Vivamus placerat lacus vel vehicula scelerisqu

The impact of Tekes and innovation activities 2015

Innovation funding with proven impact

2

Tekes has provided funding for

SMEs funded by Tekes increased their exports by

Projects that endedin 2014 resulted in

65%

1 billion

1,130

generally known Finnish innovations

within four years of the project's end

patents orlicence applications

Projects that ended in 2014 resulted in

SMEs expect 2014 projects to bring

1,500

5.8 billion

over 80%

products, services or processes

turnover in the target year

Annual turnover increased in 2010–2013in international grow SMEs funded by Tekes by

Jobsincreased in2010–2013 in SMEs funded by Tekes

For every euro invested by Tekes, companies increase their R&D investments by

24%

20%

percentage points more than in other SMEs.

percentage points more than in other SMEs.

2 euros

Exports increased in SMEs funded by Tekes by

Projects that ended in 2014 resulted in

37%

1,090

annually between 2010 and 2013

academic theses

of Tekes customers that have been successful in their innovation activities say that Tekes funding has been a key part in their success

Out of ten of the fastest-growing Finnish technology companies,

9 were Tekes customers in 2014

Contents

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INNOVATION, ENGINE THAT DRIVES ECONOMIC GROWTH  .............................................................................  5 The Finnish welfare state is based on a globally competitive business life  ..................................................................................................................................... 6 Finland has top innovation environment  ...................................................................................................... 9 Startups and growth businesses bring new ideas to the economy  ......................................  9 Public funding for R&D at companies essential for renewal  ............................................................. 10 First results coming in from tax incentives for innovation activities  ..................................  10 Public innovation funding compensates for market failures  .................................................  11 Public innovation funding can achieve major reforms  ............................................................  11

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INNOVATION FUNDING WITH PROVEN IMPACT  .................................................................................................15 Good return on investment for Tekes funding   ........................................................................................  16 Companies funded by Tekes increased their turnover and created more jobs  .........................  18 Risk-taking is a key part of innovation activities  ................................................................................... 20 Main part of Tekes customers are SMEs  ....................................................................................................  21 Young growth companies create new dynamism  ................................................................................... 22 Growth companies funded by Tekes were successful  .........................................................................  24 Funding for large companies important for the innovation environment  ..................................  25 Multidisciplinary research creates new business in companies  ..................................................... 27 Tekes programmes have many benefits on business and society  .................................................  29 Smart living  ......................................................................................................................................... 29 Vitality of people  ............................................................................................................................... 29 FiDiPro programme  ........................................................................................................................... 29 Targets describe socio-economic impact  ..................................................................................................  29 Tekes has promoted wellbeing and environmental issues in many ways  .......................  30 Tekes supports renewal and encourages productivity  ..........................................................  30 Major role in developing cababilities of research community and large companies  .................................................................................................. 31 References  ................................................................................................................................................................ 33

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4

1 INNOVATION, ENGINE THAT DRIVES ECONOMIC GROWTH Innovation activities play an increasingly important role in turning round the Finnish economy. Innovation can boost economic growth and revitalise economic structures.

5

The Finnish welfare state is based on a globally competitive business life

Finland is one of the world's top countries measured by a number of welfare and economic indicators. Our welfare is based of competitiveness on the global market. Innovation activities gives a boost to structural change in business and to productivity and competitiveness. Successful companies increase welfare and create more jobs in Finland. Success in the international market requires companies to engage in continual renewing. Successful companies can come up with innovative solutions and increase their

Innovation is the engine for economic growth, which in turn can finance our welfare state services.

6

sales through products and services with high added value. Positive employment trends both in the private and public sectors is based on higher productivity. Better competitiveness increases investment in Finland and keeps our welfare state running, enabling us to maintain a high level of education, daycare, geriatric services and to create opportunities for young people. Finland's economic growth relies on the export of goods and services. The global recession of recent years has hit Finland so much that exports have not yet bounced back. Innovation activities play an increasingly important role in turning round the Finnish economy. Innovation can boost economic growth and revitalise economic structures. Structural renewal is needed when there is no economic growth even if international business cycle improve. Innovation will contribute to structural change in the long run.

Finnish innovation does well by international comparison Figures show that Finland is one of the world's most innovation-rich countries. The impact of public investment in businesses' innovation activities has been excellent.

Innovation refers to a new product, service or working method that creates economic or social benefits.

• WEF's Global Competitiveness Report 2014– 2015: Finland is fourth after Switzerland, Singapore and the USA in terms of global competitiveness, and first in terms of innovation. • Finland is 18th in IMD's 2014 competitiveness comparison, somewhat better than the year before. Finland's strengths are education and a well-functioning infrastructure. • WEF's Europe 2020 Competitiveness Report: Finland is the most competitive country in the EU area. Finland's strengths are education, innovation, move towards digital economy and businesses' operational environment. • According to Union Scorebroad (2014), Finland is one of the EU's leading innovators alongside Sweden, Germany and Denmark. Finland is successful especially in research and innovation, publications, patent applications, corporate innovation and cooperation and patent and licence income. • WEF, The Global Information Technology Report, The Network Readiness Index 2014. Finland is for the second time at the top of the table in terms of the IT use index. Finland's strengths include infrastructure and digital content. • According to Forbes (2014), Finland has the world's best innovation environment for businesses. The indicators used included technology, innovation, taxes and corruption. • Finland was fourth in INSEAD's Global Innovation Index 2014 report. Finland's strengths include education R&D, ICT applications and cooperation between companies and research, with a weakness in low international investment levels.

