Version: Final Date: 19 August 2011

Regional Innovation Monitor

Regional Innovation Report (Eastern Finland/Itä-Suomi)

To the European Commission Enterprise and Industry Directorate-General Directorate D – Industrial Innovation and Mobility Industries

Kimmo Viljamaa

Henri Lahtinen

Advansis

www.technopolis-group.com

PREFACE The Regional Innovation Monitor (RIM)1 is an initiative of the European Commission's Directorate General for Enterprise and Industry, which has the objective to describe and analyse innovation policy trends across EU regions. RIM analysis is based on methodologies developed in the context of the INNO-Policy Trendchart which covers innovation policies at national level as part of the PRO INNO Europe initiative. The overarching objective of this project is to enhance the competitiveness of European regions through increasing the effectiveness of their innovation policies and strategies. The specific objective of the RIM is to enhance the scope and quality of policy assessment by providing policy-makers, other innovation stakeholders with the analytical framework and tools for evaluating the strengths and weaknesses of regional policies and regional innovation systems. RIM covers EU-20 Member States: Austria, Belgium, Bulgaria, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, the Netherlands, Poland, Portugal, Romania, Slovakia, Spain, Sweden and the United Kingdom. This means that RIM will not concentrate on Member States where the Nomenclature of territorial units for statistics NUTS 1 and 2 levels are identical with the entire country (Estonia, Latvia, and Lithuania), Malta which only has NUTS 3 regions, Slovenia which has a national innovation policy or Cyprus and Luxembourg which are countries without NUTS regions. The main aim of 50 regional reports is to provide a description and analysis of contemporary developments of regional innovation policy, taking into account the specific context of the region as well as general trends. All regional innovation reports are produced in a standardised way using a common methodological and conceptual framework, in order to allow for horizontal analysis, with a view to preparing the Annual EU Regional Innovation Monitor reports. European Commission official responsible for the project is Alberto Licciardello ([email protected]). The present report was prepared by Kimmo Viljamaa ([email protected]). The contents and views expressed in this report do not necessarily reflect the opinions or policies of the Member States or the European Commission. Copyright of the document belongs to the European Commission. Neither the European Commission, nor any person acting on its behalf, may be held responsible for the use to which information contained in this document may be put, or for any errors which, despite careful preparation and checking, may appear.

1 http://www.rim-europa.eu

Table of Contents

Executive Summary i 1. Main Trends and Challenges in the Regional Innovation System 1 1.1 Recent trends in regional economic performance 1 1.2 Recent trends in regional innovation performance 2 1.3 Identified challenges 3 2. Innovation Policy Governance 5 2.1 Degree of institutional autonomy 5 2.2 Institutional-set up, co-ordination and implementation mechanisms 5 2.3 Availability and use of policy intelligence tools 8 2.4 Key challenges and opportunities 9 3. Innovation Policy Instruments and Orientations 11 3.1 The regional innovation policy mix 11 3.2 Appraisal of regional innovation policies 14 3.3 Good practice case 15 3.4 Portfolio of innovation support measures 15 3.5 Towards smart specialisation policies 17 3.6 Possible future orientations and opportunities 18

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Appendices

Appendix A Bibliography ...... 19 Appendix B Stakeholders consulted ...... 20 Appendix C RIM Repository information...... 21 Appendix D Explanation of factors of Innovation Performance, Governance and Policy ...... 22 Appendix E Statistical data ...... 26 Appendix F RIM survey responses ...... 27

Figures

Figure 1-1 Economic and innovation performance indicators for Itä-Suomi ...... 3 Figure 2-1 Governance, policy, and innovation performance factor scores for Itä- Suomi...... 9

Tables

Table 3-1 Existing regional innovation support measures...... 13

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Executive Summary 1. Introduction: Main recent trends in the Regional Innovation System Itä-Suomi is one of the structurally more challenged regions in Finland. The per capita GDP in the region was €22,100 in 2007, 75% of the Finnish average and 88% of the EU average. The average annual real growth rate of GDP in Itä-Suomi between 2000 and 2007 was only 2.1%, 86% of the EU average. The region has suffered from high unemployment for a long time. Although unemployment has fallen in the 2000s, the unemployment rate, at 10.9% (2009), remains still above the EU27 average (7%). Ageing population and outmigration pose challenges to the economic performance of the region. The large contributions of agriculture (157% of the EU27 average) and public services (121%) in the economic structure are noteworthy. Despite its rather poor economic performance, Itä-Suomi has a lot of potential in terms of knowledge assets. The region has a rather high share of young people with a tertiary education and the share of people involved in life-long learning is also well above the EU average (206%). The innovation performance in the region has also been relatively good during recent years. Although the gross expenditure on R&D (GERD) was only 1.56% of GDP in 2006 (84% of the EU average) the GERD growth rate (6.7% between 2000 and 2007) has been significantly higher (159%) than in the EU as a whole. The proportion of SMEs innovating in-house has grown and is well above that of the EU. The innovative SMEs are also widely collaborating with others. 2. Major innovation challenges and policy responses The following challenges have been identified as the most important, based on the analysis made for the ERDF programme 2007-2013, Itä-Suomi Programme, Itä-Suomi Innovation Strategy and expert interviews. Challenge 1: Retaining educated workforce A high level of tertiary education can be considered as a strength of the region, and the general level of education of young people is quite good. The higher education Eastern Finland University (formed from a merger of two universities) provides a mix of education in several fields, many of which are relevant to the regional economy. The university is supported by four polytechnics, which are relatively tightly connected to the region in terms of focus and various forms of interaction with the government and the private sector. The biggest challenge in terms of education is to retain the educated workforce in the region (Puhakka et al., 2009). Challenge 2: Strengthening and focusing private sector innovation One of the key challenges in the region is the low level of business R&D, 40.6 % compared with EU27 average of nearly 64 % or the Finnish average of over 74 %. Although there are a few key companies active in the global market, on the whole the level of business innovation is well below that of other regions in Finland. This is partly explained by the industrial structure of the region, which is still quite concentrated on natural resources and agriculture. The level of patenting is also relatively low. The extent of expertise in key technological areas needs to be increased if a critical mass for R&D is to be reached. There is also a need to further support innovation in the private sector. There have been many initiatives to set up regionally networked clusters of expertise in the region, and while they have produced quite good results these initiatives have not boosted private sector innovation to an adequate extent.

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Continuous efforts are clearly needed to support innovation in SMEs using a broad based approach supporting innovation in organisational, market and process innovation as well as technological R&D. Challenge 3: Ageing population in a low population density area Ageing presents challenges for innovation and for the regional economy as a whole, but particularly to services, both public and private. The need for innovation is emphasised by the low population density in the region, which makes efficient service provision a challenge. There are several initiatives supporting the development of public services and information society in the region, which could be further developed. 3. Innovation policy governance There are no formal regional organisations covering the whole of Itä-Suomi related to innovation policy. At the regional (NUTS 3) level, regional councils are responsible for regional development, which incorporates innovation policy. Regional innovation policies are designed co-operatively by the regional councils, the Centres for Economic Development, Transport and the Environment (ELY-centres) (responsible for regional implementation and development tasks of the state administration), and other stakeholders, especially the city governments, universities, technology centres and other intermediary organisations such as chambers of commerce. Furthermore, many sub-regions have their own economic development policies that also cover aspects of innovation. Regions have a relatively high degree of autonomy in the design and implementation of regional policies, such as the Regional Cohesion and Competitiveness Programme. The regional centres funded by the Centre of Expertise Programmes (OSKE) design their own aims and measures, and the ERDF programmes are designed and implemented at the regional level. However, the regional authorities have relatively little autonomy over the allocation of government funding. Municipalities do have considerable overall budgetary autonomy, but in practice much of their support for innovation is in the form of co- financing projects supported by ERDF, ESF and national programmes. Local strategies and measures capture specific needs and opportunities better than centralised processes, although it is not certain that current co-ordination is efficient enough to provide good results in a relatively sparsely populated region with limited human and financial resources. Local policymakers implement innovation policy using several different EU, national and regional policy instruments. Although this multi- level approach provides opportunities to better cater for the local specific development needs, the institutional setup poses many challenges, with a danger of fragmentation from the allocation of resources across a broad range of areas, many of which have inadequate critical mass. 4. Conclusions: future actions and opportunities for innovation policy Regional innovation policy has been pursued actively in Itä-Suomi over the last 10-15 years. Innovation policy has been more closely linked with regional policy and structural funds than in other regions, to some extent reflecting the less developed research infrastructure and low private R&D expenditure. Sub-regions in Itä-Suomi have tried to find a more focused, innovation-oriented approach to regional development by increasing cooperation and joint policy design. But the institutional setup for innovation policy is still fragmented, involving policy design and implementation at many regional levels and with diverse stakeholders. Regional innovation policy is also financed largely by various national and EU-policy instruments. This leads to a complex system which, while providing opportunities for appropriate solutions to local problems, may cause problems for a region seeking to specialise, given its limited resources.

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Smart specialisation appears to provide opportunities, given that there are a few strong emerging fields (e.g. bio energy, environment, health and welfare) that have the potential to find global market niches, as well as addressing societal challenges.

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1. Main Trends and Challenges in the Regional Innovation System

1.1 Recent trends in regional economic performance In terms of economic performance, the Itä-Suomi region does not rank highly among the Finnish regions. The level of per capita GDP reached €22,100 in 2007, 75% of the Finnish average and 88% of the EU average. The average annual real growth rate of GDP in Itä-Suomi between 2000 and 2007 was only 2.1 %, 86% of the EU average and much lower than the growth rate in Finland as a whole (3.46%).2 Unemployment has been a persistent problem in the region and the unemployment rate remains well above the EU27 average of 7%. In the Itä-Suomi region the unemployment rate was 10.9 % in 2009, while the employment rate was 61.9%. The former figure was the highest among the Finnish regions whereas the latter was the lowest. The situation has improved since 2000, when the figures were alarmingly 14.1 % and 58.8 % respectively. The effects of the recession at the beginning of 1990s were still visible at the turn of the new millennium. Ageing of the population is also a challenge. Younger people tend to migrate to other regions with more opportunities for education and work, leaving the older generations behind. This is illustrated by the size of the economically active population (head count) in the region, which was 300,000 in 2008, around 46% of the population, representing 90 per cent of the EU27 average. Unemployment problems date from the 1990 recession, which hit the region hard, and are exacerbated by structural change. The region has not fully kept up with the shift from an industrial economy to a knowledge society, and several local companies have issues with productivity and international competitiveness. The knowledge base of Itä- Suomi has been built on vast natural resources (various minerals and wood), and needs to be updated to meet the needs of the information society. On the other hand natural minerals discovered recently in the region could stimulate the local economy, create jobs and increase the demand for various services. New and better services are required by the growing numbers of tourists to the Itä-Suomi region from Russia. Tourism is one of the most promising drivers of growth in the region. About 48% of the economically active population is female, which is 103% of the EU average. The share of economically active population with at least upper secondary education (in total) in Itä-Suomi was 81% in 2008, 108% of the EU27 average. The share of the economically active population with tertiary education (30%) outperforms the equivalent EU average by 115 %. Business investment (Gross Fixed Capital Formation) in Itä-Suomi was €2582m in 2004 (15% of GDP), an increase of 47% from 1995, but only 70.1% of the EU27 average. The share of employment in agriculture, hunting, forestry and fishing was 8.8% in 2007 in Itä-Suomi, 157 % of the EU27 average. The share of employment in industry (including construction) was 24.2%, slightly below the national and EU average. Mining is a growing sector in the region. The private service sector is relatively underdeveloped. The share of employment in services (other services including trade) was 19.9% in 2007 (24.5% in the EU27) and 11.1% in business sector services (12.6%). However the share of employment in public services (35.3%) is relatively high, being 121% of the EU average.

