The Estonian success model of entrepreneurship?

By Antti Ainamo

Professor (International Business), Entrepreneurship and International Business Research Group, Dept of Business Administration, School of Business and Governance

Tallinn University of Technologyantti.ainamo@taltech.ee

TalTech Entrepreneurship Academy, MEKTORY, TallinnJanuary 23, 2020

Introduction

• Generally, research on internationally competitive business in many countries has traced to a given startup, industry, and type of specialization, e.g.:

- The U.S. model in large is based on the assembly line of Ford Motor Company (Abernathy 1978; Utterback & Abarnathy, 1975)

- The French model of haute couture luxury fashion is characteristic of French entrepreneurship (Djelic & Ainamo, 1999; cf. Djelic, 1998)

- In Estonia, the whole system of corporate can be said to have organized around Hansapank as a creditor (Ainamo & Cardwell, 1998)

- However, Hansapank was not a model for TalTech students when I asked them…

- Tallink was more understandable to the students…

What kind of national success models ofentrepreneurship exist

in other countries than Estonia ?

What about Estonian ones?

Italian exemplar of entrepreneurshipmade famous by Michael E. Porter

• Italians entrepreneurs have and build initially local business, around their family, friends, neighbors, making “art” even of ceramic tiles.

https://www.moodiedavittreport.com/nuance-watson-hk-opens-worlds-first-giorgio-armani-airport-boutique-at-hong-kong-international-airport-100509/

Armani -- Italian entrepreneur

https://www.moodiedavittreport.com/nuance-watson-hk-opens-worlds-first-giorgio-armani-airport-boutique-at-hong-kong-international-airport-100509/

DOMINANTVISION

Techno-logicalchange

Marketchange

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Source:A. Ainamo, C. Dell’Era & R. Verganti, work in progress.

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Entrepreneurship in Italy (below) vs. in most countries (above)

Bernard Arnault, a French entrepreneur

• The French have historically been better than Italians at entrepreneurship from the top-down or hierarchically – for example, in haute couture, the French model of luxury fashion.

French entrepreneurs – hierarchy and rules

https://frenchcorporategovernance.wordpress.com/the-french-model/

Ralp Lauren, U.S. entrepreneur

• Many U.S. entrepreneurs believe in the benefits to market exchange

• Sometimes U.S. entrepreneurs outsource to an extent that little else is internalized in the enterprise than the product brand and a(n real or mythical) entrepreneur.

“I don’t design

clothes,

I design dreams.”

Erling Persson, Swedish entrepreneur

• Swedes have made large "market investments" rather than investments in production capacity, so that the fashion brand has risen to the fore.

• Erling Persson started H&M as a retail store

Erling Persson

Armi Ratia, founder of Marimekko

Finnish entrepreneurs have been notable exceptiosn to dominant national vision of "business as usual” (e.g. Ainamo, 2003; Ainamo, 2005; Djelic & Ainamo, 2005)

Kari Kairamo, CEO of Nokia

Jaakko Pöyry, founder of Pöyry

The Estonian model?

• What might be the Estonian model of entrepreneurship?

Estonians on average are better at math than are those in the Nordics, the U.K., or France

https://www.nytimes.com/2016/12/06/upshot/what -america-can- learn-about-smart-schools- in-other-countries.html

16

Note : colour coding matches the groups of countries: green are the Innovation leaders, yellow are the Innovationfollowers, orange are the Moderate innovators, blue are the Catching-up countries. Average annual growth rates ascalculated over a five-year period. The dotted lines show EU27 performance and growth.

SI

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UK

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IE EE

DE

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0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0%

Average annual growth in innovation performance

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EU27 innovation performance in 2009

EU27 average growth rate in 2005-09

Innovation leaders

Denmark, Finland, Germany, Sweden, UK

Innovation followers

Austria, Belgium, Cyprus, Estonia, France, Iceland, Ireland,

Luxembourg, Netherlands, Slovenia

Moderate innovators

Czech Republic, Greece, Hungary, Italy, Lithuania, Malta, Norway, Poland, Portugal, Slovakia, Spain

Catching up Bulgaria, Croatia, Latvia, Romania, Serbia, Turkey

Innovation performance and convergence trends in innovation in the EU27 and other countriesEstonia is innovative, compared to other EU27 countries, behind only Nordic countries, Germany, and the UK

Estonian tend to be cynical pessimists

General building blocks ofEstonian entrepreneurship?

• Good at math

• Innovative

• Social restrained (not willing indulge; not good at small talk )

Estonian particularly noteworthySUCCESS STORIES

• In this presentation, based on work in progress on Estonian startups from the 1960s until present day, initial findings by 130 students reached by Taltech’s International Business course are presented

• Tallink

• Alexela

• LVH

• Playtech

• Nortal

• Skype

• Transwerwise

• Bolt

• Starship Technologies

• Sorainen Law

Alexela• The fuel retail company fuel retailer AS Alexela Oil was established in 1993.

