Globalization and Business - Innovation in a Borderless World Economy

Karl Aiginger, Paavo Okko and Pekka Ylä-Anttila

A chapter in The Evaluation of the Finnish National Innovation System - Full Report, 2009, pp 103-146 from The Research Institute of the Finnish Economy

Abstract: Innovation and globalization are closely connected. Openness and innovation benefit the society both independently and jointly. Today’s innovative activity is inherently global. Especially small countries are increasingly dependent on global knowledge flows. This poses a challenge to national innovation policies. Furthermore, traditional innovation policies are not easy to justify in the case of a small open economy. More emphasis should be put on enhancing diffusion of technologies and new knowledge,localizing international knowledge spillovers, as well as on promoting the development of production factors that are less mobile internationally. The Finnish innovation system has been performing relatively well in international comparison. There are, however, a number of signals of needs for change – these are, in part, due to changes in global drivers of innovation. The system is – as well as the whole Finnish economy – much less international than often thought. This applies especially to the higher education and research. Yet, deeper tapping into the global knowledge pool should be one of the future corner stones of innovation and sustained well-being. In the global economy Finland is strongly specialized in two industrial sectors : ICT and forest. Both are in turmoil due to shifts in global demand and relocation of production. Our analyses show that there are clear signals of even broader deficits in industrial structure and needs for broad upgrading of quality of exports and production. Policies – both policy organizations and instruments – to support business sector internationalization needs streamlining. Today, practically all innovation and business support organizations provide internationalization services for firms.

Date: 2009
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