Etla » research and development

Investments in Finland. Development and international comparison (in Finnish with English abstract and summary)

Ville Kaitila — Wed, 15 Feb 2012 11:00:00 +0000

The report looks at investment activity in Finland by industries and types of investment, and makes international comparisons. Investment rate (fixed investment in relation to GDP) fell in Finland in the early 1990s from an internationally high level to the average West European rate. Among key factors behind the structural change were opening up of the economy and an increase in competition. The economy transformed itself from investment-driven economy to a more innovation-driven one. The use of capital became more efficient. During the global financial and economic crisis in 200810 the investment rate declined in Finland as it did in most other developed countries. There are, however, some country-specific features in the Finnish case. Investment in manufacturing fell dramatically, by almost 40%, i.e. clearly more than in other EU countries. Furthermore, over the first decade of the 21st century investment in machinery and equipment has been at a substantially lower level (in relation to GDP) than in most other West European countries. On the other hand, construction investment has been relatively high in international comparison. Investments in intangible assets have steadily increased in all highly developed countries, including Finland. They have become an important source of economic growth and structural change. In Finland especially R&D expenditures have been high but their growth has stagnated. The future of R&D depends very much on the structural transformation of the ICT sector, since the sectors share in Finlands total private R&D expenditure is well above 50%.

JEL: E22, F21, O38
Publication year: 2012
Pages: 38
Price: 10€
Language: Finnish
Discussion Papers no. 1267

EU:n rahoituskehykset – Suomen asema seuraavalla kehyskaudella 2014-2020

Hannu Kaseva — Fri, 04 Dec 2009 11:00:00 +0000

The study analyses the financial framework of the European Union in 2014-2020 and the prospects of Finland in this framework. The study is structured according to budget headlines the most central of which are the natural resources (agriculture and rural development), cohesion (regional and structural policies), and competitiveness. Scenarios concerning the future are built upon alterna-tive developments in the composition of the budget. The development of Finlands net payment posi-tion is analysed using different assumptions of GDP growth. A central assumption in most scenarios is the fact that the budget shares of the natural resources and regional and structural policies will decline substantially, also giving room to cut the size of the budget. According to our study, Finland will be able to adjust to the changes in the structure of the budget. In the case of agriculture, an increase in the size of farms, productivity growth, and especially the assumed continued national agricultural support will have an outcome that the level of agricultural output does not change substantially. In regional policy, a decrease in the growth of or cuts in EU regional subsidies can be compensated for by na-tional subsidies. The pressures for adjustment which Finland will face during the future financial framework will be decreased because during the current financial period Finland already experienced many adjustments. Finland will be able to respond to the growth of funding under the competitiveness headline, if the country will be able to develop capabilities to apply for research and other competi-tiveness funding.

JEL: O52, F53, F55, H87, Q18, R58, I28
Publication year: 2009
Pages: 102
Price: 10€
Language: Finnish
Discussion Papers no. 1207

The Impact of Technological and Non-Technological Innovations on Firm Growth

admin — Thu, 13 Nov 2008 11:00:00 +0000

This study investigates the relationship between innovations and firm growth, based on the data of Finnish firms operating in the software industry. We find that in terms of turnover and employment, firms with only technological innovations do not grow more rapidly than other firms. However, firm growth is positively associated with the combination of technological and non-technological innovations.

JEL: O3, O33, L2
Publication year: 2008
Pages: 19
Price: 10€
Language: English
Discussion Papers no. 1165

Domestic R&D Employment Effects of Offshoring R&D Tasks: Some Empirical Evidence from Finland

admin — Thu, 06 Nov 2008 11:00:00 +0000

This study empirically explores whether R&D offshoring affects the domestic R&D employment at the firm level. Overall, the Finnish survey data suggest that the impact of R&D internationalization on domestic R&D employment depends on the mode of internationalization (in-house offshoring vs. offshore outsourcing vs. in-house expansion of R&D abroad). Moreover, manufacturing and service firms are found to be different when it comes to R&D internationalization and its domestic employment effects. In the manufacturing sector, especially in-house offshoring of R&D has a significant negative impact on the plan to increase R&D employment. But the relationship between the in-house expansion of R&D abroad and domestic R&D employment turns out to be complementary. In the service sector, it is in the first place offshore outsourcing of R&D that has a significant negative impact on the plan to increase R&D employment. A final result supports the view that R&D does not always follow production but that a strong location link between production and R&D does have a significant negative effect on the domestic R&D employment.