7

Research results on productivity development • R&D and know-how has a strong positive impact on productivity. Crass – Peters (2014) • Productivity growth is strongest when there is plenty of innovation, and technological development is fast. Maliranta (2014) • Finland has plenty of resources for productivity growth: highly trained workforce, ICT expertise and knowledge of international markets at senior management level. Holmström – Korkman – Pohjola (2014)

• Finnish companies must adopt new technology more readily to improve productivity. Maliranta – Vihriälä (2014) • Start-ups are important in terms of innovation, economic renewal and productivity growth. Holmström – Korkman – Pohjola (2014) • Labour productivity within industry in OECD countries correlated positively with direct investments and an increase in R&D expenditure. High education level and companies' adaptability for change also increase productivity. Hyvärinen (2012)

Productivity slows down in Finland due to structural changes Gross domestic product (GDP) per inhabitant 40 35 30 25 20 15 10 5 0

60

65

Finland

70

75

80

OECD

85

90

95

00

05

USA

Productivity has slowed down in Finland more than in many other countries. Source: OECD 2014

8

10

15 Year

Finland has top innovation environment We have an excellent innovation environment in Finland: strong competence, good cooperation between businesses and researchers, good networks and wellfunctioning infrastructure. Our solid ICT expertise is valued the worldwide. The fact that the Finnish gaming industry has climbed up to the top internationally is a case in point of recent years' successes. Health technology exports are rising well at the moment. New growth areas are springing up in industry and the service sector: cleantech, digital services and the Internet of Things, among other things. International attractiveness of our innovation environment is a key objective. This requires a comprehensive reassessment of regulation and taxation, and a change in attitudes. The Finnish operational environment must be moulded to favour entrepreneurship and to boost growth and experimentation. One reason for Finland's long-term success has been modern values and attitudes to learn about new ideas, to produce and implement innovation and our attitude to higher competition and productivity. Countries that rely on modern values, especially the Nordic countries and North America enjoy higher job satisfaction than countries with traditional values. New ideas and operating practices increase work satisfaction (Bojilov – Phelps (2012), Phelps (2013)). This can also be seen in long-term productivity statistics. Countries that are

prepared to develop and implement new ideas and innovation are also at the top of the productivity growth. Finland is a good innovation environment for competence-based entrepreneurship. In global division of labour and production, it is good for Finland to specialise in those parts of the value chain that create added value, such as research and innovation activities, marketing and brands. Finland offers a good setting to start-ups and growth-oriented businesses.

Startups and growth businesses bring new ideas to the economy Startups are important as they provide new jobs and create innovation. The funding prospects of startups and growth businesses have improved considerably in Finland thanks to, for example, Young Innovative Companies funding, Vigo accelerator programs and Growth Track service model. Gaming and health technology startups in particular have been successful internationally. There are not enough globally operating medium-sized Finnish companies at the moment. We need more businesses that seek growth through international operations. Global value networks offer great opportunities to Finnish growth companies. It is therefore important that both startups and SMEs can utilise their innovations in global networks.

9

Public funding for R&D at companies essential for renewal Even during difficult economic times, it must be remembered that public RDI (R&D and innovation) funding is profitable in the long run. There are two reasons for this. Public research and development investment and other measures that give a boost to the national innovation environment have a widespread positive impact on society. Secondly, RDI in Finland compares favourably in the global context with countries that put in many times more money into it. In order for us to be successful, we need sufficient resources, clear strategic

Public funding for R&D at companies is quite low in Finland by international comparison. Most of the public funding goes to universities and research organisations. At the moment both private and public R&D investments are being cut at the same time. Savings have been made in the difficult economic situation in Government R&D expenditure, unlike in the 1990s recession when growth was sought by increasing public R&D funding. The corporate sector's own R&D investments have gone down in real terms since 2009.

Finnish public funding into research, development an innovation relative to the gross domestic product is less than a quarter of that in the US and half of the EU average.

12%

US

9%

Estonia

7%

EU

5% Sweden

(Lähde: OECD, percentage BERD financed by the goverment)

10

3% Finland

choices and good partnerships within Finland and internationally.

First results coming in from tax incentives for innovation activities As international tax competition is becoming tighter , many OECD countries have introduced tax incentives for innovation activities, which have produced some positive results. Several research results show that investments into businesses' innovation activities have increased by at least as much as the tax incentive. Tax incentives were employed in Finland in 2013 and 2014, with 566 companies applying them to wage costs related to RDI. The additional deduction granted to these companies totalled EUR 65 million in 2013, of which companies received a tax return of 30%, or about EUR 20 million. According to preliminary results, about a third of the companies that utilised the tax incentives have not received Tekes innovation funding after 2000. Companies that made use of the tax incentives were larger, more solvent companies that had been around for longer that those that received Tekes funding (Kuusi et al., 2015). Use of tax incentives was much lower than expected.

According to OECD data, public R&D investments – even taking into account the new tax incentives – were moderate in Finland compared to its competitors.

