What creates regional excellence? Kerttu Saalasti seminar discussed special economic zones, location-based development, resilience and cooperation

At the Kerttu Saalasti seminar on 19 September 2022, Minister of Finance Annika Saarikko presented the role of the state in the development measures needed regionally. She stressed that incentives should be developed for young people to stay in their home region in order to bring sustainable well-being in the future. Saarikko would increase the number of university places in these regions. The seminar also presented methods for allocating regional development funding to different areas based on criteria developed through location-based research. According to the speakers, cooperation between research and regional actors should be improved in order to strengthen regional resilience. The seminar also presented the Kerttu Saalasti Award to Professor of Entrepreneurship Ulla Hytti and announced three significant donations to the micro-entrepreneurship professorship at the University of Oulu.
Annika Saarikko puhumassa Kerttu Saalasti -seminaarissa
Minister of Finance Annika Saarikko spoke at the Kerttu Saalasti seminar on 19 September 2022. Photo: Elisa Kujala.

Finland, like the rest of Europe, lives in extremely challenging and exceptional conditions. The Minister of Finance Saarikko painted a dark picture of the reality for the people at the seminar, but also sought solutions to cope with it.

‘We are a small, export-driven country that relies on the survival of companies. The dependency ratio of our population is dismally high. We are currently tormented by the phenomenon of inflation, rising prices and the energy crisis – and a recession knocking at the door,’ Saarikko said.

Saarikko considered the state’s position in the middle of challenges, such as the rising electricity prices, from the perspective of both private individuals and companies. The state has been tackling economic problems in the midst of a security crisis, energy crisis and war in an exceptional manner. However, according to Saarikko, there is a limit to how much the state can do.

‘In any case, it is clear that security is increasingly intertwined with the economy as a result of the war,’ Saarikko estimates.

The increase in prices and interest rates is punishing households and companies who have invested heavily and run into debt. However, according to Saarikko, regional vitality and the growth that relies on companies, as well as the sustainability of our well-being are values and issues that support us, regardless of the circumstances. Professor Matti Muhos, Director of the University of Oulu Kerttu Saalasti Institute, highlighted the importance of micro-enterprises in coping with the exceptional circumstances.

‘A well-functioning market and a competitive economy are also the foundation for the security of supply. It is important to keep micro-enterprises involved in this debate and development, as they act as a buffer in crises. For example, in 2020, in the middle of the coronavirus pandemic, the number of personnel in micro-enterprises increased by 12 000 while the number of personnel in larger companies decreased by 40 000. In addition, the proportion of those working in micro-enterprises of all working-age people grew, business start-ups emerged at an increased frequency, and micro-enterprises employed more new people than before,’ Muhos said.

Reductions in taxes and student loans

Saarikko is developing a special model based on economic zones. The model would offer people and companies an opportunity to benefit from tax or other reductions in different regions in order to strengthen the prerequisites for working, studying, investing and finding employment.

‘One concrete example of this is the government’s decision to experiment with the student loan compensation in municipalities where labour shortages are evident, particularly in the public sector. This is based on the Norwegian model. This would make it possible to ensure the availability of labour by forgiving student loans for young people who accept work in such regions,’ Saarikko said.

According to Saarikko, training opportunities and RD investments could be targeted at special economic zones. Saarikko is envisioning experiments that contribute to an increase in employment in the form of reduced social security contributions or free depreciation of assets for employers, as well as lowering corporate tax for companies investing in less developed regions.

The importance of education for regions

Saarikko was concerned about the decreasing birth rate in some regions. She reminded us that there are municipalities in Finland where no children have been born this year. According to her, supporting all levels of education is an important means of ensuring regional vitality. She described the government’s activities in support of education.

‘We increased the number of study places in all Finnish higher education institutions equally and in consultation with the needs of the different regions. We strengthened new educational responsibilities for the University of Oulu, for example, in consultation with the needs of these regions. This is the only and most certain guarantee for companies to find employees during labour shortages. This, in turn, is the only way to create investments throughout Finland. And the only guarantee of economic growth is that we have skilled workforce,’ she summed up.

Arto Maaninen, Vice Rector for Cooperation at the University of Oulu, also called for pull factors to make young people stay in these areas. Like Saarikko, he was worried about the decrease in birth rate. One key solution for keeping young people in these regions is education. Training also contributes to the success of companies, as a skilled workforce is the foundation for success. Maaninen saw the University of Oulu as the engine of sustainable growth in an area ranging from the entire Oulu region and Northern Ostrobothnia to the entire Northern Finland.

