Finnish and Swedish economies in the 20th century: economic growth and structure, business behaviour

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Finnish and Swedish economies in the 20th
century economic growth and structure, business
behaviour and large companies

• Riitta Hjerppe, 9 Nov 2006
• Regions, nations and dynamics of cooperation
  the Nordic model in societal and economic
  perspectives

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Economic growth 1900-2000

• Sweden GDP 2,6 percent/year
• Sweden GPD per capita 2,1 percent/year
• Finland GDP 3,2 percent/year
• Finland GDP 2,5 percent/year

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Comparisons of Finnish and Swedish development

• 1900 Finland had a more traditional structure of
  economy
• - More primary production
• - Less manufacturing industry
• Lower productivity of labour
• Lower Gross Domestic Product

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Comparisons of Finnish and Swedish economic
development

• Finland had advantages of a latecomer
• Finland could import technology
• Finland could grow faster
• - Finland had relatively good institutions
  administration, legislation
• - partly inheritance from the Swedish era, before
  1809 continued to develop during the autonomy
  period 1809-1917

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Susanna Fellman Riitta Hjerppe

• Increasing Sales, Competitive Advantages and
  Monopolisation Attempts Economic cooperation at
  company level Between Finland and Sweden
  1800-1938. Markets and Embeddedness. Essays in
  honour of Ulf Olsson. Publications of the
  Department of Economic History, School of
  Economics and Commercial Law, Göteborg
  University, no 92, 2004. p. 53-80.

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Finnish and Swedish business

• Wide cooperation between companies in Sweden and
  in Finland today often have been seen as
  competitors mainly
• Economic cooperation between the countries
  existed already before WWII
• Cooperation between the two countries is seen to
  have offered
• - wider home market
• - common business area
• Sweden as an international training ground for
  Finnish companies during later periods.

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Finnish companies in Sweden, 1900-1938

• Ca. 20 companies, a very small group among
  Swedens foreign companies
• Many subsidiaries short-lived, of little
  significance
• Some profitable investments, however.

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Three important examples

• Finnish cigarette producers in Sweden before
  1915 market niche and technological advantage
  (Strengberg)
• Saw-mill industry in the north of the Gulf of
  Bothnia regional cooperation
• Arabias and Rörstrands porcelain factories long
  common history of both cooperation and competition

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Swedish companies in Finland, 1900-1938

• At least 160 registered Swedish companies
  perhaps all never active
• The largest group of all foreign companies one
  third of all foreign companies
• One third in manufacturing and mining
• One third in trade and transport and
  communication
• One third in miscellaneous industries

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Industrial companies

• Often not really industrial production but
  selling, installation and services
• Important in new industries chemical industry
  (gas, paints, rubber), electro-technical
  industry, telephones

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Domination efforts of some companies

• ASEA, metal manufacturing, electro-technical
• L.M. Ericsson, telephones
• Kreuger Toll, construction matches

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ASEA, 1893-1904, 1913-

• Important provider of machinery and metal
  constructions to industry and power plants
• Selling, installation, service
• Two efforts to buy Strömberg, the most important
  Finnish electro-technical company with the help
  of ostensible partners in the 1920s 1930s
• Led to intervention of the Finnish state
  contract of cooperation of ASEA, Brown-Boveri and
  Strömberg (Nowadays ABB)

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L.M. Ericsson, 1918-

• Provider of equipment for building telephone
  lines, centres, telephones
• Selling, installation, service
• Competition with Siemens and ITT in Finland
• In the early 1930s tried to influence Finnish
  decision making about nationalisation of
  telephone operators by company acquisitions to be
  able to hold its market share

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Kreuger Toll, 1910-

• Construction company first
• Ownership of real estate
• Acquisitions of match factories with ostensible
  partners
• Monopolisation efforts managed to force other
  match factories to agreements of market sharing,
  decreases of production
• Owned half of Finlands match production in the
  1930s

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Lack of forestry industry companies

• Both countries had important forestry industry
  saw-mills and paper factories
• No paper companies in the neighbouring country
  because of Nordic cartels from the 1920s
• Very few saw-mills because of negotiations of
  Nordic cartels, cartel in the 1930s

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Swedish companies in Finland and Finnish
companies in Sweden a comparison

• Low language barrier
• Traditionally regional cooperation in northern
  Finland and Sweden in timber industries
• Finnish companies went abroad earlier than
  previously known. Often first investments of
  Finnish companies in Sweden.
• Swedish companies also often went to Finland
  first. Also earlier than previously known.

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Comparisons

• Mostly green-field investments, some acquisitions
• Looking for new sales markets less production in
  mind
• Swedish companies did not use the Finnish low
  wage advantage
• Some early examples of Swedish companies to
  settle down in Finland in order to sell to the
  Russian market
• Swedish companies brought new technology only
  Finnish tobacco companies had technological
  advantage in Sweden

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Comparisons

• For Swedish companies Finland was often the place
  of the first foreign subsidiary, but not the only
  one a training ground for foreign activities
• Finnish companies before the Second World War
  normally had their small, sole foreign subsidiary
  in Sweden no ambitions to go further abroad

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Growth and profits in Swedish and Finnish big
business during the 20th century

• Riitta Hjerppe, Dept. of Social Science History
• University of Helsinki, Finland
• Mats Larsson, Department of Economic History,
• University of Uppsala, Sweden
• Conference on Industrial Heritage - 2
• Gus-Khrustalniy, Russia 26-27 Jun 2006

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Part of a research project Performance of
European Business in the 20th century

• Participants from Belgium, Finland, France,
  Germany, Italy, Spain, Sweden and UK
• Quantitative and institutional analysis of big
  business performance
• To seek indicators of performance
• To test validity of explanatory variables of
  economic performance
• To draw results concerning the relationships
  between
• institutional structure
• business performance
• economic welfare
• Database of European big business

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Hypotheses

• Swedish companies more modern and many-sided
  earlier than Finnish ones
• Good profits in both countries to allow the
  companies and the countries fast economic
  development over the 20th century

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Top 10 in Finland

• Mostly wood and paper companies
• - Minimum 3 (2000), maximum 8 (1927)
• Consumer goods (textiles, sugar, tobacco) early
  in the 20th century
• Mechanical engineering, electricity and water
  supply, chemicals from the 1950s
• Services/Commercial activities from the 1970s
• Electronics 2000

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Top 10 in Sweden

• Mechanical engineering, wood and paper, food
  (sugar, beer, tobacco) in the early 20th century
• Only one in wood and paper in 2000
• Mechanical engineering and transport equipment
  important throughout the century
• Services and construction on the second half of
  the 20th century

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Top 10 in both countries

• A lot of stability in large industry same
  companies stay on the lists
• Large industry reflects the structure of the
  resp. economy
• Mergers important
• Also stability in financial intermediation more
  stability in Sweden
• Swedish big companies about twice the size of the
  Finnish big companies larger country, earlier
  industrialisation, higher standard of living
  earlier

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Performance of big business, 10 largest companies
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Conclusions

• Big business important especially in exports
• Not very high ROE or HR
• More active stock market in Sweden
• Possibly more possibilities to hidden profits in
  Finland (to minimise taxes)
• Do the indicators explain fast economic growth?
• It will be interesting to compare with the
  results of the other countries