The impact of the internationalisation of Finnish companies on domestic investments: seven company case studies

Abstract

The report examines the relationship between companies’ internationalisation strategy and investments directed at the domestic market. The study is a case study of the development of seven significant Finnish corporate groups over a period of approximately ten years.

The analyses have been carried out by examining the companies’ annual reports and financial statements. The perspective adopted is that of the corporate group — the significant domestic companies operating within each group are treated as a single entity. The internationalisation process has been described through one key mode of business expansion, namely acquisitions.

Among the companies studied, there is a clear relationship between the mode of internationalisation and the allocation of investments. The more a company’s business growth has been directed abroad, the greater the proportion of its investments directed abroad. The investment activity in Finland of the example companies that have expanded internationally has been lower than the industrial average. Furthermore, the greater the proportion of available funds that a corporate group allocates to foreign acquisitions, the less it appears to invest domestically. Companies’ location decisions are reflected in their investment activity.

The expansion of the example companies abroad has taken place primarily through acquisitions and mergers. An important motive behind significant foreign acquisitions has been the desire to influence market consolidation and to achieve a globally leading or more prominent market position. It appears that defending market positions and increasing market power has led to a reduction in the number of employees and in investments in Finland.

The principal finding of our case study can be summarised in the generalising thesis that “location follows strategy and investment follows location decisions.” Business operations have been expanded abroad in a manner that has led to a decline in the relative importance of the domestic market. (AI translation)

• ISSN: 1795-2832
• ISBN: 978-952-209-087-4
• Press Release in Finnish
• Publication in PDF-format