2 All figures are based on Eurostat statistics, unless otherwise stated

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There is no regional data available on environmental sustainability, but national figures provide a reasonable proxy for Itä-Suomi. The share of renewable energy in gross final energy consumption was 30.5% in Finland in 2008, significantly higher (296%) than in the EU as a whole. Greenhouse gas emissions in Finland, on the basis of 1990=100, were 99.7 in 2008, down from a peak of 119.7 in 2003, but still 112.4% of the EU27 average.

1.2 Recent trends in regional innovation performance The share of the population aged 30-34 years with tertiary education reached 45.9% in Finland in 2009, significantly higher (142.1%) than the EU27 equivalent. The proportion of the population aged 24 to 64 involved in life-long learning was 19.4% (2008) in Itä-Suomi, while in 2000 the figure was estimated to be 16.2%, indicating a steady rise during the past decade. The proportion is well above (206.4%) the EU27 average, but below (83.6 %) the Finnish average. In 2003, only 12% of Finns had broadband access. Since then the level and growth of broadband access have improved, with 74 % of the Finnish population having broadband access in 2007, well above the EU27 average (56%). In 2010, 73 % population in the Itä-Suomi region had broadband access – compared with just 45% in 2006 - while the national average was 75.25%. Gross expenditure on R&D as a proportion of GDP was 1.56% in 2006, 84% of the EU average and only 45% of the Finnish average. However, the growth of R&D expenditure in Itä-Suomi (6.7%) between 2000 and 2007 was 159% of the EU growth rate. In terms of R&D expenditure by sector of activity, 41% is spent by the business sector, 46% by the higher education institutes and 13% by the government sector. Public sector expenditure on research and development was 0.23% of GDP (2007) in Itä-Suomi, which is slightly below (95.8 % of) the EU27 average. The relative share of public R&D has declined - it was only 13.2% of GERD in 2007 (down from 16.5% in 2000). Higher education R&D is relatively high, although there is only one university and a few polytechnics in the Itä-Suomi region. The contribution of the University of Eastern Finland is particularly important for the region. Higher education R&D was 0.74% of GDP in 2007, which corresponds to 176% of the EU level. The share of higher education R&D was 46% of all R&D expenditure in 2007 and this share has grown slightly from 2000 (44.4%). Business sector expenditure on research and development was only 0.65% of GDP in Itä-Suomi in 2007, small compared to the national average of 2.51%. It is also significantly below the EU27 average, estimated at 1.18% in 2007. This shows that the number of innovative companies and their R&D expenditure is significantly lower in Itä-Suomi than in other Finnish regions, or in the European Union in general. However, the relative share of business R&D of GDP has grown by 16% from 2000, apparently indicating that the role of private sector R&D is increasing. The proportion of SMEs innovating in-house was 0.77% in 2006 in Itä-Suomi, 145% of the EU average. The proportion of innovative SMEs collaborating with others in Itä- Suomi in 2006 was some 2.5 times higher the average in the EU, and this proportion was increasing3. Based on these indicators, innovation activity in Itä-Suomi is high and increasing, in contrast to a small decline in the EU. Itä-Suomi had 39.8 EPO patent applications in 2005, 3% of all Finnish patent applications. This share is slightly lower than the region’s share of total R&D

3 Community Innovation Survey, 2004; 2006

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expenditures (4.6%). The number of patent applications has fluctuated greatly but has shown no strong trend throughout the 2000s, with the annual average of 36.9 between 2000 and 2005. 43.3% of Finnish companies were product and/or process innovators in 2008, compared with 38.7% of Itä-Suomi companies, the lowest proportion of all the Finnish regions. The share of marketing and/or organisational innovators was 33% in the whole country compared with 28.6% for Itä-Suomi, not the lowest of all regions. The share of resource efficiency innovators has remained slightly higher in the EU27 than in the Itä-Suomi region, where the share for 2004 was 0.31% (79% of the EU27 figure), rising to 0.33% (80%) in 2006. Employment in high-tech sectors (high-tech manufacturing and high-tech knowledge- intensive services) is relatively low in Itä-Suomi, amounting only to 3.86% of people in employment in 2007, the lowest figure of the four Finnish regions. The level of employment in high-tech sectors has remained almost the same between 2000 and 2007. The proportion of the labour force in knowledge-intensive-services is higher in Finland than in most other EU countries. In 2007 the proportion was 40.73% in Finland, while the EU27 equivalent figure was 32.96% lower. The Finnish figures have grown steadily from 2000, when the share was approximately 37.9%. The rise is at least partly due to the changing economic structure of Finland (decline of traditional industries, more emphasis on knowledge-intensity and highly trained professionals). No information is available on the share of new-to-market or new-to-firm products in total sales. Figure 1-1 Economic and innovation performance indicators for Itä-Suomi

Source: Eurostat.

1.3 Identified challenges Challenge 1: Retaining educated workforce A high take-up of tertiary education is a strength of the region, and the general level of education of young people is quite good. The Eastern Finland University (formed from a merger of two universities) provides a mix of education in several fields, many of which are relevant to the regional economy. The university is supported by four polytechnics, which are relatively tightly connected to the region in terms of activity and through various forms of interaction with the government and the private sector. The biggest challenge in terms of education is to retain the educated workforce in the region. Challenge 2: Strengthening and focusing private sector innovation

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One of the key challenges in the region is the low level of business R&D. While there are a few key companies working in the global market, the general level of business innovation is a long way behind other regions in Finland. The level of patenting is also relatively low. The challenges to business R&D are partly explained by the industrial structure of the region, which is still quite concentrated on natural resources and agriculture. There is a need to further strengthen the key areas of expertise to get a critical mass for R&D. There is also a need to further support innovation in the private sector. Many regionally networked clusters of expertise in the region have been initiated, and they have had quite good results, but on the whole these initiatives have not boosted private sector innovation sufficiently. Continuous efforts are clearly needed to support broadly-based innovation in SMEs, including organisational, market and process innovation as well as R&D. The Eastern Finland University has a strong research base, especially in a few specialist fields such as forests and the environment and health and well-being, and an increasing capability in many emerging fields such as biosciences, information sciences, materials sciences and nanosciences. The significance of higher education R&D can also be seen from the statistics on regional R&D expenditure. The challenge in terms of higher education R&D is that the centres of excellence are mostly quite small and not all strong research fields are matched by correspondingly strong business activity in the region. There are innovation strategies in the region that support smart specialisation by focusing innovation support in selected key areas. The challenge is that strengths are not tightly focussed, but dispersed across several sectors. However, there are a few broad fields such as renewable energy, forestry and biomass, and welfare technologies, which have the potential to become leading technology sectors in the future. Challenge 3: Ageing population in a low population density area Ageing provides challenges for the regional economy as a whole, but particularly for service sectors including public services. Innovation to meet this challenge is needed in both public and private services, which provides an opportunity to focus on innovations related to the elderly. This kind of approach has already been taken in the Kainuu sub-region, where the services for the elderly is one of the focus areas in the regional innovation policy, The work force is expected to decrease by one third by 2030, while the elderly population increases significantly. A project funded by the European Regions Development Fund aims at securing sufficient services to the elderly in Kainuu. The need to find new solutions is further emphasised by the low population density, which makes efficient service provision a challenge. There are several initiatives supporting the development of public services and information society in the region and these developments could be further developed.

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2. Innovation Policy Governance

2.1 Degree of institutional autonomy The regional authorities have relatively little control over the general allocation of government funding. Regional councils have some independent funding in addition to Structural Funds (SF), but the regional Centres for Economic Development, Transport and the Environment (ELY-centres) mainly provide innovation support based on the funding that is allocated to them. Municipalities have great budgetary autonomy, but in practice much of their support for innovation is linked to co-financing of projects that are supported by ERDF, ESF and national programmes. Regions have a relatively high degree of autonomy in the design and implementation of regional policies. For example, the regional centres funded by the Centre of Expertise Programmes (OSKE) design their own objectives and measures, as is also the case for the Regional Cohesion and Competitiveness Programme, where sub- regions plan their own goals and measures. In both programmes the plans are examined by the national coordinators to check that the general objectives are in line with the national objectives, but in practice there is a lot of autonomy both in terms of design and implementation. It is important to note that the Finnish governance system is a strong mix of national and local administration. The municipalities in Finland are relatively strong actors compared to many other countries and the bigger cities and towns in particular have been very active in local economic development and RTDI policy, often supporting development of a local science and technology infrastructure. The biggest cities and towns such as Kuopio, Joensuu, Kajaani, Mikkeli and Savonlinna all have active innovation-oriented economic development policies.

