom result to reassesment of

allocation of R&D&I-funding, specially at the level of ministries

evaluation results are sometimes even unuseful due to the lack of quality of evaluation or for example due to unclear or incomplete performance targets

Performance audit report 157/2008 of National Audit Office


Use of performance information in budgeting Different level of targets are set and examined:

social policy targets: changes in the state of society and the conditions of its members and the extent to which the set targets have been achieved (social effectiveness);

costs of achieving the social policy targets (cost effectiveness);

operating performance outputs, service capacity and the quality of outputs and

processes (outputs and quality management) economy, productivity and the cost effectiveness and

profitability of charged and jointly financed operations (operational efficiency)

personnel and job satisfaction, and information, expertise and renewal.

Above targets are set also for the R&D&I funding, however, there is no direct mechanical link between results achieved and allocation of funds

Mainlyat the level of Government and ministries

Mainlyat the level of agencies, e.g.Universitiesor institutes


The effect chain of government agencies

Policy effectiveness

OUTCOMES

Operational PROCESSES and their quality

RESOURCES

Appropriations, staff, intangible assets

OUTPUTS

Goods an services, service capacity of the agency

PER

FORM

AN

CE

MANAGEM

ENT

ACCO

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TABILIT

Y


Preliminary conclusions, how to perform better Inputs are already at a relatively high level More emphasis on outcomes

Significant amount of actors doesn’t necessarily mean significant results

New challenges (e.g. ageing or energy and climate issues) demand adaptability from the management of R&D&I-funding

Systemic approach More weight on utilizing evaluation information in

decision making, specially at central government level Widening the innovation concept, more emphasis e.g.

on services and social innovations Adjusting the innovation process to be more demand-

and customer-driven (“innovating together”)

funding of finnish r&d&i-policies 3.7.2008 juha majanen, ministerial adviser, budget...

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