Introduction: RDI roadmap and its objectives

The National Roadmap for Research, Development and Innovation, adopted by the Government in spring 2020, consists of a set of measures to develop the RDI operating environment. The roadmap provides guidelines for sustainable growth and wellbeing as well as for increasing the volume and the level of ambition of R&D activities. The goal is to increase R&D expenditure to 4% of GDP by 2030.

In addition to increasing the volume and quality of RDI activities, the roadmap measures will strengthen competence centres and ecosystems, increase cooperation between R&D actors and diversify the role of the public sector as a driver and user of innovation activities. The roadmap measures will raise competence levels, improve the international attractiveness of Finland’s RDI environment, and encourage companies to invest more in RDI activities in Finland.

The strategic development priorities of the RDI roadmap remain unchanged: competence, partnerships and public sector innovativeness. The roadmap measures supporting these priorities have been updated and measures already undertaken have been removed. New measures are also included. The RDI roadmap monitoring indicators are unchanged.

The measures in the updated roadmap are actions to be implemented or launched during this government term. They will support the roadmap’s objectives for 2030. A number of measures included in the RDI roadmap are expected to raise the level of R&D funding in the coming years.

The increase in public R&D funding has been examined by a parliamentary RDI working group, appointed by the Prime Minister’s Office, whose report will be published by the end of 2021. The working group has explored ways to strengthen commitment to a long-term increase in public research and development funding. In addition, the working group has assessed a permanent R&D tax incentive as part of the overall solution. The working group has also established key principles for the development of the RDI system, namely predictability and long-term vision, leverage, comprehensiveness, scientific freedom and high quality research and education, effectiveness, competitiveness, cooperation, internationalisation, recognition of global challenges, and technology neutrality.

RDI systems on different continents have responded flexibly to the COVID-19 crisis. Research projects to develop COVID-19 vaccines have been launched in record time. The resulting solutions are based on decades of research and development work carried out over decades. The crisis has also accelerated the use of digital tools and strengthened international cooperation and public-private partnerships in coronavirus-related fields. The crisis has hastened the transition to more open science and innovation.

The exceptional situation has affected different fields of research in different ways. The pandemic has delayed research as experimental activities become more difficult. Gaps in production and innovation capabilities have arisen in the worst affected sectors.

The pandemic and its effects are accelerating the need to develop socially sustainable solutions. Investments in research and development in accordance with Finland’s Recovery and Resilience Plan will support, in particular, the implementation of the green transition and digitalisation, strengthen the shared use of research infrastructures and increase R&D intensity to boost growth over the longer term. 

The roadmap and its measures will be updated periodically in consultation with RDI actors. The Ministerial Working Group on Competence, Education, Culture and Innovation decided in autumn 2020 that the RDI roadmap would be updated during 2021. This first update of the RDI roadmap was coordinated by the Ministry of Education and Culture and the Ministry of Economic Affairs and Employment. The update takes into account the changes that have taken place in the operating environment, feedback from RDI actors and other stakeholders, as well as reports and reviews by working groups to develop the RDI system.

The Research and Innovation Council discussed the update of the RDI roadmap on 17 November 2021. The Ministerial Working Group on Competence, Education, Culture and Innovation approved the RDI roadmap on 14 December 2021. The measures in the updated roadmap will be monitored regularly and implementation reported to the Ministerial Working Group on Competence, Education, Culture and Innovation.

Current situation of RDI system

Development of R&D expenditure

R&D expenditure indicates the intensity with which a country is building wellbeing based on research activities and high technology. Investment in research and development activities is growing worldwide. The United States remains the country that invests most in R&D. China is rising strongly. In Asia more broadly, business enterprise R&D investment is significant. By international standards, Finland’s R&D expenditure is still at a good level. In contrast with peer countries, however, Finland’s R&D expenditure is trending downward (see Figure 1 below). In the period 2014–2018, the decline in Finland’s R&D expenditure-to-GDP ratio was second largest in the world. (Shneegans et al. 2021). Finland has lagged behind the level of the best in the world.

Figure 1. Development of Finland’s R&D expenditure in a global comparison. By international standards, Finland still invests relatively heavily in R&D activities, but the development of Finland’s R&D expenditure-to-GDP ratio was among the weakest of the EU countries over the last decade. Source: OECD Main Science and Technology Indicators.

Development of Finland’s R&D expenditure in a global comparison. By international standards, Finland still invests relatively heavily in R&D activities, but the development of Finland’s R&D expenditure-to-GDP ratio was among the weakest of the EU countries over the last decade.