2.2 Institutional-set up, co-ordination and implementation mechanisms Innovation policies and strategies in Itä-Suomi are designed at many different levels. The Finnish government decision on national regional development goals lays down the general guidelines for regional innovation policy. The national guidelines and measures set out the general framework for all regions. From a national perspective, the Centre of Expertise Programme is a key part of the innovation policy. The general objectives of this programme are set at the national level, but the actual regional objectives and measures are designed and implemented in the regional centres of expertise. The Regional Cohesion and Competitiveness Programme (COCO) is another support instrument that is partly directed towards innovation policy. In addition, the national policy decisions and measures aim to strengthen and extend the effectiveness of universities and polytechnics’ regional activities. The responsibility for preparing this package of measures rests with the Ministry of Employment and the Economy (TEM) and Ministry of Education and Culture (OKM). There is no single regional organisation covering the whole of Itä-Suomi innovation policy. Regional councils are responsible for regional programmes that also cover innovation policy to some extent. Regional councils took over this responsibility in the early 1990s, and this has strengthened the role of the regional level in innovation policy, particularly with EU membership in 1995 and the introduction of structural funds. The regional councils operate at the NUTS3 level. In practice this means that Itä-Suomi has four regional councils working in the regions of South Savo, North Savo, Kainuu, and North Karelia. The regional programmes draw together various other planning instruments like regional innovation strategies and strategies of individual organisations. Typical innovation policy measures are the development of key industry clusters, the

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commercialisation of RTDI, innovation services and measures to improve the functioning of the innovation system. Regional councils are also mainly responsible for ERDF funds, which are increasingly directed to RTDI support. Compared with other Finnish regions the role of SF has been very significant in Itä-Suomi. At the regional level, policies (including SF) are designed by the regional councils together with the Centres for Economic Development, Transport and the Environment (ELY-centres), which manage regional implementation and development tasks of the state administration, and other stakeholders, especially the city governments, universities, technology centres and other intermediary organisations. There is also horizontal co-ordination at the level of the whole Itä-Suomi region, carried out by the so-called the Eastern Finland Advisory Board. This is a cooperative body with representation from South Savo, Kainuu, North Karelia, North Savo and South Karelia (the latter is part of the South Finland NUTS2). The aim of the Advisory Board is to promote issues of importance across East Finland at both national and international fora. Cooperation and coordination has taken place especially in relation to the regional ERDF programme but also with respect to innovation policy. South Karelian participation does not include matters related to SF programmes. The five-region alliance is concerned with several joint development themes, including forestry, materials engineering, ICT, leisure and tourism, welfare, environment and energy, and mining. Joint activities are implemented under the Eastern Finland Programme (2005) and regional development programmes, and through joint projects with participants from different regions. In the individual regions and sub-regions of Itä-Suomi, horizontal coordination is carried out in the regional development programme processes coordinated by the regional councils. In South Savo, for example, a Regional Innovation Strategy of South Savo was prepared in 2009 to co-ordinate activities in the region. Sometimes other mechanisms are used for design and coordination, which can vary somewhat between sub-regions. In the Upper Savo (Ylä-Savo) sub-region, which is part of the North Savo region, a new sub-regional innovation strategy was prepared as part of the regional centre programme (the predecessor of the COCO programme), co- funded with central government. Horizontal co-ordination in the sub-region is carried out through this programme. Multi-level coordination is often carried out through various plans and strategies at different levels. For example, national-regional links are used to ensure that regional strategies take account of national plans. In South Savo, for example, the regional innovation strategy states that it “expands on” the more general targets set out in the National Innovation Strategy (2008) and the Itä-Suomi Innovation Strategy (2007). Moreover, it also takes account of the specific local circumstances in various sub- regions, as specified in sub-regional (seutukunta) economic development plans. Higher education institutions are strongly committed to regional development and are actively involved in regional strategy processes. The horizontal coordination between education, research and innovation activities are thereby co-ordinated through various planning and strategy making processes. There is also cross-border co-operation in the region. Several organisations and sub- regions have cooperation across the border with Russia through various programmes, including Interreg programmes. Horizontal co-ordination with innovation activities is mainly carried out in the context of strategic planning. All in all, both horizontal and multi-level coordination are very important in Itä- Suomi, since it comprises four independent regions and its innovation issues are administered at several different levels, each with their own strategies and intermediary organisations. Intermediaries play a strong role in innovation policy implementation. These include Joensuu Science Park, Kuopio Science Park, Mikkeli Technology Centre, Kajaani

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Technology Centre Savonlinna Innovation Centre and several (sub)regional development companies. Local science parks and technology centres are responsible for coordinating regional Centres of Expertise and initiate a range of innovation activities, in which research is combined with technological, design and business activity. The centres of expertise are also actively involved with innovation strategies in their own fields of expertise in the region. The centres of expertise are tightly linked with the local universities and polytechnics and with key industries in the region. Itä-Suomi hosts the following Centres: • North Karelia − Nanotechnology − Forest Industry Future − Energy Technology − Living Business • Kuopio Region (North Savo) − Food Development − Health and Well-being − HealthBIO − Cleantech • Kainuu − Measurement Technology • Mikkeli Region (South Savo) − Nanotechnology − Forest Industry Future • Savonlinna (South Savo) − Tourism and Experience Management (responsible for the whole of Eastern Finland) The regional Centres of Expertise also participate in the horizontal coordination of sector specific innovation policies by participating in national competence clusters. These are network organisations under the National Centre of Expertise Programme, which comprises four to seven regional centres of expertise in each of several sectors around the country. In this way each regional centre is also networked nationally, improving horizontal co-ordination and division of labour. All in all, innovation policy is delivered in Itä-Suomi through co-ordinated efforts by a broad network of several organisations including regional councils, municipalities, regional ELY-centres, higher education institutions and various intermediaries. Networked activities take place mostly at the regional (NUTS3) level and sub-regional level, where most of the strategies are designed and programmes implemented. Innovation policy implementation includes the use of several funding mechanisms and development programmes such as ERDF, ESF, OSKE and COCO. Although these instruments focus on different aspects of innovation policy a lot of vertical and horizontal coordination is needed to avoid fragmentation in the system. There have been a few changes in the institutional setup related to innovation policy recently. The establishment of regional ELY-centres to co-ordinate the activities and policy measures of the Ministry of Employment and the Economy (MEE) in the regions has been an important recent change in the regional governance structure. Many national innovation services are provided by ELY-centres. They are also

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responsible for regional foresight activities and participate in many local and regional planning processes. There are four ELY-Centres in the Itä-Suomi region. Before 2010, the ELY-Centres were known as the TE-Centres. The establishment of ELY-Centres form part of the government’s reform project for regional administration. The ELY-Centres are responsible for the tasks and services of the former Employment and Economic Centres, Regional Environmental Centres, Road Districts, and State Provincial Offices’ departments for transport and communications and for education and culture. Another key change in the institutional organisation is the creation of Eastern Finland University in 2010 as a result of a merger between the University of Kuopio and the University of Joensuu. With approximately 14,000 students and 3,000 members of staff, the University of Eastern Finland is one of the largest universities in Finland.

2.3 Availability and use of policy intelligence tools Regional policymaking as a collaborative process can be viewed as a combination of evidence-based policy making and negotiation. In practice this means that strategies and objectives are typically the result of co-operative planning processes by various stakeholders. Decisions are not always based on direct evidence, although previous evaluations and studies are considered, and various tools such as statistics, information provided by intermediaries and other forms of relevant data are used. In other words, the design of innovation policies is based on a variety of sources of evidence provided by various organisations, but specific evidence based-methods are not always used in a consistent way. Evaluations are mostly carried out at the programme level. In Itä-Suomi these include evaluation of the ERDF programme, evaluation of the Centre of Expertise Programme and evaluations of the COCO programme. However, the ERDF evaluation does not concentrate specifically on innovation issues, and the two national programmes have a more national focus in their approach. However, the evaluations differentiate between regions in their results. Other strategies and programmes are also evaluated, generally on an ad-hoc basis. Foresight techniques are used, especially by the regional organisations of the central government. The ELY-centres and Regional State Administrative Agencies compile monitoring and forecasting information linked to their routine operations and also to various development projects. Part of this information (education, economy, and research) is linked with innovation policy and is used as a tool in the strategy-making processes.

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Figure 2-1 Governance, policy, and innovation performance factor scores for Itä- Suomi

Source: RIM survey In terms of the Governance and Policy Factor scores, Itä-Suomi does not seem to fare very well. These factors capture the fragmentation of innovation policy at the regional level rather than a lack of governance and policy capacity. The administrative structure where municipalities have a lot of responsibility and power at the local and sub-regional level may lead to the implementation of effective local solutions at the expense of efficiency at the greater regional level.

2.4 Key challenges and opportunities The key challenge in Itä-Suomi is the lack of a coherent innovation system at the greater regional level. Each of the four regions in Itä-Suomi has built their own regional organisations and networks based on their own interests. As a result there are many planning and implementation processes taking place in Itä-Suomi, and although the local and sub-regional strategies and measures capture the specific needs and opportunities of the locality better than centralised processes, it is often doubtful whether horizontal and vertical co-ordination is adequate for overall efficiency. The fragmentation has sometimes resulted in numerous small-scale projects showing little overall benefit. The fragmentation and need for extensive co-ordination also partly results from the availability of several different EU and national regional policy and innovation policy instruments. In addition to their own objectives, the measures have to be consistent with the various financing instruments and this increases co-ordination costs. The fragmentation caused by the multi-level and multi-actor character of the innovation policy governance and implementation system also has a positive side. If and when the horizontal and vertical coordination works well and without too much bureaucracy, it provides a unique opportunity to pool resources for smart specialisation at the greater region level, while at the same time addressing specific characteristics of the innovation environment in each sub-region. This is important since the instruments and measures which work well in the bigger cities and industry clusters do not work in the more rural areas with a less developed innovation environment.

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In terms of building a stock of knowledge, the challenge for the region is its lack of substantial knowledge centres. The dispersed regional structure and the small population are the main reasons for this, although the problem is exacerbated by the fragmented innovation system. The Kuopio region may be the only significant knowledge centre in the region with enough critical mass to develop new knowledge- based industries.

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3. Innovation Policy Instruments and Orientations

3.1 The regional innovation policy mix Since Itä-Suomi is basically a statistical unit rather than a functional entity, there are not many RTDI policy documents at the regional (NUTS-2) level which directly influence the development of the region. The main policy documents are either national (e.g. the national innovation strategy) or sub-regional (e.g. the Etelä-Savo regional Innovation Strategy). Tekes assisted in the preparation of the Innovation Strategy for Itä-Suomi in 2007. The other recent document specific to Itä-Suomi is the ERDF Operational Programme 2007-2013, which also covers some RTDI issues and pulls together various regional and national objectives related to RTDI. The ERDF programmes have a broad approach to innovation by concentrating on the horizontal governance of sub-regional policies and the research and technology infrastructure, as well as supporting the creation and growth of innovative enterprises. ERDF measures focus on the promotion of innovation and networking and the strengthening of knowledge structures, by promoting the measures that are concerned with knowledge and innovations and by strengthening the structures and knowledge clusters linked to them. Project financing includes support for cooperation and networking of innovation actors and SMEs, the improvement of the availability and efficiency of innovation services, the development of business incubators, the development of special knowledge areas, the development of activities that support R&D, the development of electronic advisory and customer service systems and the utilisation of applied research. The main goals of priority axis 2 (Promotion of innovation and networking and strengthening of knowledge structures) are to develop innovation environments, to increase R&D, to support the development of support services to growth companies, to develop competitive centres of expertise, to contribute to networking, and to increase the utilisation of various funding instruments. The main indicators used to follow the progress of the programme are numbers of new companies and new jobs created, and expenditures on R&D activities. Some key projects in the field of innovation involve the development of research facilities and training factories in the higher education institutes and the development of innovation networks around key technologies such as metals, surface materials, sensor technology, mining technology and battery technology. The budget for priority area 2: Innovation is €303m over 7 years. The main instrument for regional innovation support in terms of research and technologies is the Centre of Expertise programme (OSKE). The objective of the programme has been to create a strong network of centres of expertise supporting specialisation and cooperation between regions, and by so doing to increase regional competitiveness. In the period of 2007–2013 there are 21 centres of expertise in Finland as well as 13 national networks (called clusters) linking various centres across the country. Each centre is a member of one or more expertise clusters and their Cluster Programmes. There are five Centres of Expertise in the Itä-Suomi region. Although OSKE is a national programme, the activities of individual centres are designed and implemented at the regional level. One region, North Karelia, has a dedicated instrument for the development of research and technologies, namely the Development Programme for Technology Industry in North Karelia 2015. A new regional cohesion and competitiveness programme (COCO) was launched in 2010 and the first period will run until 2013. The objective of the programme is to improve the competitiveness of all regions and to balance regional development by supporting interaction and networking. Innovation policy is one of the key focus areas. COCO will organise development activities in selected sub-regions and is co-financed by TEM and the municipalities. Like OSKE, COCO follows a bottom-up approach with various sub-regions planning their own COCO programme for 4 years. The role of

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COCO in the innovation policy mix is to concentrate on issues such as innovation culture and the development of innovation support instruments. The regional councils have their own funding instruments, and although relatively small, they provide funding for many projects related to innovation policy. The regions in Itä-Suomi also actively use various EU co-financed instruments such as Interreg-programmes and the Karelia ENPI CBC Programme, ESPON etc.

