Finland far ahead of Canada in proactively funding innovation

Looking at Canada's lagging global competiveness performance, and especially its low global innovation ranking, it appears the country doesn't care about competitiveness and innovation. How ...

Looking at Canada's lagging global competiveness performance, and especially its low global innovation ranking, it appears the country doesn't care about competitiveness and innovation. How little Canada invests in innovation stands in stark contrast to how much Finland – the top-ranked country in the European Union and third-ranked globally, invests.

The Global Competitiveness Report 2012–2013 (Klaus Schwab, World Economic Forum), shows Canada's ranking dropping from 12th to 14th in the past year. The report uses 12 measurement pillars, grouped into three sub-indices:

•basic requirements;

•efficiency enhancers; and

•innovation and sophistication factors.

In the innovation and sophistication factors, Canada's performance is embarrassing, ranking 26th in business sophistication (Finland ranks 7th) and 22nd in innovation (Finland ranks second).

I have compared Finland with B.C. before in this column. They are roughly comparable in population, GDP, climate and advanced education. Both also have substantially resource-based economies, with strong forest product exports and mining potential.

However, when it comes to innovation, Finland and B.C. are going in opposite directions. Innovation, and improving competitiveness, can only happen with investment. Simply put, Finland out-invests Canada/B.C. by a mile.

The quality of Finnish R&D and industrial partner co-operation are of the highest international standards, attracting global companies to set up research bases there. Technology is integrated in all areas of Finnish business and personal life. The country is "wired," with almost all educational institutes, banks, libraries and companies existing virtually. E-business processes and online banking are entrenched, and several top Internet security firms are based in Finland, a pioneer in strong encryption approaches. Finns use the least physical cash per capita of any country in the world.

Finland has led innovation on many fronts. The Linux operating system was spawned by the genius of Linus Torvalds. Finland was first to launch a digital network for mobile communications and the first to break new ground with mobile devices, with one of the highest mobilephone and broadband penetration rates.

The Finns specialize in high-tech medical equipment, 90% of which is exported. Biotech flourishes, with one in 10 European companies in Finland.

Encouraging innovation, Finland has developed biotech science parks as "excellence" centres in Helsinki, Turku, Kuopio, Tampere and Oulu to provide fertile ground for networking and co-operation between universities, public research institutes, university hospitals, small and medium-sized enterprises and R&D units of large companies.

Finland has fully integrated IT and communications technology in health care, giving it a unique advantage.

Its burgeoning tech venture scene is largely fuelled by Tekes – a public-funded agency for financing innovative R&D and business with a whopping annual budget of more than $700 million. This non-profit governmental organization offers services to Finnish or international companies located in Finland and does not take any equity or ownership of intellectual property.

"Public funding leverages private funding – you can't really operate your company sustainably with public funding alone. In general, there is a shortage of early-stage funding in Finland," explained Antti Vilpponen, the former ArcticStartup CEO who is now working at infrastructure-as-a-service startup UpCloud.

Boosting the Finnish startup ecosystem, Vigo – an accelerator initiative aimed at bridging the gap between early-stage tech startups and international venture funding – was launched in 2009 by the Finnish Ministry of Employment and Economy.

Often, funding is not enough to help get a startup off the ground, which is why the backbone of the program is made up of Vigo accelerators – private companies run by seasoned entrepreneurs who provide funding, mentorship and access to their networks. Currently, there are 10 Vigo accelerators ranging from clean tech, games and web to fashion and mobile.

Vigo works because experienced entrepreneurs put their own stake into the startup and leverage their investment. The format they're testing at Vigo is similar to models in Israel and Singapore, where the government multiplies private funding.

In addressing the chicken-and-egg question of when to invest, Finland believes that if it commits public innovation investment, innovation will follow. Canada seems to think that if it leaves funding mostly to a dysfunctional private-venture capital industry, innovation will still follow. The results don't show it.

(Acknowledgements: Finland: Europe's IT Superpower, Thomas White International; Not just saunas and Angry Birds – how the Finnish tech scene is bubbling into a startup hothouse, Venture Village) •

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