Public innovation funding compensates for market failures Public RDI funding compensates for market failures and makes companies increase their R&D investments (additionality). Owing to low funding provided by the markets, companies do not receive enough private funding to develop their innovation. Moreover,

public funding is important, because without it companies will not invest enough in innovation from the viewpoint of the entire society. The is a clear market failure for startups. Finnish companies do not receive enough market-based funding or private equity investment in the initial stages of their operations. At this stage the risks are too high and profits seem too distant to private investors. Public funding has proved to be a good solution in order to share the risk. International comparisons show that the best results were made by companies that received a

Public funding for R&D is needed for radical innovations and renewal.

reasonable amount of public funding and a considerable amount of private funding.

Finland is a leading country in innovation cooperation between companies and research organisations – Tekes plays are key role in creating such partnerships Innovation cooperation with universities, universities of applied sciences and research institutes Finland Austria Great-Britain Belgium Sweden Denmark Germany Norway EU-26 France Netherlands Spain Portugal Italy 0

5

10

15

20

25

30

Percentage of innovative companies, 2010–2012 Universities and universities of applied sciences Source: Eurostat, Community Innovation Survey

Research institutes

Public innovation funding can achieve major renewal Public innovation should in the long run produce new information and competence to benefit the entire society, that is, to make spillovers. Competence created through public funding spills over when employees change jobs, as companies cooperate other companies and research institutes, and as innovations build upon previous innovations. Cooperation between universities, universities of applied sciences, research institutes and companies creates expertise that accumulates corporate innovation activities in Finland. Large companies play a key role, because research and the networking of SMEs with large companies create competitive advantages – global challenges require large companies to play their part and network with SMEs. Many successful private sector innovations have received funding 11

Half of the benefits of public RDI incentives will impact society at large in the form of new competences and information in networks.

and other services in the early stages of development in the US and other developed economies. In the US, for example, the smart technology in iPhones is funded by the public sector, as are as the internet, wireless networks, GPS system and touch screens. Technologies funded by the public sector have spread widely to private sectors (Mazzucato, 2014). The state plays an important role in industries that have a major impact on society, in the form of digital applications, for example. Start-ups and growth companies producing innovations are important in terms of economic reform. According to the study, the state plays an important role in their support of growth companies. Israel is an excellent example of this, with companies entering growth paths aided by strong government subsidies (Holmström – Korkman – Pohjola, 2014).

12

Tekes has played an important role in Finland's innovation-oriented renewal. According to the Sfinno database, Tekes has been funding over half of commonly known innovations created in Finland between 2000 and 2013 (VTT Sfinno, 2014). Tekes has co-funded many innovations in their early stages that turned out to be important for the national economy in the fields of information technology, industrial services and environmental and wellbeing services. Tekes has promoted the creation of innovations that have had a positive impact on society, environment, slowing of environmental change, and wellbeing (Hjelt et al, 2011).

Research results in effects of innovation activities on national economy • Innovations necessary for creative destruction are created everywhere: in the public and private sector, and in companies whether they are large or small, or start-ups, relatively new or older. Likewise, creative destruction concerns companies of all ages and sizes. Maliranta (2014). • Public R&D funding and tax incentives increase employment in OECD countries. Thomson – Jensen (2013) (25 OECD countries). • Receiving corporate R&D for several years in a row or from multiple sources does not reduce the impact of public R&D funding. Czarnitzki – Bento (2012) (Flanders). • Public R&D funding increases the acquisition of outside competence in low-technology companies, while in high-technology

companies it boosts the company's own R&D activities. Cooperation and networking is increasing in both types of company. Albors Garrigos – Barrera (2011) (Spain). • A business incubator programme with both public and private funding acted as an important transmitter of open innovations and competence especially from large companies to other players in society. This would not have taken place without the programme. Clausen – Rasmussen (2011) (Norway). • Public R&D funding (both EU and national) increases private R&D funding. Czarnitzki – Bento (2011) (Germany).

Tekes funding plays key role in creation of innovations in Finland % 100 90 80 70 60 50 40 30 20 10 0

Funding from Tekes had a significant role Funding from Tekes had a small role

No public funding Completely new innovations

New in the global markets

The company's key technology

Source: Sfinno survey, VTT 2014, concerning 2000-2013

13

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2 INNOVATION FUNDING WITH PROVEN IMPACT Tekes is the enabler in the Finnish innovation ecosystem. Our strategy is to create vibrant business into Finland and do our part in building the world's greatest innovation environment. Our customers are bold in reshaping business life within firms of all sizes and research organisations. Internationalising, growth-seeking SMEs form Tekes' key target group. The thousands of examples along the years show that revitalising corporate funding has a major effect on the company's growth and success.

Innovation activities are assessed and measured to determine the effects of public RDI funding to businesses, industries and the entire economy. Assessing the effect of public funding has become more and more important, as efficiency requirements governing public funding are tightened. Assessment results and preliminary assessments are also utilised more in the planning and development of innovation policies.

According to international comparisons, Finland has the best impact assessment practices among OECD countries (Jacob et al 2015), followed by Switzerland, Canada and the US. Finland has risen well in the table, lying 12th in 2002. Tekes has played an important role in the development of impact assessment practices in Finland.