In recent years, Finland’s R&D expenditure-to-GDP ratio has risen slightly. Business enterprise R&D expenditure has grown since 2017, but growth is not sufficient to achieve the goal of 4% R&D intensity by 2030. (Ali-Yrkkö et al. 2021, Statistics Finland 2021). Over the past ten years, Finland’s GDP has also lagged behind the development of the other Nordic countries. A major reason for this is that labour productivity has increased in Finland only modestly since the 2008 financial crisis.

The public sector accounts for around one third and the private sector for around two thirds of Finland’s R&D expenditure. Two thirds of public sector R&D funding goes to the higher education sector, one fifth to the public sector (including private non-profit activities) and around 12% to companies. According to the General Government Fiscal Plan 2022–2025, the grant authorisations of the Academy of Finland and Business Finland, in particular, will decrease in central government R&D funding in 2023 (see Figure 2 below). The decrease is mainly due to the ending of non-recurring items such as the Recovery and Resilience Facility (RRF) and other fixed-term funding under the Government Programme as well as a reduction in proceeds from profits on state-owned gambling activities.

RDI activities are long-term and their results are seen with a delay. The outcomes of investments involve significant risks, which can be reduced through public RDI subsidies. In encouraging the RDI activities of companies, a credible prospect of long-term commitment is required from public funding. The unpredictability of public R&D funding is one of the weaknesses of Finland’s RDI system. In Finland, the share of business enterprise R&D expenditure accounted for by central government funding is below the averages of EU and OECD countries (OECD 2021: Main Science and Technology Indicators).

Figure 2. Estimated development of government R&D funding in the General Government Fiscal Plan period 2022–2025 and the 4% target path1. Source: Statistics Finland: Central government funding for R&D activities, Statistics Finland: R&D funding in the State budget, BP 2022, GGFP 2022–2025.

Estimated development of government R&D funding in the General Government Fiscal Plan period 2022–2025 and the 4% target path.

Intensified international competition further emphasises the importance of the quality of RDI activities and the need to develop the RDI operating environment. At the turn of the millennium, Finland regularly ranked at or near the top in international competitiveness comparisons and its innovation system was considered to be very advanced. 

The importance of cooperation will be further underlined in the future, both nationally and internationally. Cooperation between companies and research organisations has traditionally been strong in Finland. In a Eurostat comparison, Finland was ranked 7th place in joint publications. Companies’ direct funding to universities has been declining for the past 10 years (Husso & Moilanen 2021). Changes in the operating environment and the solving of systemic problems require wide-ranging cross-sectoral cooperation and interdisciplinarity. Universities and universities of applied sciences and other research organisations involved in international cooperation, and companies investing in RDI activities have a key role in solving societal challenges. They act as producers, disseminators and appliers of knowledge as well as developers of new technologies. Research and innovation policy is central to solving serious problems in society and promoting sustainable growth and wellbeing. 

Education, competence and research

Competent personnel are a vital factor in successful R&D and innovation activities. Finland’s education system is comprehensive and in many ways of high quality. Nearly everyone completes basic education and learning outcomes are still at a good level by international standards. The number of intake places in higher education is approximately one and a half times the cohort size, and demand for education is high. However, the system does not in all respects function as expected by society and individuals or produce the desired results. The learning outcomes of basic education have deteriorated and educational equality has not progressed. Significantly fewer young adults (aged 25–34) in Finland complete a higher education degree than in peer countries. The vision and roadmap for higher education and research in 2030 set as goal that at least half of the young adults will complete a higher education degree by the end of the decade (Ministry of Education and Culture 2017; also Prime Minister Marin’s Government Programme). Reaching this goal is a key prerequisite for achieving an adequate number of experts in R&D and means that the basic funding of universities and universities of applied sciences will make a significant contribution to overall success in realising the goal.

Lack of availability of competent labour is a significant barrier to growth. Finland has the largest shortage of highly educated workers in the OECD countries. In order to achieve an employment rate of 75%, Finland needs more than 100,000 new workers by 2025 (OECD 2021: Skills for Jobs Database). The number of foreign students and RDI professionals settling in Finland does not currently meet the targets. At present, around half of the international students who have completed a higher education degree in Finland are employed in Finland. Through their activities, universities, universities of applied sciences, research institutes and regional actors integrate international experts into Finnish society and working life in cooperation with the business community and public sector employers. In the future, it will be necessary to pay further attention to the factors promoting international students who have completed a high education degree in Finland to remain in the country.

