Study finds policy-backed entrepreneurship working well in Finland

There are many who argue that governments are no good at picking winners through innovation policies. But this is not the case in Finland, according to new research.

A six-year study of the Finnish National Technology Agency’s ‘Young Innovative Companies’ (NIF) initiative, which awards high-growth potential start-ups with up to €1 million, finds it is backing the right horses.

The programme has, “been substantial in value for money terms”, with every €1 of public funding spent generating a €1.11 return in sales down the road, the report’s authors from Imperial College Business School and Aalto University researchers say.

The biggest success from the programme is gaming giant Supercell, which the Finnish National Technology Agency says paid three times more tax in in the last two years than the yearly amount of public start-up funding.

However, knowing when to stop throwing good money after bad is hard for the programme managers, says Erkko Autio, Imperial College professor in technology venturing and entrepreneurship. During the course of data-gathering he, along with fellow researcher Heikki Rannikko of Aalto University, received anecdotal comments that administrators, “could have been more disciplined in deciding when to discontinue participants.”

Launched in 2008, NIF is the first Finnish entrepreneurship policy initiative that explicitly seeks to facilitate the growth of new, entrepreneurial firms.

By the end of 2012, 160 new firms had received NIF funding. Of these, 34 firms had completed the programme. A further 34 firms dropped out of the programme because of failure to meet goals.