Finnish Direct Investment Abroad

Finnish Direct Investment Abroad

From the end of World War II until the 1970s, Finland imported large amounts of capital to finance infrastructure investment and industrial development; however, by 1987 Finnish capital exports exceeded capital imports by about six to one. During the earlier period, foreign firms had set up subsidiaries in Finland, but few Finnish enterprises had established branches abroad. In the 1970s, the forest industry led a shift toward capital exports by founding sales outlets in the most important foreign markets, especially in Western Europe. The metalworking and chemical industries did not begin to expand overseas until the late 1970s, but they made up for lost time during the following decade. These industries first invested in Sweden, Norway, and Denmark, important markets sharing Nordic culture. Next came subsidiaries in the United States, which by the mid1980s became the second-largest recipient of Finnish investments after Sweden and which hosted more than 300 Finnish manufacturing and sales firms. In the late 1980s, some firms targeted markets in the rapidly expanding economies of the Pacific basin. Beginning in the late 1980s, the service sector began to follow industry abroad. Banks, insurance companies, and engineering and architectural firms established branches in major business centers worldwide. By the late 1980s, Finnish firms owned more than 1,600 foreign concerns, of which some 250 were engaged in manufacturing; more than 900, in sales and marketing; and 450, in other functions.

Businessmen had many motives for setting up overseas operations. In general, the Finns wanted to deepen ties with industrialized countries where consumers and businesses could afford high-quality Finnish goods. Maintaining access to important markets in an era of increasing protectionism and keeping up with new technologies had become crucial. Finnish enterprises, generally small by international standards, needed additional sources of capital and know-how to develop new technologies. Analysts believed that, despite their small size, Finnish firms could succeed abroad if they followed a comprehensive strategy, not only selling finished products but also offering their services in the management of raw materials and energy, development of new technologies, and design of attractive products.

Government policies helped achieve greater international integration of productive facilities. During the 1980s, legislation relaxed limits on foreign investment in Finnish firms, allowing foreigners to hold up to 40 percent of corporate equities; likewise, the BOF loosened restrictions on capital exports. The Technology Development Center (TEKES), under the Ministry of Trade and Industry, sponsored international cooperation in research and development. The government also arranged for Finnish participation in joint projects sponsored by the European Space Agency (ESA) and the European Community (EC), including the EC's Eureka technology development program. Although it was still too early to predict how Finland would perform in international joint ventures, many observers felt that such enterprises were the best way for the country to achieve industrial progress.

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