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Good return on investment for Tekes funding Plenty of research has been made on the impacts of Tekes activities. Most Finnish growth companies with worldwide success are Tekes customers. This means that Tekes funding has been successful: Tekes has been able to create a major impact with small investments. In 2014, Tekes funded 1,500 corporate projects. Owing to insufficient funding authorisation,

Tekes had to abandon 790 projects, of which 230 would have been good and fulfilled the funding criteria. 80 assessments have been made since 2000 on Tekes results. These assessments relate to Tekes programmes, social impact in terms of Tekes objectives and various Tekes instruments, such as Young Innovative Companies and Global Access Program GAP.

Research results about the impact of Tekes innovation funding • Tekes funding increases growth of employment, fixed investment and sales in the short term. Einiö (2014).

• Tekes funding increased growth companies' business planning, management and ability to collect investments from the private market. Autio et al. (2013).

• Strategically significant Tekes projects in SMEs have the highest impact (especially Young Innovative Companies projects). Viljamaa et al. (2013).

• Tekes funding results in profits of 30–50% to society. One euro invested by Tekes in R&D in addition to one euro invested by the company itself (total of two euros) increases impacts by one euro. Takalo et al. (2013).

16

• The employment figures and especially value added of SMEs funded by Tekes since 2000 have increased at a higher rate than those of other companies. These factors have also led to a higher labour productivity in these companies. Rouvinen – Pajarinen (2012).

• Tekes has been able to promote the creation of innovations that have had a positive impact on society, environment, slowing of environmental change, and wellbeing. Hjelt et al. (2011). • One euro of direct public research and development funding increases companies own funding my more than one euro, which means that the company's R&D investments increase by at least two euros. Ali-Yrkkö (2008), Einiö (2009).

For every euro invested by Tekes, companies increase their R&D investments by

2 euros

Tekes has participated in the financing of

over half of commonly known innovations created in Finland between 2000 and 2013

More than

80%

of Tekes customers that have been successful in their innovation activities say that Tekes funding has been a key part in their success

17

Companies funded by Tekes increased their turnover and created more jobs 2013. The turnover of SMEs seeking international growth increased in 12 months by as much as 24 percentage points more than in other similar companies. Jobs in SMEs increased by 20 percentage points more during the entire period. The exports of funded SMEs increased by almost 1 million euros between 2010 and 2013. The projects under review ended between 2010 and 2011.

Tekes follows up on the results of projects they have funded at the end of each project and three years afterwards. The results show that Tekes has successfully chosen good companies and projects to fund. The turnover of SMEs funded by Tekes that are seeking international growth increased in 12 months by 14 percentage points more than in other similar companies between 2010 and

Turnover development in SMEs funded by Tekes Questionnaire to SMEs funded by Tekes three years after the project's end 581 companies whose project ended 2010–2011 and that answered the survey

200

140

Growth companies entering the international market that were funded by Tekes

120

SMEs funded by Tekes

100

Comparison companies: industry, information and business services

180 160

80 60

2010 = 100

40 07

08

09

10

11

12

13

The following resulted from projects which ended in 2014 • 1,500 products, services or processes • 1,130 patents or licence applications • 870 academic theses

Annual turnover of the international market oriented companies funded by Tekes increased by 24 percentage points more than in SMEs on average in 2010–2013. Source: Asiakastieto Oy

18

Jobs increased in SMEs funded by Tekes by 20 percentage points more than in other similar companies in 2010–2013

Annual turnover increased in SMEs funded by Tekes that were seeking global growth by 24 percentage points more than in other similar companies in 2010–2013

Expert development in SMEs funded by Tekes Billions of euros 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0 2010

2013

Source: Finnish Tax Administration

19

Risk-taking is a key part of innovation activities Risk-taking is a key part of innovation activities. Distribution of risk is one reason for businesses to seek public RDI funding for their innovation activities. An average of two thirds of SMEs' projects funded by Tekes are commercially successful. About 1 per cent of companies receiving Tekes funding go bankrupt annually, corresponding to the average of all Finnish companies. In 2014, 60 of Tekes' customers went bankrupt, which was seven fewer than in 2013.

The impact of capital of companies funded by Tekes has been studied by Tempo Economics Oy. The key observation was that when a company folds, the capital developed by it will not disappear but

1. In about half of the cases, innovations of the company that had ceased to exist were used in other companies. 2. Only a small percentage (13) said that key personnel had become unemployed after the company discontinued its operations. 3. The case study contained good examples of what is learned from failures can lead to success in a new company (e.g. Rovio and Supercell)

More than half of SMEs' projects funded by Tekes are commercially successful SMEs' projects completed in 2010 and 2011 that were funded by Tekes % 60 50 40 30 20 10 0 Very successful, successful or reasonable

Commercialisation incomplete

Source: Tekes customer survey 2013 and 2014

20

is transferred elsewhere. The survey consisted of 200 telephone interviews with Tekes' customers whose companies no longer operated, and of 20 case studies. The conclusions were:

Unsuccessful

Commercialisation failed

Main part of Tekes customers are SMEs The majority of Tekes customers are SMEs. SMEs seeking growth through international operations are Tekes' key target group. Tekes follows up the results and impacts on the innovation environment and the Finnish national economy with ex-post (three years after the project has ended) questionings. An impact assessment of SME projects shows that both funding and

