The global economic crisis and Finnish multinational corporations

Abstract

The aim of this study is to examine the adaptation of Finnish multinational corporations to the global economic crisis that began in 2007, with particular attention to the period 2007–2010. Although the crisis years are the primary focus of interest, the study proceeds from the premise that analysing the crisis years also yields more general information about the current stage of internationalisation among Finnish corporate groups and, in particular, about shifts in the focus of their business operations. The central question of interest is whether the development of subsidiaries operating in Finland differed from that of subsidiaries operating abroad. Was the trend away from Finland and towards international operations — already a fundamental feature of business strategy since the 1990s — also evident during the crisis years?

Finnish multinational corporate groups reduced their workforce across subsidiaries located around the world by a total of 82,000 employees during the period 2007–2010 — a considerable figure. Of this, the vast majority, 66,000, took place in Finland. The adjustment was therefore not distributed evenly but was concentrated in Finland.

This concentration in Finland was not ultimately due to the fact that the global crisis led to a collapse in exports and overall output in Finland, but rather to the fact that, despite the crisis years, Finnish multinational corporate groups continued to implement their internationalisation strategies in regions of importance to them around the world. In some respects, certain features of the internationalisation process became more pronounced during the crisis years than during normal years of growth.

In companies operating across different branches of industry, however, the modes of adjustment and differences in development could vary significantly. In the paper industry, the workforce contracted more in Finland than abroad, but also declined considerably in foreign countries such as Sweden and Germany. Differences between countries could be substantial. What makes the paper industry’s adjustment particularly distinctive is the combination of the global economic crisis with a global structural transformation.

In the metal industry, the workforce contracted somewhat more sharply in Finland than abroad. Development could, however, differ considerably from country to country. The workforce contracted in Sweden and Germany, for example, while conversely it grew in Asia, particularly in India. The development of metal industry corporate groups has thus reflected both the international economic crisis — especially the eurozone crisis — and the continued expansion of these groups’ business operations in Asia, particularly in the electrical and electronics industry.

Industry is not, however, the sector in which the shift in business focus towards foreign operations was most clearly evident during the period 2007–2010. The greatest differences in development between Finland and abroad are found in construction and in certain service sectors: for example, in trade, real estate, rental and research activities, and the information and communications sector. In these service sectors, the headcount of multinational corporate groups contracted domestically while growing abroad. In construction, the workforce grew both in Finland and abroad. The fact that, during the period 2007–2010, the workforce of multinational subsidiaries contracted considerably more in Finland than abroad is largely explained by differences in development in construction and certain service sectors. These differences in development encapsulate the current phase of Finnish companies’ internationalisation.

Although industrial corporate groups could, despite the global crisis, expand their operations abroad in some countries, the sectoral differences in development may be characterised as follows: in construction and certain service sectors, differences reflecting corporate internationalisation strategies are most prominent; in industry, development during the period 2007–2010 was shaped primarily by international cyclical trends. In industry, however, sector-specific differences in shifts in business focus could be considerable.

In Finland, workforce contraction was dominated by staff reductions in the subsidiaries of large corporate groups: of the 66,000-person decline, 32,000 — nearly half — occurred in the 30 largest groups. The significance of large companies was also evident in Finland in that staff reductions were concentrated more heavily in workforce cuts within subsidiaries rather than in the closure or divestment of subsidiaries. In large corporate groups, Finland’s share of their total workforce fell to 37 percent during the period 2007–2010 — a decline of nearly 5 percentage points. (AI translation)

• ISSN: 1795-2832 (Print), 2242-6914 (Online)
• ISBN: 978-952-209-116-1 (Print), 978-952-209-117-8 (Online)
• Press Release in Finnish
• Publication in PDF-format