JEL: J6, J3
Publication year: 2008
Pages: 31
Price: 10€
Language: English
Discussion Papers no. 1163

Essays on the Impacts of Technology Development and R&D Subsidies

Jyrki Ali-Yrkkö — Fri, 25 Apr 2008 11:00:00 +0000

This thesis studies the impacts of technology development and R&D subsidies. The first essay examines whether public and private R&D funding are substitutes or complements. Particular attention is paid to capital market imperfections by examining what kind of effect financial constraint has on the relationship between public and private funded R&D. According to empirical analyses, public R&D funding does not crowd out privately financed R&D. Instead, the results suggest that receiving a positive decision regarding public R&D funding increases privately funded R&D. The second essay analyses how public R&D financing impacts the labour demand of companies. Empirical results suggest that public R&D financing increases both group-level and domestic R&D employment. However, public funding does not have a statistically significant effect on non-R&D employment. The third essay focuses on the productivity effects of R&D. The results of empirical analyses are two-fold. In the short run (in 1-2 years), no statistically significant productivity impact of R&D is found. However, R&D does have an economically and statistically significant impact when R&D efforts made 3-5 years earlier are taken into account. Hence, a window of almost 5 years is needed to capture the productivity impact of R&D. The fourth essay studies how patent quality impacts the likelihood of a merger or acquisition. To proxy the quality of patents, both forward and backward citations are used. Multinomial logit estimations show that owning patents correlates with becoming a target for a foreign company. The same does not apply to targets for domestic firms. However, the results also indicate that the quality of patents does not have a statistically significant impact on the likelihood of becoming target for a domestic or foreign company.

Publication year: 2008
Pages: 121
Price: 30€
Language: English
ETLA A 43

Determinants of Manufacturing-R&D Co-location

admin — Fri, 30 Mar 2007 11:00:00 +0000

The phenomenon of physical R&D-manufacturing co-location is interesting, because researchers have made very different observations regarding its prevalence. In some populations co-location of the two functions seems to be the norm; in others, an exception. However, we still do not have an explicit explanatory theory of co-location. In this paper, we look the reasons why manufacturing and R&D may have to be physically co-located. In a sample of 241 Finnish industrial firms, we find that the need for co-location varies drastically from company to company. We further find that product complexity, process complexity and industry clockspeed have an effect on co-location need.

JEL: D21, D23, F21, F23, L6, O32
Publication year: 2007
Pages: 28
Price: 10€
Language: English
Discussion Papers no. 1082

Simulaatio lääkekehitysalan kannattavuudesta ja riskeistä

admin — Mon, 05 Mar 2007 11:00:00 +0000

Tässä tutkimuksessa simuloidaan lääkekehitykseen suuntautuneiden pienten ja keskisuurten biotekniikkayritysten tulevaisuutta, erityispainopisteenä kansantaloudelliset implikaatiot. Simulaatiossa huomioidaan vaihtoehtoisia kehityspolkuja, joiden avulla on arvioitu erilaisten liiketoimintamallien toimialakohtainen kasvuvaikutus. Koska simulaation lähtökohtana ovat yhtiöiden vuonna 2004 ilmaisemat kehityskelpoiset hankkeet, laskee projektien lukumäärä simulaation myöhemmässä vaiheessa verraten pieneksi ja markkina-arvon kehitys riippuu täysin siitä, mitkä yksittäiset projektit pääsevät eteenpäin. Simulaatio perustuu 21 yhtiön yhteensä 46 erillisen tuoteaihion portfolioon; otos kattaa n. 80% Suomen pienistä ja keskisuurista lääkesovelluksiin tähtäävistä bioteknologiayhtiöistä. Kansainvälisesti tarkasteltuna verrattain pienestä hankemäärästä ja toisaalta lääkekehitykseen liittyvien korkeiden riskien johdosta to-dennäköisyysjakaumat yksittäisen vuoden sisällä ovat varsin vinoja siten, että suurin todennäköisyysmassa sijaitsee lähellä nollaa sisältäen kuitenkin pitkän hännän korkeille markkina-arvoille. Simulaatio siis osoittaa, että kehitystyöhön sisältyy suuria tuotto-odotuksia, mutta sa-malla liiketoiminnan ja teknologiakehityksen epäonnistumisriskit ovat huomattavat jopa koko alan tasolla. Tulosten perusteella tulisi miettiä, miten tällaisia riskejä voisi hallita. Tämä voisi tapahtua esimerkiksi kehittämällä sellaisia innovaatiopolitiikan välineitä, jotka 1) ohjaavat yrityksiä hyödyntämään Suomen erityispiirteitä ja ainutlaatuisia voimavaroja, ja jotka 2) ohjaisivat panostamaan erityisesti [epäonnistumis]riskien hallintaan, sekä 3) mahdollisesti painottamaan ratkaisuja jotka tarjoavat myös yhteiskunnallisia hyötyjä, perusteluna julkiselle sektorille kantaa kehitysriskejä

