Regional Innovation Monitor

Transcription

1 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

2 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 (Alberto.LICCIARDELLO@ec.europa.eu). The present report was prepared by Kimmo Viljamaa (kimmo.viljamaa@advansis.fi). 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

3 Table of Contents Executive Summary i 1. Main Trends and Challenges in the Regional Innovation System Recent trends in regional economic performance Recent trends in regional innovation performance Identified challenges 3 2. Innovation Policy Governance Degree of institutional autonomy Institutional-set up, co-ordination and implementation mechanisms Availability and use of policy intelligence tools Key challenges and opportunities 9 3. Innovation Policy Instruments and Orientations The regional innovation policy mix Appraisal of regional innovation policies Good practice case Portfolio of innovation support measures Towards smart specialisation policies Possible future orientations and opportunities 18 Regional Innovation Monitor

4 Appendices Appendix A Bibliography...19 Appendix B Stakeholders consulted Appendix C RIM Repository information...21 Appendix D Explanation of factors of Innovation Performance, Governance and Policy Appendix E Statistical data Appendix F RIM survey responses 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 Regional Innovation Monitor

5 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 , 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. Regional Innovation Monitor i

6 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 cofinancing 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 multilevel 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 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. ii Regional Innovation Monitor

7 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. Regional Innovation Monitor iii

8 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 Regional Innovation Monitor 1

9 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 in 2003, but still 112.4% of the EU27 average. 1.2 Recent trends in regional innovation performance The share of the population aged 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 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 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; Regional Innovation Monitor

10 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 % 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 Employment in high-tech sectors (high-tech manufacturing and high-tech knowledgeintensive 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 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 Regional Innovation Monitor 3

11 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. 4 Regional Innovation Monitor

12 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 subregions 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 Regional Innovation Monitor 5

13 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), cofunded 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 subregions, 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 subregions 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 6 Regional Innovation Monitor

14 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) Kainuu Food Development Health and Well-being HealthBIO Cleantech 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 Regional Innovation Monitor 7

15 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. 8 Regional Innovation Monitor

16 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. Regional Innovation Monitor 9

17 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 knowledgebased industries. 10 Regional Innovation Monitor

18 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 The other recent document specific to Itä-Suomi is the ERDF Operational Programme , 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 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 A new regional cohesion and competitiveness programme (COCO) was launched in 2010 and the first period will run until 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 Regional Innovation Monitor 11

19 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. 12 Regional Innovation Monitor

20 Table 3-1 Existing regional innovation support measures Title Duration Policy Priorities Budget Organisation responsible More information ERDF operational programme for Eastern Finland Horizontal measures in support of financing Support to technology transfer between firms 303,299,997 The Regional Council of Etelä-Savo The Development Programme for Technology Industry in North Karelia Support to sectoral innovation in manufacturing Support to innov active start-ups incl. Gazelles Direct support of business R&D (grants and loans) n/a The Regional Council of Pohjois- Karjala Source: Regional Innovation Monitor repository Regional Innovation Monitor 13

21 The three most important regional innovation policy measures in Itä-Suomi are the following: 1. ERDF operational programme for Eastern Finland 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 ( ), 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. 14 Regional Innovation Monitor

22 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 Continued funding was provided by the European Social Fund (ESF) for the second phase, beginning in 2011 and due to end in 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 Regional Innovation Monitor 15

23 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. 16 Regional Innovation Monitor

24 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. Regional Innovation Monitor 17

25 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 cityregions. 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. 18 Regional Innovation Monitor

26 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 SEC(2010) 1183, Brussels, (cf. growth/annex_comm2010_553.pdf). 3. Etelä-Savon innovaatiostrategia Etelä-Savon maakuntaliiton julkaisu 104: Malinen, P. (2008) Itä-Suomi ohjelma: toimeenpanon tilanne 2008 Presentation Pohjois-Karjalan teknologiateollisuuden kehittämisohjelma Uusiutuva teknologiateollisuus. Pohjois-Karjalan maakuntaliitto. Julkaisu 131, Puhakka, A., Rautopuro, J., and Tuominen, V. (2009) Maisterit liikkeellä. Vuonna 2001 ylemmän korkeakoulututkinnon suorittaneiden alueellinen liikkuvuus. 7. Regional cohesion and competitiveness programme Ministry of Employment and the Economy. 8. The Centre of Expertise programme Ministry of Employment and the Economy. 9. The ERDF programme for Itä-Suomi The final evaluation of the Centre of Expertise Programme Ministry of Interior. 11. The mid-term evaluation of the Centre of Expertise Programme Ministry of Employment and the Economy. 12. The mid-term evaluation of the Itä-Suomi ERDF-programme Ministry of Interior. 13. Ylä-Savon yrityslähtöinen innovaatiostrategia Savoniaammattikorkeakoulun julkaisusarja D 10/2007 Regional Innovation Monitor 19

27 Appendix B Stakeholders consulted 1. Jorma Teittinen (Kainuun liitto), Pentti Malinen (Itä-Suomi -ohjelma), Kalervo Väänänen (Itä-Suomen yliopisto), Riitta Koskinen (Aluekehitysjohtaja, Etelä-Savon liitto) Regional Innovation Monitor

28 Appendix C RIM Repository information Regional Innovation Monitor 21

29 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 Policy documents ERDF operational programme for Eastern Finland The Innovation Strategy of Etelä-Savo Region 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