• In 2002, a petroleum product terminal was opened in Paldiski, Estonia, and in 2007 in Sillamäe, Estonia.

• In March 2006, Latvia, and Lithuania, thanks to funding from Kazakhstan…

• Collaboration with Tallink

• Highly advanced IT solutions.

Sorainen – ”connected law firm”

• Established in 1995 by the Finn Aku Sorainen, this law firm has e.g. ”advisedventure capital fund Startup Wise Guys on investing in Lithuanian transport management system developer GoRamp.” -- Deals & Cases / 21 January 2020

• ”Launching innovative services and technologies? Looking to have your existingservices verified for legal compliance? We connect the region’s legal expertise to help you succeed – no matter whether you are an international tech and telcogiant or a local startup. Our integrated resources and natural curiosity about techguarantee we actually understand your technology before we give you legal advice.”-- Technology, Media & Telecommunications

• https://www.facebook.com/SorainenLawFirm/videos/334790127144786/?v=334790127144786

Sorainen Law

• By 2020, ”the firm has more than 80,000 cases on its track record, along withover 1000 M&A transactions to date.”

• ”With 33 partnersa fully integrated regional business law firm with officesthroughout the region, in Estonia, Latvia, Lithuania, and Belarus”.

” Sorainen employs modern legal technologies & AI… a cloud-based legal software platform for automating contracts and know-how… artificial intelligence technologywhich streamlines M&A due diligence processes…”

LHV

• Founded in 1999 as investment bank AS [ Rain ] Lõhmus, [Toin] Haavel & [Andres] Viisemann by Hansapank founders of the these surnames

• Acquired Danske Bank’s operations in 2019, to further consolidate position as leading Estonian bank

Playtech

• Playtech was founded in 1999 by the Israeli entrepreneur Teddy Sagi in Tartu, Estonia, with partners from the casino, software engineering and multimedia industries.

• Playtech launched its first casino product in 2001, and since then it has grown to become the world’s leading and largest international designer, developer and licensor of web and mobile application software to the digital gaming industry.

SkypeSkype was founded in 2003 by the Swede Niklas Zennström and the Dane Janus Friis, in

cooperation withAhti Heinla, Priit Kasesalu, and Jaan Tallinn, three Estonians who had earlier developed the

backend for the music-sharing application Kazaa.

Transferwise

• TransferWise is a British online money transfer service founded in 2011 by Estonians Kristo Käärmann and Taavet Hinrikus and is based in London.

• The company supports more than 750 currency routes across the worldincluding GBP, USD, EUR, AUD and CAD, and provides multi-currencyaccounts

Bolt

• Bolt (then called Taxify) was founded by Markus Villig (then only 19 years old, a high-school student) in 2013, with a vision to aggregate all Tallinn and Riga taxis into one platform.

• The service was launched in August 2013 and in 2014 it went on to foreignshores.

Starship Technologies

• Founded in, 2014, headquartered in San Francisco, with engineering operations in Tallinn, Starship Technologies is developing small self-driving robotic delivery vehicles, having trials with logistics firms

Synthesis of the students’ initial findings

• that the Estonian entrepreneur would be marked by a hybrid or mix of two kinds of particular competences: those related to

• "logistics” (Tallink, Alexela, Sorainen, Starship Technologies, Transwerwise, Bolt – all but LVH, Playtech, Nortal, and Skype)

• "digitalization” (Tallink, Alexela, Sorainen, LHV, Playtech, Nortal, Skype, Starship Technologies, Transwerwise, Bolt – all 10 firms)

• Traces its origin to ”international” from startup (Tallink, Sorainen, LHV, Playtech, Skype, Starship Technologies, Transwerwise, Bolt – all but Alexelaand Nortal)

ESTONIA

http://www.gvpartners.com/web/pdf/WEF_EE_Full_Report.pdf

Implementing the concept of entrepreneurial ecosystems in

Estonia July 4, 2018

Merli Reidolf, Aleksandr Michelson, Helena Rozeik, Merle Küttim, Marianne Kallaste

What is the Estononian success model?

• Generally, it has been considered that entrepreneurs are drawn to and, inextricably bound together, with other core entrepreneurial actors in close geographic, institutional and relational proximity (Brown and Mason, 2017; Reidolf et al., 2018/201), within the local entrepreneurial environment (Mason and Brown, 2014).

Geographical unit of analysis

Spatial

• nested geographies

• national level

• regional level

• urban level / urbanregion

Non-spatial

• global productionsystem

• economic sector

• startup

Antti comments 15.2.2019Alternatives to Dream-Plan-Act-Explore include “AIDA” (as a cycle?)

Weaken x

Resilient x

Strengthening x

Nascent x

Dream Plan Act Explore