Reliability now key factor in drawing businesses to Finland

Technological know-how losing importance

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By Päivi Isotalus
     
      Foreign companies begin to do business in Finland primarily in hopes of finding new markets. They value the reliability of Finns, as well as the fact that the society functions efficiently.
      Five years ago, foreign companies felt that technological know-how was Finland's most important asset. According to a new study that was published on Friday, the significance of technological know-how has decreased.
      This study, commissioned by Invest in Finland, the Finnish National Fund for Research and Development, and the National Technology Agency of Finland, investigated the factors that affect location decisions of corporations.
     
The starting impulse for the study can be found in the so-called China phenomenon. Finns began to speak of the China phenomenon after mobile phone battery charger maker Salcomp announced last autumn that it will shut its plant in Kemijärvi and transfer its production to China.
      This raised the question of whether something had changed so radically in the world that Finland is no longer an attractive location for corporations.
      According to the researchers of Etlatieto, who conducted the study, the flow of companies to China is nothing new. The largest wave of investments in China was witnessed ten years ago. The current events represent a second wave.
     
The China phenomenon is perhaps also being exaggerated. Although considerable sums of money are invested in China, 75 percent of global investments are directed to countries such as Finland.
      The researchers also find new characteristics to the current globalisation development.
      According to Jyrki Ali-Yrkkö, large developing countries such as China and Mexico have joined the global economy increasingly forcefully. An internationalisation of the service industry is also underway, with manufacturing having already experienced its round of internationalisation.
     
When selecting the location for their different operations, companies use varying criteria. When choosing where to place a production site, the size of the local market as well as growth prospects weigh heavily in the scales.
      Cost factors are also receiving growing emphasis. Finnish small and medium-sized enterprises in particular are looking at Eastern Europe and wondering if they could cut their costs by transferring production there.
      The location of research and development is affected by the level of expertise, the proximity of universities, costs, and public financial support.
      History is usually decisive when determining where the headquarters are. If the headquarters move, a merger or acquisition is most often the reason.
     
Foreign corporations view the honesty and reliability of the people, a functioning infrastructure, and a stable society as Finland's strengths. Technological know-how is also among the top assets, but its role is not as dominant as before.
      CEO Sirkka Aura from Invest in Finland feels that it is quite significant that foreign companies also value Finnish marketing and business expertise. Finns often tend to regard themselves as less than perfect dealmakers.
      There are fewer foreign companies operating in Finland than in the EU on average. The Finnish market is small and not that attractive, the researchers admit that much. Many foreign players enter the Finnish market with the broader Nordic marketplace, or Russia and the Baltics in mind.
     
In the race to globalise, it has become increasingly important for corporations to conquer even smaller markets. The market for services has been relatively underdeveloped in Finland, and foreign companies have begun to fill this void.
      During the first half of the year, 85 foreign corporations started operating in Finland, a clearly higher figure than in the previous year. What was exceptional was that over half of the companies operate in the service industry.
      Foreign companies seldom open manufacturing plants in Finland. Industrial corporations normally enter the country through an acquisition.
     
Helsingin Sanomat / First published in print 4.9.2004

More on this subject:
 Quality of work keeps zipper manufacturer in Finland

Previously in HS International Edition:
  Salcomp to close charger plant in Kemijärvi; all production to transfer to China (11.9.2003)

Links:
  Invest in Finland Invest in Finland

PÄIVI ISOTALUS / Helsingin Sanomat