Growth-seeking entrepreneurship: The role of the support system

Petri Rouvinen ETLA , The Research Institute of

the Finnish Economy

Nýsköpunarverðlaun Íslands Grand hótel Reykjavík April 10th, 2014

What I mean by…

Invention Innovation≠

$+

Innovation ≈ Seeking opportunities

1% spark – 99% sweat

Needs (some) money

Mostly not technical

Mostly incremental

Increasingly digital

Innovation Entrepreneurship≈

$+ $+ +

Entrepreneurship Self-employment

Perceives economicopportunities andintroduces them

in the market

Works but is notemployed by others;may employ others

but typically not

Overlap under 10%

EU Innovation Scoreboard:Finland among leaders &Iceland among followers(above the EU average)

Source: European Union, Innovation Union Scoreboard, 2014

Finland Iceland

0.684

0.593

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0

Economic effectsInnovatorsIntellectual assetsLinks, entrepren.Firm investmentsFinance, supportResearch systemsHuman resources

Economic effects: Finland

Innovators: Iceland

Intellectual assets: Finland

Links, entrepreneurs: Iceland

Firm investments: Finland

Finance, support: Iceland

Research systems: Iceland

Human resources: FinlandNew PhDs,upper sec. ed.

Int. co-publicat.,non-EU grad stu.

Pub-privco-publ.

Patents, trademarksprotected designs

Share ofInnovative sales

Dimensions of Innovation Union Scoreboard

Source: European Union, Innovation Union Scoreboard, 2014

VCn/a

“ Iceland is the only country for which innovation has not improved over the 2006–2013 period.”

Innovation Union Scoreboard 2014, p. 71

Early-Stage Entrepreneurs:

Iceland leads the advanced countries

Source: Global Entrepreneurship Monitor, 2010 Global Report.Measure: Early-Stage Entrepreneurial Activity / Adult pop.

Finland Iceland

5.7

10.6

• History: Attitudes & culture hostile to growth companies… but since the crisis Finland to a global startup hotbed!

• Why?– Aalto university

– Encouraging examples

– Challenges of incumbents

– Digitalization & globalization

– Several good policy measures

Startup in Finland !?

A new Act in 2009 “privatized” universities and reformed management & decision-making

3 former university merged to form Aalto Univ. in 2010

Aalto’s faculty & students became cheerleaders for startups:Aalto Entrepreneurial Society, Aalto Centre for Entrepreneurship …

A brochure of Tekes and NeoGames by the same name.

After 50 failures, Rovio hits the jackpot with

Angry Birds

Over 800 employees

After just three years of operation, Supercell

sold a 51% stake for €1.5bn

150 employees

2012 2013

250

900TurnoverMillion €

1,800 pers. 2,200 pers.

0.5 0.3 0.5 0.7 0.8 1.1 1.2 1.8 2.5 3.1 4.0 3.3 3.6 3.8 3.0 2.9 3.1 3.2 2.6 1.2 1.2 0.5-0.1

0.5

Nokia’s Share of Finnish GDP, % Source: Ali-Yrkkö, ETLA

est.

Beyond corporate & public employment…

1011010111000010

3D

IoT

Cost of entry ↓ Market reach ↑

With outsourcing &offshoring: size & location matters less

Ability to position oneself in global value chains

Vigo Accelerators Tekes: Shift in Emphasis

10 Vigos, public–private Tekes startup funding, m€

partnership business

accelerators: €220mn

private & €70mn public

investment to 90 target

firms in 2009–2013.

Some public measures

20032004

20052006

20072008

20092010

20112012

45 40 42

61 58

7488

102

127134

Conclusions

Some observations regarding Finland

• Seeking a list of (broad) growth industries inconsistent with global realities (cf. megatrends)

– Businesses do grow, but across a range of industries & often in small increments

• Too focused on “big hits” & the VC market?– A number of “nice growth” companies

may jointly matter more for society

Humble questions regarding Iceland

• Good scientific base ... Applications ???

• Icelanders with sufficient tools for thought ?

• Banks & family/friends finance 90% of new firms – But does not fulfill needs of growth-seeking startups– 5–10 rounds of startup finance before maturity: path?

• Manifold innovation support in Finland ... Iceland at its optimal level of public support?

Growth-seeking entrepreneurs (and similarly-minded corporate intrapreneurs)

are a necessary link between ideas & their societal impacts …

Is this link sufficient in Iceland ?

For Iceland to do?• Lessons from Finland?– Vigo Accelerators?

• A Norwegian-style tax incentive (≈ Tekes)?

• But: No silver bullets – this domain is systemic– A broad set of framework conditions needed

for innovation & entrepreneurship (cf. Nordic Innovation: 20 categories)

Try a lot, fail fast and often, scale up or try again.

ThankYou!

fi.linkedin.com/in/petrirouvinen/Petri.Rouvinen@ETLA.fi +358–50–3673474