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Table 3-1 Existing regional innovation support measures

Title Duration Policy Priorities Budget Organisation responsible More information ERDF operational 2007-2013 • 1.3.2. Horizontal measures in €303,299,997 The Regional Council of Etelä-Savo http://www.esavo.fi/region programme for Eastern support of financing Finland 2007-2013 • 4.2.3. Support to technology transfer between firms

The Development Programme 2011-2015 • 4.1.1. Support to sectoral n/a The Regional Council of Pohjois- http://www.pohjois- for Technology Industry in innovation in manufacturing Karjala karjala.fi/ North Karelia 2015 • 4.3.1. Support to innov • active start-ups incl. Gazelles 2.3.1. Direct support of business R&D (grants and loans) Source: Regional Innovation Monitor repository

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The three most important regional innovation policy measures in Itä-Suomi are the following: 1. ERDF operational programme for Eastern Finland 2007-2013 2. Centre of Expertise Programme (OSKE) 3. Regional cohesion and competitiveness programme (COCO)

3.2 Appraisal of regional innovation policies The appraisal of regional innovation policies in Itä-Suomi is somewhat complex since there is not much evidence available at the NUTS2 level. The only evaluations available are those of the ERDF programmes. In the mid-term evaluation of the previous programming period it was estimated that around 9% of the projects had an impact on innovation activity and 5% on the development of regional expertise. This implies that ERDF funding on innovation has not had a great deal of impact on regional innovation. The role of the regional centres of expertise is quite important in connecting regional research and technological capabilities with the key industry sectors and regional industry clusters. According to the latest mid-term evaluation of the Centre of Expertise Programme, the centres in Itä-Suomi have had a moderate impact in directing regional resources and knowledge capabilities. In the final evaluation of the previous term of the Centre of Expertise Programme (2000-2006), the regional centres in Itä-Suomi received above average scores with respect to impact by the stakeholders. The centres were also assessed to be more effective as tools of regional innovation policy than other regional instruments (although there is no clear comparative data in the study). All in all it seems that the regional centres of expertise in Itä- Suomi have proved to be relatively efficient. Another key strength, according to regional experts, are the regional development companies and technology centres (owned mostly by the municipalities). These organisations have a good knowledge of local firms (particularly SMEs) and good networks to higher education organisations and sources of finance. The challenge with these organisations is the local ownership, which sometimes makes larger regional measures difficult to implement. Another strength may be active networking and a will to find complementary expertise within other organisations. Networking has been particularly necessary in the higher education sector, partly as a result of the non-technological focus of the University of Eastern Finland, which has been forced to cooperate with the regional polytechnics. The higher education institutions have also cooperated with actors outside the region. Given the challenges identified in the region, the current policy mix seems not be quite adequate. However, the problem in the region is not the extent of project funding, but rather the lack of capabilities, especially among SMEs. Many of the promising industry sectors are also quite small. There seems still to be a need to further concentrate on key sectors and build the capacities to increase their competitiveness. In the targeted sectors such as the health care technologies, the result of the innovation policy mix has been quite successful. Considering the impact of the innovation policy mix on the innovation and economic performance indicators, it seems that innovation policies have impacted positively on higher education R&D, especially in the development of the R&D infrastructure but also on R&D activity. In the private sector, regional innovation policy has not had a significant impact on private sector R&D expenditure as a whole but may have had an influence on the number of companies that innovate.

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3.3 Good practice case Promis Centre was launched in recognition of the growing need for quality control during the production of medicines, by utilising process analytical technology (PAT). This kind of approach has been supported by the FDA (the US Food and Drug Administration) and EMEA (European Medicines Agency); it reduces the costs of production of medicines, as well as improving their quality. The Centre began as a project and has since grown into a multidisciplinary research consortium that develops and uses new methods for the analysis and optimization of pharmaceutical processes. The work conducted by the consortium supports the R&D and value chain development of the pharmaceutical industry. The Promis Centre consists of three research partners (University of Eastern Finland, Savonia University of Applied Sciences, and VTT Technical Research Centre of Finland) and several industrial partners, ranging from large global to small local enterprises. The first phase of the project was conducted during 2008 – 2010. Continued funding was provided by the European Social Fund (ESF) for the second phase, beginning in 2011 and due to end in 2012. The second phase is being carried out by the University of Eastern Finland under the supervision of the regional council of Pohjois-Savo. Several different projects are carried out by the Promis Centre, with Tekes, EU and regional funding having been very important in laying the foundation and securing the growth of the Centre. Technology transfer projects of the Promis Centre facilitate the creation of commercially and socially significant innovations and their development into new products. The Promis Centre speeds up the creation of strategic business partnerships, technology transfer, business activities of companies in the region and networking. Another important feature is the increased use of laboratories by other stakeholders. The international research environment built around the Centre offers an internationally competitive and attractive innovation environment and network for manufacturers in Eastern Finland. The research environment will also attract internationally active national companies into the region, as well as foreign companies operating in the medical field. The Centre has commissioned an evaluation from an international consulting company. The results have not been published but the indications are that the feedback was mostly positive. All in all, the Centre was only initiated three years ago and has now grown into a consortium of increasing regional and international significance, having thus reached or even exceeded its initial targets.

3.4 Portfolio of innovation support measures There are several national support programmes having an effect at both the national and regional levels. The two most important are COCO and OSKE, which have been discussed previously. Also important are the programmes run by the Finnish Funding Agency for Technology and Innovation (Tekes). These programmes act as forums for the exchange of information and networking between businesses and research groups. They aim at providing opportunities for carrying out ambitious R&D projects and for developing business expertise and international cooperation. The programmes also provide a gateway for collaboration with the best research groups and innovative R&D companies in Finland. The programmes focus on strategically important areas of R&D that Tekes, together with the business sector and researchers, has identified. Each programme goes through a trial period; the

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average duration of a programme ranges from four to six years, and typically Tekes covers approximately half of the project costs, the other half being contributed by the participating businesses and research units. In 2008 Tekes introduced a new funding instrument for young, innovative, growth-oriented companies. The aim is to provide an opportunity for the most promising young companies to develop their businesses in a comprehensive way, and to grow and internationalise their activities more rapidly. Company R&D is also supported by Finnvera plc, a specialist financing company owned by the State of Finland. Finnvera provides its clients with loans, guarantees, venture capital investments and export credit guarantees tailored to the stage of company development. In addition to more traditional financial incentives, Finnvera provides Microloans and Loans for Women Entrepreneurs targeting enterprises employing five people or less. The loan schemes for micro companies and female entrepreneurs were designed in the middle of 1990s when Finland was gradually starting to recover from the severe economic downturn of the first part of the decade. The big challenge was to help to reduce unemployment and promote entrepreneurial activity. Since then, micro loans and loans for women entrepreneurs have been one of the tools to promote entrepreneurship by facilitating the access to debt finance and to promote self-employment. A more research oriented organisation, the Academy of Finland, also has programmes which are used as tools to direct research and allocate research funding to fields that are considered of key importance to science and society. The goal of the programmes is to advance a certain field of research and to create new scientific knowledge and knowhow by emphasising multidisciplinarity and transdisciplinarity as well as international cooperation. In 2010 the Academy of Finland funded 12 programmes. The funding is provided for at least four years and the decision to begin a new research programme rests with the Academy Board. Another research-related measure is the ERA-NET funding scheme, currently part of the EU Seventh Framework Programme. The Academy has actively participated in ERA-NET activities. EU level funding has been very important for the development of Eastern Finland. There is active national and regional participation in two EU support measures, the European Regional Development Fund (ERDF) and European Social Fund (ESF). While ERDF programmes are designed at the regional level, ESF is a national level programme in Finland. The ESF-programme focuses on projects concerned with internationalisation and competitiveness which develop knowledge and innovation systems, the working conditions and well-being of staff; that promote networking; that develop systems that facilitate the functioning of the labour market; and that increase employment-related immigration and support the integration of immigrants. The ESF programme is implemented in the four regions (Southern, Western, Eastern, and Northern) of Finland, based on the employment, industrial, and knowledge strategies of the areas. Eastern Finland has a special position in terms of financing. It has its own financial framework, and it receives financing separately from the national section, which has separate national themes. Actors in Eastern Finland may also participate in the implementation of national themes, but these will be financed from Eastern Finland’s own financial framework. Efforts to boost innovation through tax-based mechanisms are relatively new in Finland and there have not been any significant policies affecting RTDI policies in the Eastern Finland region.

