Learning from the Land of a Thousand Lakes: Finland, Innovation Policy, and Indonesia’s Long Road Ahead

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Finland is often associated with good education, Nokia, clean cities, and thousands of lakes.

But behind those familiar images is something we found far more interesting: a country that has spent decades deliberately building and repeatedly rebuilding its innovation system

This article grew out of one of our final assignments in the Regional Innovation master’s program at Universitas Padjadjaran. We, Sholeh Qomaruddin, Abdul Faqih Hanan, and Marla Ruby Quintine, prepared a comparative review titled A Comparative Review of Innovation Policy: Theoretical Framework, Finland Case Study, and Its Relevance for Indonesia.

Each team was assigned a different country to examine. Our team received Finland, while other teams explored countries such as China and other national innovation systems.

Our analysis was grounded in several core references assigned for the course, combining theoretical perspectives on innovation policy with country-level evidence from Finland and Indonesia (Llerena & Matt, 2005; Vonortas et al., 2014; OECD, 2017; Asian Development Bank, 2020; Suominen et al., 2024).

The theoretical literature provided a foundation for understanding the evolution of innovation policy, while the OECD, Asian Development Bank, and VTT reports allowed us to examine how these ideas have developed in practice across the Finnish and Indonesian contexts.

At first, the topic appeared to be mainly about technology, research funding, and government programs.

As we worked through the literature and compared Finland with Indonesia, however, the picture became much broader.

One idea gradually became central to our analysis: innovation is not simply about creating something new. It is about building a system that allows knowledge to move, ideas to be tested, institutions to collaborate, technologies to find users, and the entire ecosystem to adapt when circumstances change.

Finland’s story is therefore useful not only because of what the country has done well. The moments when that system was tested are equally valuable.

Innovation Is a System, Not a Single Policy

Innovation policy has changed considerably over time.

Earlier approaches tended to describe innovation as a relatively linear process: basic research produces knowledge, that knowledge becomes technology, and technology eventually reaches the market.

Later approaches recognised that innovation rarely follows such a simple sequence.

Markets influence research. Companies collaborate with universities. Governments create incentives and regulatory environments. Users shape products and services. Knowledge moves between institutions and sectors.

This shift eventually produced more systemic approaches such as the Triple Helix, which emphasises interaction among government, industry, and universities, and the Quadruple Helix, which extends that relationship to society and users.

Our review followed this evolution from linear and interactive models toward increasingly systemic and participatory approaches. In Finland, initiatives such as SHOKs and INKA, together with institutions such as Sitra, illustrate efforts to connect multiple actors rather than treating innovation as the responsibility of a single organisation.

This distinction matters.

A country can have strong universities and excellent researchers without necessarily turning research into widely used innovation.

It can have innovative companies, but without access to knowledge, capital, infrastructure, markets, and supportive regulation, many ideas may never scale.

And a country can invest heavily in research and development without automatically creating an effective innovation ecosystem.

What makes Finland particularly interesting is therefore not one extraordinary policy.

It is the interaction among different parts of the system.

Finland’s national innovation architecture has involved government, companies, universities, public research organisations, funding institutions, regional actors, and wider society. It has also maintained an ambitious long-term commitment to research and development, including a national target of raising R&D intensity to 4% of GDP by 2030.

But funding the creation of knowledge is only one side of innovation.

Creating Innovation Is Not the Same as Creating Adoption

One part of Finland’s innovation framework that became particularly important in our review was demand-side innovation policy.

Innovation policy is often viewed from the supply side.

Governments finance laboratories, research projects, universities, researchers, and companies, then expect new technologies and services to emerge.

These instruments are essential.

But another set of questions appears once something has been created.

Who becomes the first customer?

Who accepts the risk of adopting an unfamiliar solution?

What encourages companies to use it?

What regulations allow new technologies to enter the market?

Finland has complemented traditional research support with demand-side instruments such as market incentives, innovative public procurement, regulation, and standards intended to stimulate the adoption and diffusion of new solutions.

This changes how government can participate in innovation.

Government does not always have to remain only a funder standing behind the process.

In different situations, it can become an early customer, a market maker, a regulator, a coordinator, or a connector between researchers, companies, public institutions, and society.

This distinction is particularly relevant when thinking about Indonesia.

Increasing R&D investment is important.

