Etla » Discussion Papers

How foreign companies in Finland differ from Finnish-owned enterprises? (In Finnish with English abstract)

Ville Kaitila — Thu, 11 Oct 2012 08:27:08 +0000

We analyse foreign-owned companies operating in Finland and compare them with domestic non-multinational firms while controlling separately for domestic multinational firms. The statistical and micro-econometric analysis is done using Statistics Finland data that contain all firms with at least ten employees in 1998–2008, partly in 1995–2010. We also control for a number of exogenous factors. According to the results, foreign-owned firms have higher productivity than domestic non-multinational firms. There is no difference in the average growth rate of productivity if the difference in levels is not controlled. Accordingly, a shift to foreign ownership has, on average, not affected the growth rate of productivity. The results concerning the growth rate of employment depend upon the method and timespan used in the analysis. The personnel of foreign-owned firms have a longer and higher education than the personnel of domestic non-multinational firms. Foreign-owned firms pay more direct taxes in relation to the number of their employees, which is partly due to these firms’ higher productivity. The probability of becoming a target of a foreign acquisition is higher for medium-sized and large Finnish firms with high productivity than other firms.

JEL: C23, F23, G34, J24
Publishing year: 2012
Pages: 62
Price: 10 €
Language: Finnish
Discussion Papers no. 1279

Will production relocate from Asia to Finland? Case Bicycle (in Finnish with English abstract and summary)

Matias Kalm — Wed, 19 Sep 2012 11:00:00 +0000

In this paper, we study the value chain of a Finnish designed bicycle and how the value added of the product is spread through the value chain in three distinct cases. In the first case the bicycle is manufactured in Finland by the researched company. In the two other cases the manufacturing of the bicycle is outsourced to the Baltic countries or to Indonesia. In addition, we analyze the geography of value added in each case. We also study how the exchange rate fluctuations affect the distribution of the value added. Our results show that the researched company creates 36% of the total value added, when the bicycle is made in its plant. The manufacturing creates 16% of the total value added. The researched company creates 27-28% of the total value added, when the production is outsourced. The value added share of Finland is 67%, when the bicycle is produced in Finland, and 58-59%, if the production is outsourced. In conclusion, the results show that outsourcing offshore is financially beneficial for the researched company and that the Finnish economy suffers from the production transfer. Furthermore, the results suggest that transferring the production away from Asia is financially and otherwise justifiable however, the production is transferred to the Baltic countries instead of Finland. Our findings support the view that, while the low value added activities and processes are outsourced, the high value added activities are still positioned to Finland, since the outsourcing partners create only 2% of the total value added.

English summary Trade-offs_Finnish_National_Economy_vs_Helkamas_location_20120928-1

JEL: F14, F23, L22, L23, L24
Publication year: 2012
Pages: 28
Price: 10€
Language: Finnish
Discussion Papers no. 1287

Expectations, Reality and Performance in the Finnish Biotechnology Business

Martti Kulvik — Wed, 19 Sep 2012 11:00:00 +0000

In this paper our aim is to assess the evolution of the Finnish biotechnology sector during the 2000s. Particular focus is given to the growth expectations and realized outcomes of Finnish biotechnology companies, to the evolution of public investments, and to potential determinants of company performance in the sector. The empirical results suggest that there is considerable disparity between the companies growth expectations and actual performance. Roughly one third of the expected sales have materialized. That being said, it should be noted that the sector has witnessed a significant increase in terms of sales and employment. At the same time, the scale of public funding has dramatically fluctuated during the 2000s in part due to public policy changes and in part due to the financial crisis towards the end of the decade. We also aim to identify where the growth in the sector has come from by discussing company growth and profitability. The findings provide important implications for policy makers regarding the potential evolution paths of the Finnish biotechnology business.

JEL: O30, M21, L25
Publication year: 2012
Pages: 30
Price: 10€
Language: English
Discussion Papers no. 1286

Renewal and co-operation networks in Finnish industry – Observations from a corporate survey (in Finnish with English abstract and summary)

admin — Fri, 14 Sep 2012 11:00:00 +0000

The renewal of Finnish manufacturing companies has often been addressed through their innovative activities. But com-panies do renew themselves in many other ways. This report takes into account, in addition to innovative activities, product and service range, supply and distribution channels, internationalization and marketing. Based on large survey data, the results show that the Finnish manufacturing companies are active in renewing themselves, but independent in their activities. In addressing the co-operation in renewal activities, significant differences can be observed between industries. Few external partners stand out as being important in the renewal processes. The results reveal a broader picture than in previous research efforts on the renewal activities of companies. But, the diversity of these activities makes the incorporation of these dimensions to statistical analysis challenging.