JEL: C15, G31, L65
Publication year: 2007
Pages: 25
Price: 10€
Language: Finnish
Discussion Papers no. 1075

Tax incentives for R&D and firm dynamics (in Finnish with English abstract and summary)

Niku Määttänen — Fri, 05 Jan 2007 11:00:00 +0000

We compare different tax incentive schemes for private R&D investments using a numerical model of R&D-investments and firm dynamics. We find that tax incentives that are based on the incremental annual spending increase firms’ R&D spending much more than tax incentives that are based on the level of R&D spending. However, incremental incentives also distort the allocation of R&D personnel across different firms much more than level-based tax incentives. This effect tends to lower aggregate output. We also find that whether the tax benefits are targeted to only profit-making firms, which pay corporate income tax, or given to all firms, does not make a big difference in terms of aggregate R&D spending or aggregate output.

JEL: H25, O38, L11
Publication year: 2007
Pages: 23
Price: 10€
Language: Finnish
Discussion Papers no. 1065

When Does Distributed Innovation Activity Make Sense? Location, Decentralization, and Innovation Success

admin — Thu, 21 Dec 2006 11:00:00 +0000

Companies face an expanding set of choices about where to locate their innovation activity, both within their home countries and abroad. This location choice also requires firms to make a simultaneous choice about the organizational structure of innovation activity : almost by definition, multiple locations per firm imply some degree of decentralization. Using firm-level data on innovation output and the location of research and development (R&D) activity, we shed new light on the question of whether firms that have multiple locations also have greater innovation success. Our results indicate that, on average, having distributed R&D activity is beneficial in terms of the extent and breadth of innovation success, and the effect is strongly related to the knowledge sourcing strategies that firms employ. These results are consistent with the interpreta-tion that R&D location decisions are driven by the desire of firms to access a broad set of external sources of knowledge for innovation activities. We also find that the benefits of multiple R&D lo-cations do not apply to novel (new-to-the-market) innovations. Our results suggest that when analyzing technological innovation, it is important to distinguish between novel and imitative innova-tions, since their determinants may differ.

JEL: O32, L22
Publication year: 2006
Pages: 32
Price: 10€
Language: English
Discussion Papers no. 1063

Outsourcing and Offshoring – Overview from Finland in the Early 21st Century (in Finnish with English abstract and summary)

admin — Mon, 11 Dec 2006 11:00:00 +0000

This study analyses the extent and motives of outsourcing and offshoring. We find that in early 2000, 10, 000 23, 000 jobs were transferred overseas from Finland. Annually this corresponds to approximately 1.0 2.5% of normal job losses and creations in the Finnish labour market. The majority of offshored jobs concern manufacturing tasks. Only a tiny number of R&D jobs have been relocated from Finland. Outsourcing is most commonly observed in ser-vice-related functions, but also manufacturing and R&D tasks have been outsourced. The main drivers of production outsourcings have been cost savings, capacity and flexibility increases. In terms of R&D outsourcing, attempts to acquire knowledge, increase flexibility and reduce costs are dominating motives.

Publication year: 2006
Pages: 24
Price: 10€
Language: Finnish
Discussion Papers no. 1059