Explaining Technical Change in a Small Country The Finnish National Innovation System
ETLA - The Research Institute of the Finnish Economy Series B84 The Research Institute ofthe Finnish Economy (ETLA) was founded in 1946 to conduct research in the fields of economics, business and social policy designed to serve financial and economic-policy decision making. At present the members ofthe association sponsoring ETLA are the central association of industry and employers, major banks and the central association ofinsurance companies. ETLA also conducts special studies financed from sources outside the association, for which a separate unit has been established. ETLA publishes monographs, reviews and forecasts in several different series. Address: ETLA, Lonnrotinkatu 4 B, SF-00l20 Helsinki, Finland Telephone 359-0-609900 Telefax 358-0-601 753
Synnove Vuori Pentti Vuorinen (Eds.) Explaining Technical Change in a Small Country The Finnish National Innovation System With 30 Figures Physica-Verlag in Association with ETLA, Helsinki
Synnove Vuori Pentti Vuorinen ETLA The Research Institute of the Finnish Economy Lonnrotinkatu 4 B SF-00120 Helsinki Finland ISBN 978-3-7908-0760-8 DOI 10.1007/978-3-642-95913-4 ISBN 978-3-642-95913-4 (ebook) This work is subject to copyright. All rights are reserved, whether the whole or part of the material is concerned, specifically the rights oftranslation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in other ways, and storage in data banks. Duplication ofthis publication or parts thereof is only permitted under the provisions of the German Copyright Law ofseptember9, 1965, in its version ofjune 24,1985, and a copyright fee must always be paid. Violations fall under the prosecution act ofthe German Copyright Law. Physica-Verlag Heidelberg 1994 The use of registered names, trademarks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. 88/7130-543210 - Printed on acid-free paper
FOREWORD The idea to produce this book was based on the observation that technical change in small countries has been rather well described, but not very well explained. In addition, it is based on recognising that technical change is produced by the interaction of a large number of technical, economic, social and institutional factors. It was thus quite natural to take the concept of national innovation systems, as formulated by Bengt-Ake Lundvall and used by several other researchers, as a key concept for the book. We wanted to take Finland as an illustration of more general developments, but also to include international comparisons to allow more general conclusions to be drawn on the basis of the material to be produced. We thus invited several researchers and experts of various fields to give their views on why developments have turned out as they have, and to form a coherent picture of where we are now and where we are heading. Fortunately, we succeeded in getting a well-balanced group of prominent experts to take part in this project. We would like to thank the authors warmly for their contributions. Most of the papers in this volume were presented at a seminar held on February 2, 1993 in Helsinki. That occasion produced a lively, and, in our view, fruitful discussion about matters that are highly relevant for technical change. The participants were, even though representing various disciplines and lines of thinking, really discussing the same problems and issues, not just presenting their own views. For this we would like to thank the authors and other seminar participants. We are indebted to several persons for help in producing this book. Pekka Yla Anttila was one of the initiators of the project, and an informal group consisting of Markus Koskenlinna, Tarmo Lemola, Raimo Lovio, Erkki Ormala and Pekka Yla-Anttila, in addition to the editors, discussed the goals and contents that would be relevant for it. Timo Lepisto translated one of the chapters, and Kristina Puranen and John Rogers checked and improved the language of the others. Maarit Sdynevirta assisted with data and editing tasks, and the figures were drawn by Arja Selvinen. Tuula Ratapalo and Elina Mikkela produced the final layout of the book. Thanks are also due to Mariti Maenpaa for useful comments at the abovementioned seminar. Financial support from The Technology Development Centre (I'EKES) is gratefully acknowledged. Helsinki, December 1993 Synnove Vuori Pentti Vuorinen
Contents 1 Outlines of the Finnish Innovation System: The Institutional Setup and Performance... 1 Synnove Vuori and Pentti Vuorinen 1.1 Posing the Question.... 1.1.1 Technical Change and the Size of the Economy... 1 1.1.2 National System of Innovation and Production... 2 1.1.3 The Aim of the Book: Explaining Finnish Technological Development.......................................................... 3 1.2 The Institutional Set-Up for Technical Change in Finland... 4 1.2.1 Production Structure and Technological Development... 4 1.2.2 Infrastructure and Institutional Support................................ 9 1.2.3 Firm Behaviour: Technology Management, Linkages and Labour Relations................................................ 13 1.2.4 Technology in National Development and Attitudes... 18 1.2.5 Policy for Developing Technology... 20 1.3 Technological Performance of the Finnish Innovation System... 23 1.3.1 Research Efforts and the Finnish Manufacturing Industry in International Comparison... 23 1.3.2 Industrial Growth and Results of Research Efforts: Measures of Technological Advance... 32 1.4 Concluding Remarks... 36 1.4.1 The End of an Era?... 37 References... 39
