Each week this summer a Brookings expert will post related to one of the 10 traits of globally fluent metro areas. These 10 traits below have proven to be particularly strong determinants of a metro area’s ability to succeed in global markets, manage the negative consequences of globalization, and better secure its desired economic future. This week's post expands on trait 5 – Culture of Knowledge and Innovation.
Today, and throughout human history, export markets are where the money is. From Athens to Florence, London, and New York City, prosperity flows to regions that trade successfully. To export, a nation’s businesses have to innovate and in so doing, create a desirable product either cheaper or better than competitors. That takes human capital, one of the 10 traits of globally fluent metro areas, according to recent research published by my Brookings colleagues, or a culture of knowledge and innovation, as they put it.
Helsinki, Finland’s largest metropolitan area, is a paragon of human capital and innovation, and thus an appropriate role model for aspiring regions. Before discussing some of its particular merits, however, it’s worth recounting Finland’s extraordinary success, to which Helsinki has made outsized contributions.
In 1960, Finns produced 33 cents less for every dollar produced by Americans, and agriculture constituted roughly 10 percent of value added, compared to about 1 percent in the United States. Then, after decades of rapid industrialization, Finland closed the gap with the United States to just 10 cents in 2012. They did so through education, innovation, and trade.
University of Helsinki’s Pasi Sahlberg has documented Finland’s extraordinary rise in international education performance from an average country on international exams for high school students to one that consistently scores at the very top. Likewise, at the higher level of education, Finland has invested heavily in research universities in recent decades by actually building new science and engineering schools, and this has dramatically increased innovation according to a compelling study by Finnish economists. Now, no other country in the world has a higher percentage of young adults completing college degrees in science and technical subjects. Consequently, Finland is the most innovative country in the world, if measured by international patent applications per resident or no lower than third using patents granted to the largest patent offices per resident (behind only Sweden and Switzerland).
Helsinki is at the heart of much of Finland’s success. Not only is it the political capital, it is home to 26 percent of Finland’s population, and those residents develop 33 percent of its patents and produce 35 percent of its GDP. This makes it one of the world’s most innovative metropolitan areas. The OECD reports patenting per resident data for 296 metropolitan areas, and Helsinki ranks 17th, in between two of America’s leading tech clusters—Raleigh, North Carolina and Austin, Texas.
One company in particular is central to the national and regional economy: Nokia, headquartered in the Helsinki suburb of Espoo. As recently as 2012, the tech giant Nokia was the world’s leading mobile device provider, until it was unseated by Samsung. That marked the end of an awful decade for the company in which its stock price plunged from almost $60 per share in 2000 to approximately $4 per share today. Nokia still sells more cell phones than Apple, Blackberry, and Motorola put together, but it has seen total sales plummet in recent years because of its slow role out of innovative smartphones, a problem only recently addressed with its compelling Lumia product line. Fortunately, Nokia is still innovating. Last year, only 41 other companies in the world were granted more patents by the U.S. Patent Office than Nokia and its Nokia-Siemens subsidiary, which, together, developed more patents than large advanced manufacturing companies like Ford and 3M. The problem for Finland and Helsinki is that Nokia accounted for more than half of all patents granted to Finnish inventors by the USPO, so its slump poses a major risk.
If Nokia is able to successfully re-invigorate itself, Helsinki’s Aalto University will likely play a major role. Nokia, along with its partner Microsoft, has already invested millions of dollars in creating an “AppCampus” at the school to promote software entrepreneurship. The program includes and a business “accelerator” program for promising developers that provides grant money and a four-week training course.
Beyond Nokia, Helsinki is turning into a start-up hub, often through companies started by alumni from Nokia or Aalto. One former Aalto professor, helped create a Helsinki-based cleantech company called ZenRobotics, which makes recycling much more efficient through the use of an artificial intelligence waste-sorting system. In 2003, three Aalto students (then called Helsinki University of Technology) won a contest sponsored by Nokia to design a video game. Their company eventually became Rovio Entertainment, which makes Angry Birds, the most popular video game and app of all time.
Helsinki residents are actively trying to nurture more hit companies. A non-profit called the Start-up Sauna is a case in point, in that it provides internships, coaching, and access to funder networks for aspiring entrepreneurs from the metro area and greater Baltic region.
With such strong human capital, other internationally prominent Helsinki-based companies will likely soon emerge, underlining how global fluency has never been more valuable in an increasingly interconnected world.