Lead markets

Report of the thematic expert group: Lead markets

Description of the theme and its relevance

An innovation driven economy is crucial for competitiveness. Both at EU and national level (e.g. Finland’s national innovation strategy and Government Bill on Research and Innovation from 2008 in Sweden) the need for using demand driven approach systematically and strategically to facilitate innovation has been recognized.

At EU level the Commission has launched an initiative where six areas with high economic and societal value (e-health, sustainable construction, protective textiles, bio-based products, recycling and renewable energies) have been identified as potential to become lead markets i.e. enabling European companies to enter first the fast growing world wide markets with a competitive advantage.

The EU lead market initiative designs a process to streamline legal and regulatory environments and accelerate the growth of demand. The main policy instruments are legislation, public procurement, standardization, labeling and certification. The analysis of the six markets show that supported by the focused lead market approach, the combined market volume of the markets could more than double by 2020 and some 1 million new jobs could be created in the European Union.

For the realization of the great potential of the selected lead markets, measures taken at EU level are not sufficient.  Additionally, firm and timely action in the Member States and by the private sector is also clearly needed. Regarding the public sector the role of procurement in creating demand for innovative solutions is crucial.

Creating increased demand for innovative goods and services is essential for both Sweden’s and Finland’s future competitiveness and economic success.  By identifying possible areas for joint action (either those selected at the EU level or others) and  consequently implementing  consorted policy measures, favorable conditions for world class lead markets could be created,  bringing advantages to the both countries’ economies and societies as a whole.  

Goals and objectives
The objective is to improve the competitiveness of Sweden’s and Finland’s industries in areas where the countries could become the best in the world and have a world wide impact. 

Sweden and Finland could work together, first, in identifying areas for joint action, either by choosing among the areas selected at the EU level (renewable energies, for instance) or finding other promising areas by in-depth analysis and consequently formulating effective policy tools to foster, in a more targeted manner, the creation of increased demand for innovative goods and services, thereby facilitating the emergence of innovations and their marketing.

This joint approach would improve synergies creating bigger market potential and thus giving companies bigger incentives to innovate. The aim is to create the best possible market conditions for transforming innovative ideas into new products and services and to shorten the gap between the invention and its marketing. Working together would create wider impact in the selected areas and bring increased advantages for the countries’ economies, companies and consumers.

In addition, a consorted action would enable Sweden and Finland to take leadership in innovation processes by demonstrating the efficient implementation of demand based innovation tools.  

Proposed actions
In the first phase an in-depth study would be carried out to identify promising areas for further joint action. The study should examine more closely from Sweden’s and Finland’s point of view the six areas selected at the EU level to identify existing potential for creating lead markets. In addition, the study should investigate the feasibility of further areas which are of interest to both countries.  The study should focus both on the regulatory (in a wide sense) and the market side and make necessary recommendations for policy action.

On the basis of the study, and taking into account the projects already under way in both countries (e.g SHOKs in Finland and Vinnova Pilot Programme in Sweden), certain sector(s) would be selected for further action.  The exact nature of actions cannot be determined at this stage.  They could, however, include measures such as joint analysis of hindrances and bottlenecks in the business environments as well as how they could be tackled with commonly identified policy tools.  Also joint public procurements, joint impact assessments, co-ordination of policy formulation, exchange of best practices and pilots could be considered.

The active participation of private sector is crucial for the creation of lead markets. Companies and other market players must be closely involved in the whole process including the policy formulating phase.

At the European level Sweden and Finland will actively participate in the implementation of the EU’s lead market initiative in order to reinforce the activities chosen at the national level.

Prerequisites of the implementation (financing, organizations, etc.)
Implementing lead market policy is not primarily about funding but using suitable policy instruments to boost demand in a systematic and strategic way.  Financing is, however, needed to carry out the proposed study, possible pilots and general management of the project. The estimated budget for the proposed activities would be approximately 600.000 euros.

The lead market approach, where a mix of policy tools is selected to create enhanced effect, requires effective co-ordination and continuous dialogue between the relevant actors in the two countries. Further, a joint project calls for a clear division of tasks and responsibilities. Therefore, necessary mechanisms for co-ordination, follow-up and general management of the project should be established.