‘Our work produces expertise and innovations which allow us to influence regional success and sustainability with the best and latest information,’ said Maaninen.

Bringing together science and actors

According to Maaninen, the special strength of the University of Oulu and the Kerttu Saalasti Institute is to bring science and different societal actors closer together. In his opinion, the needs of society should be strongly integrated into research.

‘This is done actively in everyday work with stakeholders in regional and national projects, but particularly as part of multinational projects. The work is carried out with a strong intent and great results,’ said Maaninen.
Minister of Education Kerttu Saalasti was one of the founders of the University of Oulu in 1958. The Kerttu Saalasti Institute of the University of Oulu has also originated from a needs-based idea and dream, and it has been built in an entrepreneurial and determined manner.

‘As the Minister of Education, Kerttu Saalasti contributed to the promotion of regional equality in an exceptionally significant manner. She emphasised the importance of an active and entrepreneurial attitude. These are the key elements of continuous regional renewal and sustainable growth that should be promoted,’ said Matti Muhos.

Resilience is created through cooperation and the utilisation of information

In her video speech, Helka Kalliomäki, Associate Professor at the University of Vaasa, explained the importance of resilience for regional coping. This is achieved by, for example, integrating researched information into regional development in daily life. Research provides a valuable basis for use by regional actors – but only when the researchers speak the same language as the actors and there is continuity of cooperation.

‘Researchers and regional developers work continuously together with companies in different cooperation frameworks, but too often they run directly from one project to the next, and researchers’ reflections remain too abstract from the perspective of solving acute challenges,’ Kalliomäki pointed out.

According to Kalliomäki, harnessing regional excellence as a resource for sustainable growth requires new types of competences related to cooperation, which should also be built on a regional basis. Regional development manifests itself not only in the ability of actors to work together, but also in the promotion of effective use of information. The partnerships must be of high quality.

‘It takes two to tango and to build information that has societal impact. In addition to researchers’ competences, attention should be paid to the competence of actors on the ground to use research data and operate at the interface between research and practice,’ Kalliomäki said.

Kalliomäki reminded the audience that information becomes effective only in interaction – in processes where there is time and opportunities for thinking together. Kalliomäki emphasised that motivation is a significant starting point for cooperation.

‘When motivated actors are already collaborating at the point when the research problem is considered and specified, it is as if they open their minds to research and their interest arises, and they are waiting to hear more from research. This way, they are also more prepared to use research data more efficiently to support their own activities. In other words, active reflection on the usability of information is needed at different stages of the process. Not only when the study is already finished,’ Kalliomäki said.

Research Director of the University of Oulu Kerttu Saalasti Institute, Ossi Kotavaara from the Regional Excellence research group, was delighted that the regions already have motivated and development-oriented actors who want to cooperate with researchers.

‘When you visit an area and seek cooperation, the response is really dynamic and people present their own perspectives. The regions want to cooperate with research and universities, and, of course, they want the work to be effective. It also feels easy to seek cooperation outside the main campus if the development orientation already exists. In other words, these regions have expertise and they also want to use it,’ Kotavaara said.
According to Butterfly Ventures’ capital investor Juho Risku, trust and high-quality cooperation are key factors in creating success.

‘If we are talking about the fact that information does not spread sufficiently to these regions or municipalities, I do not think it’s solely the researchers’ fault. There is a lot of information, but if you don’t want to listen to it or really interpret it and have a good discussion, it won’t take you anywhere,’ Risku said.

Location-based research produces more relevant criteria for the distribution of funding

In the seminar, Associate Professor and Research Director Olli Lehtonen from the Department of Geographical and Historical Studies at the University of Eastern Finland explained how to better support regional success by using the location-based starting point for regional development. In regional development, it should be noted that the regions are different and need different development measures. For example, the availability of natural resources varies from one region to another, and the state of infrastructure is different. In addition, social capital, the type of inhabitants in the region, varies. If these factors are considered, more detailed criteria can be obtained for how to effectively distribute funding intended for regional development.

‘Location-based regional development recognises and understands that different regions have different resources, challenges and development opportunities. In addition, the regions have very different abilities to access different networks or benefit from what is happening in the adjacent areas, for example. We do not have a regional development model that could be duplicated from one region to another,’ Lehtonen said.

