Rewind to the early 1980s. That's when Finns, worried that the economy was too dependent on the USSR, set up the National Technology Agency to finance cutting-edge industries. Research spending rose from 1.1% of gross domestic product in 1982 to 3.4% in 2002.
The economic effects were dramatic. In the late 1990s, growth topped 5% a year, productivity boomed, and unemployment was halved. Massive telecom technology investments transformed old economy conglomerate Nokia Corp. (NOK
) into the world's No. 1 maker of mobile handsets, accounting for more than 20% of Finland's $54 billion annual exports.
Call it the Nokia economy. The company's $3.5 billion annual spending on R&D, together with supplier contracts and outsourcing, has helped nurture hundreds of startups, including successful software maker Digia Inc. "The entire university system has been fine-tuned to serve the needs of technology companies," says founder Pekka Sivonen. Digia is hiring dozens of software experts. It's just a growth dividend from Finland's investment in R&D. By Gail Edmondson in Frankfurt