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R&D, investment and structural change in Finland: Is low investment a problem?

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  • Elina Berghäll

Abstract

Low aggregate investment in Finland has been argued to merely reflect structural change to an innovation economy, with high R&D levels adequately compensating for reduced physical investment. This paper briefly reviews the issues and discusses the severity and persistence of the shortage. Immaterialization of investment clearly plays a role and outward FDI crowds out domestic investment to some extent. Yet, we find no obvious explanation to low investment in the real economy relative to other western economies, since Finland fares rather well in multi-factor productivity and country risk and the supply of capital abode before the onset of the global crisis. We conclude that if investment was low when capital flew abundantly to any potentially high return end, it will most certainly be seriously damaged by the repercussions of the present global financial crisis. R&D and other intangible investment may not be able to compensate, if other factors, such as exchange rate policies, act against them and long-term growth prospects are generally bleak.

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Bibliographic Info

Paper provided by Government Institute for Economic Research Finland (VATT) in its series Working Papers with number 6.

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Date of creation: 10 Jun 2009
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Handle: RePEc:fer:wpaper:6

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Keywords: Investment; R&D; productivity; structural change; high-technology;

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