In practice, different regions cannot be placed on the same line when the development work starts. According to Lehtonen, location-neutral or so-called area-blind measures are not effective. For example, the economic structures of different regions develop at very different times in the process of evolution.

The University of Eastern Finland is developing a location-based regional development index for the Ministry of Agriculture and Forestry, which can be updated annually. Over time, monitoring data will be available to help assess the development of different regions in Finland. The indices are related to locational and developmental disadvantages.

According to Lehtonen, locational disadvantage describes how different regions can benefit from the job development or positive employment trends in the neighbouring areas. By examining developmental disturbances, it is possible to identify the issues that slow down or weaken regional development. Above all, it is possible to identify the extent to which these issues affect regional development.

‘In other words, it is not enough to know that an inadequate infrastructure weakens the development of a region, but we need to find out how important a role the infrastructure plays in that development,’ Lehtonen illustrated.

Lehtonen explained how the Rural Development Programme for Mainland Finland in the programming period 2014–2020 allocated EUR 580 million to the regions of the Centres for Economic Development, Transport and the Environment (ELY Centres) based on the population shares of their rural areas and previous development funding for the ELY Centres.

‘The distribution of such development funds to these regions can be interpreted as being regionally blind because, for example, the objectives highlighted in this rural development programme were not reflected in any way in how the money was distributed between these regions. We have now woken up to this,’ said Lehtonen.
According to Lehtonen, it was impossible to find two regions with the same financing criteria in Finland, based on the new funding model. For example, more than half of the funding decisions made in Northern Ostrobothnia were based on the development of infrastructure and the region’s socio-economic status.
Location-based research opened up new prospects for micro-enterprises’ impacts on employment, growth and export in the regions

For the panel discussion conducted at the seminar, Ossi Kotavaara further explained what location-based research can tell us about, for instance, the employment impact of companies. According to him, the importance of micro-enterprises is emphasised in rural areas, and investment in their development also balances the development of regional structure.

‘Micro-enterprises are a significant employer. They cover 24% of all jobs in companies, and, together with small enterprises, they cover 40% of jobs. In many rural municipalities, micro-enterprises employ up to 70 per cent of all people employed in companies,’ Kotavaara said.

However, company growth is not high in all rural areas. According to Kotavaara, there are only few clusters outside large urban areas where the number of active companies is increasing. However, there are some exceptions.

‘In addition to the strong pull of the Oulu region, the Nivala-Ylivieska-Sievi area stands out as a positive example, Kotavaara said.

Kotavaara also drew attention to the number of companies and the population, which, when in decline, challenges rural resilience. Kotavaara presented statistics and maps compiled by the Kerttu Saalasti Institute’s Regional Excellence research group, which illustrate small and micro-enterprises’ service and goods exports in different regions in a new way. At the municipal level, the fluctuations in exports are significant.
According to Kotavaara, there are strong exporting regions for micro and small enterprises in Finland. These regions have demonstrated ability, expertise and opportunities. At the same time, it is very obvious that there is no such thing as a typical area on the map. Nivala is a noteworthy reference point for other areas.

‘If companies exported as much as the average amount of export here in Nivala, that is, about half a million euros per one thousand people for micro-enterprises and small enterprises, this average would mean that the export from Finnish micro-enterprises and small enterprises would already mount to EUR 2.8 billion, if the level of export was the same everywhere. Our capital is also a strong export area for micro and small enterprises. However, if we look at the centres of export in relation to their population in terms of micro and small enterprises, Isokyrö, Hanko and Pello are even more successful,’ Kotavaara explained.

Kotavaara’s studies have shown that many rural areas are uniquely successful despite the challenges. Well-functioning export ecosystems have emerged that boost business and regional success.

‘It’s really amazing how big the regional differences are. In particular, it is astounding how some regions grow despite their infrastructure and location factors. Of course, if we look at the economies of scale in urban areas, those companies are located in a growth environment. However, we can also find growing entrepreneurial ecosystems that are striving to export in many rural conditions,’ Kotavaara continued in the panel.

