Management quality, economic renewal, and productivity: an assessment of Finland’s state

The causes of Finland’s “productivity slump” remain elusive

In economic policy debate, explanations have been sought for Finland’s weak economic performance. In particular, the prolonged decline in productivity has caused considerable concern (Maliranta 2011). Weak productivity growth has been reflected in problems with cost competitiveness, which in turn appear to be linked, among other things, to Finnish firms having lost market shares in international export markets (Kajanoja 2012; Maliranta and Vihriälä 2013; Maliranta 2014).

On the other hand, based on long-term growth competitiveness indicators that measure the economy’s growth potential, the problem should not lie in the fundamentals of the economy; economic and societal institutions are functional, the level of education of the workforce is high, and substantial investments in innovation continue (Pajarinen and Rouvinen 2014, p. 17). These factors have yielded results in the past—prior to the current crisis, productivity growth was, by international comparison, rapid in many sectors (Maliranta, Rouvinen and Ylä-Anttila 2010).

One explanation proposed for our competitiveness problems is deficiencies in management skills (Haaparanta 2013). It is natural to think that good management is particularly needed in situations of change; for example, when a firm is renewing its production, task structures, and organization of work. The importance of management is also emphasized in modern theories of economic growth (Acemoglu, Aghion and Zilibotti 2006). In empirical productivity research, management quality has been found to explain productivity differences both between countries (Bloom, Sadun and Van Reenen 2016) and between firms (and establishments/organizations) within the same country (Bloom, Brynjolfsson, et al. 2013; McCormack, Propper and Smith 2014).

Economic growth can be achieved either by increasing the use of inputs (labour and capital) or by improving productivity. In the long run, productivity growth is decisive. Productivity growth is based on technological development. As a result of technological progress, a greater output can be obtained with the same amount of labour and capital inputs than before. Technology and management practices are closely interconnected, and it is therefore important to examine them in parallel (Bloom, Sadun, et al. 2016).  (AI translation)

Publication Information

Maliranta, M. (2017), Johtamisen laatu, talouden uudistuminen ja tuottavuus: arvioita Suomen tilasta, Työpoliittinen Aikakauskirja, 60(2), 33–49.

• ISSN: 1797-5085