5.1 Finland in a changing world economy
5.2 What is the National Economy invested in?
5.3 R&D and internationalization
5.4 ICT Finland
5.5 Nokia - a big company in a small country
5.6 ICT cluster in Finland - A historical perspective
5.7 The World's most competitive nation?

5.4 ICT Finland

In a decade, Finland has risen to join the group of leading producers and users of information and communications technologies. At the same time, its entire economic and export structure has fundamentally changed. Its economy has shifted from a production structure intensive of capital, raw materials, energy and scale to an information-intensive one. High-tech foreign trade is clearly in surplus and the R&D input in relation to GNP is one of the highest in the world. Finland has become an export-driven location for leading international ICT sector companies. Finland is seen as a pioneering adapter and an important research centre of the new technology. International companies (e.g., ICL, IBM, Siemens, Hewlett Packard, Ericsson and Lotus) have both set up research units in Finland, increased their co-operation with Finnish firms or acquired small companies in the sector.

Thus Finland has come full circle in regard to foreign capital. In the 1800s, foreign entrepreneurs brought their know-how to the country. Now the importance of foreign companies is again on the rise - this time as part of Finland's well-developed ICT cluster.

There are many reasons for Finland's rise to become a leading ICT country. The strength of the telecommunications field is largely based on the rapid deregulation of competition in the 1990s as well as previously created markets that included more competition than in many other countries.

There have always been a large number of telecommunications companies in Finland.
In the 1930s, there were more than 800 local telephone companies along with the national telephone company. The kind of single operator and single equipment supplier system that emerged in most other European countries never existed in Finland.

The operators forced the equipment suppliers to compete with each other, leading to rapid technological development. Nokia succeeded in domestic competition before doing so globally.

In addition to the deregulation of telecommunications competition and the liberalization of the market, the research and educational system spurred the emergence and growth of a strong ICT cluster. This cluster is a central element of the Finnish innovation system, which includes networks of large and small companies as well as research, training and corporate co-operation.

Finnish consumers and companies have always been quick to adopt new technical innovations. Mobile telephone density is the world's highest, with over 70 per cent of Finns owning a cellular handset. The number of Internet users per capita is also one of the world's highest.

Within the past decade, the national economy's dependence on raw-material-driven manufacturing has been sharply reduced. Cyclical fluctuations from the world markets no longer disturb the national economy as before. As a member of the EU and EMU, Finland can no longer correct these disturbances with its exchange rate policies. This structural change in exports has come at a favourable time for the stability of the economy.

The central challenge of Finland's economic policy is the continuous increase of 'knowledge capital' and remaining at the forefront of technology. For a small country this is the only way to survive in the global competition.