SMEs and Their Peripheral Innovation Environment: Reflections from a Finnish Case

Abstract

As it has now been widely argued, innovation is ever more seldom the product of isolated firms but usually requires a combination of multiple technologies, skills and competences, part of which have to be acquired from outside the boundaries of the innovating firm. As the literature on regional systems of innovation and other territorial innovation models suggests, the region is the most appropriate spatial level for investigating and understanding the nature of firms’ external knowledge acquisition in their innovation processes, as well as for identifying the critical actors and factors contributing to them. Unlike the majority of studies focusing on the innovation activities of firms at the regional level, this paper focuses not on the actual importance of different location factors, but on the perceptions of small- and medium-sized firms entrepreneurs of the quality of different factors in their regional innovation environment. By identifying differences between the perceptions of innovative and less-innovative firms, this study contributes to the literature on innovation as a regional-level phenomenon, and also tentatively puts forward some managerial and policy implications, as well as suggestions for further research.

Notes

Although Isaksen (2001, p. 109) rightfully presents his scepticism towards the applicability of the RSI concept in LFRs and suggests that “a more adequate approach may be to link regional firms to relevant national and international knowledge resources and firms”, this does by no means depreciate the relevance of the systems of innovation approach as such, as it explicitly calls for the inclusion of various spatial levels in the analysis of the nature of important network relations for innovation (e.g. Oinas & Malecki, 2002).

The KIBS sector is a good example of an industry that is located very unevenly across space, concentrating on urban centres. As illustrated by Hansen and Wither (2010) in the case of Copenhagen city region, even within urban areas the KIBS industry is clustered in certain places, leading to “uneven geographies” within these areas.

The Finnish Centre of Expertise programme is a fixed-term special government programme aimed at focusing regional resources and activities on development areas of key national importance, promoting the utilization of the highest international standard of knowledge and expertise that exists in the different regions (see e.g. Valtonen, 1999). Kuopio was one of the eight initial regional centres of expertise with special strengths in the welfare and biotechnology sectors. This specialization is also reflected in the fact that the Kuopio region (alongside with the Turku region in south-western Finland) has received substantial public funding in biotechnology and related fields, while, in general, the Finnish public funding in the high-tech sectors is heavily concentrated in the metropolitan area of Helsinki (Pelkonen, 2005).

Twenty six of the firms in the sample did not indicate their industrial affiliation or the number of employees, which explains the missing cases.

According to Statistics Finland (2008), in the overall population of Finnish firms, the rate of product and market innovators was 33% and 28%, respectively, in the period of 2004–2006. It should be noted, though, that in our study the review period was longer (four years), which may overestimate the innovativeness of the firms in our sample. However, this may also explain the slightly higher share of innovators in the small firm category, compared with the figures presented by Statistics Finland.

It is subject to some debate, whether, in the strict sense of the term, there are any genuine regional systems of innovation in Finland. Although Heidenreich (2004) has classified the innovation system of Tampere in Southern Finland as representing the “ideal” regionally networked innovation system type (cf. Asheim & Isaksen, 2002), the system is mainly concentrated in the central city of the region. Hence, as suggested by Lievonen and Lemola (2004), it is more or less a matter of opinion whether regional innovation systems do exist in Finland, or as Sotarauta (2007) puts it, such systems are most likely to be local–national by nature, that is, localized in the largest cities in the country and rather strongly connected to the national innovation system.

It should be stressed, nevertheless, that even if Finland was the first country to adopt the national innovation system framework as a basis for the formulation of national innovation policies, until recently the Finnish innovation policy has developed following the traditional lines of science and technology policies. At the moment, however, the Finnish innovation policy is facing a transitional period: there is a shift from the narrow science and technology policies towards an extensive innovation policy which stresses not only the traditional technological innovations but also service innovations and demand- and user-driven organizational, social and managerial innovations (Valtioneuvosto, 2008; Työ- ja elinkeinoministeriö, 2010).