Where is Finland’s entrepreneurial spirit?
Finland has basically just one company, Nokia, and thank God for it because it’s what puts Finland on the map. The country is made up of highly educated individuals, yet companies rarely make it out of Finland, and it seems like they’re not even trying. Finns were major players in the mobile applications and services industry, yet appear to be completely non-existant in the emerging Web 2.0 field, and we know Finland has plenty of engineers and programmers who’d be ideal for this . So where is Finland’s entrepreneurial spirit?
Finland is renowned for its research and development (R&D) but has been much less successful at commercialising its innovations and growing world-beating companies. In this respect Nokia is very much the exception that proves the rule.
“R&D is like an ice hockey club,†says Mauri Pekkarinen, the minister for trade and industry. “If you bring on young players but don’t give them an opportunity to play, you lose them to the US.â€Â
R&D represents 3.5 per cent of Finland’s gross domestic product – of which 70 per cent comes from the private sector, notably Nokia – and Finland is high in the league table of patents per capita. However, many of these innovations are either exploited abroad or the companies that develop them are soon sold to foreign owners.
The lack of a real go-getting US-style entrepreneurial culture is blamed for this state of affairs. Attention is now focused on what can be done to change individual attitudes and the Finnish environment so that more of the knock-on effects of innovation are retained inside the country.
The first problem is that few Finns are entrepreneurs and few want to be. According to a Eurobarometer survey in 2004, 68 per cent of Finns are employees, compared to a European Union average of 50 per cent.
I think Finland’s entrepreneurial problems are two fold – First off, this self-hating, lack of self-confidence, “I shouldn’t ask for too much” Lutheranism found everywhere in Finnish culture is the genetic makeup of a successful entrepreneur. And two, starting your own business is a HUGE risk with a LOT of sacrifice, but in the welfare state, it has little payoff. People only take on these enormous risks if there’s a big enough carrot at the end of that stick, but the welfare state ideology gnaws most of that carrot off through heavy taxation, so the risks are no longer worth it.
Plus, Finns have the lowest net worth in all of the EU15, so few can afford to survive off savings in the company’s early years, and have few options to turn to when looking for investors. And Financial Times agrees…
For some critics, the reasons for the lack of an entrepreneurial culture run much deeper and lie in the country’s generous welfare state model. “In this kind of (welfare) society you need to make a special effort to encourage people not just to be very good workers in someone else’s company but to be employers themselves,†says Mr Pekkarinen.
Risk-taking is deterred as the costs of doing so can be severe and the rewards uninspiring. “The balance between returns and risk is not good enough,†says Mr Järventaus.
There is no US-style Chapter 11 bankruptcy, though it is being considered, and until recently an entrepreneur was discriminated against if his company failed and he tried to claim social benefits.
On the return side, income taxes are heavy and dividends are double-taxed (though reform is being considered), so entrepreneurs have to give up much of the gains from their hard work and vision.
Nevertheless, as Finns become wealthier and more self-confident, attitudes to wealth and risk are beginning to change, according to Mr Mäkinen. “People have become wealthier,†he says. “They are prepared to take risks and look for quality of work.â€Â