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3.5 Towards smart specialisation policies In Itä-Suomi there has for some time been a debate on the need to place greater emphasis on innovation. Development of key competence areas has been a strong but not a dominant approach in development strategies since the mid to early 1990s, when the first ERDF programme and the first OSKE-programme started. However, the division of the greater Itä- Suomi region into four administrative regions and the fact that municipalities (especially cities) have a great administrative autonomy has caused the approach to development to be somewhat fragmented when viewed from Itä-Suomi as a whole. The various programmes targeting different aspects of innovation policy and different regions have further emphasised this fragmentation. While OSKE can be seen as focusing on smart specialisation in the more technology and research intensive fields, COCO and ERDF take a more broad based approach. The regional co-operative processes have encouraged smart specialisation in the regions, but as a result of the fragmented and multi-level nature of regional innovation policy in Itä-Suomi, there are several sub-regional strategies and plans with sectoral specialisation instead of one “big plan”. There have been regional technology plans in the past designed together with Tekes, but their impact in the region has been rather modest. However, during the past five years the situation has become more focused. In 2006 the four regions together with the regional TE-centres (the predecessor of ELY-centres) and Tekes implemented a joint strategy aimed at recognising the key globally competitive areas for development in the whole of Itä-Suomi. In addition to creating a joint regional vision, the strategy was part of the national innovation policy and preparation for the next SF funding period. As a result, a regional innovation strategy for Itä-Suomi was created. The joint strategy process carried out in specific work groups identified nine strong or promising fields of technology that should be developed through joint activity in the region. Moreover, specific measures were discussed to support the growth of enterprises, together with the instruments needed to support innovation-based growth. The Itä-Suomi innovation strategy is complemented by other lower-level strategies. For example, the Etelä-Savo innovation strategy takes the Itä-Suomi strategy and the National Innovation Strategy as starting points and complements them by focusing on the more generic development of its innovation support environment, including educational areas. Educational institutions are involved in innovation strategies and corresponding priorities, although the priority areas of universities and polytechnics are also determined by agreements with the Ministry of Education and Culture. All in all, the regional policy making processes in Itä-Suomi can to some extent be viewed as following a smart specialisation strategy, but with a focus on local strengths rather than on global markets. Since the former are predominantly in low-tech areas, it is difficult to say if the stakeholders in Itä-Suomi have actually considered how they should position themselves in the knowledge economy. The idea of smart specialisation starts from the assumption that in order to have a meaningful impact, R&D and innovation resources must reach a critical mass and need to be supported by targeted interventions in human resources and knowledge infrastructure. The logic in Itä-Suomi does follow this approach to some extent, but the existence of a relatively broad focus in Itä- Suomi with a more detailed sub-regional focus may lead to a situation where the scarce resources are scattered in too many specialised areas. With the low population and small number of companies in each specialised cluster, a critical mass may not be achievable.

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This problem is partly addressed by the Centre of Expertise Programme, where regional centres in the same field around the country form networks, allowing increased division of labour and joint activity. At the regional level there have also been efforts to form networked clusters. However, since innovation policy design and implementation is mainly carried out in the NUTS3 level regions, most of the activities still tend to be at a relatively small scale, with highly localised measures tending to dominate development efforts rather than larger development measures covering just a few selected key areas across the whole Itä-Suomi region. It could also be argued that the Itä-Suomi region is not at the right level to pursue a smart specialisation strategy at all. Since Finland is quite a small country, it may make more sense to pursue smart specialisation strategies at the national level and complement this with nationally networked but more local development strategies at the level of sub-regions (NUTS3) or city- regions.

3.6 Possible future orientations and opportunities Itä-Suomi is a relatively sparsely populated region with only 12% of Finland’s total population. The region also has only two major city-regions, one university and 4 polytechnics. The industrial structure is dominated by a few leading companies working at the global markets with several smaller supplier firms. The industry structure is heavily concentrated on agriculture and natural resources (particularly forestry), although there are some smaller concentrations of emerging technology intensive sectors as well. The combination of small size, rural nature, ageing population, industry structure and the regional knowledge base poses many challenges for regional innovation policy. There is a specific need to network the scattered organisations and resources and develop the regional innovation capacity in a coordinated way. Itä-Suomi is composed of four sub-regions with their own plans and development responsibilities and strong municipalities. There have been many attempts to facilitate both horizontal and multi-level cooperation and coordination, but nevertheless the institutional setup continues to pose many challenges. What makes the orchestration of regional innovation policies even more complicated is the need to coordinate the activities of several support measures, such as ERDF, ESF, OSKE, COCO and Tekes programmes. A danger of fragmentation is evident since there may be too many areas of activity, many of which fail to achieve critical mass. As a result, the future development of regional innovation policy in Itä-Suomi may need to be focused even more narrowly on the most promising areas, from the perspective of future global markets. There are several fields with potential, e.g. welfare technologies and specific niche markets in industrial machinery. The existing strong areas in forestry-related industries and tourism also provide new opportunities, e.g. in bioenergy and nature tourism, which are both growing areas. In this context, there is a need to consider the division of labour between different regional levels as well as between various instruments linked to regional innovation policy. The current system, with local, regional (NUTS3), greater regional (Itä-Suomi NUTS2) and national levels seems to be too complex and fragmented for the efficient pursuit of smart specialisation strategies. Although the degree of autonomy at local and sub-regional levels makes it possible to design policies that make best use of the local opportunities and strengths, it may at the same time result in numerous local initiatives which do not have enough resources to achieve a critical mass.

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Appendix A Bibliography

1. Ammattikorkeakoulujen tutkimus-, kehittämis- ja innovaatiotoiminta innovaatiojärjestelmässä. Opetusministeriön työryhmämuistioita ja selvityksiä 2010:8 2. Commission Staff Working Document accompanying the Commission Communication on Regional Policy contributing to smart growth in Europe 2020. SEC(2010) 1183, Brussels, 6.10.2010. (cf. http://ec.europa.eu/regional_policy/sources/docoffic/official/communic/smart_ growth/annex_comm2010_553.pdf). 3. Etelä-Savon innovaatiostrategia 2010-2015. Etelä-Savon maakuntaliiton julkaisu 104:2010 4. Malinen, P. (2008) Itä-Suomi – ohjelma: toimeenpanon tilanne 2008 Presentation. 04.09. 2008 5. Pohjois-Karjalan teknologiateollisuuden kehittämisohjelma 2015 -Uusiutuva teknologiateollisuus. Pohjois-Karjalan maakuntaliitto. Julkaisu 131, 2010. 6. Puhakka, A., Rautopuro, J., and Tuominen, V. (2009) Maisterit liikkeellä. Vuonna 2001 ylemmän korkeakoulututkinnon suorittaneiden alueellinen liikkuvuus. 7. Regional cohesion and competitiveness programme 2010-2013. Ministry of Employment and the Economy. 8. The Centre of Expertise programme 2007-2013. Ministry of Employment and the Economy. 9. The ERDF programme for Itä-Suomi 2007-2013. 10. The final evaluation of the Centre of Expertise Programme 2000-2006. Ministry of Interior. 11. The mid-term evaluation of the Centre of Expertise Programme 2007-2013. Ministry of Employment and the Economy. 12. The mid-term evaluation of the Itä-Suomi ERDF-programme 2000-2006. Ministry of Interior. 13. Ylä-Savon yrityslähtöinen innovaatiostrategia 2007 – 2013. Savonia- ammattikorkeakoulun julkaisusarja D 10/2007

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Appendix B Stakeholders consulted

1. Jorma Teittinen (Kainuun liitto), 1.2.2011 2. Pentti Malinen (Itä-Suomi -ohjelma), 24.2.2011 3. Kalervo Väänänen (Itä-Suomen yliopisto), 2.3.2011 4. Riitta Koskinen (Aluekehitysjohtaja, Etelä-Savon liitto) 2.3.2011

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Appendix C RIM Repository information

Regional Innovation Monitor 21 Baseline regional profile

SUOMI / FINLAND MANNER-SUOMI Region East Finland NUTS Code FI13

Regional Profile

Introduction

Itä-Suomi is located in the eastern part of Finland and is known for its lakes and forests. The region is situated next to the Russian border and has good connections to Northern Europe. The region has a low population density - approximately one-tenth of the population and the economic activity of Finland is concentrated in the Itä-Suomi region. R&D activities have concentrated in the new emerging sectors such as health and the challenge is to stimulate also the strong established sectors such as machinery, forest and paper.

Repository

Support mesures The Development Programme for Technology Industry in North Karelia 2015 ERDF operational programme for Eastern Finland 2007-2013 Policy documents ERDF operational programme for Eastern Finland 2007 - 2013 The Innovation Strategy of Etelä-Savo Region 2010 -2015 Eastern Finland Programme The Innovation Strategy of Eastern Finland Organisations Kainuun Etu Ltd. Regional Council of North Kalelia Centre for Economic Development, Transport and the Environment of Pohjois-Karjala MikTech Ltd The Regional Council of Etelä-Savo

Economy

Itä-Suomi region covers six regional authority NUTS 3 areas (Etelä-Savo, Kainuu, Pohjois-Karjala and Pohjois-Savo,). The region is quite sparsely populated. It accounts for 25% of the national territory and 12% of the country's total population with a population about 650,000. The region has suffered from outmigration for decades but nevertheless has been able to sustain a relatively high rate of innovation especially in the key cities. Although there are many successful industries in the region, Itä-Suomi can be considered a lagging region. The regional GDP (PPS) was €14.5b in 2007, which accounts for about 9% of Finnish national GDP. Regional GDP per capita reached €22,100, which is 75% of the Finnish average and 88% of the EU average (Eurostat, 2010). The average annual real growth rate of GDP in Itä-Suomi between 2000 and 2007 amounted to only 2.3 % p.a., which is well below the GDP growth in Finland (3.46%) (Eurostat, 2010). The industry structure in Itä-Suomi is more oriented toward services. The share of employment in services (102%) is slightly above EU average. However, the role of public administration (127%) is quite string in the region. Person employed in business services was 9% in 2006 (Eurostat, 2009). The share of industry jobs (26.2%) is slightly less than the EU-27 average of 28.0%. In absolute numbers over 10% of the people employed in the industry sector in Finland live in Itä-Suomi. The share of agriculture (10%), however, is much higher than in the EU (6.5%). Itä-Suomi has a strong position in agriculture and forestry as well as tourism. Unemployment in Itä-Suomi is above average by European standards: the unemployment rate of 9.0% in 2008 was above both the EU-27 (7.0%) and national average (6.4%) rate. The recent recession has increased unemployment in Finland and Itä-Suomi has suffered a bit more than the average. From 2008 to 2009, unemployment rose 1.85% in the region compared with 1.4% in Finland ( Statistics Finland, 2010)

Research, Development & Innovation

Itä-Suomi has a very low expenditure for R&D as a percentage of GDP (GERD) in a European comparison. With a GERD of 1.60% of GDP (2007) investment in R&D is well below the national (3.48%), and also below the EU-27 (1.85%). The R&D activity is also heavily concentrated in Pohjois-Savo and Pohjois-Karjala NUTS 3 regions. In absolute terms the region achieved a GERD of €269m (2007), which accounts for 4% of the Finnish GERD (Eurostat). Compared with the national average growth rate between 2000 and 2007 (5.7%), the growth of R&D expenditure in Itä-Suomi (6.7%) was a bit higher. In terms of R&D expenditure by sector of activity, 41% is spent by the business sector, 46% by the higher education institutes and 13% by the government sector (Eurostat, 2009). Compared to the EU-27 average, Itä-Suomi also shows significantly lower R&D expenditure in the business sector. A significant amount of public funding is directed to R&D activities in Itä-Suomi and especially the role of Universities is remarkable. Itä-Suomi also receives a notable amount of funding from the EU Structural Funds and a relatively high share of this goes to support for RTDI. Itä-Suomi hosts only one university (with two main campuses) and four polytechnics with moderately level of research capacity. The region also hosts many public and private research institutes. Finland has also 20 government R&D institutes in eight policy sectors, with many of them having some activity also in Itä-Suomi. The share of human resources in science and technology as % of active population was 37.7%, which was significantly lower than the Finnish average of 50.1% and also lower than the EU-27 average of 39.8%. Itä-Suomi region has a relatively low level of patenting activity. Between 2000 and 2004 the EPO filings per thousand inhabitants was 0.05 in Itä-Suomi, which was much lower the EU-27 average of 0.11. The most important technological fields were health and biotechnology as well as physics.