Publication year: 2012
Pages: 28
Price: 10€
Language: Finnish
Discussion Papers no. 1285

Competitiveness and future challenges of Pohjois-Savo – A report for The Regional Council of Pohjois-Savo (in Finnish with English abstract and summary)

Martti Kulvik — Fri, 07 Sep 2012 11:00:00 +0000

The turnover of the companies in North Savo in 2011 was nearly 10 billion euros, of which industry accounted for just under a third. The industrial structure of the region is not strong, but on the other hand it is not alarmingly thin either, because it does have certain successful niches. North Savos production and export growth has been on par with the average of other regions. The region is specialized in forestry and machinery industries as well as food production. The forest and machinery industries are export-oriented. Promising growth businesses include biopharmaceutical research, testing and production. These segments will be the engines of growth for the region in the future. In the forest industry the wood products industry is strong and its special products, such as heat treated wood, glue-laminated timber and hardwood floors, are selling well. Pulp and paper production have suffered losses, but the carton is in demand. In the machinery industry, power plant boilers, forestry tractors and mining machinery are global successes. Their production networks include a considerable number of local sub-contractors. Counterflow strategies will be the key to future development. The forest industry will evolve into a biotechnology industry, where decentralized local bio-oil production instead of large plants will play a large role. Clusters can be built around wooden apartment buildings. The key skills of the machinery industry should be kept as Savos own secret, but the network of services and output should go global. In addition to timber, milk is one of the regions precious raw materials, the production of which should be safeguarded in the future. Research can facilitate processing of milk and timber into more lucrative products with higher value-added. Fresh, local and organic food production can be promoted via entrepreneurial training, product development, and use of competitive bidding in purchases of fresh food products by public institutions. Development of the pharmaceutical industry is following a dual strategy : the development of the biopharmaceutical industry is based on synergies and investing in research, entrepreneurship and the raising of risk capital. Neighbouring Russia is investing in the development of its pharmaceutical industry. Kuopios medical cluster could participate by helping in the development of medicines, approval process, manufacturing and packaging, as well as marketing to Western markets. Industrial development requires close-knit co-operation with government departments. The University of Eastern Finland, the Savonia University of Applied Sciences, vocational schools, research institutes and laboratories, Kuopio University Hospital and the Finnish Medicines Agency as well as authorities responsible for business development and funding are key players is this development.

JEL: R11, D28, R53,L52, L73,L 66, L61,L62, L64, L65
Publication year: 2012
Pages: 92
Price: 10€
Language: Finnish
Discussion Papers no. 1281

The performance of trading firms in the services sectors Comparable evidence from four EU countries

admin — Thu, 06 Sep 2012 11:00:00 +0000

We analyse common stylized facts of services firms engaged in trade in a comparative study across four EU member countries. We find that, though relatively less engaged in trade than manufacturing firms, services firms have similar traits. Services firms are more likely to import than to export. Their prevalent type of trade is trade in goods. The complexity of trade activities is increasing in firm size and productivity. Two-way traders outperform one-way traders. Services are more likely to be traded by firms already engaged in trade of goods. Changes in trading status by either adding another dimension of trade (imports, exports) or another type of product (goods, services) are infrequent and are associated with significant pre-switching premia. In contrast, learning effects from switching trading status are uncommon. This evidence points to significant fixed cost of being engaged in trade. Thus, the literature on heterogeneous firms is able to explain the sorting of firms into trading and non-trading firms in the services sectors as well.

JEL: F14, F19, F23
Publication year: 2012
Pages: 44
Price: 10€
Language: English
Discussion Papers no. 1284

A portrait of trading firms in the services sectors Comparable evidence from four EU countries

Ville Kaitila — Thu, 06 Sep 2012 11:00:00 +0000

We establish a set of stylised facts for trade and trading firms in five market services sectors using comparable firm-level and services data from four EU countries. Our analysis shows that exports account for much lower shares of overall sales in the services sectors than in manufacturing. In line with this there are also fewer firms engaged in trade in the services sectors than in manufacturing; trade intensities, in turn, vary by services sector and country. Trade by services firms is somewhat less dominated by firms that both export and import than trade by manufacturing firms. In terms of value, trade in services is considerably more important than in manufacturing, yet the majority of services firms trade mostly goods. Larger and more productive firms are more likely to be two-way traders and to engage in both goods and services trade. Few firms export many services or to many countries. Those firms that export services to many countries account for a large share of export value; this is not the case for all countries for the firms which export many services.

JEL: F14, D22, L80
Publication year: 2012
Pages: 38
Price: 10€
Language: English
Discussion Papers no. 1283

The Impact of Networking on Firm Performance – Evidence from Small and Medium-Sized Firms in Emerging Technology Areas

Matias Kalm — Fri, 31 Aug 2012 11:00:00 +0000

Recent developments in the field of network research have led to a growing interest in interorganisational relationships among social science scholars. One of the most important research areas is related to entrepreneurship research and how relationship networks affect firm performance. However, the existing literature focuses mostly on qualitative case studies and quantitative studies that analyse mergers and acquisitions or patent types of data.

By analysing connection and causality between activity in co-operational relationships and firm growth, this study seeks to empirically address the following research question : How does activity in network relationships influence the growth and internationalisation of technology-based firms in emerging technology areas? Furthermore, the connection and causality between activity in co-operational relationships and the internationalisation rates of firms are also analysed.

