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Article (06/10/2006)


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Public spending on innovation in Sweden, Finland and Belgium

This working paper analyses public financing in two countries that have already reached the Barcelona goal (R&D expenditure on GDP at least equal to 3%), Finland and Sweden, and compares it with the situation in Belgium. This comparison covers not only the quantitative aspects but also the organisational dimension of the public support for innovation.

In the context of the renewal of the Lisbon strategy, the European Council of March 2005 has once again underlined the importance of innovation for the future of the Union in terms of sustained growth and job creation. The efficiency of national innovation systems is becoming a major political concern among Member States. In its recent diagnostic of the Belgian system, the Secretariat of the Central Council for the Economy observed that the limited involvement of the public sector in the financing of research constitutes one of the main problems. The results reached by the Belgian innovation systems also raise questions on the efficiency of this financing.

The paper demonstrates that public support systems organised in very different ways can be successful. Indeed, Finland has a highly centralised system while Sweden has established a decentralised structure with nine ministries in charge of innovation policy. The de facto decentralised structure of the Belgian system between the Regions, Communities and the federal State is therefore not a priori a cause of inefficiency.

The first main difference between leader countries, such as Finland and Sweden, and follower countries, such as Belgium, is the very large size of government support to the innovation system. This high public financing in Finland and Sweden illustrates the clear political willingness to place innovation at the heart of all implemented policies after the severe recession recorded by both countries at the beginning of the nineties.

The share of R&D public expenditure devoted to the higher educational system is relatively comparable between the three countries. But given the large differences in the amounts under consideration, the critical mass effect is easier to reach in Finland and Sweden than in Belgium. R&D public expenditure in higher education expressed as a percentage of GDP is also higher in Finland and Sweden than in Belgium.

The second main difference is linked to the organisation of public support systems. The two leader countries have chosen a sectoral orientation for their innovation policy while Belgium, given its institutional organisation, has a regional orientation for its innovation policy. The sectoral dimension is only expressed at the Regional level, without any coordination between the choices that are made independently by the Regional Governments.

The identification of strategic sectors and the focusing of public support policy on these sectors are already deeply anchored in Sweden and Finland, while this development is more recent in Belgium. In addition, the scientific world participates more in the orientation and the implementation of research policy in the former two countries. A closer look at the IWT and DGTRE budgets shows that support to R&D in businesses still has a large place. However, in recent years, the three Regions have increased the importance of networking between businesses and of networking between businesses and research centers.

Thirdly, both in Finland and Sweden, the continuous high-quality assessment of projects and policies allows constant modification of public action to achieve higher efficiency. The awareness of the importance of independent assessment is more recent in Belgium and its implementation is not yet complete.

Finally, Finland and Sweden appear to have each clearly and unanimously identified their weak and strong points concerning their innovation system and to have programmed the required public interventions well. Belgium appears less advanced in this aspect.

In conclusion, this first analysis indicates that Sweden and Finland have reached a level of development in their innovation system which allows them to concentrate their efforts on the consequences of innovations on job and activity creation, while Belgium is still occupied to various degrees with the construction of its innovation systems. Research into optimal repartition of public support between fundamental and applied research, the identification by all stakeholders of strategic technological fields, and the analysis of efficiency of implemented and planned public measures, are required steps to construct a true innovation policy in Belgium and in its Regions.

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