Etla » Finland

Determinants for Foreign Direct Investment in the Baltic Sea Region

Markku Kotilainen — Tue, 06 Nov 2012 08:14:21 +0000

Abstract: We have defined the Baltic Sea Region as consisting of the following countries: Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Poland, Sweden, and Russia. We investigate foreign direct investment (FDI) flows from 1995 to 2010 to these countries econometrically. We use two basic models: the first one treats aggregate FDI inflows by countries, and the second focuses on bilateral FDI flows between country pairs. Because of limitations in data availability, the second model is built for a smaller group of countries. In this model we take into account the origin country of the FDI. Our results show that macroeconomic factors such as corporate taxes are important determinants for FDI flows. We notice that these factors and their effects vary between the Baltic Sea Region countries. Foreign trade with the investing country is also a statistically significant determinant for FDI, i.e. the countries that have trade with each other also invest in each other. On the other hand distance between countries doesn’t explain FDI flows. Institutional factors such as EU membership or a common currency are not statistically significant in our estimations but this could be because of data limitations and because of the fact that these changes in countries’ international status are incorporated in the other variables and are also foreseen by the investors.

Finpron vaikuttavuus – Finpron palveluiden käytön vaikutukset yritysten kansainvälistymiseen ja menestymiseen

Mika Pajarinen — Mon, 19 Sep 2011 11:00:00 +0000

The study investigates, by using econometric evaluation methods, how the usage of Fin-pros (a public agency promoting internationalization of business) services impacts on the internation-alization and performance of small and medium-sized firms in Finland. We measure internationalization and firm performance using a number of complementary indicators. The results indicate that being Finpros customer is positively associated with internationalization when firms establish new subsidiaries abroad or expand the geographical coverage of their foreign operations. There are also indications of a positive association between usage of Finpros services and exports (measured using a binary export indicator), although the results vary across methods of evaluation. Finpros customership does not appear to have a statistically significant impact on the share of foreign personnel. Similarly, we do not in most estimations find any statistically significant impact on the firm performance. However, different methods of evaluation and data sets produce somewhat inconsistent results. The study also looks at the possible synergy effects of utilizing Finpros services, and receiving funding from other public organizations (Tekes, Finnvera and the Ministry Employment and the Economy). It turns out that such synergy effects do not seem to exist.

The role of business subsidies in job-creation start-ups, gazelles and imcumbents

Heli Koski — Fri, 08 Apr 2011 11:00:00 +0000

Our data concerning the whole Finnish company population from the years 2003-2008 suggest that the impacts of business subsidies on employment growth differ more between high-growth start-ups and other firms than between start-ups and over five years old incumbents. All subsidies seem to relate positively to the contemporary employment growth both among start-ups and incumbents. Furthermore, our data show that both the employment of start-ups and older incumbents receiving employment or other subsidies grow more than that of non-subsidized firms after subsidy reception. Instead, we find that business subsidies do not provide significant further boost for the contemporary or after-subsidy growth of gazelles. There are apparently some other factors dominating the growth of young high-growth firms making them to grow strongly, in many cases, with or without subsidies.

Do Business Subsidies Facilitate Employment Growth?

Heli Koski — Tue, 04 Jan 2011 11:00:00 +0000

We use data from 15508 Finnish companies with 10 or more employees for the years 2003-2008 to explore the relationship between employment growth and three endogenously determined business subsidy types (i.e. employment subsidy, R&D subsidy and other business subsidies). We find a positive contemporary relationship between all business subsidy types and employment growth. Our findings suggest that R&D subsidies further contribute to the firms employment for one year after and employment and other subsidies for three years after the reception of subsidies. After that, the differences between the subsidized and non-subsidized firms vanish. We further find, in line with the empirical studies of Harrison et al. (2008) and Hall et al. (2008), that both product innovation and sales growth from a firms old products contribute to the firms employment growth. Process innovation, instead, does not seem to have any significant effect on employment.

Why do firms invest in the Baltic Sea Region

Markku Kotilainen — Fri, 19 Nov 2010 11:00:00 +0000

We have defined the Baltic Sea Region as consisting of the following countries and regions : Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Poland, Sweden, and the regions of St Petersburg, Leningrad Oblast and Kaliningrad in Russia. We have investigated the factors af-fecting FDI in the Baltic Sea Region in three ways. First, we have studied the factors affecting FDI on the basis of the existing theoretical and empirical literature. Secondly, we have studied the characteristics of the existing FDI in the Baltic Sea Region. Thirdly, we have researched the investment motives through two firm questionnaires : 1) firms participating in the MIPIM real estate fairs and 2) Finnish firms active in the Baltic Sea Region (Finpro register). The common results of both empirical enquiries were : 1) the most important reasons for FDI are market size and its growth potential, 2) companies do not see the BSR as a single market in their actual decision making process, 3) there are clear benefits in having the non-Euro area countries as members of the EMU, but the results are not very robust : obviously they are weakened by the already rather credible pegs of the Estonian, Danish, Latvian and Lithuanian currencies and the diversification benefits of the floating Swedish krone, and 4) governmental investment promotion organizations have a rather small role in the actual investment decision making process. Their role is rather in giving general information on the countrys investment environment. The most important differences between the samples of firms are : 1) in the real estate sector the majority of FDI is done through buying an existing firm, whereas in the sample of Finnish firms most FDI is done as a greenfield investment (establishing a new firm), 2) among the real estate firms Sweden, Finland, Germany and Poland are the most important destinations for FDI, while in the Finnish sample of firms (including more manufacturing and service firms) St Petersburg, Poland, Estonia and Sweden are the most important destinations, 3) in the sample of real estate firms R&D and the proximity of the Russian market are not important motives for FDI, contrary to the Finnish, more manufacturing and retail trade-oriented sample, and 4) among the real estate firms the potential for large increases in real estate prices is an important motive for FDI.

