Studies Eastern European Markets
Eastern European Markets
Panu Kalmi
in Kari Liuhto (Edit.). Business in Poland. Experiences of Finnish companies in doing business in the largest Eastern EU candidate country
Lappeenranta University of Technology. Studies in industrial engineering and management, no 18, 2002

    Main Conclusion

    The main aims of this study were: 1) To find out why the interest of Finnish companies towards Poland has remained relatively low, if compared to investment to Russia or Baltics; 2) To increase the awareness on the experiences of Finnish businesses in Poland. This is the first study where a representative sample on Finnish businesses in Poland has been used. Of special interest to this study were the reason for entry and the obstacles the firms had experienced. In addition, I evaluated the timing of entry of the firms, entry mode (greenfield or acquisition), the decision to produce or not, co-ownership with Polish partners, and other issues.

    Two types of empirical evidence were used: case studies and a survey. Case studies were used in order to collect detailed information from a small number of Finnish firms operating in Poland. Survey evidence was collected in order to get representative responses from a larger number of enterprises. A limitation to the survey design was that the number of firms we could approach was relatively limited. However, the high response rate (close to 70%) mitigated this defect.

    The main result of this study in a nutshell is: (almost) every firm seeks to operate in Poland because of the large and growing market, but each firm faces a unique set of problems in their operations. Of course, this statement is subject to a number of qualifications. The motives for entry seem to be more multifaceted with the firms that have production in Poland. The producing firms frequently state such objectives as cost savings with low wages, access to neighbouring markets, and even improvements in efficiency. However, resource-seeking Finnish FDI to Poland is rare. An interesting exception was Bellstream, a new Finnish-based IT firm, that uses highly educated workforce and oriented to exporting.

    The most significant obstacles to the operations of Finnish firms included the 'usual suspects': bureaucracy and legislation. However, it came as a surprise that actually Finnish firms experience customer indebtedness as by far the most significant obstacle in the Polish market. This risk can be reduced be specialising to serve especially foreign firms in Polish market, as the case study firms usually did. Finding reliable partners was also a problem for most firms. In this regard, those firms that had longer experience from the Polish market seemed to be doing somewhat better.

    How do the results of the study compare to earlier research? First of all, it was a bit surprising, that even 40% of manufacturing firms surveyed had production in Poland. This was more than one would have expected on the basis of previous research, that usually has concluded that Finnish firms seldom engage in production in transition economies. However, previous research cited in the work is now perhaps a bit outdated. It is possible that many firms have started to produce relatively recently, after the situation in Poland has stabilised.

    Compared to the results of Borsos-Torstila, I find that market-seeking FDI is even more important in Poland that could have been expected from her results. However, the importance of forthcoming EU membership was surprisingly low. Also in case study interviews the respondents tended to downplay this issue. However, it is clear that the development towards the enlargement has indirect influence, e.g. by improving the general business environment.

    Contrary to the results of the Tampere research group, I do not find that hiring personnel would be a problem to Finnish firms. Instead, finding good partners clearly is a problem. Possibly export promotion organisations (such as Finpro) could be helpful here?

    Since many of the questionnaire items were similar to those of Piispanen study, the results can be to some extent compared, although it must be recognised that Piispanen study compared different regions, which might have influenced the way respondents perceived the questions. Of course, that study was completed in a quite different stage of transition. Perhaps the most striking finding in this comparison is that although the respondents, quite expectedly, find Poland an easier place to operate than Russia in mid-1990s, it is regarded much more difficult than Estonia or even Latvia and Lithuania in mid-1990s! Generally speaking, many respondents, both in case studies and in the survey, were surprisingly critical. The development of Finnish firms' operations in Poland has already been relatively cautious and slow, perhaps reflecting these difficulties.

    It seems that many firms first are experimenting in the neighbouring countries, notably the Baltic states, before coming to Poland. However, Poland as a market area is quite different from these small economies. The market is very competitive and in some fields – as in retail banking – even saturated. It appears that Finnish firms can hardly compete by selling or producing bulk products. Perhaps the best future exists for firms that are able to find niche markets and well-off customers. Although Polish markets are more risky than Baltic markets, they contain also a promise of higher returns. In such a large market, even medium-sized player can be quite big – in Finnish standards at least.

    Finally, it is interesting to note that many respondents believe they are able to increase their sales considerably. This is a finding that is common also to some earlier studies. It would be interesting to repeat a survey after a few years and see whether the reality met the expectations.

Panu Kalmi on valmistunut valtiotieteen maisteriksi Helsingin yliopistosta 1996 ja hän on väitellyt Kööpenhaminan kauppakorkeakoulussa toukokuussa 2002. Hänen pääasiallinen tutkimuskohteensa on yritysten omistuksen ja organisaation vertaileva tutkimus. Kalmin väitöskirja käsitteli henkilöstön omistamien yritysten menestystä ja omistussuhteiden muutosta Virossa 1990-luvulla. Hän toimii tällä hetkellä Suomen Akatemian rahoittamana tutkijana Helsingin kauppakorkeakoululla.

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