Finnish ICT Cluster in the Digital Economy

Edited by Laura Paija

No 176 in ETLA B from The Research Institute of the Finnish Economy

Abstract: The last decade of the past millennium marked a fundamental change in the industrial structure and international position of Finland. It became one of the world’s most high-technology intensive economies, and gained a position in the forefront of the global digital economy. This book provides three complementary perspectives on the development of the information and communications technology (ICT) cluster in Finland. First, the book digs into the factors behind the competitive advantage of the cluster, and analyses the dynamic interaction between the factors, which has given rise to a self-nourishing system. Indeed, despite the seemingly rapid boom of the Finnish ICT sector, there is a long evolutionary process behind it. However, many coincidental factors beyond the control of the cluster play also a role in the phenomenon, which ultimately raises the question, can we actually explain it? There are several fundamental questions on the horizon, which will test, once again, the Finnish ICT cluster’s ability to rise to the challenge. Second, the book describes the birth of the private venture capital market in Finland in the 1990s. Greatly improved access of technology start-ups to risk funding explains much of the increased scale and scope of the ICT cluster. The book examines the growth and internationalisation of technology-based new companies through eight cases, with a focus on the impacts of venture capital on their value creation processes. It is concluded that the entrance of venture capitalists in the case companies has fuelled their growth not only through fortified capital base, but also through managerial support and improved credibility in the eyes of interest groups. Thirdly, the book analyses strategic differences between the two ‘digital superpowers’, the U.S. and Europe, which have taken different paths on their way to the digital economy. To date, U.S. companies have enjoyed a leadership in the wired digital economy, while European, and most particularly, Nordic companies have pioneered in the wireless market. The two pioneers, however, cannot rest on their laurels. There are perceivable signs of the erosion of their leaderships. The transition to the third generation communications, which represents a disruptive technology, will vitiate some of their first-mover advantages gained in the previous phases of competition, and will thus challenge the pioneers’ capability to find ways to renew the sources of their strategic advantages.

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