But increasing expenditure without strengthening the ecosystem around research may simply produce more knowledge that struggles to move beyond laboratories, reports, or academic publications.

So one of the questions emerging from our review was not only:

“How much are we spending on innovation?”

but also:

“How much of what we create can actually move into industry, markets, public services, and society?”

The second question is considerably harder.

And Finland itself has had to confront it.

Nokia and the Danger of Becoming Too Good at Yesterday

For generations that grew up during the 1990s and early 2000s, Nokia needs little introduction.

For a period of time, the name was almost synonymous with the mobile phone.

Its transformation is remarkable in itself.

A company whose history began in nineteenth-century Finland eventually became a global telecommunications leader. By the late 1990s, Nokia had overtaken Motorola as the world’s largest mobile-phone manufacturer.

Models such as the Nokia 3310 and Nokia 1100 became part of everyday life in many countries.

But Nokia was more than a successful Finnish corporation. It became deeply intertwined with Finland’s broader innovation performance.

During the 1990s and early 2000s, Nokia and the ICT sector represented a major concentration of technological capability, engineering talent, private R&D, and economic activity.

The timeline developed in our review illustrates how closely these developments were connected. Finland increased its R&D ambitions from the 1970s onward, Nokia emerged as a global ICT leader during the 1990s, and Finnish R&D intensity reached its peak during the period in which Nokia and ICT played an unusually large role in the economy.

Then the industry changed.

The iPhone arrived.

Android expanded.

Competition in mobile devices increasingly shifted from hardware toward software, touch interfaces, applications, and digital ecosystems.

Nokia struggled to adjust quickly enough. Its mobile-phone business was sold to Microsoft in 2013. For Finland, the consequences extended beyond one company.

The decline of the ICT sector contributed to a substantial fall in business R&D. Our review notes that Finland’s R&D intensity declined from its earlier peak, while the ICT sector’s share of national R&D also decreased considerably.

This exposed an important vulnerability: a national innovation system can become fragile when too much of its strength becomes concentrated in one dominant sector.

This does not make Finland a less interesting innovation case.

It makes the case more useful.

Its innovation system had to adjust after a period of exceptional success.

Finland subsequently faced declining R&D investment, pressure on applied research funding, difficulties in industry–academic collaboration, and periods of weaker national policy coordination.

Its response included renewed efforts to diversify the national innovation base toward fields such as artificial intelligence, clean technology, bioeconomy, sustainability, and other knowledge-intensive sectors.

Nokia itself did not disappear either.

It transformed again, increasingly concentrating on telecommunications infrastructure and network technologies.

For us, the Nokia story therefore became more than the story of a company that lost the smartphone race.

It demonstrates how yesterday’s competitive advantage can become tomorrow’s dependency.

Success can create blind spots.

Companies can become attached to what once worked.

Institutions can continue supporting structures designed for an earlier environment.

Countries can do the same.

One of the clearest lessons we took from this part of the Finnish experience was: Innovation is not the ability to become successful once. It is the ability to keep adapting after success.

Finland Is Not a Blueprint for Indonesia

Studying a country with a strong innovation record creates an obvious temptation:

“How can Indonesia become like Finland?”

We do not think that is the most useful question.

Indonesia is not Finland.

The two countries differ enormously in population, geography, economic structure, institutional capacity, industrial development, and regional diversity.

Replicating institutions by name would not necessarily reproduce the conditions that allow those institutions to function effectively.

A more useful question is:

“Which principles from Finland can be adapted to the Indonesian context?”

The distinction between copying and learning is important.

Our comparative analysis examined differences across several dimensions, including institutional coordination, R&D financing, research orientation, private-sector participation, and technology integration.

One of the clearest lessons concerns coordination.

Finland’s innovation ecosystem has developed through relationships among government, universities, research organisations, companies, regional actors, and funding institutions.

Its experience also shows that coordination should never be taken for granted. Finland itself experienced periods in which national innovation-policy coordination weakened.

For Indonesia, the problem is not simply that innovation actors do not exist.

Indonesia already has universities.

Researchers.

Government research institutions.

State-owned enterprises.

Private companies.

Startups.

Technology communities.

And an increasingly capable pool of digital talent.

The harder question is: Are these actors connected strongly enough to solve the same problems together?

From Programs to Missions

This is where mission-oriented innovation policy becomes particularly relevant.

