Petri Rouvinen

ICT clusters in Europe The great central banana and the small Nordic potato

We analyse the clustering of European ICT activities. Our focus is primarily on the ICT manufacturing industries in the EU countries. We find a clear and intensifying concentration tendency of ICT-related production and R&D. As a rule, originally specialized countries have become more so. In terms of export specialization, however, countries have become more similar. This may be a consequence of new production modes and distribution systems in the sector. Mapping of ICT businesses by postal code reveals two blocs of European ICT activity. The larger central bloc begins in the greater London area and proceeds via Randstad through Germanys industrial heartland and ends in northern Italy. The smaller Scandinavian bloc covers the Helsinki and Stockholm metropolitan areas. Our empirical investigation shows a notable country-level specialization in ICT, but businesses within the EU are concentrated into spatial clusters that do not respect national borders.

Characteristics of Product and Process Innovators: Some Evidence from the Finnish Innovation Survey

The characteristics of product and process innovators among Finnish manufacturing firms with Community Innovation Survey (CIS) data are studied. Results of bivariate probit estimations suggest that, while the product and process innovations are related, they are largely driven by different factors. The ability to benefit from inward spillovers is the only variable having a symmetric effect onboth types of innovation. Cooperation with non-academic outside partners is the only other variable that becomes significant in both equations. Process innovations benefit from capital embodied technology, whereas product innovations require disembodied forms of technology.

The Labour Market Consequences of Self-Employment Spells: European Evidence

We examine how those re-entering paid-employment after a brief self-employment spell fare upon return using data from the European Community Household Panel. Unconditionally, those re-entering paid-employment appear to have considerably lower wages than those staying in the wage sector. This difference appears to be larger in Europe than in the US. Conditional analysis suggests, however, that the difference is more apparent than real: It seems that Europeans select negatively into (and possibly out-of) self-employment, i.e., the likelihood of entering (and exiting) entrepreneurship correlates negatively with unobserved ability and/or in-paid-employment productivity. Our analysis of non-wage outcomes indicates that the selection is mostly involuntary, and that for highly educated men, the brief self-employment spells are unemployment in disguise.

Informational Mobility and Productivity: Finnish Evidence

The labor productivity effects of portability and connectivity of information and communication technology (ICT) are studied with Finnish firm-level data. It is found that a computer with only processing and storage capabilities boosts labor productivity by 9% (corresponding to 5% output elasticity), portability by 32%, wireline connectivity by 14%, and wireless connectivity by 6%. The findings are in line with previous literature and comparisons to ICT costs suggest that firms equate marginal costs and returns. Although increasing ICT penetration can no longer be a major source of productivity growth in developed economies, the relatively new characteristics studied can.

The existence of R&D spillovers: A cost function estimation with random coefficients

This is a study of the effects of R&D spillovers on the cost and production structures of Finnish manufacturing firms. Confidential data on firms is used to estimate a translog cost function system with random coefficients. Although the results suggest that intra-industry spillovers are present in Finnish manufacturing, the findings regarding inter-industry spillovers are inconclusive. The variable cost reduction associated with spillovers is positive, but relatively low. Spillovers reduce the demand for labor but increase the demand for materials. Spillovers also reduce the willingness to pay for capital inputs.

The Nordic Model and the Challenge from Global Value Chains

With the increasing ease of communication and transportation, the falling costs of processing and transferring information, and the major political and societal changes that have occurred in recent years, the link between economies of scale and the geographic concentration of production has weakened. It has become feasible and profitable to disperse global value chains in time and space at a fine level of aggregation. This trade-intasks (Grossman and Rossi-Hansberg, 2008) or second unbundling (Baldwin, 2006; 2009) is among the most important features of modern globalization.Basic economic theory suggest that deepening specialization brings about aggregate benefits. As agents and institutions involved do not necessarily/fully redistribute these benefits, there are bound to be both winners and losers. Therefore, current high-income countries are justly concerned about the sustainability of their prevailing standards of living.

IT Outsourcing in Finnish Business

This paper reviews the characteristics and magnitude of information technology (IT) outsourcing as well as studies its labor productivity effects with a representative sample of Finnish businesses. Depending on the IT task in question, on average from one-third to two-thirds of IT has been outsourced; of the ten categories considered, the development of non-Internet business-to-business applications (e.g., EDI) is the leading activity in this respect. The various dimensions of IT outsourcing are all highly positively correlated. After controlling for industry and regional effects as well as characteristics of firms and their employees, it is found that an externally-supported computer user is about 20% more productive than an otherwise similar worker without a computer, which corresponds to about 5% output elasticity of outsourced IT; the effect of internally-supported computer use is not statistically significantly different for zero, and it is also several times smaller in magnitude. While the issues of causality, timing, self-selection, and unobserved firm heterogeneity are not fully addressed, the findings nevertheless suggest that IT outsourcing may have significant economic consequences.

Family Businesses and Globalization in Finland

This paper studies whether family businesses (FBs) differ from non-family businesses (non-FBs) in various dimensions of globalization with a representative sample of businesses in Finnish manufacturing and private services. FBs and non-FBs are not so different when it comes to export and off-shore (includes both in-house moves and outsourcing) probabilities and intensities. After controlling for other relevant factors, however, family businesses are less likely to have employment abroad and their shares of foreign employment are likely to be lower than their non-family counterparts. FBs foreign employment may also be qualitatively different : Compared to non-FBs, FBs seem to be more prone to have employment in the neighboring country rather than in ones geographically more distant. The strategic role of FBs foreign employment also seems to be different, although due to data limitations we are unable to pin down exactly how. FBs are somewhat more likely to increase their overall Finnish employment in the course of the next few years. This overall observation is largely be-cause family businesses are particularly more likely to hire those with somewhat lower levels of formal education, who also initially tend to command a relatively larger share of their employment.