Governance

Finland has a nationally centred governance system, which also includes innovation policy. Various related policy areas such as the legislation, taxation and education are also mainly decided at the national level. The primary responsible bodies for research and innovation policy are the Ministry of Employment and the Economy (TEM) and the Ministry of Education and Culture (OKM). OKM is responsible forEducation , Training , Science policy , Higher Education Institutions and theAcademy of Finland (support for academic research). TEM is responsible for the development, implementation and success of innovation policy in Finland. Regional innovation is promoted by TEM through innovation policy and regional development measures. The measures include the development of innovation environments, regional innovation and promotion of growth entrepreneurship policy. The main tools for the development of innovation are the Centre of Expertise Programme (OSKE) and the Cohesion and Competitiveness Programme (KOKO). The primary public agencies supporting and directing innovation activities are Tekes (support for applied research and industrial RTDI) and the 15 regional Centres for Economic Development, Transport and the Environment (ELY-centres), four of which have activities in Itä-Suomi. There are no formal regional organisations covering the whole Itä-Suomi related to innovation policy. In the regional (NUTS 3) level, regional councils are responsible for regional programmes that also cover innovation policy to some extent. The regional programmes draw together various other planning instruments like regional innovation strategies and strategies of individual organisations. Typical innovation policy measures are the development of key industry clusters and commercialisation of RTDI, innovation services and measures to improve the functioning of the innovation system. Regional councils are also mainly responsible for ERDF funds, which are increasingly directed to RTDI support. Compared with other Finnish regions the role of SF has been very significant in Itä-Suomi. The municipalities and particularly the bigger cities and city-regions have had a very active role in local economic development and innovation policy, often related to support in building local science and technology.

Policy

Since Itä-Suomi region is basically a statistical unit instead of being a functional entity, there are no regional RTDI policy documents in the regional level, which directly influence the development of the region. The main policy documents are either national (e.g. the national innovation strategy) or regional documents (e.g. Etelä-Savo region Innovation Strategy). Tekes has assisted in the preparation of the Innovation Strategy for Itä-Suomi in 2007. The other recent document specific to Itä-Suomi is the ERDF Operational Programme 2007-2013, which also covers some RTDI issues and pulls together various regional as well as national objectives related to RTDI. The main instrument for regional innovation support is the Centre of Expertise programme (OSKE). The objective of the programme has been to create a strong network of centres of expertise supporting specialisation and cooperation between regions, and by so doing to increase regional competitiveness. In the period of 2007-2013 there exists 21 centres of expertise in Finland as well as 13 national networks (called clusters) linking various centres across the country. Each centre is a member of one or more expertise clusters and their Cluster Programmes. There are five Centres of Expertise in Itä-Suomi region. A new regional cohesion and competitiveness programme (KOKO) was launched in 2010 and the first period will run until 2013. The objective of the programme is to improve the competitiveness of all regions and to balance regional development by supporting interaction and networking. Innovation policy is one of the key focus areas. KOKO will organise development activities in selected sub-regions and is co-financed by TEM and the municipalities. The local level especially in the city-regions has been quite active in innovation policy. The biggest cities and towns such as Kuopio, Joensuu, Kajaani, Mikkeli and Savonlinna all have active innovation-oriented economic development policies. Some hot innovation/RTDI policy topics in Itä-Suomi include better use of existing strengths as the forest industry and the collaboration with Russia. From the key technologies specific attention has been paid to wellness technology, environmental knowledge, measurement techniques, optics and sensor technology as well as the creative industries.

Support measure

SUOMI / FINLAND MANNER-SUOMI Region Itä-Suomi NUTS Code FI13

Support Measure

Title of measure The Development Programme for Technology Industry in North Karelia 2015

Full title

Pohjois-Karjalan teknologiateollisuuden kehittämisohjelma 2015

Duration

From: 2011 To: 2015 To: 2015 Policy objectives 4.3.1. Support to innovative start ups incl Gazelles 2.3.1. Direct support of business R&D (grants and loans) 4.1.1. Support to sectoral innovation in manufacturing

Presentation of the measure

In the early 2000 the technology industry in North Karelia developed rapidly based on few core companies (in metals, forestry and plastics industries) and their producer and marketing networks. Machinery and metals industry have been especially successful. In 2007 the first signs of decline appeared and the following year was particularly difficult for many companies operating in the region. There was a need for a new programme, which is based on the regional development strategy. This development programme replaces the previous development programme for plastic and metals industries dating back to 2004. The current development programme focuses on metals business, services for metals and plastics businesses and plastics industry, which make up for more than 50 per cent of all industrial activity in the region. The goal of the programme is to support and sustain the renewal of businesses and industries facing the challenges posed by e.g. globalisation. Another aim is to help the companies in the shift from product to service and value-based production. There is also a need to encourage the companies to invest more to research and development and by doing so, decrease the level of subcontracting. The programme puts emphasis on innovation activities and the development of such. It is crucial to turn ideas into innovations. This will be accomplished by activating and educating SMEs, integrating research more closely to business and increasing funding options (such as seed funding).

Keywords

Science-industry cooperation Innovation networks Entrepreneurship Budget, source and type of funding Currency: EUR

Source of funding 2011 2012 2013 National public funds 179 176 433 774 450 250 Regional public funds 155 015 155 991 158 494 EU Structural funds 361 703 363 978 369 819 Private funds 44 794 108 443 112 563 Other Form of funding provided Grants Other Policy learning

Extent the measure can be considered as a success and worthy of policy learning

It is too early to judge the success of the measure (e.g results of first call for proposals still not known).

Evidence of outcomes based on evaluation and other evidence

There is no evidence available, because the implementation of the programme will begin in 2011. Do's and Don'ts

It is too early to tell the do's and don'ts, because the programme will be implemented in 2011.

This measure is recommended as an example of regional good practice to policy-makers from other regions:

No Organisation(s) responsible Regional Council of North Kalelia

Support measure

SUOMI / FINLAND MANNER-SUOMI Region Itä-Suomi NUTS Code FI13

Support Measure

Title of measure ERDF operational programme for Eastern Finland 2007-2013

Full title

Itä-Suomen EAKR-toimenpideohjelma 2007– 2013

Duration

From: 2007 To: 2013 Policy objectives 1.3.2. Horizontal measures in support of financing 4.2.3. Support to technology transfer between firms

Presentation of the measure

Eastern Finland has traditionally been one of the priority areas for ERDF funding due to low population density, long distances and large border regions. The regions in Eastern Finland have also suffered from the structural change and ageing of the population. The innovation perspective is highlighted in the operation of the ERDF programmes by focusing on promotion of innovation and networking and strengthening of knowledge structures. This is done by promoting the measures that are concerned with knowledge and innovations by strengthening the structures and knowledge clusters linked to them. Project financing includes support for cooperation and networking of innovation actors and SMEs, the improvement of the availability and efficiency of innovation services, the development of business incubators, the development of special knowledge of areas, the development of activities that support R&D, the development of electronic advisory and customer service systems and the utilisation of applied research. The main goals of priority axis 2 (Promotion of innovation and networking and strengthening of knowledge structures) are to develop innovation environments, to increase R&D, to support the development of support services to growth companies, to develop competitive centres of expertise, to contribute to networking, and to increase the utilisation of various funding instruments. The main indicators used to follow the progress of the programme are new companies established, new jobs created, and the amount of R&D activities. Some key projects in the field of innovation involve the development of research facilities and training factories in the higher education institutes and the the development of innovation networks around key technologies such as metal, surface materials, sensor technology and mining technology and battery technology.

Keywords

Incubators/science parks Small and medium-sized enterprises Early stage-financing Budget, source and type of funding Currency: EUR

Source of funding 2007 2008 2009 2010 2011 2012 2013 National public funds 18,757,143 18,757,143 18,757,143 18,757,143 18,757,143 18,757,143 18,757,143 Regional public funds EU Structural funds 18,757,143 18,757,143 18,757,143 18,757,143 18,757,143 18,757,143 18,757,143 Private funds 5,814,285 5,814,285 5,814,285 5,814,285 5,814,285 5,814,285 5,814,285 Other Form of funding provided Grants Policy learning

Extent the measure can be considered as a success and worthy of policy learning

There has been a positive response by beneficiaries to the measure (e.g. over-subscribed in terms of requested versus available budget) but it is too early to judge results or impact

Evidence of outcomes based on evaluation and other evidence

Based on estimations, the ERDF operational programme has contributed to the creation of 22,000 jobs and over 3,200 since 2007. Therefore nearly 44% of the targeted goal in terms of jobs created has already been accomplished. In terms of new businesses the figure is 24%. In general the ERDF funding is used for projects increasing development, research, investments, technology, and education in companies as well as for labour intensive infrastructure projects. Even though the implementation of the programme has progressed well, the rate of development needs to increase in order to fight recession and enhance employment.

Do's and Don'ts

Primarily, the institution managing such instruments should monitor closely the implementation to maximise the impact and ensure sustainability of projects that obtained support. What should be avoided above all is a lack of co-operation between measures operating in the region and other instruments.

This measure is recommended as an example of regional good practice to policy-makers from other regions: Yes Organisation(s) responsible The Regional Council of Etelä-Savo

Policy document

SUOMI / FINLAND MANNER-SUOMI Region Itä-Suomi NUTS Code FI13

Policy Document

ERDF operational programme for Eastern Finland 2007 - 2013 Itä-Suomen EAKR-toimenpideohjelma 2007– 2013

Organisation responsible

The Regional Council of Etelä-Savo Content

The Eastern Finland programme covers the regions of South Savo, Kainuu, North Karelia and North Savo. The population of the Eastern Finland programme area was 664 000 in 2006. According to its vision, the Eastern Finland of the future will be a globally competitive environment for knowledge, business and living and its proximity to Russia will be a strength. The key objective of the programme is to improve the attractiveness of Eastern Finland on the basis of the region's own strengths both nationally and internationally and to reduce the problems arising from the region's remote location and sparse population. Innovation policy has an important role in the programme: one of the three priority areas is "Promotion of innovation and networking and strengthening of knowledge structure", which covers around 20% of the programme financing. The objective of the projects in Eastern Finland is to create 13 230 new jobs and 2 020 new companies. The total financing of the ERDF programme for Eastern Finland is estimated to be over €1.5b.

