Company growth 2018: The preconditions for entrepreneurship have improved but the number of growth companies is dwindling

The network examining the situation picture on innovation has recognised that successful growth companies in the Tampere Region cannot be created without capable new entrepreneurs, business trials and studies, or external funding that accepts the possibility of risk. An effective combination of these elements creates a favourable foundation for fresh growth-oriented business activity. Growth entrepreneurship is preceded by growing into an entrepreneur. In accordance with the approach, the situational picture now includes a revised Business Growth indicator section to replace the Growth Enterprises companies of previous years.

Metrics regarding capabilities that promote entrepreneurship, entrepreneurship training, the fledgling phase of a company and the development of start-ups have been selected to form business growth indicator. Growth companies are monitored in terms of their number and the development of their turnover. The increase in the number of patent applications indicates capability for innovation and foretells the entry of new products and services into the market in the near future. The industrial policy climate is the experience-based grade given by the current entrepreneurs to the industrial policy in the Tampere Region.

The consolidated Y-kampus services bring entrepreneurship into the Tampere3 campuses

Y-kampus provides entrepreneurship and innovation services to students, teachers, staff members and researcher alike within the Tampere3 university community. Among other things, the services support the development of business ideas and the establishment of enterprises. The Y-kampus organisation, which encompasses all campus areas, began its operations in 2016. Reference information on the indicators selected for the purpose of monitoring the situational picture of innovation (i.e. credits gained within the scope of the Y-kampus arrangement and the number of ideas that have been through the business sparring process) is only available for 2016 and 2017. Some 3,400 credits were completed and about 70 ideas received sparring during both years.

New companies are also created in higher education institutes. In terms of the three past years monitored in the situational picture, the situation is stable. Statistically, roughly ten new companies annually have been established at TUT. This includes the companies established by students, researcher and other staff members.

TUT and Suomen Asiakastieto produced materials on TUT corporate connections in the autumn of 2017. The results indicated that more than 5,000 companies have had TUT graduates or employees in decision-making positions between 2008 and 2017. The majority of the companies operate in software development, architectural and engineering services, technical testing and analysis, and business management consultation.

In 2017, TUT spun off four research-based companies, with 16 projects related to the commercialisation of research results currently under way.
Harri Länsipuro, Head of Innovation Services, TUT

In the field of growth companies, the number of small employers decreased and large employers increased – growth seemed to beget growth

The number of growth companies turned to a slight decline in the Tampere Region during the growth period of 2013–2016. There were 648 growth companies (-48 over the previous period). However, the decrease was lower in the Tampere Region (-6.9%) than on a national level (-10.1%). As a result, the region’s share of the total number of growth companies in the country increased to slightly over 9%.

The number of growth companies decreased by 9.1% in Uusimaa, 7.7% in Northern Ostrobothnia and 8.0% in Central Finland. Southwest Finland was one of the few regions that managed to continue increasing the number of growth companies compared to the 2012–2015 growth period. The examination and situational diagrams take into account any companies that have grown by an annual minimum of 10% each year and have initially employed at least three persons.

According to the OECD and EU definition, a growth company must have achieved an average annual growth of more than 20% and initially employed at least ten people. The Tampere Region had 76 growth companies that match this definition, and the number increased significantly over the previous growth period (+19%). Of the Finnish growth companies that comply with the official definition, 8.7% are located in the Tampere Region, which is a slight increase.

The field division of the growth companies varies depending on the size limits selected. The majority of smaller growth companies cropped in with a lower growth requirement operate in construction, trade and professional activities. Growth companies that meet the official definition in terms of employees and growth expectations primarily operate in the fields of construction, administrative and support services, industry, information and communications.

For growth companies that initially employed at least three people and grew by an annual average of more than 10%, the total turnover within the region stood at MEUR 3,040 at the end of the growth period. In other words, the total turnover of these companies changed by MEUR 1,476 during the growth period. The amounts were lower than the previous period in the Tampere Region and the entire country.

Both Business Finland’s funding for Young Innovative Companies (NIY) and the risk financing of growth companies according to data collected by Invest Europe have decreased dramatically in the Tampere Region. In terms of both, 2016 was an exceptionally good year but 2017 dropped back near the level of 2015. Large annual fluctuations are characteristic of both NIY and venture funding.

In 2017, 110 patent applications were submitted in the Tampere Region (+11%; 2016: 99 applications). The region’s share of the patent applications across the country was 8.2%, which is roughly in line with the size of the business sector.

Entrepreneurs in the Tampere Region feel that the climate has improved in terms of enterprise and industrial policy, but Tampere’s position is poor when compared with other large cities

The general climate established in the region by the industrial policy is important with regard to encouraging new business operations and drawing in existing operators and investment decisions. Every two years, the Federation of Finnish Enterprises and various local entrepreneur organisations implement an extensive study for their respective member municipalities to measure the preconditions for various trades and professions in different parts of the country. The latest relevant industrial policy indicators (Elinkeinopoliittinen mittaristo) were published nationwide on 23 May 2018 in a seminar for municipal administration held at Tampere Hall.

The overall grade given by Pirkanmaan Yrittäjät (Federation of Enterprises in the Tampere Region) has increased substantially from the level two years prior to a grade of 6.93 (2016: 6.58). The evaluations improved significantly more than in the rest of the country and, in a comparison between regional enterprise federations, the Tampere Region reached fourth place in terms of satisfaction. In many previous years, the general assessment has been slightly lower than the national average.

The industrial policy indicators are determined based on the grades given by responding entrepreneurs to the municipality on measures that promote trade and industry. In the Tampere Region, the highest grades were received by municipal communications (7.09), industrial policy and resources (7.07), education and competence (6.97), operations of the local business support organisation, company or similar body (6.91) as well as municipal services and infrastructure (6.89). The evaluations of procurement policy (6.44) and enterprise-orientation of decision-making (6.75) received more criticism. In terms of the different areas, the evaluations across the board in the Tampere Region were more positive than the nationwide average in 2018.

Among the municipalities, the highest overall grades were gained by Ylöjärvi, Lempäälä and Pälkäne (8.00–7.67). Ruovesi was acknowledged as the municipality that managed to improve its result the most in the entire country, compared to last time.

The overall situation in the Tampere Region is weakened by the fact that Tampere’s overall grade (6.08) has continued to drop since the last survey. The industrial policy of Tampere received the lowest overall grade among the large cities with more than 100,000 inhabitants.