Global success of Finnish business and economy requires strong home ecosystems and a strategic place in global value chains. Tekes has done and can do in the future to make Finnish companies globally competitive, meaning that the value created in Finland is captured in Finland and helps maintain a high standard of living, quality employment and social well-being.

1. Tekesin vaikuttavuusarviointi analysoi innovaatiotoiminnan ja Tekesin vaikuttavuutta Suomen elinkeinoelämään ja
kansantalouteen
Creating and capturing
value for Finnish
business and society
Finnish global
competitiveness ‘post-
Nokia requires a more
diverse economy
Alasdair Reid - Vesa Salminen - Jelena Angelis - Elina Griniece - Kimmo Halme - Julien
Ravet - David Regeczi
Competitiveness is a concept that is used and abused: it is defined in a myriad of ways
by economists; politicians promise to maintain ’national competitiveness and jobs’
while the media spin stories about the ups and downs of major firms. For the citizen,
competitiveness may seem like a threatening idea when their job is ’on the line’ due to
global market or technological trends. This study explored what Tekes has done and
can do in the future to make Finnish companies ’globally competitive’, meaning that the
value created in Finland is captured in Finland and helps maintain a high standard of
living, quality employment and social well-being.
Renewing the motors of the Finnish economy – business ecosystems
Since 2009, Finnish companies had to cope with asymmetric shocks in the form of the
loss of external demand for electronic and paper products, sectors that Finland in which
Finland is strongly specialised. Compared to other European countries, Finnish value
added is also much more concentrated in sectors related to the bioeconomy (forestry
and logging, paper, wood); as well as residential care (social, health, etc.).
Exports in electronics were particularly hit ‘post-Nokia’ and did not recover in the
following years unlike other sectors. The Finnish economy is dependent on a few large
companies and more generally has a weakly diversified export base. Such challenges are
not unique to Finland and external shocks are unavoidable, however, maintaining global
competitiveness depends on whether new business ecosystems are develop to replace
declining industries and can position themselves rapidly in foreign markets.
Several authors have drawn parallels with biological systems and proposed the concept
of eco-system (e.g. start-up ecosystem). The study used Autio & Thomas (2014)
definition of an innovation ecosystem as “a network of interconnected organisations,
organised around a focal firm or a platform, and incorporating both production and use
side participants, and focusing on the development of new value through innovation”
In this respect, while there have been some positive trends especially in service (digital,
etc.) sectors, turnover and employment in the manufacturing industry sector has
dropped sharply. To date, despite their promise, the new emerging ecosystems have
not been able to compensate the decreased exports (or jobs) of manufacturing.
How to improve global competitiveness in Finnish
business and industry?
Brief No. 3/2016
Impact Brief

2. Tekesin vaikuttavuusarviointi analysoi innovaatiotoiminnan ja Tekesin vaikuttavuutta Suomen elinkeinoelämään ja kansantalouteen
Finnish business success
requires strong ‘home’
ecosystems and a
strategic place in global
value chains
Local ecosystems, global reach - positioning Finnish businesses in global value chains
A review of internal and external drivers and barriers to Finnish businesses competing in
global markets was undertaken by the study. To examine these factors, the study
developed an ‘open innovation system’ framework (see diagram below) to structure the
analysis of key factors into ‘internal and external’ blocks. While Finnish policy-makers
can intervene more or less directly to improve internal factors, it is much more difficult
to exert an influence on global factors. The model was used to assess the overall Finnish
competitiveness (macro-level) but also four specific ‘business ecosystems’.
National economies and specific business ecosystems do not function in isolation, but
are open to global pressures and interactions. In particular, technology upgrading is
highly dependent on the extent to which key national businesses are positioned in
global value chains (GVC). Similarly, involvement in international R&D networks can
favour learning and adaptation. The ability of a country to attract foreign direct
investment, particularly in knowledge intensive activities or key players in GVC, depends
on how well it is able to foster new emerging high-value activities.
The study argues that global competitiveness should not be measured (only) in terms of
export growth but rather on the capacity to gain a strategic position in global value
chains. This raises the question of the extent to which policy interventions lead to not
only value creation but, in particular, ‘value capture’ in an economy.

