The competitive advantage of regions and small economic areas. The case of Finland

Abstract

The aim of this article is to answer the question, “What are the prerequisites for the success of Finland’s regions and smaller areas, when barriers to trade are being lowered and Finland is integrated into the international economy?” The answer is based on a study where regional success factors are defined primarily on the basis of Porter’s concept of “the competitive advantage of nations.” Empirical findings and observations on the most important locational factors of industrial firms in the modern regional economy add to this definition. The success factors are grouped into two blocks: (1) economic activities (five variables), and (2) locational factors of industrial firms (eight variables). Both blocks of variables are analysed with the help of principal components analysis. On the basis of the regional values produced by the first principal component of both blocks, the regions and small economic areas are grouped into four categories that represent their respective competitive advantage. This is done by means of cluster analysis.

Uusimaa, the southernmost region of Finland that includes the capital city Helsinki, is in the best position and has the best prerequisites for success. The next regions are Southwest Finland with its main centre Turku and the Tampere region (Pirkanmaa). South Ostrobothnia, North Karelia, South Savo, and Central Ostrobothnia have the weakest prerequisites of all nineteen regions. The disparities within the regions are often considerable. The core area of the region is generally in the best position. After the Helsinki area, the small economic areas of Turku, Tampere, Oulu, and Jyväskylä are in a good position,
followed by Vaasa, Kuopio, Lahti, and Pori. Related studies carried out in the latter part of the 1990s confirm these results almost without exception. The results suggest that the polarisation of Finland’s regional economy continues. The new national regional development program, approved by the Finnish government for the period 2001–2006, supports this view of the future.