Tekes services produce plenty of results and impacts. Projects are carried out more extensively and faster, with increased cooperation. Projects outcomes include numerous patent applications, trademarks and licence agreements that help companies increase their competitiveness. Turnover, exports and number of jobs in SMEs that received Tekes funding increased more than in other similar companies. Thanks to better

Results and impacts from projects by SMEs that ended in 2010–2011

INVESTMENTS

Tekes funding EUR 142 million Companies' own funding EUR 50 million Other external funding EUR 71 million Tekes' innovation services to companies

cooperation, added value is higher and productivity also improves in the whole network. Altogether,616 completed projects in 581 SMEs. The Activity column contains the percentage of respondents that agreed with the question. The Results and Impacts columns have the targets in order of importance. Information on turnover, exports and increase in jobs are based on data provided by Asiakastieto Oy and the Finnish Tax Administration.

Annual turnover increased

Effect of Tekes on the project: • Carried out more extensively (84%) • Would not have been carried out without Tekes funding (79%) • Faster timetable (77%) • Became more challenging (74%) New business models and networking • More effective use of cooperation networks (64%) • Cooperation partners more numerous and more multi-disciplinary (64%)

More than 78% of Tekes funding in 2014 went to companies with less than 500 employees.

by 14 percentage points more than in other similar companies in 2010–2013

They impacts on innovation and business

Exports increased by

• More cooperation and subcontractor connections • Creation of added value in networked companies • Innovation and flexibility in networked companies • R&D activity, productivity and jobs in networked companies

almost EUR 1 billion in 2010–2013

ACTIVITY

Jobs increased by 20 percentage points more than in other similar companies in 2010– 2013

RESULTS

New processes, products and services 236 patent applications, 74 utility models, 182 trademarks, 72 protection of designs, 573 licence agreements, 49 spin-offs

IMPACTS

They results in innovation and business • Understanding customer and user needs • Creating value for the business and the customer • Business increase • Acquisition of new information and competence

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Young growth companies create new dynamism Tekes has increased its funding to young growth companies in recent years The growth figures of these companies and their good rating in comparison to other companies shows that Tekes has been able to pick the best companies and projects to fund from a large group. In 2013, Tekes funded young innovative companies seeking rapid growth with EUR 28 million. About 16 % of this went to companies in the

Vigo accelerator program. Funding has since 2008 covered a total of 247 companies, receiving a total of EUR 158 million from Tekes. In 2014, Tekes funded young companies, that is, less than six years old, with EUR 127 million. The turnover growth of young innovative companies funded by Tekes was five times that of comparison companies. Tekes funding increased the companies' business planning,

The turnover of companies seeking rapid growth in the Young Innovative Companies funding programme increased by 93 percent a year within 4 years.

22

Young innovative companies funded by Tekes increased their sales and employment clearly better than other similar companies.

management and ability to collect investments from the private market (Autio et al., 2013). According to an assessment by the Evidence Network (Canada), Tekes funding had a particularly positive effect on companies' business planning, international sales, strategy and management. Tekes funding also had a major effect on growth companies' turnover and increase of exports, in addition to the creation of

new jobs and international customer relationships. An impact analysis showed that funding young innovative companies boosted their chances of obtaining private investment. According to the analysis, funding is not sufficient on its own, it is the services offered by Tekes that are important for success. According to a survey by the Small Business Center at the School of Business of Aalto University, companies taking part in the funding programme for young innovative growth companies enjoy the fastest growth. The survey also tested the impact of the Tekes funding instrument for young innovative companies, finding out that Tekes funding clearly contributed to company growth (Autio et al., 2013).

Research findings about young innovative companies • The competence of the company founders increases R&D investments in start-ups. Honjo – Kato – Okamuro (2014) (Japan).

• The innovation ability of young innovative companies and commercialisation of products are better than in the comparison group. Tåg – Maliranta – Pehkonen (2013) (Finland).

• Young (less than 6 years old) innovative companies (with fewer than 250 employees) are growing at a higher rate than other growth companies, and

increase economic growth in the long run. Czarnitzki – Delanote (2012) (Flanders).

• The R&D intensity of young innovative companies correlates positively with the level of indebtedness and the human capital of the founders and staff. Fryges – Kohn – Ullrich (2012) (Germany).

• The performance of young innovative companies that received public R&D funding did not deviate significantly from other similar companies. Schneider – Veugelers (2010) (German).

Turnover development in young innovative companies funded by Tekes 2010=100 800 700 600 500 400 300 200 100 0 2009

2010

2011

2012

2013 Year

Source: Asiakastieto Oy

23

Growth companies funded by Tekes were successful Start-ups and growth companies funded by Tekes have compared well in a number of surveys. This underlines the role of Tekes in Finland to provide funding for companies in their early stages.

Deloitte Technology Fast 50 Finland

Wired-magazine

Of the 10 fastest-growing companies in Finland in 2014, 9 are Tekes customers (growth within 5 years)

Wired magazine listed in August 2014 Europe's hottest start-up cities and their top 10 start-ups. Nine of the list's Finnish companies are Tekes customers, and most of them are included in the corporate funding programme for young innovative companies.