3. Tekesin vaikuttavuusarviointi analysoi innovaatiotoiminnan ja Tekesin vaikuttavuutta Suomen elinkeinoelämään ja kansantalouteen
Tekes support is focused
on the bioeconomy,
cleantech, digital and
health priority areas
Tekes impact on global
competitiveness is
positive but is a long-
term investment
Four motors of future Finnish competitiveness – long term policy focus on ‘BCHD’
Finnish competitiveness policy has focused on four areas since the mid-2000s:
bioeconomy, cleantech, health and digitalisation. Tekes has dedicated significant
investments to help develop business ecosystems in these four target areas.
In terms of internal competitiveness factors, the study argues that three are
particularly problematic: limited internal demand, economic/export structure and the
regulatory/tax environment. In response, the direct interventions of Tekes are focused
on the renewal and diversification of the economic structure through targeted
programmes in the priority areas. Various Tekes programme seek to develop ‘upstream’
in the ‘policy value chain’ new ecosystems or foster new business models which can be
tested nationally (by the relatively sophisticated Finnish consumer, government
services, etc.), potentially stimulating demand for new products or services. The limited
internal demand is addressed more directly through the internationalisation activities
either embedded in specific Tekes programmes or as related downstream ‘policy value
chain’ services of other Team Finland agencies.
The assessment of external competitiveness factors underlined that Finnish businesses
are particularly sensitive to external factors and shocks. The sectoral trade patterns
(intermediate goods, declining trend in high-tech exports, etc.) means that external
shocks due to global demand or global value chain repositioning can have particularly
severe economic impacts. Another drag on competitiveness is that Finland performs,
surprisingly, poorly in attracting foreign investment in high-value added or technology
intensive (R&D functions, etc.) businesses or skilled individuals to pursue advanced
studies or careers. In response to these issues, Tekes, and Team Finland partners, have
given increasing emphasis to activities designed to anticipate such shocks, favour
market access and rapid internationalisation and attract key foreign investments.
The application of the ‘open innovation system’ model to analyse Finnish
competitiveness suggests that policies to ‘boost exports’, ‘accelerate start-ups’ or build
‘growth companies with global ambitions’ only succeed if rooted in a highly performing
national innovation system and the component business innovation ecosystems.
National and global competitiveness are two sides of the same coin.
Tekes support had an observable (short-term) impact on business performance
To assess the impact of Tekes support, a literature review for the four main priority
areas was carried out, an econometric analysis of data on companies which received
Tekes funding from 2010-15 in each priority area and interviews were conducted with
stakeholders and companies. For each priority area, a specific ecosystem that had
received significant support from Tekes was selected for a case study analysis, namely:
bio-based chemicals, smart grids, game industry and self-care and monitoring.
A positive impact on employment was observed for bioeconomy and health for the
period 2011-15. A positive effect was observed for bioeconomy, digital and health from
year one, but in the case of digital for the first year only. The impact on turnover is less
important with only bioeconomy recording a positive impact for the whole period. ICT
and health recorded a positive impact on turnover but this occurred after a time lag of a