Passion and cooperation create a culture of success

In the panel, Mari Kokko, Managing Director of Coop Center Pellervo, highlighted the entrepreneurs’ passion and willingness to build something new as a growth platform for regional success. According to Kokko, attention should be paid to the creation of a supportive and encouraging culture and atmosphere in the region. Kokko mentioned cooperative activities as a low-threshold way of getting to know business together with other people. For young people, in particular, this may be a worthwhile way to start off as an entrepreneur.

‘After all, cooperatives are based on the idea of bringing people together. There is a common problem that people want to solve. As a result, the cooperative serves as a good channel for testing your own business idea, working together and focusing on your own strengths, too,’ Kokko said.

Kokko also feels that finding and receiving advice at different stages is essential, if the company is also hoping to start exporting and become international.

‘Of course, the company must have expertise, willingness and resources to do so. But the available business services have a very important role to play. When you think about the entrepreneurial path, you have the budding entrepreneurs who need advice on starting a business, and then there are the ones who employ, grow and export,’ Kokko said.

Butterfly Ventures’ capital investor Juho Risku also emphasised the importance of cooperation both in companies and as a basis for regional development. For him, good partnerships can be even more important for regional success than tax concessions. Risku was looking for a point of comparison in the start-up world: how can start-ups challenge the giants?

‘I think that these regions are dealing with something similar. The major reason for this is that start-ups, as organisations, are considerably more agile and, in principle, cooperation plays a really great role. The team is utterly crucial. If we want the economy of a region to develop further, the important thing is good cooperation, that people stick together and collaborate with each other with a good attitude. This is much more important than tax concessions or something else defined from the outside,’ Risku said.

Paying attention to the words innovation, research, development, competence and education in municipal strategies

Olli Lehtonen raised the issue of the ageing and declining population and how we should prepare for this change, as well as the ability to envision the future by taking this fact into account. This factor should also be taken into account in municipal strategy work. When compiling his reports, Lehtonen has noticed that it is possible to anticipate which regions will or will not be successful by looking at their municipal strategies.

‘The strategies of regional development – and municipalities in general – are perhaps not entirely up to date. For example, when we have analysed these municipal strategies, the municipalities that focus on competence, research and development are clearly highlighted. This is already visible in the municipal strategies. The strategies of growing municipalities contain the words: innovation, research, development, competence and education. In the strategies of retroactive municipalities, on the other hand, there is much talk about the economy. They talk about sticking to the problems that they are currently experiencing, and they are unable to see what could generate growth in the future, in other words, how to grow again as a smaller unit in the future,’ Lehtonen said.

In Lehtonen’s opinion, measures related to education and the strengthening of competence are completely under-resourced in relation to their potential effectiveness.

‘The focus should be directed towards innovations and ideas which actually generate economic growth, rather than fixed capital, machinery and equipment that are important but that may not eventually generate economic growth’, Lehtonen said.

Juho Risku estimates that the exceptional vitality of the Nivala region, as highlighted by Kotavaara and measured by export, is linked to the region’s way of doing municipal politics. Trust between regional actors and those conducting research is also essential.

‘My guess is that there is also a vibrant and good municipal policy in place, which may have been partly behind the fact that decisions have been made, and that it has been possible to rely on information and make agile decisions. If there is no such trust, there is no way to use the information either,’ Risku said.
According to Mari Kokko, cooperation between companies and educational institutions is also important in terms of creating a successful future. We must invest in research and innovation activities and make long-term choices.

‘The shortage of skilled labour in all sectors is currently an acute situation all across the country. Although we are heading towards a recession, it is a topical theme for us. Are the Regional Council, universities and higher education institutions working together regionally and figuring out the region’s own strengths, and what they want to invest in? If we have regional development funds, for example, how will they be allocated?’ Kokko pondered.

Strengthening the culture of experimentation

Juho Risku encouraged entrepreneurs, researchers and others involved in regional development to experiment boldly.

‘In exactly the same way as in a market economy, the important thing is to try out different things. Some of them will die and some will develop. In the same way, there should be a systemic approach to developing regional development. Let’s try out different things, but we should also measure what actually works and what doesn’t work or is not effective. Then we’ll just forget about it and replace it with something new,’ Risku said.
Mari Kokko pointed out that the culture of experimentation requires sufficient funding.

‘If a company wants to grow and become international, it also needs funding. Then there is also the matter of risk finance. Not all business activities are always successful. We must also have the courage to think about how to support these experiments in the role of investors,’ Kokko said.

