Project Report Regional Brain Gain Designing Regional Strategies to Mobilize Evasive Knowledge Entrepreneurs Version 2.2 January 26th 2004 Synocus Oy, Bulevardi 5 A 5, FIN 00120 Helsinki, Finland Tel: +358 9 622 62 60, Fax: +358 9 622 62 622 www.synocus.com Contents 1 Introduction .......................................................................................... 1 2 Boat building in the Ostrobothnia region; case Nautor ..................... 3 3 Strategic management in a regional context ...................................... 9 3.1 The regional implications of the Nautor development .................................... 9 3.2 Regional competitiveness; established frameworks ..................................... 15 3.3 Towards an improved understanding of regional competitiveness ............... 22 4 Three cases of regional evolution; the Oulu region, the Tampere region and the Finnish capital region ................................................ 28 4.1 The Oulu region ............................................................................................... 28 4.1.1 The dynamics of employment development in the Oulu Region .................................. 28 4.1.2 The evolution of the electronics and IT cluster ............................................................. 34 4.1.3 The city of Oulu as an nurturer of the electronics and IT cluster .................................. 35 4.2 The Tampere region ........................................................................................ 38 4.2.1 The dynamics of employment development in the Tampere region ............................. 38 4.3 The Finnish capital region .............................................................................. 42 4.3.1 The city of Espoo as a part of the capital region ........................................................... 42 4.3.2 The dynamics of employment development in Espoo .................................................. 43 5 An empirical study of the mobility of Finnish knowledge holders ... 46 5.1 Quantitative study ........................................................................................... 46 5.2 Qualitative interviews ..................................................................................... 48 5.2.1 Employment, work environment and incentives ............................................................ 48 5.2.2 Living environment and local services .......................................................................... 50 5.3 Conclusions ..................................................................................................... 51 6 Implications for regional management in the Finnish context ........ 52 Appendix 1. How the Regional Brain Gain project was conducted....... 58 Appendix 2. The conceptual framework ................................................. 64 Appendix 3. Initial capability formation in Nautor ................................. 74 Appendix 4. Conducting the empirical study ......................................... 80 Appendix 5. Normann’s criteria for a competitive region ...................... 81 1 Introduction When the Regional Brain Gain initiative was started the ambition was to look for ways to better understand why certain regions are more competitive than others (for a more detailed description of the original objectives, and how the Regional Brain Gain –project unfolded, see Appendix 1). The initial assumptions were as follows: 1. Regions are competitive when they create new job opportunities, generate economic growth and at the same time have an increased amount of residents being satisfied with both their professional situation and their private life. 2. For a region to be competitive it has to attract knowledge holders. These knowledge holders are residents within the region and combine their knowledge with the one of other members of the region, thereby generating development. 3. The knowledge holders form the major driver for the regions to become competitive. Subsequently the regional decision makers have to understand why such individuals are attracted to the region, and make their best to improve the conditions for such individuals. This ways an increasing amount of “right” type of individuals will stay in or move to the region, and increased competitiveness of the region will follow. 4. As knowledge holders will evaluate their situation both based on their professional life and their private life, the regional decision makers should direct their efforts to provide best possible conditions on both dimensions. The basis for this reasoning can be expressed as in Figure 1. Private Company High Low Firms: Contextual resources High Environment Low Teams: Value capabilities Constellation Employee: Skills and Citizen competencies Offerings Figure 1. Professional and private roles as drivers for individual localization The first discussions relating to the Regional Brain Gain –project were initiated in the year 2000. At this moment in time there was the IT-/Internet-boom. The project idea was born in Sweden, inspired by the front cover of Newsweek on February 7th, 2000 portraying Stockholm as Europe’s Internet Capital. At that time it was felt that highly educated, presumably young, and workers Page 1 especially in the ICT sectors, would be decisive for how a region could grow and prosper. As we know now, the Internet did not deliver on all of its promises. Regions that were announced as the center of future growth in the new economy, like Stockholm, have three years later went through radical restructuring, and many of their flagship firms are now bankrupt or have been radically downgrading their previous growth ambitions. In light of the more nuanced perspective on what really makes regions competitive the research team around the Regional Brain Gain project had to also more profoundly investigate what really creates more long term success of a region. In this context the notion of capabilities rose as a centerpiece of the research (see Appendix 2 for the conceptual framework used in the study). Prahalad and Hamel1 introduced the notion of core competence in 1990, based on which a significant stream of research around organizational capabilities has been conducted. This has considerably changed the way management scholars look upon the notion of competitiveness. A capability can be defined as the ability of an organization to perform a coordinated set of tasks, utilizing organizational resources, for the purpose of achieving a particular end result2. In spite of the growing amount of research on organizational capabilities, there is yet very little applied research on the role of capabilities in a regional context. However, the very early discussion regarding core competence and capabilities had a strong regional attachment to the use of the word competence. In their award winning article Prahalad and Hamel used Sony as one example, and stated that miniaturization was a competence. It can be argued that this competence was based on a long manufacturing tradition in Japan that had generated a collective regional learning, which could be exploited by Sony. Inspired by this notion the development of the conceptual framework used in this study was tested by investigating the boatbuilding tradition in Ostrobothnia, which has showed some remarkable success lately (Chapter 2). By using this as a basis it was then possible to generalize some of the findings to develop a framework for strategic management in a regional context (Chapter 3). This framework was then applied to analyze the development of the three regions participating in the Regional Brain Gain study: Oulu, Tampere and the Finnish capital region (Chapter 4). Throughout the whole Regional Brain Gain –study there has been a strong emphasis on “grounding” the reasoning based on stringent empirical research. The results from this part of the project including both quantitative and qualitative findings are presented in Chapter 5. The final chapter of this report (Chapter 6) synthesizes both the conceptual development work and the findings from the empirical study into some normative conclusions. In addition some implications for policy and decision makers are suggested. 1 Prahalad, C.K., Hamel, G. 1990. The Core Competence of the Corporation, Harvard Business Review, May-June 1990, pp. 79-91. 2 Helfat, Peteraf. 2003, p. 999 Helfat, CE, Peteraf MA. 2003. The dynamic resource-based view: capability lifecycles. Strategic Management Journal. Special Issue 24(10): 997-1010. Page 2 2 Boat building in the Ostrobothnia region; case Nautor 3 The area around Pietarsaari has a long tradition of boat building. Earlier, when Finland belonged to Sweden, shipwrights traveled north from Stockholm to here to build the nation’s naval vessels. The area has since that maintained its boat building tradition, which in the mid 1960’s also caught the interest of Pekka Koskenkylä. In 1966 he founded a company called Nautor, which by 2003 has produced more than 1 700 Swan yachts, considered as the Rolls-Royce of the seas, and bought by wealthy people from all over the world, as the price range is from 600 000 € upwards. When Koskenkylä arrived in Pietarsaari it was estimated that around 100 people got their living from boat building activities. In the year 2003 it was estimated that there are about 1 500 people or more in the area that get their income from boat building. This development has been possible because of the successful interaction between strong individuals, companies and regional actors. How