VIII 2 Pecularities of Social and Technological Change in the Finnish Society...... 43 Erik Allardt 2.1 The Multidimensionality of Modernization... 43 2.2 The Decline of Political Mobilization... 45 2.3 The Development of the Web of Interest Organizations... 46 2.4 The Rapid and Ruptuos Changes in the Occupational Structure... 47 2.5 Problems of a Frozen Party System... 49 2.6 The Rigidity of the Web of Interest Organizations... 50 2.7 The Indiscriminate Urge for Innovations... 53 References... 55 3 The Social Infrastructure of Innovation in Finland... 57 Antti Kasvio 3.1 From Technology-Oriented Studies Towards Comparative Analyses of National Systems of Innovation... 57 3.2 Finland as a Special Case Among the Nordic Countries... 59 3.3 Industrial Relations in Finland... 62 3.4 Policies of New Technology in Finnish Enterprises... 64 3.5 The Innovative Potential of Finnish Cultures of Work... 65 3.6 Towards a New Era of Industrial Development... 66 3.7 Finland at a Turning Point... 67 3.8 The Need for Radical Innovations... 68 3.9 Finland as Part of the Baltic Sea Region... 70 3.10 Summary: Will the Nordic Democracies Retain their Competitive Advantages?... 71 References... 72 4 Growth and Technical Change in Finland: The Role of Collective Sharing of Economic Risks... 79 Vesa Kanniainen 4.1 Introduction... 79 4.1.1 Historical Overview... 79
IX 4.1.2 The Questions to be Addressed... 80 4.2 Some Stylized Facts of the Finnish Economy, 1970-1990... 82 4.2.1 Macro Development and Collective Risk Insurance... 82 4.2.2 Finnish R&D and Productivity: Evaluation... 90 4.3 Some Lessons from the Theory of Economic Growth... 95 4.3.1 Growth: International Evidence... 95 4.3.2 Theory of Economic Growth... ;... 96 4.3.3 What Determines R&D Incentives?... 99 4.4 Conclusion... 99 References... 100 5 The Role of Firms in Technological Change - A Company View... 103 Yrjo Pessi 5.1 Introduction... 103 5.2 Ownership and Company... 104 5.3 Company Culture... 106 5.4 Cooperation for Information Technology Diffusion... 106 5.5 Some Business Strategies................................ 107 5.6 Company Development and the Market... 108 5.7 Management and R&D... 109 5.8 The Importance of Becoming International... 111 5.9 Venture Capital Investment... 112 5.10 General Conditions for Industrial Activity... 113 5.11 Conclusions........................................................ 113 References... 114 6 Comparing National Systems of Innovation. The Case of Finland, Denmark and Sweden... 116 Birgitte Gregersen, Bj0rn Johnson and Arne Kristensen 6.1 Methodological Considerations..................................... 117 6.1.1 How Can National Systems of Innovation Be Compared? - A General Comparative Model... 117 6.1.2 Some Specifications of the Model... 119
x 6.2 Comparing Denmark, Finland and Sweden, Some Points of Departure... 123 6.2.1 The Environment of the National System of Innovation... 123 6.2.2 Common Institutional Preconditions for Interactive Learning... 124 6.2.3 Common Structural Preconditions.................................. 124 6.3 Comparison of Economic Structure... 125 6.3.1 Resource-Based Development Blocks... 127 6.3.2 'Engineering'....................................................... 131 6.3.3 'New Blocks'... 132 6.3.4 Firm Size... 133 6.4 Comparison of Institutional Set-up... 135 6.4.1 Formal Institutions... 135 6.4.2 Informal Institutions... '"..,........................ 140 6.5 Comparison of Innovation Policies... 143 6.6 Comparison of 'Performance'... 145 6.6.1 Measurement of the Immediate Performance of the Nordic National Systems ofinnovation... 145 6.6.2 Comparison of Ultimate Performance... 149 6.7 Conclusion...,.............. 153 References... 154 Appendix 1. Development Blocks... 157 7 Technological Systems and Economic Growth: Comparing Finland, Sweden, Japan, and the United States... 159 Bo Carlsson 7.1 Introduction...,.................... 159 7.2 International Trade Performance... 159 7.3 Industrial Structure and Performance... 163 7.4 Research and Development......................................... 168 7.5 Patenting Activity... 170 7.6 Technological Systems... 171 7.6.1 Dimensions of Technological Systems... 172
XI 7.6.2 Characteristics of Technological Systems: Results of Four Swedish Case Studies... 174 7.6.3 International Comparison of Technological Systems................ 176 7.7 Conclusion... 180 References... 181 8 Characteristics of Technology Policy in Finland... 184 Tarmo Lemola 8.1 Introduction........................... 184 8.2 The Development Phases of Finnish Technology Policy... 185 8.3 Foundations of Technology Policy... 188 8.4 Quantitative Possibilities of Technology Policy... 189 8.5 The Impact of Technology Policy on the Structural Development of Finnish Industry................................... 193 8.6 Technology Policy as the Creator of a Favourable Atmosphere... 196 8.7 Summary... 197 References... 198 9 Comment on Tarmo Lemola's Article...... "... 201 David Roessner References... 204 10 The Rigidities and Potential of a National Innovation System... '"... 206 Synnove Vuori and Pentti Vuorinen 10.1 What Was This All About?... 206 10.2 Dimensions and Problems of the Finnish Development............. 207 10.3 The NSI Concept... 210 10.4 Further Issues to Study, National and Conceptual... 212 10.5 National, Regional or International Systems of Innovation?... 213 References... 215