‘One thing that I would like to see is knowledge-based benchmarking in the regions that succeed in exporting during the stage of early growth. To tell a friend what works. After all, we are all in the same boat of ‘Finland Ltd’ in that respect. Sharing information, learning from others,’ Ossi Kotavaara summarised.

Award for entrepreneurship research

For the second time, the Kerttu Saalasti Foundation and the University of Oulu Kerttu Saalasti Institute awarded a prize for a significant achievement in research, education or social influence that promotes micro-entrepreneurship or entrepreneurial culture. This year, the EUR 5,000 monetary prize and Marjanpoimija [Berry Picker] relief by artist Kalervo Kallio went to Ulla Hytti, Professor of Entrepreneurship at the University of Turku.
Professor Ulla Hytti has been working on entrepreneurship research since 1996. In 2021, She was appointed President of the European Council for Small Business, a European organisation for entrepreneurship researchers. Hytti’s research focuses on entrepreneurship, especially from the perspective of individuals.

The awarding bodies were of the view that, as a high-level researcher of entrepreneurship, Professor Ulla Hytti has promoted micro-entrepreneurship and an entrepreneurial culture in an exemplary fashion, especially in the field of entrepreneurship education, both regionally, nationally and internationally.

In her expression of gratitude, Hytti highlighted both the challenges of entrepreneurship and the opportunities that are particularly good here.

‘The rate of company creation in Finland continues to be lower than in some reference countries. For example, the entrepreneurship of women, highly educated people and young people is lagging behind the reference countries. The good news for politicians and city representatives alike is that the preconditions for entrepreneurship in Finland are of premium, world-class quality. When support measures or the availability of funding are considered, there is no need for new instruments. But we still need to be able to influence the entrepreneurial culture here, and perhaps these models of cooperation and working together will support this process,’ Hytti said.

Significant donations for a professorship in micro-entrepreneurship

At the Kerttu Saalasti seminar, three significant donations were also announced for a professorship of micro-entrepreneurship. The international call for applications will be opened in 2023. The professorship, jointly established by the University of Oulu Kerttu Saalasti Institute and the University of Oulu School of Business, is the first of its kind in Finland.

The cooperative Osuuspankki banks of Joki-Pohjanmaa, Suomenselkä and Alavieska made a joint donation of EUR 50 000 and the City of Nivala donated the same amount. In addition, the City of Raahe donated EUR 25 000. The total budget of the new professorship for the five-year period starting in 2023 is at least EUR 600 000. The costs of the first five-year period will be covered directly from the donation funds allocated to support the professorship. In the future, the professorship will be made permanent in accordance with the university’s practices, and the University of Oulu will bear the costs arising from this post through its basic budgeting.

‘With this donation, we want to support the University of Oulu and its national micro-entrepreneurship research and education carried out by the Kerttu Saalasti Institute. Ninety-four per cent of companies in Finland are micro-enterprises with fewer than 10 employees and they play an important role in promoting employment and regional well-being. These issues are also close to the heart of the Osuuspankki cooperative banks, and we are therefore happy to direct our donation to the micro-entrepreneurship professorship,’ said Managing Director Markku J. Niskala from Joki-Pohjanmaan Osuuspankki.

‘It is important for the City of Nivala to participate in supporting the micro-entrepreneurship professorship of the University of Oulu Kerttu Saalasti Institute, as the majority of Finnish companies consist of micro-enterprises. It is also important that we can use information based on scientific research in order to take the correct measures to support the prerequisites for entrepreneurship and growth at the regional and national level,’ said Päivi Karikumpu, Mayor of Nivala.

In her closing speech, presented in the role of Chairman of the Board of the Kerttu Saalasti Foundation, Karikumpu stated that the University of Oulu Kerttu Saalasti Institute is implementing research, development and education projects with regional, national and international impact through an extensive cooperation network.

‘It is important that research-based information can be used for taking measures to promote new business opportunities and entrepreneurship. With its own network, the institute brings international networks and partners close to the operations taking place in our region. Research is also conducted in our own area. Regional impact is important, and I believe that it will also help develop our region’s competitiveness,’ Karikumpu said.

A recording of the seminar can be viewed on the University of Oulu’s YouTube channel (in Finnish).

Author: Minna Kilpeläinen, M.Ed, M.Phil. Communications Specialist, University of Oulu Kerttu Saalasti Institute