Towards a Green Post-Crisis Economy – The Position of Finland in Environmental Technologies

admin — Fri, 13 Aug 2010 11:00:00 +0000

Climate change is a major global challenge and governments around the world are now promoting environmental technologies to address both climate change and realize new employment and growth opportunities in this rapidly expanding area. Investments have reached unprecedented levels and stimulus packages to tackle the recent economic crisis also contain noticeable commitments to green technologies. Innovation policies are now under pressure to capitalize these investments and define priorities in the application of environmental technologies to both boost competitiveness and eco-innovation. The aim of this paper is to clarify foreseen impacts of growing environmental technology investments, green components of economic stimulus packages and the ideas of a Global Green New Deal and Green Growth and to assess how Finland is positioned in environmental technologies. The paper reviews existing studies, analyzes global and Finnish patenting and considers the role of environmental technologies in its industrial context in Finland. The findings suggest that renewable energy is the most rapidly expanding environmental technology area, while the economic stimulus packages will play a lesser role than originally anticipated in transitions to low-carbon economies. Finland is comparatively well positioned in environmental technologies by overall levels of patenting activity. Nonetheless, Finland does not have a specific specialization profile in the area, neither a comparative advantage in renewable energy technologies as the most rapidly expanding fields globally. Environmental technologies are developed in the context of a broad range of Finnish industries whereby the application potentials of these technologies are manifold

Supply, Complementaries, and Repetitiones of Public Support in Finland

Heli Koski — Wed, 09 Jun 2010 11:00:00 +0000

We use the databases of Statistics Finland to explore the supply of public support for firms in Finland during the years 20002008. Particularly, this report provides a de-scriptive analysis of complementarities and repetitiousness of public support from the perspective of the applying firms. We observe that both the order of magnitude of public resources allocated annually for supporting firms and the number of firms applying for and receiving public support have increased during sample years. The relative financing shares of the organizations allocating support have remained relatively constant. We find that the probability to apply for and to receive public support increases with firm size, age and R&D intensity. The data also show that there are complementarities between certain support forms and organizations allocating public support and that various firms tend to receive support from the Finnish government repeatedly over time.

The Characterics of Finpro’s Clients

Mika Pajarinen — Tue, 23 Mar 2010 11:00:00 +0000

Finpro is an expert service organization, partly financed from public funds, providing services for internationalization market information, consulting and advice, business development, and other related services. It is one of the largest organizations in the Finnish innovation and business support system. Finpro regards its mission to include increasingly a role of an information intermediary, providing information on global megatrends, new business models, and early signals of business opportunities. The company clientele is close to 5000 Finnish businesses. This report studies the Finpros client firms, their characteristics and profile against the organizations mission and stated objectives. It turns out that firms using Finpros services are typically highly internationalized, innovative and knowledge-based. They use, more likely than Finnish firms on average, other publicly supported business services and receive funding from public funding organizations.

Revealed Technological Advantage of the Finnish Industry

Mika Pajarinen — Mon, 08 Feb 2010 11:00:00 +0000

This study analyzes trends in specialization of the Finnish industry since the 1980s. Low technology industries, such as pulp and paper, have had traditionally a large proportion of the Finnish industrial output. During the recent decades their share of output has decreased significantly and Finland has specialized more and more in high technology industries, especially in ICT. The pattern of the Finnish revealed technological advantage with focus on ICT, and pulp and paper technologies differs from the pattern of the revealed technological advantage of many other countries. Internationally compared Finland has some technological advantage also in special purpose machinery, such as papermaking machines, special purpose vessels, elevators and transfer equipments, and in basic metals.

Price Formation and Market Functionality of Foodstuffs

Heli Koski — Mon, 01 Feb 2010 11:00:00 +0000

The study analyses the price formation and market functionality of the Finnish food chain. A significant portion of the report consists of international comparisons. The main comparison countries are the so-called old EU countries (EU15) of Western Europe, the new EU countries (EU12) and the United States. Comparisons are also made with individual countries. After the international comparisons, the price formation of the food chain, degree of concentration, competition, and the position of small producers is analysed for Finland in more detail. The main findings of the study are as follows : 1) a significant reason for the high price of foodstuffs in Finland is the high VAT, 2) the price level without VAT was in 2005 a couple of per cent higher and in December 2009 about 7 per cent higher than the average in the old EU countries, but it is considerably higher than in the new EU countries and the United States, 3) In Finland the price level of food-stuffs is elevated by the weak agricultural competitiveness (northern location and small farm size); on the other hand, the competitiveness of the foodstuffs industry and the wholesale and retail trade is rather good, 4) measured in terms of price-cost margins, competition works in Finland just as well in agriculture, the foodstuffs industry and the wholesale and retail trade as it does in the food chain of the comparison countries, 5) the large share of the wholesale and retail trade in the Finnish food chain is attributable to higher transport costs than in the comparison countries, 6) in Finland the prices of foodstuffs have moved in the same direction as in comparison countries, albeit with a lag of a few months; in 2009 the prices of dairy products, butter and margarine, meat, fish products and food products nevertheless fell by considerably less than in the comparison countries and less than the development of producer prices would have indicated, 7) the foodstuffs industry and the wholesale and retail trade are concentrated sectors; enterprises nevertheless compete with each other and with imports, 8) the degree of concentration, agreement practices and price development should be monitored especially in product groups where consumer prices have not fallen in line with a decline in producer prices, 9) access of small producers to markets is important from the standpoint of competition and consumer choice; the position of small producers can best be improved by fostering the exchange of information within the chain.