THE VTT Technical Research Centre of Finland has launched a 30-month project designed to reveal the causal factors behind the success – and failure – of innovative Finnish companies.

The Finnentre project is expected to provide useful lessons for innovators beyond Finland too, with factors such as early-stage survival, innovation timing and the influence of geographical location all coming under scrutiny.

“Our aim is to produce an analysis that can inform policy making and provide useful strategy management suggestions for managers,” explains project manager Dr Mariagrazia Squicciarini.

Finnentre takes place against a background of reassessment of the innovation strategies implemented by Tekes, the main public funding agency for technology and innovation in Finland.

In theory, says Squicciarini, when it comes to giving money to firms, Tekes shows no preference with respect to old customers or new customers, relying instead on the intrinsic merits of the innovation. But that might be about to change.

“There has been a lot of investment in the past in biotechnology especially, which hasn’t led to the expected results. So, the question has become: should we invest in firms regardless of sector and who they are insofar as the idea is good and we think the potential is there, or should we prefer a narrow group of innovators?” explains Squicciarini.

The project, which will focus on companies that have developed and commercialised one or more technological innovations, will be split into three phases.

The first phase, which looks at the first five years of a firm’s existence, will examine the way innovative entrepreneurial ideas get implemented, and how this may be related to early-stage survival and performance. It will also investigate the way innovative ideas get to market in an attempt to understand whether and to what extent having a clear innovative idea enables firms to be successful in the first phase of their lifetime.

The second phase of the project, which will look at firms that have been in existence for five to 15 years, will investigate the product life cycle of innovations themselves, and the way innovation timing may relate to the success or failure of innovative companies.

With Tekes’s experiences in mind, the researchers will examine whether firms need to continuously innovate or whether it is sufficient for them to produce just one or two innovative products or services.

Finnentre will draw on information pulled from VTT’s patent data centre. Ten years in the making, the data centre stores detailed information regarding more than 4,000 Finnish innovations dating back to 1942. It includes qualitative data from innovators, which provides a history of the innovation, including their account of the obstacles encountered in bringing their innovation to market.

In its third phase, the project will investigate how the geography of innovation relates to company performance. Looking at well-established firms with several locations and business units, this phase will pay particular attention to knowledge spillovers – the exchange of knowledge between individuals, companies, and institutions.

Knowledge spillovers can increase due to the presence of research centres, universities, and specialist companies. This brings direct benefits to innovators by enabling collaboration with other entities and indirect benefits due to their presence in a region where pertinent issues are regularly discussed.

However, knowledge spillover is dependent upon firms’ “absorptive capacity”, that is, their ability to understand high-level debates in their field, says Squicciarini, which is, in turn, dependent upon the education levels of key staff.

There has been ample research into innovation worldwide, but researchers have found that their results are too geographically localised, or too specific to certain companies, to provide universally significant insights.

“That is the result of mainly qualitative studies,” responds Squicciarini. “Especially case studies and surveys with just a few samples. That’s where our study wants to make a step forward. We are going to combine detailed microeconometric assessments based on our knowledge of thousands of innovations with a qualitative analysis.”

Squicciarini hopes that Finnentre will inform government policy in Finland and beyond.

“Many governments have policies that address early-stage entrepreneurship. If you talk to entrepreneurs, however, they are likely to complain that the money they get doesn’t cover the whole period that they need to be successful. Our research will ask whether it is it true that support for early-stage entrepreneurship projects should be longer,” explains Squicciarini.

“This is relevant not just to Finland but to any country in the world. Because, regardless of the country, the entrepreneurs you talk to tell the same story – that they don’t get enough money for a sufficient period of time. We would like to see whether that is true.”