Finland’s Growth Paradox: Why More RDI Spending Delivers Less

Key Takeaways

• RDI budgets are structurally flawed: Most corporate and subsidized innovation is tied to operational budgets, biasing outcomes toward core, incremental improvements.

• The subsidy trap: State subsidies and grants overwhelmingly preserve the status quo, and even innovation subsidies tied to OpEx create perverse incentives.

• The stagnation cycle: Three-to-five-year RDI programs inflate OpEx, kill Horizon 2 and 3 projects at their end, and yield little beyond low-impact core innovations.

• The path forward: Corporate Venture Studios, particularly regional models tied to universities, can reframe RDI as CapEx investments and build transformational ventures.

Finland’s Productivity Crisis

Finland has enviable strengths: world-class education, high trust in institutions, and a tradition of industrial champions. Yet since 2007, productivity in the market sector has declined by 10%, while Sweden and Denmark surged ahead by nearly 20. GDP per capita has stagnated, and the corporate sector—the engine of prosperity—has failed to keep pace with peer.

Policymakers and companies have doubled down on RDI (Research, Development, and Innovation) budgets as the cure. But more spending, under current structures, will not solve the problem. Without systemic change, it risks becoming an illusion of action—money spent without moving the competitive needle.

Why More RDI Spend Will Not Move the Needle

Innovation as OpEx

In Finland, most innovation is financed from operational budgets. This means RDI is managed with the same mindset as marketing or HR costs: tightly controlled, judged quarterly, and optimized for efficiency.

Breakthrough innovation rarely pays off in 12–24 months. When managed as OpEx, long-horizon bets are structurally excluded. Core, incremental improvements survive; adjacent or transformational opportunities die.

The Subsidy Paradox

Finland spends heavily on subsidies compared to European peers. Yet the majority are preservation-oriented: tax concessions, energy rebates, and compensations for carbon costs. These may protect competitiveness in the short term but rarely stimulate renewal.

Even innovation subsidies, when tied to OpEx, backfire. Corporations swell project teams to maximize reimbursement. Subsidized programs become showcases of activity, not engines of growth.

The OpEx Show

When subsidies are distributed as operational grants, corporations respond rationally: they inflate budgets and include more staff. The result is an “OpEx show”—busy, subsidized projects that tick boxes but fail to generate new markets.

At the end of three-to-five-year program cycles, the pattern is predictable:

• Horizon 2 and 3 initiatives are cut.

• Adjacent innovations are shelved just as they gain traction.

• The ecosystem moves on, leaving only low-yielding core outputs.

Taxpayer money, rather than creating net new growth, becomes net negative: it subsidizes inefficiency and entrenches survival behavior.

The Cycle of Stagnation

This dynamic repeats in a predictable loop, which can be summarized as follows:

Figure: The Cycle of Stagnation—how subsidies and OpEx-driven RDI create a repeating loop of inefficiency.

This cycle explains why Finland’s substantial RDI investment fails to translate into competitive advantage. Each loop consumes resources, generates modest improvements, and then resets—without producing lasting structural renewal.

Breaking the Cycle: Why Corporate Venture Studios Matter

Corporate Venture Studios (CVSs) offer a structural solution to break free from this cycle. Studios build companies systematically, with dedicated teams, entrepreneurial discipline, and long-term investment horizons.

Their advantages include:

• CapEx-driven logic: Ventures are treated as investments, not costs, freeing them from quarterly budget pressures.

• Focus on Horizons 2 and 3: Studios deliberately target adjacent and transformational opportunities, creating new markets.

• Dormant intellectual capital unlocked: Studios can systematically commercialize underutilized patents, research outputs, and corporate know-how—transforming “sleeping assets” into new ventures with market traction.

• Regional anchoring: Studios tied to universities and RDI pipelines ensure that research translates into ventures, exports, and jobs.

By embedding venture studios into Finland’s innovation architecture, RDI spending can finally be converted from sunk cost into competitive advantage.

Toward Boldness

The evidence is overwhelming:

• Finnish corporates underperform global peers.

• Productivity has stagnated for over a decade.

• Subsidies preserve the past more than they build the future.

Without structural reform, more RDI spending will deepen the problem. Finland will continue to pour money into cycles of stagnation—subsidizing survival instead of investing to win.

What is needed is boldness:

• Redirect subsidies from OpEx preservation to CapEx transformation.

• Rebalance corporate capital allocation toward growth investments.

• Institutionalize commercialization through Corporate Venture Studios.

Call to Action

Executives, the choice is stark: continue the cycle of stagnation, or break it.

At Shift Actions, we help industrial leaders design Corporate Venture Studios that convert RDI pipelines into ventures that scale. If you want your RDI euros to create lasting competitive advantage instead of subsidizing inefficiency, now is the time to act.

Book a strategy session today—and turn Finland’s innovation paradox into a growth story.