Nokia has fallen on hard times lately. After years of dominating the market for mobile phones, the Finnish company has come up short in the race to develop desirable smart phones. Multiple shifts in strategy later, the firm continues to lose market share. Thousands have been laid off already, and the Finnish government is preparing for Nokia to cut a total of 20,000 jobs. Finland’s tech star appears to be losing a bit of its shine.
But things are not always as they seem. The Wall Street Journal reports Finland has been experiencing a wave of entrepreneurship in the wake of Nokia’s layoffs. Venture capital has been flowing into the country at more than six times the per capita rate of the rest of Europe. Rovio, the developers of the popular iPhone game Angry Birds, has been perhaps the most visible addition to Finland’s tech startup scene, but there are many others.
New companies rising from the ashes of old ones is “common,” says James B. Shein, a clinical professor of management and strategy. “We saw it even in cutbacks such as Motorola. It happens more often from high-tech companies.”
The job market in the tech industry has been red hot in recent years, making prospects for the newly unemployed less daunting. But layoffs at large corporations still sting. Entrepreneurship can replace some of the lost output from a firm’s slide, but it takes a while to make a real impact. “There is a big ripple effect,” Shein said. “The people let go, their families, the company’s suppliers all cut back. Since it is small companies that create most of our new hires, there is some offset, but it takes real time to offset the large failure.”
In time, though, new companies like Rovio could grow to become the next powerhouse firms. Startups during recessions can gain a foothold by finding new talent easier to hire and deals on office space and equipment. “The tough part is getting credit during a recession,” Shein said. But for those firms that do, the outlook is bright. Shein points out that a slight majority of companies in the Dow Jones Industrial Average—including General Electric, Hewlett-Packard, and Microsoft—were formed during an economic downturn.
Photo by Jusbe.