Innovation-led Pathways to Economic Growth

This brief presents key findings from Etla’s “Innovation-Driven Pathways to Economic Growth” project, which deepen the understanding of the mechanisms behind innovation-driven growth and evaluate the role of innovation policy in promoting sustainable growth in Finland. The findings underscore the critical role of foreign inventors and skilled employees in driving innovation and economic renewal. Immigration of highly skilled individuals enhances knowledge and diversity, boosting the effectiveness of innovation policy measures, such as R&D subsidies. Fully realizing this potential requires the effective integration of foreign experts into research and innovation activities. Supporting the green transition simultaneously presents Finland with significant opportunities to strengthen its competitiveness. While Finland’s share of green production currently lags behind international leaders, the country’s industrial structure and high-tech expertise provide a solid foundation for growth. Effectively targeted R&D subsidies can boost productivity and improve societal welfare. Targeting support for high-innovation-capacity companies can accelerate structural economic reforms. However, policymakers must consider adjustment costs, which can reduce the impact of growth policies.