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Review: Nordic start-ups are struggling to grow

The Nordic project members in the panel debate discussing the preliminary findings of the Review
  • Published 18/09/2012
Many new firms are being established in the Nordic countries every year, but too few of them ever manage to grow beyond 50 employees. This is one of the key findings of the Nordic Growth Entrepreneurship Review 2012, which was discussed at the Nordic Growth Entrepreneurship seminar in Helsinki on 13 September.

According to the Review, there is a high level of start-up activity across the Nordics and a relatively good level of gazelles (in line with the OECD definition, firms that over 2006-2009 have experienced an annual average growth in employment of at least 20%, have at least 10 employees and are less than 2 years old at the beginning of the growth period).

 

When looking at the Nordic region, Norway and Denmark are the ones generating most new firms, and the only Nordic countries above OECD average. In Finland and Denmark 0.4-0.5% of firms are gazelles whereas the share is higher in Sweden and Norway, up to 0.7-0.8% (in proportion of all firms with at least 10 employees 2009). Most of the gazelles are in the service industry and more knowledge-intensive – here with the highest proportion in Denmark. In Norway and Finland a relatively high share of gazelles are also in manufacturing and higher technology.

 

The area in which the Nordic region seems to struggle most, is the scaling up of young companies. There are very few gazelles that grow large. Finland is outperforming the other Nordic countries in terms of gazelle growth, with almost 50% of these reaching more than 50 employees and about 25% reaching 100 employees over a three-year period between 2006-2009.

 

 

Nordic challenges and strongholds

Glenda Napier, chief advisor at RegX and University of Southern Denmark, and project leader for the Nordic Growth Entrepreneurship Review, pointed out the inability of scaling up the companies in the Nordic region.

 

- Nordic gazelles seem to grow from small to small companies. When the absolute number of gazelles is small, it is even more important that they become successful growth firms, which is also reflected in their size.

 

Areas that are especially challenging are access to finance, in particular, venture capital at expansion stage, and entrepreneurial capabilities and business skills, which are crucial to success.

 

On the other hand, the Nordic strongholds are regulatory framework and market access.

 

The Review also indicates the good development of an entrepreneurial culture in the Nordic countries.

 

- This reflects something that has been worked with in the recent years. In general, the Nordic framework conditions for entrepreneurship are catching up with the top performers USA, UK and Canada, continued Napier.

 

 

Ecosystem is essential for growth entrepreneurship
According to the Review, there is a need for relevant networks and ecosystems in order to boost Nordic growth entrepreneurship. These include, for instance, investors, funds, service providers, collaborative knowledge institutions and established firms with an open collaborative culture. The Nordic countries also need better data and indicators for comparing Nordic growth entrepreneurship ecosystems with the best ones in the world.

 

- When zooming in the areas and cities in the US, it is clear that those with good networks have more successful entrepreneurs than others, stated Napier.

 

Karen Wilson, consultant to the structural policy division of science, technology and industry directorate at OECD, provided an international perspective on growth entrepreneurship, and praised the Nordic countries for their universities and innovation programs. However, she emphasized the need for a greater focus on high growth policy, and not only on start-ups. She also highlighted the importance of facilitating tailored entrepreneurial ecosystems – mapping out the right people and helping them to connect with each others.

 

- Processes like these do not happen overnight, and developing ecosystems and capabilities takes time, she said.

 

 

Nordic countries learning from each others

The purpose of the second theme of Nordic Growth Entrepreneurship Seminar in Helsinki was to discuss growth entrepreneurship policy and recent initiatives in the Nordic countries. The theme was opened by managing director of Nordic Innovation, Roger Moe Bjørgan, who referred to Nordic Innovation’s active role in facilitating innovation, funding, and knowledge sharing across the Nordic countries.

 

Sakari Immonen, head of growth ventures division of the Ministry of Employment and the Economy, described the Finnish growth entrepreneurship policy.

 

- Some of the key elements are a broader use of tax incentives, such as those of facilitating companies’ R&D and encouraging investments in SMEs by private investors, as well as streamlining the enterprise and innovation services. For instance, the new Team Finland concept refers to a new, networked way of promoting exports and providing services for companies’ internationalization.

 

Helene Mørne explained how Innovation Norway works with growth enterprises, and also pointed out the main challenges for growth.

 

- It is relatively easy to start and close a company in Norway, but the growth phase is a struggle. A big issue is the lack of patient, competent venture capital.  Also, entrepreneurship was not previously seen as “cool”, but this is changing.

 

Internationalizing and opening up borders is an issue in all the Nordic countries. To attract entrepreneurial talents from abroad, Denmark is launching a tender in which the selected entrepreneurs will be granted residence and work permit for 12 months.

 

- There is a need not only for Denmark to come out to the world, but for the world to come to Denmark, said Dorte Heegaard Johansen from Danish Business Authority.

 

The final Nordic policy case was presented by Björn Falkenhall from Tillväxtanalys, Sweden, who discussed high growth enterprises and new innovation strategy of Sweden. He referred to taxation as one of the important pre-conditions to start and run enterprises. The focus of the entrepreneurship policy in Sweden is making it easier and more rewarding to run businesses in which taxation plays a key role.

 

 

About Nordic Growth Entrepreneurship Review 2012
Nordic Growth Entrepreneurship Review is the first joint Nordic analysis focusing on growth entrepreneurship and assessing the framework conditions for growth and the company performance across the Nordic countries.

 

The Review was commissioned by Nordic Innovation to a Nordic consortium with wide expertise on research in the area of growth entrepreneurship and innovation. The Review applies the most recent comparable statistical data and provides international benchmarks, thus putting the Nordic countries in an international context. The main aim of the Review is to increase knowledge and provide fact-based input for developing growth entrepreneurship policy in the Nordic countries. The Review will be published in the fall 2012.