Year of publication

2007

Link to website

Link: http://www.rakennerahastot.fi/rakennerahastot/tiedostot/esitteet/eakr_ita_suomi_eng.pdf

Policy document SUOMI / FINLAND MANNER-SUOMI Region Itä-Suomi NUTS Code FI13

Policy Document

The Innovation Strategy of Etelä-Savo Region 2010 -2015 Etelä-Savon innovaatiostrategia 2010-2015

Organisation responsible

The Regional Council of Etelä-Savo Content

Etelä-Savo region is located quite close to the Finnish capital - Helsinki - but is a very different area. Etelä-Savo has more lakes and forests than any other region in Finland, forestry being an integral part of the region's production base. The Innovation Strategy of Etelä-Savo Region is based on two policy documents - the National Innovation Strategy and the Innovation Strategy of Eastern Finland. The strategy puts emphasis on strong clusters, innovation environments and essential working models. The regional innovation environment is formed of joint competences, or r&d activities and of physical infrastructure. Globalisation is a challenge to the region as it adds competition and puts pressure on productivity. Renewal and multidisciplinary skills are utmost important if the region wishes to succeed. In the future more focus and resources will be placed for renewable energy, environmental technology and technology-based and service innovations. In the vision for 2015 the region will have an innovation environment, which is formed of growth companies, research groups, state-of-the-art laboratories and cooperation of innovation actors.

Year of publication

2010

Link to website

Link: http://www.esavo.fi/media/Innovaatiostrategia.pdf

Policy document

SUOMI / FINLAND MANNER-SUOMI Region Itä-Suomi NUTS Code FI13 Policy Document

Eastern Finland Programme Itä-Suomi -ohjelma

Organisation responsible

The University of Oulu Content

The mission of the programme is to strengthen the economic competitiveness and increase the attractiveness of the region as a place to live, work and travel. Three themes for development were identified: internationally competitive business and innovation system, attractive living environment and renewal of the wellbeing society. High skilled jobs and increase in productivity were seen as challenges. Clustering and networking of important actors of the region were the ways to tackle the challenges. The implementation of the programme are based on 14 large scale projects and shared activities. The development projects are working in the following themes: forest industry, food industry development, bioenergy, measurement technology, creative economy, business skills, Finnish-Russian cross-border university, place marketing, business-to-business co-operation with across the border with Russia, strategic road development, Russian language skills, aging, health promotion, welfare technology and entrepreneurship in the welfare sector, new models to capitalise on immigration.

Year of publication

2005

Link to website

Link: http://rakennerahastot.ita-suomi.fi/alueportaali/www/fi/muu_yhteistyo/Ita-Suomi_ohjelma/Ita-Suomi-ohjelma.pdf

Policy document

SUOMI / FINLAND MANNER-SUOMI Region Itä-Suomi NUTS Code FI13

Policy Document

The Innovation Strategy of Eastern Finland Itä-Suomen innovaatiostrategia

Organisation responsible The Finnish Funding Agency for Technology and Innovation Content

Prior to 2006, there used to be regional technology strategies in Finland. They were updated to innovation strategies and the one of Eastern Finland was the first. The innovation strategy was being created during 2006 and 2007. The process involved four regions in Finland (Etelä-Savo, Kainuu, Pohjois-Karjala and Pohjois-Savo) and their strong cooperation, which was important for the successful implementation of the strategy. At the first stage, the strengths of the large region were searched for and special features were defined on either global or national level. The focus was on interregional clusters and the approach was larger than in traditional industry development. The identified clusters will be developed further in the region. Additionally new areas for future growth were searched. Active cooperation in the region was emphasised. As a result of the strategy process, the chosen competence clusters in the region are forestry, environmental technology, wellbeing, security, building components, travelling and sensor technology.

Year of publication

2007

Link to website

Link: http://rakennerahastot.ita-suomi.fi/alueportaali/www/fi/liitetiedostot/Ita_Suomen_innovaatiostrategia.pdf

Organisation

SUOMI / FINLAND MANNER-SUOMI Region Itä-Suomi NUTS Code FI13

Organisation

Kainuun Etu Ltd. Kainuun Etu Link: http://www.kainuunetu.fi/Default.aspx Lönnrotinkatu 1 Kajaani, FI-87100 Mission Kainuun Etu LTd. supports all the sectors of the economic life in Kainuu and assists the regions key sector companies to develop their know-how in business operation, competitiveness, growth and cooperation as well to improve key clusters and their condition of activities.

Kainuun Etu Ltd is operating both in national and international level by four key sectors: 1. ICT, Electronics & Metal Industry 2. Experience Production & Food Industry 3. Wood Sector 4. Stone & Mining Sector Activities The organisation aims at knowing its clients and their development needs. The actual activities consist of project design preparations, finding out various possibilities for funding and applying for funding, recruitment of skilled personnel, project management and taking care of reporting. Additionally Kainuun Etu Ltd. is also responsible for invest in Kainuu related activities.

Organisation

SUOMI / FINLAND MANNER-SUOMI Region Itä-Suomi NUTS Code FI13

Organisation

Regional Council of North Kalelia Pohjois-Karjalan liitto Link: http://www.pohjois-karjala.fi/Resource.phx/maakuntaliitto/index.htx Pielisjoen linna Siltakatu 2 Joensuu, FI-80100 Mission The Council oversees the interests of the people, municipalities, organizations and enterprises and speaks on their behalf regarding both national and international questions. Activities The council outlines regional development targets, key projects and measures through the regional planning system that consists of the regional development plan, the regional strategic programme and the regional land use plan.

Organisation

SUOMI / FINLAND MANNER-SUOMI Region Itä-Suomi NUTS Code FI13

Organisation

Centre for Economic Development, Transport and the Environment of Pohjois-Karjala Pohjois-Karjalan ELY-keskus Link: http://www.ely-keskus.fi/fi/ELYkeskukset/pohjoiskarjalanely/Sivut/default.aspx Kauppakatu 40 B Joensuu, FI-80101 Mission Centres for Economic Development, Transport and the Environment started operating on January 1 st, 2010. There are 15 of them in Finland. The Centres are responsible for economic development, labour force, competence and cultural activities, transport and infrastructure, the environment and natural resources. The strategic objectives of the centre are based on the joint strategy of the ELY-centres in Finland on one hand, and the key objectives defined in the regional programme of Pohjois-Karjala. The regional key objectives are linked with four horizontal themes addressed specifically by the North Karelian ELY- centre (young people, Russia, future growth industries and production based on natural resources) Activities The tasks of the Centres comprise those of the former Employment and Economic Centres, Road Districts, Regional Environmental Centres and State Provincial Offices. The Centres operate in close collaboration with the Regional Councils. The Centres foster regional development by implementing and developing government activities in the regions. The innovation activities comprise of implementing the national innovation strategy through the activities and measures of the centre. Providing Technology Experts in the centres bring Tekes funding and expert services as well as international research and development, and networks to customers in the regions. Experts help businesses and research organisations to launch national and international research and development projects. Innovation liaison officers serve companies and private individuals in IPR related issues. Related to innovation, ELY-centres are responsible for vocational training and adult vocational training planning and monitoring in their regions.

Organisation

SUOMI / FINLAND MANNER-SUOMI Region Itä-Suomi NUTS Code FI13

Organisation

MikTech Ltd Mikkelin Teknologiakeskus MikTech Oy Link: http://www.miktech.fi/mvhome/e_miktech_yritys.html?did=111&lang=en Graanintie 5 Mikkeli, FI-50190 Mission Mikkeli Technology Centre Ltd Miktech was established in 1985. Since then the mission has been to support development activities in research institutes and in enterprises. Miktech concentrates on exploitation of new technologies and inventions. Miktech is an activator for new inventions and it promotes technology based businesses. The promotion of new businesses is vital in the region which is lacking in growth companies. Activities The activities of MikTech can be divided to innovation services, business incubator services, and business development services. Innovation related services can additionally be divided into information, networking, consulting, financing and commercialization services. One of the projects coordinated by Miktech - INNOPROSAVO - aids the financing and commercialization services. One of the projects coordinated by Miktech - INNOPROSAVO - aids the companies operating in the region to develop and strengthen their businesses through innovations (product, service or method based innovations). Another aim of the project is to encourage individuals to create new ideas which could be turned into business activity. There is also a project focusing on creating a network or a pool for companies operating in the environment, wood, materials, and metals sectors. The idea is to offer a variety of competencies and services under one umbrella - be it components, subcontractors or even specialists. At the moment there are nine projects coordinated by the technology centre. Miktech is also the administrator of the Mikkeli Region Centre of Expertise. Mikkeli Region Centre of Expertise strengthens the renewal and international competitiveness of Finnish industry and promotes the birth of technology-intensive new businesses. Mikkeli region is aiming at becoming the leading area for applied research, product development and production of new plastic composites and thin film coating technologies in Finland. There are also two national clusters in which the Mikkeli Centre of Expertise participates - Nano and Microsystems and Future Materials and Forestry Industry.

Organisation

SUOMI / FINLAND MANNER-SUOMI Region Itä-Suomi NUTS Code FI13

Organisation

The Regional Council of Etelä-Savo Etelä-Savon maakuntaliitto Link: http://www.esavo.fi/region Hallituskatu 3 A Mikkeli, FI-50100 Mission Etelä-Savo is a home to approximately 160,000 people in the Eastern Finland. The region is mostly known for the lake Saimaa, which is the largest lake in Finland. The city of Savonlinna and its annual opera festival are among other well known features of the area. The Regional Council of Etelä-Savo is the local authority responsible for the comprehensive development of the area. The mission of the regional council of Etelä-Savo is to develop the region, enhance the quality of life and increase its attractiveness to visitors. Activities The Regional Council of Etelä-Savo is a public authority responsible for the general development of the region of Etelä-Savo/Southern Savo. As a regional planning authority the Regional Council also manages physical planning within its territory. The Regional Council also provides a platform for working out the common will of the region, acts as an agent for economic development and promotes the general interest of the region at a national level in a number of ways. The Council also implements project in order to develop the region. One of the projects aims to make the region better known and thus attracting more investments, entrepreneurs, and visitors. Another goal is to attract people to move to the region from Helsinki and also from St. Petersburg. There is a project aiming to bring broadband Internet to all the residents in the area (also in the rural regions) by the end of 2015. Additionally Etelä-Savo is an active partner in the network of the Europe of the Regions. Etelä-Savo cooperates with many regions in Europe, though the main interest lies in the Baltic and Nordic spheres and in Northwestern Russia.

Appendix D Explanation of factors of Innovation Performance, Governance and Policy

D.1. Innovation Performance Factors After having normalised all indicators to a common range of 0 to 1, a factor analysis or principle component analysis has been used to identify the main patterns, reducing the eight indicators into three main factors or components of innovation performance. The resulting factors can also be seen as composite or summary indicators.

