Optimistic innovators, stubborn frictions: what’s holding Iceland’s innovation system back?

Optimistic innovators, stubborn frictions: what’s holding Iceland’s innovation system back?

New Northstack report: Nýsköpunarlandið Iceland 2025

Nýsköpunarlandið Iceland is Northstack’s recurring survey of how Icelandic entrepreneurs and innovation leaders assess the country’s innovation environment. This second edition revisits the study first conducted in 2019 and is based on responses from nearly 300 founders, CEOs, and R&D managers surveyed in spring 2025, in collaboration with Gallup and the Icelandic Technology Development Fund.

Despite major changes since 2019 (higher business R&D spending, expanded public support, and a larger venture capital market) Iceland’s position in global innovation rankings have not improved accordingly. The new survey helps explain why.

Key findings from the report:

  • Optimism holds steady: Nearly three-quarters of respondents are optimistic about Iceland’s innovation future, a level essentially unchanged since 2019.
  • Fundraising still perceived to be hard: Fewer than one in ten respondents find it easy to raise capital, despite more money in the market.
  • Banking still underwhelms: Financial services are consistently rated as mediocre by innovation-driven firms.
  • Currency friction persists: The króna continues to pose a significant challenge for exporters and internationally oriented companies.

This report highlights the findings we consider most noteworthy and places them in a broader economic and policy context, with particular attention to factors beyond direct R&D support, including talent access, finance, banking, and currency constraints. The full survey results are published separately, without commentary, on the Nýsköpunarlandið website.

Together, the findings suggest that innovation performance depends as much on the strength of Iceland’s wider economic foundations as on targeted public support. Optimism is there; converting it into sustained growth will require tackling the structural frictions that shape firms’ day-to-day reality.

Download the report in Icelandic or English.

The analyses and conclusions presented are those of Northstack and do not necessarily reflect the views of the project partners.