As of September 2013, Nokia sold its mobile phone business to Microsoft, who was their main business partner for the last couple of years. Nokia was well known from this business, but what kind of effect this will have on Finnish economy, which has been relying a lot on Nokia in the past?
Finland’s GDP (Gross domestic product) is expected to raise in 2014 by many analytics(Source: Talouselama). One of the main reasons is Nokia’s sale of non-viable business segment.
But let’s forget about the economic indicators for a moment and focus more on the human-centric matters. As it’s well known, Nokia has been huge employer for engineers in Finland. Many of these engineers have lost, or will lose their jobs at Nokia because Microsoft is expected to move everything off from Finland slowly. But is it a bad thing for economy?
Nokia in the past
In the past Nokia used to have huge effect on Finland’s GDP with their 4 percent share, but in 2013 it was only 0,4 percent. This has a lot to do with the fact that Nokia been cutting jobs after 2011 a lot in Finland. According to Jaakko Kiander(From Depression to High-Tech Boom), Nokia was the savior for the deep recession in the beginning of the 1990s. Before the “Nokia-boom” Finland’s GDP shrank by 10 percent in the 1991-1993 and employment decresed by 20 percent. Nokia’s success in the global markets helped a lot Finnish economy on it’s recovery.
Back in the days as Nokia used to be huge employer in the country, people leaving universities didn’t even consider starting their own company, they just joined the one company, Nokia. This created complete lack of entrepreneurial spirit in Finland.
But this was past, and with today’s Nokia GDP share, we can’t expect Nokia to be one of the “giants” helping Finland back to grow-path of the economy. But maybe Finnish economy doesn’t need such giant anymore?
Nokia engineers and their start-ups
Nokia engineers are well-known of their workmanship, and even Wall Street Journal(WSJ Blog, 04.08.2011) said that Nokia’s losses will become Finland’s gains. Many of the engineers who have been affected by job cuts, have started their own start-up companies in technology area. It is expected that these start-ups will start healing the spot Nokia left to Finnish economy in future. Also it’s possible that these companies will actually employ more people than Nokia used to, which leads to smaller unemployment percent. Also, as there would be multiple companies with smaller shares of GDP, one wrong financial move will not have such huge effect.
Finnish model is also encouraging foreign investors to invest to these startups. With the co-financing from Tekes, it lowers the risk of the investment significantly.
What do you think, do Finland still need one huge giant company, or has the economy changed to more sustainable model of smaller companies?
http://dare.uva.nl/document/171944 s. 35