Finland: Review on the situation of growth enterprises published

Submitted by empirica on 1 December, 2011 - 14:59

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Finland is increasingly recognising the importance of “gazelles” – i.e. fast-growing small and medium-sized companies – for sustaining prosperity and wealth in the future. The Finnish Ministry of Employment and the Economy has now published its first review on the situation of growth enterprises in Finland. This report shall be published annually from now on.

The objective of the review is to document and to analyse the present and future dynamics of Finnish “growth enterprises”, including their characteristics, relative numbers and importance within the Finnish economy. The OECD definition of a growth enterprise is: “All enterprises with average annualised [employment] growth greater than 20% per annum, over a three-year period, and with ten or more employees at the beginning of the observation period.” The report focuses specifically on enterprises of “super-growth”. These are enterprises with more than 100% average annual growth in employment over a period of three years.

The report states that there were 691 growth enterprises in Finland in the period 2006-2009. Of these, 23 were “super-growth” enterprises.

The report was initiated by the Finnish Ministry of Employment and the Economy and partly prepared by internal staff. This may raise a feeling that the report could have a “marketing” bias towards justifying the Ministry’s earlier activities. In fact, the review provides evidence that growth enterprises have received more financing from public grants than enterprises in general. Thus, the review can be seen as a means to show that this allocation of money from public support schemes has been successful.

The preparation of the report was assisted by Etlatieto Oy, a project research and information services subsidiary of ETLA, The Research Institute of the Finnish Economy. In addition, several leading Finnish experts have contributed to the work. For example, the review contains an article by Professor Gordon Murray from the University of Exeter English. It describes the “Finnish Paradox”, a term first used by the Finnish Professor Erkko Autio in 2010. It refers to the gap between Finland’s infrastructure, education and human capital advantages in the science, technology, engineering and mathematical fields and its relatively poor international performance as an incubator of high growth entrepreneurial enterprises. Professor Murray’s article elaborates this topic in the review.

The figures in the report are mostly based on data from Statistics Finland. The review compares several characteristics of the growth enterprises with those of other enterprises (that have a comparable size) for the period of 2006-2009. A key finding was that growth enterprises come in all different types: it is extremely difficult, therefore, to predict which business ideas are going to grow and which are not. Growth enterprises were most likely to be found in service sectors, especially in information intensive services. Most Finnish growth enterprises are based in the area of Helsinki.

Some important findings about Finnish growth enterprises were worked out. For example, they are less export-oriented than other Finnish enterprises, and that they tend to be engaged in foreign activities to a lesser extent than Finnish enterprises are on the average. However, they are more likely to be in foreign ownership than other enterprises. Growth enterprises tend to have a better educated workforce than other enterprises; however, they do not seem to be more R&D–oriented than other enterprises. The report also shows that growth enterprises are somewhat less technically oriented than similar other enterprises.

The report summarises the characteristics of growth enterprises as follows:

They are typically young. Over half of them are under 10 years of age.
They are difficult to find in the group of 250 employees of more.
They operate mostly in service industries (over 70%).
They can be found everywhere in Finland, with a higher concentration in the Helsinki area.
They are less international than Finnish companies are on average.
They are knowledge-intensive.
They have most likely got public support.
They have most likely gained risk capital.

One of the topics that emerged from the review for discussion is that Finland should aim to become more entrepreneur-friendly. A possible conclusion is that, if Finnish citizens themselves do not embrace entrepreneurship as much as necessary, foreign skills and talents should be imported to foster new enterprises in Finland.