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Innovation Gives Finland A Firm Grasp on Its Future

Jura-Pekka Tolbanen uses his cell phone to take a picture from the top floor of the Jyvaskyla Science Park. Such research and development projects have helped remake Finland's economy.
Jura-Pekka Tolbanen uses his cell phone to take a picture from the top floor of the Jyvaskyla Science Park. Such research and development projects have helped remake Finland's economy. (Photos By Lucian Perkins -- The Washington Post)

Three Finnish institutions channel this money. One is a unique body called Tekes, the national technology agency. It supports both basic and applied research, granting about 40 percent of its funds to universities and other research institutions and 60 percent to businesses.

This year, according to Veli-Pekka Saarnivaara, the president of Tekes, the organization will give out nearly $540 million, or more than $10,000 for each Finnish citizen. A U.S. agency investing a comparable amount per capita would put $300 billion a year into American R&D.

Tekes is an entirely autonomous agency funded by the Finnish government. This "quite special" arrangement, as Saarnivaara put it, reflects one factor that sets Finland apart from many other industrial democracies -- Finns trust their government. Visitors from other countries who express admiration for Tekes tell Saarnivaara that such an operation would be impossible in their countries "because of the corruption," he said in an interview here.

The second source of the agency's independence is its reputation as a wise and discreet investor. For 20 years, Saarnivaara said, the agency has worked closely with private firms, helping them decide where to place their R&D bets, working collaboratively to identify markets and products, persuading Finnish universities and research organizations to collaborate with business.

"We are helping to plan R&D projects that we will then fund," he said. About a third of the projects Tekes funds fail completely, Saarnivaara said. He would like that percentage to be higher -- in other words, he would like to take more risks.

A second Finnish institution that supports the research and development efforts is Sitra, the Finnish National Fund for Research and Development, founded in 1967. Its budget is just a tenth that of Tekes, but its impact on Finnish business has been enormous. It acts as a venture capitalist, investing money earned by its own $750 million endowment in the start-ups and new ventures of established companies.

Sitra is run by Esko Aho, who was Finland's prime minister during the crisis years of the early 1990s and was nearly elected president in 2000.

Sitra's endowment came largely from a block of shares in Nokia that the government acquired in return for its support of the company's cell phone enterprise when it was in its infancy. Nokia was "a miracle," as Aho put it in an interview.

Since making a major commitment to telecommunications in the early 1990s, Nokia (a Sitra client itself) has grown into the world's leading cell phone maker. Its $35 billion in annual sales drives the Finnish economy.

Sitra, too, is politically autonomous. Revealingly, more than 90 percent of the companies in which Sitra has invested were previously supported by Tekes, an example of how Finland has become what Himanen and his co-author, Manuel Castells, a Spanish-born sociologist, call "a network society."

A third important source of R&D funding is the Finnish Academy of Science and Letters. Until Reijo Vihko became its president in 1996, it was a clubby organization that channeled research funds to established scientists and labs without much regard for how good they were. Vihko, a former medical professor, turned the academy upside down, according to several Finnish scientists.

"The main point was to concentrate on centers of excellence," Vihko said in an interview. That meant giving money to the best scientists with the most promising projects and cutting off others whose work wasn't getting anywhere. Many of the latter were prominent people with good connections in government and the news media, Vihko said. They orchestrated a lot of criticism of his changes.

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