1. ePassport Payments (8,431%)* 2. Tuxera (6,391%) 3. Valopaa (3,091%) 4. Alekstra (2,240%) 5. Diktamen (1,955%) 6. iLOQ (1,832%) 7. Anders Innovations (1,705%) 8. Efima (1,435%) 9. Eniram (945%) 10. Solinor (749%) * Not a Tekes customer

1. Nanol Technologies 2. Sumoing 3. Beddit 4. Diktamen 5. Playraven 6. Nexstim 7. Nextgames 8. Bitbar Technologies 9. Team Onomatics 10. 5th Wave Brands * * Not a Tekes customer

Talouselämä-magazine Talouselämä journal listed the most interesting start-ups in January 2015 using as criteria, for example, opportunity to quick internationalisation, the product's growing market and competence within the team. The companies had a EUR 21 million turnover and exports of EUR 11 million in 2014. 19 of the companies on the list were Tekes customers. Blueprint Genetics Oy Cajo Technologies Oy Forendo Pharma Oy Haltian Oy IndoorAtlas Oy Jakamo Osakeyhtiö Kyynel Oy LeadDesk Oy MariaDB Corporation Ab Next Games Oy Nocart Oy Norsepower Oy Ltd Nosto Solutions Oy Nuuka Solutions Oy Onomatics Oy Quuppa Oy Spectral Engines Oy Synoste Oy UpCloud Oy * Yoogaia Oy * Not a Tekes customer

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Funding for large companies boosts the innovation environment Tekes improves, thanks to its funding criteria that encourage networking, the quality of large companies' RDI projects. This results in significant impacts when competence is transferred between large companies, universities, higher education institutions and research organisations and SMEs develop as subcontractors and strategic partners to large companies. Large companies create a significant proportion on Finland's research and development, develop competence and produce radical innovations (Hyvärinen – Kajala, 2014). Large companies also play a key role in that they contribute to university research. SMEs also benefit from cooperation with large companies, because their exports are often channelled to networks led by large companies. Large companies are significant employers and corporate tax payers in Finland. If large companies offshore their core competences out of Finland, other functions of the company will eventually follow. This is why public funding of companies' research and development activities are even more important to Finland than the large companies themselves. Tekes funded large companies' RDI project with EUR 124 million in 2014. One funding criteria by Tekes to large companies is research

cooperation with SMEs, research organisations and universities. 86 per cent, or EUR 106 million, of Tekes funding to large companies was channelled through subcontracting to SMEs or research service purchases or research funding to higher education institutions and research organisations. Tekes studies ex-post (three years after the project has ended)

questionings to learn about the results of projects and the impacts on the innovation environment and the Finnish national economy through large companies. Large companies participate in Tekes research projects, so their results are important especially to universities and research organisations and to SMEs making use of networks.

Tekes funding to large companies is channelled almost exclusively to SMEs, universities and research institutes.

Universities and research institutes

Large companies (over 500 employees) 50 M€

SMEs

56 M€

124 M€

25

Results and impacts from large companies' projects that ended in 2010–2011

• Tekes funding EUR 132 million • Companies' own funding EUR 100 million • Other external funding EUR 127 million • Tekes' innovation services to companies

Effect of Tekes on the project • Increased target level or challenge (82%) • Carried out more extensively (81%) • Would not have been carried out without Tekes funding (67%)

INVESTMENTS

New business models and networking

New processes, products and services • 98 new products • 62 new services • 186 complementary or improved products or services • 468 patent applications • 48 trademarks • 29 spin-offs

ACTIVITY

RESULTS Key impacts on innovation and business

Key results in innovation capacity • Acquisition of new information and competence • Utilisation of R&D networks • Understanding customer needs • Combining competences from multiple disciplines

• Cooperation networks expanded (91%) • More effective use of cooperation networks (88%) • Cooperation partners more numerous and more multidisciplinary (84%)

• More cooperation and subcontractor connections • Understanding customer and user needs • Receiving information from the research and development network

IMPACTS

Key impacts on society

The Activity column contains the percentage of respondents that agreed with the question. The Results and Impacts columns have the targets in order of importance.

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• • • • • • • • •

Reform of well-established companies Growth-oriented approach of businesses Strengthening the national competence base Better energy efficiency More international innovation activities Regional vitality Clean air, water or soil Creation of new jobs Use of renewable resources

Multidisciplinary research creates new business in companies Tekes funds high-quality research that combines views of utilising both commercial and social opportunities. This is why the focus is on multidisciplinary research, because the results create new business opportunities in Finnish companies. Public research networked with companies is the most popular type of research funding, with universities, higher education institutions and research organisations developing solutions for business needs. These research results can be utilised by companies in their own projects.

Research plays many roles in the Finnish innovation environment. The primary outcome is new information in cooperation with companies. It is vital that research results are utilised in business and industry. 76% of the research organisations said that their ability to assess and develop new research models has improved once Tekes funding has become available.

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Results and impacts from public research projects that ended in 2010–2011 Effect of Tekes on the project • Tekes funding EUR 201 million • Research organisations' own funding EUR 27 million • Other external funding EUR 52 million • Tekes' innovation services to research organisations

INVESTMENTS

Project success • Project targets were reached (85%) • Commercialisation was successful (46%)

New processes, products and services • 100 new products • 85 new services • 122 complementary or improved products • 256 patent applications • 42 trademarks • 113 spin-offs

• Would not have been carried out without Tekes funding (96 %) • Carried out more extensively (76%) • Faster timetable (73%)

ACTIVITY

RESULTS

• Acquisition of new information and competence • Understanding the needs of product or service users

IMPACTS

Key impacts on society • Strengthening the national competence base • Renewing of wellestablished companies

The Activity column contains the percentage of respondents that agreed with the question. The Results and Impacts columns have the targets in order of importance.