Rather than treating innovation as a collection of separate programs across different ministries and institutions, a mission-oriented approach begins with a strategic challenge and aligns different actors around a shared outcome.

Digital transformation.

Food security.

Energy transition.

Public health.

Climate resilience.

Advanced manufacturing.

Problems at this scale cannot be solved by one ministry, one university, or one company alone.

Our review consequently identified stronger cross-sector coordination and mission-based policy integration as important areas of learning from the Finnish experience.

This does not necessarily mean centralising everything.

It means establishing enough shared direction for separate initiatives to reinforce one another rather than functioning as isolated programs.

Research Needs a Path to Use

Another recurring issue in our comparison was the connection between universities and industry.  Producing knowledge matters.

Publishing matters.

Basic research matters.

But an innovation ecosystem also needs mechanisms that allow knowledge to travel beyond the institution that produced it.

This requires technology transfer.

Intellectual-property management.

Licensing.

Prototyping.

Spin-offs.

Industry collaboration.

And people capable of translating scientific knowledge into economic or societal application.

This is where Technology Transfer Offices (TTOs) become relevant.

Their role should go beyond the administrative registration of intellectual property.

At their best, such institutions help answer a more important question:

“What can happen to this knowledge after the research project ends?”

Our report therefore treats intellectual property not merely as legal protection, but as part of the infrastructure that allows knowledge to generate broader value. It also identifies stronger institutional support for commercialisation and technology transfer as an important issue for Indonesia.

Innovation Does Not Have to Start in the Capital

Another lesson from Finland that we found particularly relevant to Indonesia concerns regional innovation.

Indonesia is simply too large and too diverse for every region to follow a single innovation template. Different regions possess different combinations of universities, industries, natural resources, communities, capabilities, and problems.

Bandung can build on its concentration of universities, digital technology, and creative industries.

Makassar has different opportunities related to its maritime context.

Yogyakarta combines education, technology, culture, and the creative economy.

Other regions possess strengths in agriculture, fisheries, manufacturing, tourism, energy, health, natural resources, or other sectors.

The goal should not be to turn every region into “the next Silicon Valley.”

The lesson is almost the opposite.

Different regions should be able to innovate around what they understand and do best.

Our review uses regional innovation clusters and cross-sector collaboration as examples of how national innovation capabilities can emerge from local strengths rather than only from central institutions.

For a geographically and economically diverse country such as Indonesia, this principle may be especially important.

The Long Road Ahead

One of the biggest lessons we took from studying Finland is that innovation policy is not really only about technology.

Technology is one of its most visible outcomes.

Behind it are people, institutions, education, research funding, companies, universities, markets, regulation, intellectual property, infrastructure, incentives, collaboration, and trust.

Finland spent decades developing these relationships.

It also made mistakes.

Its dependence on Nokia exposed structural vulnerabilities.

R&D investment fell from earlier peaks.

Applied-research funding came under pressure.

Policy coordination weakened at different points.

Industry–academic collaboration remained an ongoing challenge.

Even a country widely regarded as innovative cannot simply declare that its innovation system is complete.

Our study ultimately returned to four recurring principles: integrated innovation policy, sustained investment in R&D, collaborative and adaptive governance, and the increasing importance of technology and data in policymaking.

And perhaps that is the most important lesson for Indonesia.

There is no final version of an innovation ecosystem.

There is only a system that continues learning or one that eventually becomes outdated.

Indonesia’s road will necessarily be different from Finland’s.

Its scale alone guarantees that.

Indonesia does not need to reproduce Finland institution by institution.

What can be learned instead are principles behind the Finnish experience: long-term commitment to knowledge, collaboration across institutional boundaries, stronger links between research and application, space for regional experimentation, willingness to invest before outcomes are guaranteed,  and perhaps most importantly, the ability to recognise when yesterday’s model is no longer enough.

Innovation is often described as the ability to create something new.

Our review of Finland suggested another dimension:

innovation also requires the humility to admit that what once worked may no longer be sufficient.

Finland learned this through its experience with Nokia.

Companies encounter it when markets change.

Institutions encounter it when established processes stop solving new problems.

Countries eventually face the same challenge.

Indonesia still has a long road ahead.

But that is precisely why experiences such as Finland’s are worth studying.

Not because they provide a blueprint to copy.

But because they show what decades of investment, experimentation, collaboration, failure, learning, and adaptation can eventually build.

Kiitos, Finland.

The journey continues.