Finnish growth companies: Business subsidies should be redirected to research and development

Finnish growth companies: Business subsidies should be redirected to research and development
R&D allocations in the state budget have recently increased. Source: Statistics Finland

In the opinion of the Finnish Startup community, the goal is worthwhile, although not sufficient. Increasing R&D spending is easier by enabling and promoting the activities of the companies involved. New jobs are created in new growth-oriented companies.

Solutions for long-term economic growth include work-based immigration, education investments and supporting companies’ R&D investments. “Finland competes for international R&D investments, especially with Sweden, the Baltic States and Germany,” pointed out Youssef Zad, economist of the Finnish Startup community. “Especially the availability of skilled personnel, the proximity of the company’s other units and customers, and the level of public R&D subsidies affect where companies in the countries focus their research and development efforts,” said Zad.

The availability of R&D personnel in Finland can be influenced by increasing university places and international students staying and getting employed in the country. The proximity of the company’s other units, on the other hand, can be influenced by attracting companies to locate in Finland in general.

More business clusters in Finland

“If we succeed in creating more attractive business clusters in Finland, it is also likely that significant R&D investments will be built around them,” he stated. Riikka Pakarinen, CEO of the Finnish Startup Community. “The game industry is a good example of this,” Parinen reminded.

R&D investments have a very positive external impact on the entire national economy. “Due to large positive externalities, the optimal amount of R&D spending is achieved only through government funding,” said economist Zad. “Research literature shows that innovation activity has a long-term positive effect on economic growth. In addition, research literature has found that public R&D funding and additional tax deductions have been able to increase R&D activity.

Business subsidies should be re-evaluated

The business support policy of the coming decade must be critically examined in order to use our scarce resources as efficiently as possible. The recent development of public sector R&D funding policy has been positive, as the government’s 2022 budget allocations will increase by 272 million compared to 2021. The state’s R&D funding will rise to a total of almost 2.5 billion euros. The direction of the R&D support policy was weak in the 2010s, but the current government has been able to make decisions in the right direction in the early 2020s. The direction looks very positive at the moment.

The members of the Finnish startup community invest significant sums in research and development expenses and aim for significant growth in terms of turnover by 2030. “If the growth targets are realized and the ratio of R&D expenditure to turnover can be kept at the same level at the current level, this would bring Finland no less than 391 million euros in additional R&D investments, which would be estimated to be up to 10 percent of Finland’s R&D expenditure growth target,” CEO Pakarinen states.


Source: Finnish Startup Community

Source: The Nordic Page

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