Innovation performance factors Innovative Technological Public

entrepreneurship innovation knowledge Non-technological innovators 0.91 Technological innovators 0.86 Higher education R&D 0.52 Non-R&D innovation expenditure -0.84 Business R&D 0.77 Patents 0.71 Government R&D 0.89 Tertiary educated 0.64

The first factor can be labelled as ‘Innovators or Innovative entrepreneurship’. It is mostly based on a high score on the share of both non-technological innovators (those introducing market- and or organisational innovations) as well as technological innovators (product and or process innovations) among SME’s in the region. This factor therefore identifies those regions where a large share of all SME’s are innovators. The second factor is labelled ‘Technological innovation’ because it mostly refers to patent generating business R&D with relative low score on non-R&D innovation expenditures as share of their turnover. In regions where this factor shows a high score, technology generating firms are well represented. The third factor is labelled ‘Public knowledge’. This component of innovation performance is based on the co-location of R&D expenditures at government research institutes and to a lesser extent on the share of population with tertiary education.

D.2. Governance Factors The first distinctive governance characteristic is labelled ‘Autonomy’. For regions where the regional innovation strategy is politically binding and containing fixed targets, we also find the highest degree of both general institutional autonomy as well as autonomy regarding innovation policy. In essence, formalisation contributes to the autonomy factor and autonomy is associated with an assessment of innovation policy as effective. The second distinctive characteristic is named: ‘Relying on Structural Funds’. It is based on the similarity in the answers regarding the strategic relevance and significance in terms of funding of EU Structural Funds for regional innovation policy. At the same time these regions report a low level of cooperation with other regions and the innovation system can be characterised as more public-driven.

22 Regional Innovation Monitor

A third distinctive factor is made up of the similar answers to the two other questions on coordination, namely the existence of vertical and horizontal coordination mechanisms. Finally, a fourth factor is labelled ‘Central, top-down’ because they combine a centralised policy delivery and top-down approach in policy design.

Governance Factors Autonomy Relying on Coordina- Central, Structural tion mecha- top- Funds nisms down -How formally binding is the regional .84 innovation strategy document on the regional public authorities? - The general degree of institutional .73 autonomy of the regional authorities in the region -To what degree is priority setting, .68 design and monitoring of innovation policy subject to the design and of formalisation of the general set-up of institutions tasked with the development of innovation policy in your region (1=informal, 3= formal) - Degree of institutional autonomy of .68 regional authorities in your region with regard to the design and implementation of regional innovation policies - How effective is the regional .58 governance process? - The relevance of the EU Structural .79 Funds for regional innovation policy, for strategy development - The significance of the EU .70 Structural Funds for regional innovation policy, in terms of funding - Inter-regional co-ordination -.68 projects and mechanisms (e.g. co- operation between agencies in different regions) - Characterise the regional innovation .68 system according to key drivers of innovative activities (1=private, 2=different, 3=public) - Horizontal coordination projects .80 and mechanisms between regional players (e.g. inter-departmental working groups, council or multi- sector platforms) - Vertical co-ordination projects and .73 mechanisms between local, regional, national and European authorities involved in designing or implementing innovation policy - Regional system of policy delivery is .81 centralised (3), mixed (2), or de- centralised (1) - Design of regional innovation .80 policies follows a top-down approach (as opposed to bottom-up)

Regional Innovation Monitor 23

D.3. Policy Factors The first distinctive factor regarding the innovation policies is labelled ‘Public innovation policies’. A high contribution to this factor comes from the survey questions regarding: policies for public sector innovation, for open innovation, public procurement, and theme based policies aiming at societal goals. The second policy factor is labelled: ‘Demand & service innovation policy’ because of the co-existence of demand-side policies and service innovation policies. The third policy factor is named: ‘Cluster & S-I partner-ship policy’ since it is based on the frequent combination of Cluster policies and policies promoting new forms of public-private-partnerships for Science-Industry (S-I) co-operation and in addition the implementation of eco-innovation policies contributes to this factor. The fourth factor is labelled ‘Research supply policy’ because it is based on the positive answers to the question on supporting research efforts (the supply side), in combination with an opposite negative answer to the question on ‘market and innovation culture (which is more on the demand side). ‘Policy making support’ is the name we have given to the fifth policy, similar to the main indicator. The last policy factor is ‘HR, creation & growth innovators’ which combines human capital development with policy aimed at creation and growth of innovative firms.

24 Regional Innovation Monitor

Innovation Policy factors Cluster Policy HR , Demand Public & S-I Research makin creation & & service innovatio partner supply g growth innovatio n policies -ship policy suppor innovator n policy policy t s Policies for public .72 sector innovation Policies for open .66 innovation Public procurement .64 policies Theme-based policies aimed at .62 broader societal goals Demand-side .79 policies Policies for innovation in .50 services Support for the internationalisatio .47 n of innovation policy. Cluster policies .70 Policies promoting new forms of public-private- .61 partnerships for science-industry co-operation Eco-innovation .58 policies Innovation related .57 tax policies Support research .74 efforts Market and innovation culture -.62 policies Support to policy making and -.79 horizontal policies Support human capital .82 development Support creation and growth of .67 innovative enterprises

Regional Innovation Monitor 25

Appendix E Statistical data

Indicator Itä-Suomi Itä-Suomi EU 27 (2008 (2000) (2008 or or most most recent) recent) Per Capita GDP (in Current EUR) 18,289.1 23,489.6 25,131.9 (2006) Growth of Regional per Capita GDP 6.5 5.9 (2006) 0.7 (in %) Unemployment Rate (in %) 14.1 9 7 Gross Expenditure on R&D (GERD; 170,9 269.2 (2007) 237,000.2 in current EUR) Share of Business Expenditure on 41.2 40.6 (2007) 63.9 R&D in GERD (in %) EPO Patent Applications (by Priority 139.9 95.73 (2006) 37,689.12 Year) (2006) Share of Population Involved in Life- 16.18 19.39 9.34 long Learning (in %) Non-R&D innovation expenditures of N/A N/A 0.41 all enterprises as a percentage of (2006) turnover (normalised scores within a 0 (lowest) to 1 (highest) range) Source: Eurostat and Community Innovation Survey

26 Regional Innovation Monitor

Appendix F RIM survey responses

Regional Innovation Monitor 27 Itä-Suomi (FI13) Average Categories 0 1 2 3 4 5 Governance Please indicate the governance level that is most important for the design and implementation of innovation policy in the region (1 = regional level, 2= national level, 3 = sub-regional level) 2 1,52 50% 48% 2% Please assess the general degree of institutional autonomy of the regional authorities in the region (1 = regional authority is an administrative appointee of the national government, 2 = regional authority including elected council but no legislative powers and no or minor tax raising powers, 3 = federated entity with legislative power in some but not all fields, limited or no tax raising powers) 2 2,11 23% 43% 34% Please assess the degree of institutional autonomy of regional authorities in your region with regard to the design and implementation of regional innovation policies (1 = very low, 2 = low, 3 = average, 4 = high, 5 = very high) 4 3,10 7% 18% 39% 31% 5% The design of regional innovation policies follows a (1 = bottom-up approach, 2 = input from both sides, 3 = top-down approach, 4 = strong top-down approach) 2 2,25 11% 57% 28% 4% To what degree is priority setting, design and monitoring of innovation policy subject to the design and of formalisation of the general set-up of institutions tasked with the development of innovation policy in your region (1 = informal, 2 = mixed, 3 = formal) 2 2,19 18% 45% 37% Is there a regional innovation strategy in the form of a published document (1 = yes, 2 = no) 1 1,34 66% 34% How formally binding is this document on the regional public authorities ? (1 = an own initiative document of a non- public body or partnership with no binding constraints on regional authorities, 2 = a 'pact' signed by a broad-based public-private partnership, 3 = a politically binding policy containing fixed targets) 1 2,21 25% 29% 46% Please indicate if there are horizontal coordination projects and mechanisms between regional players (e.g. inter- departmental working groups, council or platforms with actors from different sectors): (1 = not yet very developed, 2 = somewhat developed, 3 = quite well developed) 2 2,26 13% 49% 39% Please indicate if there are inter-regional co-ordination projects and mechanisms (e.g. co-operation between agencies in different regions) (1 = not yet very developed, 2 = somewhat developed, 3 = quite well developed) 2 1,88 27% 59% 14% Please indicate if there are vertical co-ordination projects and mechanisms between local, regional, national and European authorities involved in designing or implementing innovation policy (1 = not yet very developed, 2 = somewhat developed, 3 = quite well developed) 2 2,02 20% 58% 22% Please characterise the regional innovation system according to key drivers of innovative activities (1 = private-driven, 2 = mixed, 3 = public-driven) 3 2,26 12% 50% 38% Please indicate if the regional system of policy delivery is centralised or de-centralised (1 = rather decentralised, 2 = mixed form, 3 = rather centralised) 2 2,47 5% 42% 52% Please indicate the significance of the EU Structural Funds for regional innovation policy, in terms of funding (1 = <10%, 2= 11-24%, 3 = 25-49%, 4 = 50-75%, 5 = >75%) 3 2,96 14% 30% 19% 19% 18% Please indicate the relevance of the EU Structural Funds for regional innovation policy, for strategy development (1 = very low, 2 = low, 3 = average, 4 = high, 5 = very high) 4 3,27 11% 17% 25% 28% 19% Is there a specific Structural Funds’ regional operational programme for the region (1 = yes, 2 = no) 1 1,10 90% 10% If 1, is this Structural Funds ROP administered at the regional level. (1 = yes, 2 = no) 1 1,12 88% 12% Involvement of the Region in Hot Innovation / RTDI Policy Topics (0 = none, 1 = planned, 2 = implemented) Support for the internationalisation of innovation policy. 1 1,09 34% 24% 43% Cluster policies 2 1,28 31% 10% 59% Policies promoting new forms of public-private-partnerships for science-industry co-operation 0 1,21 28% 22% 50% Policies for open innovation 0 0,68 58% 15% 27% Demand-side policies 0 0,55 64% 18% 18% Policies for innovation in services 0 0,77 52% 19% 29% Policies for public sector innovation 0 0,64 60% 17% 24% Public procurement policies 0 0,39 72% 17% 11% Innovation related tax policies 0 0,37 77% 9% 14% Eco-innovation policies 0 0,80 50% 19% 30% Theme-based policies aimed at broader societal goals 0 0,72 53% 22% 25% Priorities on which regional innovation policy is most strongly focused (1 = very low, 2 = low, 3 = average, 4 = high, 5 = very high) Support to policy making and horizontal policies 3 2,71 21% 24% 32% 12% 12% Support research efforts 2 3,94 1% 12% 20% 25% 42% Support human capital development 3 3,41 3% 17% 29% 39% 12% Support creation and growth of innovative enterprises 4 3,85 2% 9% 23% 37% 30% Market and innovation culture 2 2,84 13% 24% 37% 16% 10%

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