How could Finland be able to have very advance information and communications industry? Discuss on Finnish strategy.

The motivation to discuss this topic:
In this essay, I would like to discuss the way which Finnish people to develop their information and communications industries. Finland doesn’t have much natural resource, except forest. That is why the main export products of Finland were paper and woods originally. However, after taking many years to develop information and communication sector, the main export products of Finland became electronic products. In addition, Finland owns advanced technology, high skilled employees and famous mobile phone giant Nokia now. How could Finnish people make those facts come true in the country with limited natural and human resources? What do people in Taiwan learn from Finnish experience?

The story of Nokia:
Information and communication technology (ICT) sector is the most quickly growth industry in Finland. Finnish ICT includes hundreds of small and medium size companies, but Nokia is the core undoubtly. So, if we want to understand the Finnish ICT more, it should be to talk about Nokia first.

Nokia is founded in 1865 for forest industry originally. In addition, there was two related companies, Finnish Rubber Works Ltd and Finnish Cable Works Ltd, which are founded in 1898 and 1912 respectively. Finally, the three companies combined to form the present famous Nokia in 1966. Before 1970, the branch of electronic in Nokia was very small. The main products of Nokia were cables, rubber and paper. After merging some European electronic companies in 1980s, Nokia started to develop its business on electronic consumer. Right now, Nokia is totally become a purely ICT company, the Finnish biggest firm and a leader in wireless telecommunications world-wide. Nokia is a giant in Finland and provides significant contribution to Finnish economy. In addition to Nokia's direct contribution, there are over 300 first-tier small and medium-sized suppliers to Nokia, which people call them as Nokia network. We can sum up Nokia's direct contribution to Finnish economy: 4% GDP, 1.5% GDP growth, 35% business sector R&D, 25% exports, 1% total employment and 5% manufacturing employment in 2000 [1].

Finnish experience:
It is not easy to explain why Nokia and Finnish ICT industries are so successful. Rather, the main contribution of the success is from the cooperation among historical, technological and economic factors. Except for the significant position which the communications equipment manufacture plays in Finland's industry change, I can see that network relationship in Finland, like Nokia network, push Finnish ICT development. The major reasons make the success can be concluded two points in the view of history: (1) decentralized structure of the industry and, (2) the liberalization of telecommunications early.

Originally, the market of Finnish telecommunications is very fragmented because of political outcome. In the 1800s, when Finland is a duchy of Russia, Finland started to lay cables. In order to avoid Russia control her national telephony, Finnish congress granted many telecommunication operating licenses. Finnish first telecommunication companies were established in 1870 by Finnish equipment suppliers. During twentieth century, the private telecommunications operating companies increased. In order to interconnect between networks of different operators, Finnish telecommunications proposed to nationalize and harmonize their network. However, Finnish congress rejected the proposal. It makes Finnish telecommunications industry still remain de-centralized. Different telecom equipments and format of terminals made difficulties of interconnection among networks. During the 1930s, the number of operators maximum about 800. After the peak, the number decreased to about 50 by the mid 1990s. Because there are so many operators in Finland, every operator had strong competition with each other. In addition, unlike other countries, those operators also had to face the competition from foreign companies. The real huge and the strongest competition between the operators begin in mid-1980s due to the open of long distance operations. By 1994, the competition included local and long-distance call and international telecommunications. Nowadays, many of those operators are not so important because kind of them have merged together. And Nokia and many equipment suppliers have global competitiveness.

Industry, technology and educational policies have played a role too. Finnish government changes its decision in the early 1980s. She underlined the role of innovation policies with the need to decide the priorities for allocating R&D resource. Finally, market decided the winner, ICT sector, in product market. Now, ICT was the national stronghold of Finland. Because of the reasons above, information and telecommunication technology is in the first priority in Finnish economy. Finnish high education also pay special attention on ICT.

After many years for developing, Finland has ICT sector with global competitiveness. Except for Ireland, Finland is the EU country owns most surplus of high-tech foreign trade runs. In the 1990s, there were many International studies (IMD and WEF) reported that Finland is the country with best competitiveness in the world. The reasons include Finnish science and technology abilities, her high level education and her internationalization. In addition, Finland also is the most advanced producer and has users of communications and information application. In comparison studies, both social infrastructure and technology ability form the basic structure to make Finland has the competitiveness above average. Presently, High-tech investment and skilled labors are the resource which international competition change into competition for. In other words, countries and regions are looking for money and highly educated employees. Because of Finnish development of technology, it make Finland has advantage as a corporate location. In other way, there are also weaknesses of Finland’s competitiveness. The weaknesses include high tax rate and remote location. Besides, high unemployment is the result due to deficiencies of labor market. Only focusing on ICT sector is also too dangerous if the demand of electronic or communications products falls.

Based on the discussion, I could conclude that there are two points make Finland own successful ICT. The first one is the correct strategy of Finnish government. The second one is high quality of employees.

Except for the decentralization and nationalization of Finnish telecommunication operators by Finnish law, when Soviet Union, the most important trade partner of Finland then, was destroyed in 1991, Finnish government speeded up to encourage Finnish companies to develop information and communications industries. The decision is very correct. Right now, electronic products has replaced woods to be the main export product of Finland then.

As mentioned before, the successful Finnish education is another factor makes Finland could have very good ICT industry. Comparing to traditional industries, say woods or paper industries, ICT industry need very high-quality employee very much. The most famous software from Finland is the kernel of Linux operation system. People who study computer science all know that the kernel is from a Finne who was a college student when he proposed the kernel. The case is an example of Finland’s strong ability of employee in ICT industry.

The lessons Finland can teach people in Taiwan:
Taiwan is a small island with not so many people. In addition, Taiwan’s government also pays much attention on ICT sectors. However, there is no any Taiwan’s company like Nokia. In my opinion, any country which wants to develop ICT industry has to own her leader ICT companies. For example, USA owns IBM, AT&T and Microsoft; Japan owns SONY, NEC and Toshiba; Sweden owns Ericsson; Germany owns Siemens. Of course, Finland owns Nokia. But Taiwan only owns some manufacturers, like Acer, ASUS and BanQ. Those Taiwanese companies are not big enough and can’t invest too much money into R&D department. It makes Taiwanese universities and colleges have to cover all R&D works for corporations. The difficult is the researches in universities are usually very theoretical and kind of impractical. In other way, how to make Taiwan has a small but open economy like Finland is also a issue for people in Taiwan.

Reference:
[1] J. Ali-Yrkkö, L. Paija, C. Reilly and P. Ylä-Anttila, “Nokia: A Big Company in a Small Country,” ETLA Series B162, Taloustieto Ltd, Helsinki, 2000.