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• More effective use of cooperation networks (90%) • Cooperation partners more numerous and more multidisciplinary (90%) • Cooperation networks expanded (89%)

Key impacts on research activities

Key results in terms of innovation activities • 1001 technology or competence transfers for businesses • 682 researchers took jobs in industry • 51 projects entered new markets • 206 IT methods or pieces of software • 74 products and services that reduce environmental load • 78 products and services that save resources • 76 methods that make service provision more flexible

New business models and networking

• More international innovation activities • Growth-oriented approach of businesses

• Utilisation of research networks • Utilisation of research results in business and industry

Key impacts on business activities • Subject field expertise and competence in the companies • Practical utilisation of technology developed in the project • Productivity and competitiveness of businesses in the sector • Increased and closer cooperation between companies in the sector

Tekes programmes have many benefits on business and society Tekes programmes focus on topical and clearly defined issues, and offer funding and expert services. The programmes enable companies and public research unit to develop new business and competence, network internationally and contribute to developments in the field. Two assessments were completed in 2014 about Tekes programmes. The assessments were more extensive than previously, focusing on results and impacts at ecosystem level.

ciplinary and technological cooperation between companies and research organisations in Finland. All the companies being studied managed to develop technology that can be commercially utilised, functional foods or nutritional products for the domestic and international market.

Smart living

FiDiPro programme

Tekes has in recent years promoted the research, development and innovation work of the built environment through the Rembrand, Sustainable Community and Spaces and Places programmes. The Rembrand programme developed the real estate business towards a more business- and service-oriented direction and promoted customer-orientation and internationalism in the real estate business. The Sustainable Community programme promoted the development of sustainable and energyefficient areas and buildings. The Spaces and Places programme focused on the business development of spaces and places and developed better understanding of their user needs. According to the programme evaluation, the grounds for started the programmes were clear and fitting. The programmes have met well the development challenges and managed to predict changes in the operational environment. As a rule, strategy work in the programmes has been successful and the objectives relevant in relation to the challenges and opportunities relat-

ed to the operational environment. The assessment was carried out by Tempo Economics Oy (Valtakari et al., 2014).

Vitality of people The programme evaluation of wellbeing programmes included the final evaluations of the Boat (2007–2011), Sapuska – Added Value for International Food Markets (2009–2012) and Free Time Services (2006–2011), and the expost evaluation of the Food and Health programme (Elite 2001–2004). The evaluation was carried out by Ramboll Management Consulting (Halme et al., 2014). According to the evaluations, the programmes were successful in their target-setting and operations. The Boat and Sapuska programmes plans took well into account the needs of SMEs that seek international growth. Companies included in the Free Time Services programme mainly served tourists into Finland. On the basis of the final evaluation, the Elite programme that ended in 2004 clearly improved multidis-

FiDiPro (Finland Distinguished Professor Programme) is a joint funding programme between the Academy of Finland and Tekes with the objective of hiring top researchers from abroad for a fixed period. According to the evaluation, almost all of the universities said that FiDiPro had contributed to the spread of new methods, information and technologies being spread at the research organisation, opening up new avenues for research. FiDiPro researchers view the effects in very much the same way as universities. Participation in the programme has helped businesses to network and making them better known internationally. Results for businesses are not expected until later. The evaluation was carried out by Owal Group Oy (Wennberg et al., 2014). In terms of the Finnish innovation environment, the programme was considered to improve Finland's visibility abroad and to reduce the threshold by top researchers to come to Finland. 29

Targets describe Tekes' socio-economic impact The Ministry of Employment and the Economy has set three targets for Tekes operations until 2014.

These targets are: • Increasing innovation capabilities • Growth and renewal of business productivity • Social and environmental wellbeing

Tekes impact and reaching of targets is monitored by means of impact analyses and surveys. Tekes' targets are direct wellbeing effects based on innovation, productivity, structural renewal and growth. The results take projects further through capabilities in the long run. It is important that that the business and industry renew in terms of Finland's competitiveness. Continuous development of competence and capabilities improves the national economy and development of the innovation environment. The state of the environment and human wellbeing affect sustainable development on a wide front, also creating new business opportunities.

Tekes has promoted wellbeing and environmental issues in many ways According to an impact assessment on wellbeing and environment, Tekes 30

has promoted wellbeing and the environment in a number of ways (Technopolis B.V. VTT and Statistics Finland, 2014). According to the impact assessment, Tekes' activities has had the best effect on businesses' R&D levels and the results and growth of innovation activities. The amount of investments put in by the companies funded by Tekes have increased. The number of commercial innovations has increased, boosting the companies' turnover growth. Those who assessed Tekes projects said that they have extensive socio-economic impacts. Funding has contributed considerably to an increase in competence levels, international innovation activities and entrepreneurship. Tekes funding has produced 1.7-fold spillovers thanks to networking and increased cooperation. According to the impact assessment, Tekes holds a unique position in terms of networking for

businesses and research organisations, and utiliser of external information. Tekes has an important effect of corporate behaviour in Finland. A change in corporate operating practices will have socially beneficial results.

