3.1 Rapid growth and recession
3.2 Forests and brains as natural resources
3.3 Change in corporate structure
3.4 Internationalization
3.5 From tar to printing paper
3.6 A small, open economy
3.7 Standard of living

3.4 Internationalization

In addition to domestic mergers and corporate reorganization, internationalization also decisively changed corporate structure and operations in the 1980s and '90s. The era of rapid internationalization and foreign investments began in Finnish companies in the late '70s, a couple of decades later than in neighbouring Sweden, for example. In the '80s, Finnish companies' foreign investments multiplied ten-fold. The number of employees of Finnish-owned companies abroad increased about six-fold.

In 1979, the number of Finnish companies abroad exceeded the number of foreign-owned firms at home. Today there are estimated to be twice as many Finnish-owned companies overseas as foreign companies in Finland. The internationalization of Finland's industrial structure is a crucial issue. Many wonder what sort of industry will remain in Finland as companies invest ever more abroad, and what sort of operations will come to Finland as direct investments from abroad.

In the past, the Finns' economic nationalism was partly expressed as a critical view of foreign direct investment. Foreign ownership was limited both directly and indirectly through regulation of capital movement, as in many small countries. However, foreign companies and entrepreneurs played a crucial role in the early industrialization of several sectors. Russians and later Norwegians, such as Hans Gutzeit, helped develop the sawmill industry. They relied on Swedish technology in particular. James Finlayson, a Scotsman, launched the cotton industry.

In 1910-20 foreign-owned companies produced one quarter of sawmill industry output, with 40 per cent of the sawmill companies' forest area held by foreign firms. After independence and the Civil War and during the Second World War, most foreign companies were sold to Finns.

A wary attitude toward foreigners was typical, particularly in the early years of independence. Suspicions about foreign ownership of Finland's forest and ore resources led to a strict 1939 law. The legislation allowed limitations on foreign companies' entry and monitoring of those operating in the country. It remained in force until the early '90s. Permit procedures were liberal, particularly in later years, but the legal and bureaucratic jungle dampened foreigners' interest in Finland, as was intended. The law changed in early 1993 because of Finnish membership of the European Economic Area (EEA). This also deregulated capital movement.

In the 1990s foreign-owned companies rapidly moved into industrial and service sectors, including transport, forwarding and other corporate services. For instance, of the 10 largest advertising agencies in Finland, eight are foreign-owned. The biggest foreign-owned company is ABB Finland. It is among the five biggest industrial employers.

In safeguarding that economic decision-making remains in national hands, the Finns hindered one means of efficient technological transfer. The role of direct investments in technology transfer has been minimal in Finland.

Since independence and in the immediate post-war years, economic nationalism mobilized extra resources to develop industry. There was a 'do-it-yourself' desire for self-sufficiency. However, the negative attitude toward foreigners continued for a surprisingly long time, perhaps too long from the structural standpoint. Arguably, the lack of diversity of Finnish industry was partly due to the scarcity of foreign investment. This channel that perhaps most effectively brings in technology and know-how was kept very narrow.

In 1990 about 70 of the 500 largest Finnish companies were foreign-owned. By 1999 the number had exceeded 150. In the early 1990s, service firms in particular, such as advertising agencies, cleaning companies, accounting firms, forwarding companies and specialty goods retailers, have transferred into foreign ownership, as have some small high-technology companies. A clear motive for these buyouts by foreign companies in recent years has been a desire to acquire specialized Finnish know-how.
The increase in foreign ownership seems to have had a positive effect on the national economy. Efficiency in the use of capital has clearly improved and markets for companies operating in Finland as well as markets for Finnish technology have grown.