The RDI funding of Finnish universities and universities of applied sciences and the human resources of the research community have remained fairly stable in recent years. In contrast, the R&D person-years of government research institutes have been declining for a long time. Of the sources of funding for universities and universities of applied sciences, Business Finland’s funding has decreased somewhat and the Academy of Finland’s share has correspondingly increased. The publishing activities of researchers operating in Finland are of good quality and quantity by European standards. In terms of the number of most cited publications, however, Finland lags behind the world’s leading countries. Finland has only a relatively small number of fields in which the level of research is among the world’s best. (State of Scientific Research in Finland 2021). Finland must aim for the top globally, which will require the effective use of the available resources. Finland needs strong and internationally attractive centres of excellence.

It should also be noted that the academic careers of many researchers are fragmented, often as a result of research funding. For example, during doctoral thesis research, 72% of researchers had had two or more sources of funding – employment, a grant or similar (Kokkonen et al. 2018). The fragmentation and unpredictability of research funding has a substantial impact on the attractiveness of a research career in Finland – for both potential young domestic and international experts. The importance of this perspective is emphasised by the fact that the availability of competent RDI personnel is a key factor in business enterprise RDI investments (see Ali-Yrkkö et al. 2021). 

Business enterprise R&D activities

In Finland, R&D activities depend on a narrow group of companies, and large business enterprises are the driving forces behind the business community’s R&D. Almost half of large business enterprises are engaged in R&D activities, compared with just over 7% of SMEs. Business enterprises with more than 500 employees account for more than half of business enterprise R&D expenditure (52% in 2020), but medium-sized enterprises (50–249 employees) have seen the strongest growth (48% in 2016–2020) in relative terms.

Three sectors account for 60% of business enterprise R&D expenditure: electronics, computers and electrical equipment (30%); information and communication (18%); other machinery and equipment (12%). After a decline of just under ten years, business enterprise R&D expenditure turned upwards and grew by 19% in 2016–2020 (at current prices). In the service sectors, growth has been higher (36% in 2016–2020) than in industry on average (9.1%). The strongest growth has been in knowledge-intensive service sectors, such as information and communication (44%) and research and development (60%). In industry other than the electrical and electronic industry, R&D expenditure has also started to grow since 2016 (21.5%).

In 2020, 55% of Business Finland’s R&D funding for companies went to service sectors and 38% to industrial sectors. The sectors receiving most of Business Finland’s R&D funding are information and communications (32%), electronics, computers and electrical equipment (11.5%), research and development (8.4%), other machinery and equipment (7.5%), and architectural and other services (7.6%). (Statistics Finland: Research and development).

Among the broader longer-term challenges are to diversify the business structure in a more knowledge- and research-intensive direction, to identify growth companies and to increase the RDI capabilities of the SME sector.

The activities of companies and their value chains have internationalised strongly in recent decades. This internationalisation has also extended to the R&D activities of companies. Even if the R&D expenditure of Finnish-origin companies increases, the growth will not necessarily be in Finland. The most important location factors for R&D activities are the availability of R&D personnel and the proximity of a company’s other units and customers. The most significant factors in the location of R&D abroad have been the cost and availability of R&D personnel and R&D subsidies. Sweden, the Baltic countries and Germany are Finland’s strongest competitors as R&D location countries. (Ali-Yrkkö et al. 2021)

Overall, Finland’s strengths continue to be a relatively high-quality RDI system, the general cost level of RDI activities, a strong knowledge base in a few areas of expertise and sectors, and a strong and developing startup culture.

1Central government R&D funding for 2023–25 has been estimated on the basis of General Government Fiscal Plan 2022–25 figures, assuming that the share of R&D funding from central government funding to universities and universities of applied sciences and from the operating expenditure of research institutes remains the same on average in 2021–22. Due to an increase in intake places, in universities and universities of applied sciences investments will be transferred to the education side, so the share of funding allocated to R&D activities may be lower than estimated. The cancellation of cuts in proceeds going to science is not included in the estimates (Academy of Finland authorisations, funding for universities). The figures for 2021–2023 include a total of approximately EUR 360 million of RRF grant authorisations from the Academy of Finland and Business Finland.

The figures for 2020 do not include coronavirus grants (EUR 980 million) disbursed via Business Finland. The figures for 2021 include EUR 200 million of Business Finland loan authorisations transferred from 2020, most of which relate to disruption loans.