Finnish small and medium-sized companies reluctant to seek growth
Recession trauma reflected in attitudes
Mauri Pekkarinen
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Finnish companies are generally reluctant to invest in growth. According to a fresh survey released by the Federation of Finnish Enterprises and the export credit agency Finnvera, only seven percent of Finland’s small and medium-sized companies are "powerfully growth-oriented".
The survey was based on a questionnaire answered by 3,000 small and medium-sized Finnish companies.
"Finland has too few companies with rapid growth", says Mauri Pekkarinen (Centre), the Minister of Trade and Industry.
"The number of Finnish companies experiencing growth is small by European comparisons, and it is insufficient for the creation of jobs, and for the economy to grow as it should."
According to a survey by the Ministry of Trade and Industry, only 1,712 of the 96,151 enterprises that were launched in 1996 - 1999 can be classified as growth companies. The low level is seen to undermine improvement in employment. According to studies, between 50 and 80% of new corporate jobs are created in companies experiencing growth.
Most of the companies in the survey who expressed a reluctance to push for growth said simply that their company was "big enough" - a view that is somewhat difficult to argue against.
Lars Wikholm, CEO of Proman, which specialises in increasing the value of small and medium-sized enterprises, says that one reason for the reluctance to seek new growth is the residual trauma of the recession of the early 1990s.
"As a result of the recession, companies have become excessively cautious. People do not want to accumulate debt, preferring to keep their balance sheets balanced. Finnish companies are on very solid ground - maintaining liquidity has become too important."
Wikholm sees the age structure of Finnish companies as another factor promoting excess caution.
"Entrepreneurs considering a change of generation do not invest, because they fear that it might have a negative effect on the company’s result and sale price", Wikström explains.
"We need a new generation of entrepreneurs, which is ready to give visions, invest, and grow aggressively."
The traditional bottleneck inhibiting growth is access to finance. However, in the fresh study, only one percent of respondents mentioned the lack of available financing as an impediment to growth.
Last summer’s corporate tax reform caused a good deal of anger in the business community.
Pekka Ruusunen, chairman of the Finnish Software Entrepreneurs Association, notes that from the point of view of a company seeking growth, "it is irrelevant, if the tax on dividends is 26% or 28%, because such companies usually do not hand out dividends".
However, the capital tax is a problem, because often a company’s property is largely theoretical, but taxes have to be paid in cold, hard cash.
Helsingin Sanomat
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| 1.11.2004 - TODAY |
 Finnish small and medium-sized companies reluctant to seek growth |
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