Small Country Strategies in Global Competition. Benchmarking the Finnish Case

Mika Pajarinen, Petri Rouvinen and Pekka Ylä-Anttila

No 144 in ETLA B from The Research Institute of the Finnish Economy

Abstract: By Globalization we refer to the latest stage of internationalization since the 1980s, initiated by widespread deregulation of financial markets and competitive policies as well as by advances in information and communication technologies (ICTs). In our discussion global competitiveness at the national level centers around the question of how can a country be an attractive home base for MNEs’ high value-added activities. Despite the potential drawbacks and uncertainties of globalization, hitherto its effects have mainly been beneficial. The benefits are, however, unevenly distributed across countries and economic branches. Technology-driven growth nevertheless offers abundant opportunities to advanced small open economies such as Finland. Finland’s shift from a factor- to a knowledge-driven economy has been rapid; among other things, its R&D-intensity is currently the 2nd highest in the world, and it is one of the leading countries in ICTs. The high unemployment rate manifests that some resources are still underutilized, but the situation is improving. Although the Finnish economy has been able to renew itself considerably in the past few decades, the economic structures are still somewhat inflexible. Thus, fiscal measures will be needed in future economic downturns as well. The Finnish position in global competition is quite good, but inflexibility and a large public debt may cause problems in periods of slow economic growth.

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