This analysis is based on a data set and interviews with 53 small and medium-sized firms. Both a descriptive analysis and regression methods are used to analyse the connection between activity in co-operational relationships and firm growth or internationalisation. Firm growth is measured with both revenue and the employment growth rate. In addition, the activity in in the co-operational relationships is divided into two components : increasing versus consistently high activity with network actors. To address possible causality issues, this research employs activity measures that are based on the importance of the relationships rather than simply the number of relationships.

The results show that increasing activity with network actors is positively connected with firm growth as measured in both revenue and employment growth. Furthermore, the results partially support the hypothesis that consistently high activity is positively connected to firm growth. Finally, the results suggest that growth firms positively benefit from increased relationship activity with both current and prospective actors in diverse relationship networks. Moreover, the single most negative result is the relatively low impact of relationship activities on public-sector actors and networks.

Publication year: 2012
Pages: 82
Price: 10€
Language: English
Discussion Papers no. 1278

Kone- ja metallialan koulutuksen laadullinen ennakointi

admin — Fri, 31 Aug 2012 11:00:00 +0000

Machinery and metal products industry employs about 130,000 people in Finland and another 100,000 people in foreign subsidiaries of Finnish companies. This report focuses on this sectors qualitative or substantive projections for vocational education and training (vocational schools and polytechnics). The starting point was a relatively rich body of research studies on future changes in the sectors job tasks and functions, which are listed in the bibliography. Based on these studies the researcher and the training committee identified the five most important future areas of expertise and related trends, which are as follows : i) customer know-how, where solution orientation and deep understanding of clients generate value for clients, ii) research and development, the importance of which is continually growing in their operations iii) the internationalization of production networks in the wake of globalization as especially leading companies seeking to manage production and marketing on a continent-by-continent basis, iv) information technology and increasing automation of intelligence in machines and automation processes, and v) energy and environmental expertise, because it is precisely these areas that will spawn new businesses. In the future educational co-operation with other sectors should be increased regarding the application of ICT to machinery, goods, and industrial processes, teaching of procurement and skills required in international research, development and innovation (RDI), such as teaching of languages, cultures and marketing. This is a pilot study. In the future a systematic analysis should be carried out based on surveys designed to pinpoint the sectors main job tasks, their frequency and importance. The result of this study would be the specification of the main job categories and job profiles of professionals in this field. Experts in this sector could be asked to assess the changes going on in these areas. This information can be used to plan the future development of curricula and teacher training so that the new educational demands can be met.

JEL: L61, L62, L64, I25, O30
Publication year: 2012
Pages: 44
Price: 10€
Language: Finnish
Discussion Papers no. 1280

Targets, Models and Policies: A Quantitative Approach to Raising the EU Employment Rate

admin — Wed, 29 Aug 2012 11:00:00 +0000

The EU 2020 process has the key headline target of raising the average employment rate in the EU to 75 from the present 69 per cent. In this paper, we first derive a new result for optimal policymaking under uncertainty. It consists of two components : one of a unilateral policy reaction under certainty, which is then multiplied by a scale factor, reflecting the uncertainty over the impact coefficient concerned with respect to those of the other policy variables. Based on this finding, we use a large multi-country labour market model, estimated in Bassanini and Duval (2006), to derive and discuss the various employment policy interventions and relevant labour market indicators to be monitored in the EUs Joint Assessment Framework (JAF). As the derived optimal labour market policy entails streamlining welfare benefits and may thus jeopardise the other target of inclusion in the EU 2020 process, we then discuss and evaluate how the distributional consequences of such a policy can be mitigated through transfer and tax changes. It turns out that compensation of the losers is possible in such a way that all will gain, and employment, GDP and aggregate labour supply will all rise.
Tiivistelmä. EU :n 2020-prosessilla on yhtenä päätavoitteena nostaa keskimääräinen työllisyysaste 75 prosenttiin nykyisestä 69 prosentista. Tässä tutkimuksessa johdamme ensin uuden tuloksen koskien optimaalista politiikkaa, joka muodostuu kahdesta komponentista : ensinnäkin yksittäisestä politiikasta varmuuden vallitessa, joka toiseksi kerrotaan skaalatekijällä, joka on yhden ja nollan välillä ja joka kuvaa kyseisen politiikan vaikutuskertoimen epävarmuutta suhteessa muiden politiikkamuuttujien kertoimien epävarmuuteen. Tähän tulokseen perustuen hyödynnämme laajaa useita maita kattavaa työmarkkinamallia, jonka ovat rakentaneet Bassanini ja Duval (2006) ja jonka avulla ratkaistaan optimaalinen työllisyyspolitiikka. Koska johdettu politiikka merkitsee mm. hyvinvointietuuksien karsintaa, tarkastelemme, kuinka tällaisen politiikan tulonjakovaikutuksia voidaan lieventää verotuksen ja tulonsiirtojen välityksellä. Saamme tuloksen, jonka mukaan häviäjien kompensointi on siten mahdollista, että työllisyys, BKT ja työn tarjonta nousevat verrattuna tilanteeseen ennen politiikkaa.

JEL: J08, J20, J30
Publication year: 2012
Pages: 22
Price: 10€
Language: English
Discussion Papers no. 1282