Tekes supports renewal and encourages productivity One of the objectives of Tekes operations is that research, development and innovation activities result in higher productivity of the national economy. Companies are the key creators of productivity. Labour productivity can be improved with solutions that make it easier to organise work and create clearer and more rational operating practices in the workplace. The impact assessment on productivity and renewal discussed the effects of Tekes activities on productivity and renewal in companies after 2000 (Viljamaa et al., 2013). According to the impact assessment, strategically significant projects funded by Tekes in SMEs had the most effects. The positive results and productivity growth of Young Innovative Companies in particular suggest that careful selection of companies and the overall support brings good results.

Tekes plays a major role in developing research and the capabilities of large companies The third Tekes target was to increase innovation capabilities. Through funding to universities and research organisations, Tekes funds high-quality research that combines views of utilising both commercial and social opportunities. Tekes encourages researchers to be visionaries whose research results create opportunities for new business. An impact assessment on Tekes operations concerning capabilities was carried out in 2014. The target group for the assessment consisted of research and development projects of large companies and research organisations. The impact assessment was carried out by Ramboll Management Consulting. The main results of the assessment were: • Tekes has been successful in promoting capabilities related to innovation activities. The key method of effecting change has been to promote cooperation and networking. • Tekes has an important role in facilitating cooperation between large corporations, SMEs and research organisations, and further to help transfer capabilities and competence related to innovation activities. • Thanks to Tekes projects, both large corporations and research organisations now have more cooperation with SMEs. • When trying to promote capabilities, it is the internationalisation of research and innovation activities and commercialisation of research results that should be developed further. Team Finland actors should agree on cooperation and division of work, for example in terms of internationalisation capabilities and growth funding. When working together, each actor could focus on its own strengths. 31

Research results on the impacts of Tekes funding Many surveys have been conducted on the impacts of Tekes research, development and innovation funding on company operations and success. There have been several dozen such surveys since 2000. They clearly show the positive effects of funding. This is a summary of the most recent surveys since 2000.

• Tekes has promoted innovation activity capabilities particularly through cooperation and networking. Halme et al. (2015). • When a company stops its operations, 50% of their intangible assets (IPR etc.) transfer to other companies. Riipinen et al. (2014). • Strategically significant Tekes projects in SMEs have the highest impact (especially Young Innovative Companies projects). Viljamaa et al. (2014). • Tekes funding results in profits of 50% to society. One euro invested by Tekes in R&D in addition to one euro invested by the company itself (total of two euros) increases impacts by one euro. Takalo et al. (2013). • Tekes funding increases growth of employment, fixed investment and sales in the short term. Einiö (2013). • The employment figures and especially value added of SMEs funded by Tekes since 2000 have increased at a higher rate than those of other companies. These factors have also led to a higher labour productivity in these companies. Rouvinen – Pajarinen (2012). • Tekes has participated in the funding of 60% of generally recognised innovations in Finland between 1985 and 2007, and in 80% of these, those who implemented the innovation considered Tekes funding to be of key importance. Hyytinen ym. (2012).

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• Tekes funding improves companies' chances of survival but will not keep afloat companies that would go bankrupt without Tekes funding. Ebersberger (2011). • Tekes funding will not increase concentration of R&D activities and market monopolies to certain companies, actually the opposite. This is because the innovation policy has been extended to include SMEs. Czarnitzki – Ebersberger (2010). • Tekes operations have direct consequences on businesses' innovation activities. This has resulted in higher R&D investments by the companies' themselves and more efficient innovation activities, positive effects in the direct results of companies' innovation activities, such as the creation of innovation and increase of intangible assets. Valtakari et al. (2010). • The direct results of innovation activities will not become visible until later. The results create productivity and renewal and effects that can also be recognised as spillovers. Valtakari et al. (2010). • There is hard evidence that Tekes contributes greatly to business growth. On the basis of existing research literature and the analyses for this survey, Tekes funding and company growth correlate positively, and this can be proved statistically. Valtakari et al. (2010). • According to studies, Tekes funding has an effect on corporate growth and success that indirectly supports business and industry renewal. Valtakari et al. (2010).

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Tekes has played a key role in the generation of Finnish innovation. Tekes has made a major contribution to corporate growth, creation of innovative products and the results of innovation activities.

Tekes funding affects company strategies, cooperation between companies, and the level of challenge, risks, quality and operating practices concerning projects.

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Innovation funding with proven impact Tekes has contributed significantly on innovation creation, corporate growth and research quality. Tekes has increased cooperation and raised Finnish companies' international competitiveness and productivity. This publication contains evidence based facts on the impacts of Tekes.

Tekes - the Finnish Funding Agency for Innovation Kyllikinportti 2, Länsi-Pasila P.O. Box 69, 00101 Helsinki, Finland Switchboard: +358 29 50 55000 www.tekes.fi/en

May 2015 | Print: Multiprint Oy | Graphic design: Cake Oy | Photos: Tekes, iStockPhoto

Tekes funds research, development and innovation aiming at pioneering research and breakthroughs.