4. Tekesin vaikuttavuusarviointi analysoi innovaatiotoiminnan ja Tekesin vaikuttavuutta Suomen elinkeinoelämään ja kansantalouteen
Global competitiveness
is a team game
year. The model did not allow to differentiate the year of impact for bioeconomy,
suggesting that the turnover effect is spread over time.
While the econometric findings should be treated with caution (given data limitations),
they are in line with programme evaluations’ findings for the priority areas. A common
observation is that impact on firm growth performance was limited (at least in the short
term) and that effects were observed more in terms of networking, technological
development and longer-term ‘ecosystem’ or value chain development (including via
the development of public-private partnerships).
Tekes has a distinct role in fostering the emergence of new business ecosystem but
long-term impact requires improved synergies between Team Finland agencies
For a new or emerging business ‘innovation ecosystem’ to achieve ‘global
competitiveness’ requires a multi-faceted and multi-actor approach. The main impact of
Tekes’s is through triggering and nurturing over a longer run period the emergence of
new technology based ecosystems that help restructure traditional sectors or develop
new high-value added activities.
Finnish companies continue to view Tekes’ main role as funding technological
development. Support for early-stage investment in technology solutions is critical, not
only in monetary terms but also because Tekes provides a quality label (‘proof of
concept’) in the eyes of (foreign) investors and partners.
Tekes is less effective in fostering collaboration or value chains linkages both nationally
and, particularly, internationally. Some initiatives including, the Tekes funded SHOKS,
have helped to structure value chain relations within Finland. However, the Finnish
ecosystems miss key competences (e.g. in industrial biotechnology) that requires
complementary investments or linkages with international partners.
The ecosystem cases underlined the significant role of larger or leading 'anchor
companies' in the creation of ecosystems and their evolution. Incumbent large firms
(e.g. in biofuels) may be critical for the development of new value chains but slow to
shift towards the new business models (e.g. due to cost of adapting to new processes).
The quality of interaction between such large or lead firms in ecosystems and
smaller/start-up companies is critical.
Across all four ecosystems, converting ‘national rising stars’ into ‘global players’ proved
challenging, with exceptions (e.g. games). The obstacles differ but common themes
included access to international market intelligence, regulatory differences/approval
(e.g. self-care, smart grids), early integration/positioning in global value chains, or
securing opportunities for piloting or testing products or ‘platforms’ in foreign markets.
A key lesson from the study is that to achieve global competitiveness, the business
ecosystems require tailored and diverse forms of support that often stretch beyond the
remit and resources of Tekes alone. This applies in terms of the development of the new
business models nationally (e.g. regulatory or policy changes lagging technology) as well
as internationally (e.g. attracting strategic investors, etc.).

5. Tekesin vaikuttavuusarviointi analysoi innovaatiotoiminnan ja Tekesin vaikuttavuutta Suomen elinkeinoelämään ja kansantalouteen
The challenge is to grow
Finnish business
ecosystems
internationally
Tailored support for ecosystems twinned with multi-agency interventions to secure
international success
The study team made six major proposals for re-orientating Tekes and Team Finland
support and enhance the impact on Finnish competitiveness:
· Tekes should focus on systemic impact, rather than individual ‘innovation
events’. Greater attention to developing the foundations for promising
ecosystems is required. This implies a systemic model where collaboration
between Tekes and other Team Finland agencies and stakeholders is enhanced
to ensure that Tekes funding or services are matched by actions on regulatory
or other enabling conditions, etc.
· The promotion of various ecosystems requires a different mix instruments and
flexible partnerships. For some ecosystems, this may require the active
construction of networks (in conjunction with other Team Finland operators),
while for more strongly networked ecosystems (e.g. gaming) the role may be
that of a 'background investor'.
· In parallel to funding for R&D projects, Tekes should sponsor coordination and
support, actions that map ecosystems or value chains (leading players,
technologies, skills, infrastructures, etc.), in Finland and internationally. Tekes
and Team Finland should ensure ecosystem companies can source investment
for pilot or demonstration actions, strategic foreign direct investment, organise
brokering and matchmaking events.
· The emergence of new ecosystems generates a discontinuity in existing market
and production structures, as well as traditional business practices. Tekes
should to strengthen cooperation between large/incumbent firms and firms
with new business models that are disruptors or enablers (e.g. digitalisation of
bioeconomy) in reconfiguring value chains. In this respect, new competition
based instruments (e.g. Challenge Finland) may be a promising model.
· More attention to attracting strategic foreign direct investment (either new
investment or through acquisitions) into emerging ecosystems. For example,
Ireland's industrial policy instead of concentrating on increasing national
companies 'organic growth', aims to attract high value foreign multinationals
and build an ecosystem around these players.
· The importance of developing strong synergies between ‘place-based’ (city or
regional) strategies and strengths (Berlin for digital health) and national
innovation and global competitiveness policies and agencies. Globally ‘visible’
cities within smaller countries (e.g. Copenhagen in Denmark) help attract not
only investment to more broadly dispersed business ecosystems, but also
attract talented and creative people. This may require a reflection on past
experience with programmes such as INKA or draw on smart specialisation
strategies at regional level to focus investment and international promotion.
More information:
Alasdair Reid, alasdair.reid@skynet.be;
Kimmo Halme, kimmo.halme@4front.fi;
Jari Hyvärinen, jari.hyvarinen@tekes.fi

6. Tekesin vaikuttavuusarviointi analysoi innovaatiotoiminnan ja Tekesin vaikuttavuutta Suomen elinkeinoelämään ja kansantalouteen