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The profile and relevance of the Helsinki-Tallinn cross-border area for innovation

The twin-city region of Helsinki-Tallinn includes the capital regions of Finland and Estonia, separated by the 65 kilometre-wide Gulf of Finland. The trade ties and mobility flows between the two countries have grown in the last few years, triggered by Estonian accession to the EU and the adoption of the euro by both countries. The cross-border area is one element in the larger Baltic Sea region. The definition of the cross-border region could extend from Tallinn to all of Estonia for innovation given: the small size of the country; the ability to influence national policy; and because the second city of Estonia, Tartu, has long-standing scientific ties with the Helsinki area.

Helsinki-Tallinn is an asymmetric area in terms of size and economic performance, but Estonia is catching up. Between 1999 and 2009, Estonia had an average annual economic growth rate of around 5%, higher than the average OECD rate of 1.4%. Estonia is one of the leading countries in Central and Eastern Europe with respect to foreign direct investment (FDI) per capita. However, the economic performance gap with Finland remains wide (the GDP per capita of the Tallinn area is 60% of that for Helsinki). Cost differences between the two economies remain significant. Many Finnish companies invest in Estonia to take advantage of cost differentials. Estonian investments in Finland are of a much lower magnitude. Mobility trends also reflect this asymmetry, as workers cross the border from Estonia to Finland to benefit from higher wages. Finns travel to Estonia mainly for tourism. Nevertheless, cross-border accessibility is an issue. Connectivity barriers prevent Helsinki-Tallinn from reaching its full potential as a functional region.

There is a clear potential to exploit complementarities in advanced ICT applications across the area, as well as science co-operation. In Estonia, the societal use of ICT is well developed, in the form of a variety of innovative mobile and e-applications. Finland could build on these advances to develop innovative businesses, as Estonia is a test bed for e-services. The strong science and technology (S&T) capacity in Finland matches well with entrepreneurship dynamics, especially in ICT, on the Estonian side. Public R&D co-operation is mostly multilateral (rather than bilateral between the two countries only) and involves Tartu. Cross-border student flows are rising, but more so from Estonia to Finland than the reverse. Cultural differences are present, but they are explicitly acknowledged and often seen as opportunities.

Table 6.3. Innovation overview: Helsinki-Tallinn

Variable

Southern

Finland

Estonia

OECD peer average: Knowledge and technology hubs1

Tertiary educational attainment as a share of labour force (2008)

39

--

30.8

R&D personnel (2010) (as a % of total employment)

3.6

1.72

2.7

Share of employment in high-tech manufacturing (2008)

44.5

--

49.2

Share of employment in knowledge-intensive services (2008)

57.9

--

56.7

Total R&D expenditure as a share of GDP (2009)

3.8

2.42

3.9

Business R&D expenditure as a share of GDP (2009)

2.6

1.52

2.9

Share of R&D by the private sector (2009)

68.4

62.5

74.3

PCT patents per million inhabitants (average 2008-10)

342

34

260

Notes: 1. Only EU regions for R&D expenditure and personnel variables. 2. Data are for 2011.

Sources: OECD (2013), OECD Regional Statistics (database), http://dx.doi.org/10.1787/region-data-en; Eurostat; Helsinki-Tallinn Euregio (2013), “Background report for OECD study on cross-border regional innovation policies: Helsinki-Tallinn”.

Table 6.4. Snapshot of the functional region for innovation: Helsinki-Tallinn

(Helsinki-Tallinn in bold)

Characteristic

Specification

Comments

Region settlement patterns

Metropolitan area

Network of small and medium-sized cities Sparsely populated with small towns

Helsinki-Tallinn is characterised by the presence of two medium-sized metropolitan areas on both sides (Helsinki and Tallinn) that are also respective national capitals.

Internal accessibility and flows

Strong

Moderate

Weak

Helsinki and Tallinn are separated by the 65 kilometre-wide Gulf of Finland. Flight and fast ferry connections provide linkages between the two cities. Despite improvements, the time and cost of crossing the gulf limits integration of the area.

Industrial and knowledge specialisations

Similar with complementarities

Same

Different

The two regions have different economic structures and levels of development. There are, however, several areas of common specialisation, such as for ICT applications.

Socio-cultural context

Very similar Somewhat similar

Different

Despite cultural and linguistic differences, the two regions have a long history of exchanges and a good degree of mutual understanding.

Innovation system interactions

Pervasive

Hub-to-hub

On the border

Most innovation interactions take place between the two urban hubs. They are limited to a relatively small number of actors. Science collaboration also includes the University of Tartu, further south in Estonia.

Level of innovation development across border

Balanced, strong Balanced, weak

Unbalanced

There is an imbalance between the two sides of the cross-border area, with Helsinki being a highly knowledge-intensive hub and Tallinn displaying lower overall values on most common innovation-related indicators, although it is improving fast. Estonia is internationally recognised for its excellence in IT and e-services.

 
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