Dynamic Factor Models and Forecasting Finnish Macroeconomic Variables

In recent years, thanks to developments in information technology, large-dimensional datasets have been increasingly available. Researchers now have access to thousands of economic series and the information contained in them can be used to create accurate forecasts and to test economic theories. To exploit this large amount of information, researchers and policymakers need an appropriate econometric model.Usual time series models, vector autoregression for example, cannot incorporate more than a few variables. There are two ways to solve this problem: use variable selection procedures or gather the information contained in the series to create an index model. This thesis focuses on one of the most widespread index model, the dynamic factor model (the theory behind this model, based on previous literature, is the core of the first part of this study), and its use in forecasting Finnish macroeconomic indicators (which is the focus of the second part of the thesis). In particular, I forecast economic activity indicators (e.g. GDP) and price indicators (e.g. consumer price index), from 3 large Finnish datasets. The first dataset contains a large series of aggregated data obtained from the Statistics Finland database. The second dataset is composed by economic indicators from Bank of Finland. The last dataset is formed by disaggregated data from Statistic Finland, which I call micro dataset. The forecasts are computed following a two steps procedure: in the first step I estimate a set of common factors from the original dataset. The second step consists in formulating forecasting equations including the factors extracted previously. The predictions are evaluated using relative mean squared forecast error, where the benchmark model is a univariate autoregressive model. The results are dataset-dependent. The forecasts based on factor models are very accurate for the first dataset (the Statistics Finland one), while they are considerably worse for the Bank of Finland dataset. The forecasts derived from the micro dataset are still good, but less accurate than the ones obtained in the first case. This work leads to multiple research developments. The results here obtained can be replicated for longer datasets. The non-aggregated data can be represented in an even more disaggregated form (firm level). Finally, the use of the micro data, one of the major contributions of this thesis, can be useful in the imputation of missing values and the creation of flash estimates of macroeconomic indicator (nowcasting).

Peeking through the Iron Curtain: Memories of Watching Finnish Television in Estonia during Soviet Occupation

The present study analyses the memories of watching Finnish television in Estonia during the last decades of the Soviet occupation from the late 1960s until the beginning of 1990s. The study stems from a culturalist approach, perceiving television as a relevant aspect in the audiences’ everyday lives. It explores the significance of Finnish television on the society of occupied Estonia from the point of view of its historical audiences. The literature review concentrates on concepts such as the power of television, transnational media, historical audience reception and memory as an object of research. It also explains the concept of spillover, which refers to the unintentional bilateral flow of television signals from one country to another. Despite the numerous efforts of the Soviet authorities to prevent the viewing of the "bourgeois television", there still remained a small gap in the Iron Curtain. The study describes the phenomenon of watching Finnish television in Estonia. It provides understanding about the significance of watching Finnish television in Soviet Estonia through the experiences of its former audience. In addition, it explores what do people remember about watching Finnish television, and why. The empirical data was acquired from peoples’ personal memories through the analysis of private interviews and written responses during the period from February 2010 to February 2011. A total of 85 responses (5 interviews and 83 written responses) were analysed. The research employed the methods of oral history and memory studies. The main theoretical sources of the study include the works of Mati Graf and Heikki Roiko-Jokela, Hagi Šein, Sonia Livingstone, Janet Staiger and Emily Keightley. The study concludes that besides fulfilling the role of an entertainer and an informer, Finnish television enabled its Estonian audiences to gain entry into the imaginary world. Access to this imaginary world was so important, that the viewers engaged in illegal activities and gained special skills, whereby a phenomenon of "television tourism" developed. Most of the memories about Finnish television are vivid and similar. The latter indicates both the reliability and the collectiveness of such memories, which in return give shape to collective identities. Thus, for the Estonian viewers, the experience of watching Finnish television during the Soviet occupation has became part of their identity.

Emerging bioenergy business at Finnish independent industrial sawmills

Finnish forest industry is in the middle of a radical change. Deepening recession and the falling demand of woodworking industry´s traditional products have forced also sawmilling industry to find new and more fertile solutions to improve their operational preconditions. In recent years, the role of bioenergy production has often been highlighted as a part of sawmills´ business repertoire. Sawmilling produces naturally a lot of by-products (e.g. bark, sawdust, chips) which could be exploited more effectively in energy production, and this would bring more incomes or maybe even create new business opportunities for sawmills. Production of bioenergy is also supported by government´s climate and energy policies favouring renewable energy sources, public financial subsidies, and soaring prices of fossil fuels. Also the decreasing production of domestic pulp and paper industry releases a fair amount of sawmills´ by-products for other uses. However, bioenergy production as a part of sawmills´ by-product utilization has been so far researched very little from a managerial point of view. The purpose of this study was to explore the relative significance of the main bioenergy-related processes, resources and factors at Finnish independent industrial sawmills including partnerships, cooperation, customers relationships and investments, and also the future perspectives of bioenergy business at these sawmills with the help of two resource-based approaches (resource-based view, natural-resource-based view). Data of the study comprised of secondary data (e.g. literature), and primary data which was attracted from interviews directed to sawmill managers (or equivalent persons in charge of decisions regarding bioenergy production at sawmill). While a literature review and the Delphi method with two questionnaires were utilized as the methods of the study. According to the results of the study, the most significant processes related to the value chain of bioenergy business are connected to raw material availability and procurement, and customer relationships management. In addition to raw material and services, the most significant resources included factory and machinery, personnel, collaboration, and geographic location. Long-term cooperation deals were clearly valued as the most significant form of collaboration, and especially in processes connected to raw material procurement. Study results also revealed that factors related to demand, subsidies and prices had highest importance in connection with sawmills´ future bioenergy business. However, majority of the respondents required that certain preconditions connected to the above-mentioned factors should be fulfilled before they will continue their bioenergy-related investments. Generally, the answers showed a wide divergence of opinions among the respondents which may refer to sawmills´ different emphases and expectations concerning bioenergy. In other words, bioenergy is still perceived as a quite novel and risky area of business at Finnish independent industrial sawmills. These results indicate that the massive expansion of bioenergy business at private sawmills in Finland is not a self-evident truth. The blocking barriers seem to be connected mainly to demand of bioenergy and money. Respondents´ answers disseminated a growing dissatisfaction towards the policies of authorities, which don´t treat equally sawmill-based bioenergy compared to other forms of bioenergy. This proposition was boiled down in a sawmill manager´s comment: “There is a lot of bioenergy available, if they just want to make use of it.” It seems that the positive effects of government´s policies favouring the renewables are not taking effect at private sawmills. However, as there anyway seems to be a lot of potential connected to emerging bioenergy business at Finnish independent industrial sawmills, there is also a clear need for more profound future studies over this topic.

Finnish Kullervo and chinese martial arts stories

Introduction: There are many important Finnish plays but, due to language barrier, Finnish drama is seldom exported, particularly to Hong Kong and China.. Objective: To find out differences in mentality between the Finnish and Chinese peoples by comparing the partially localized Chinese translation of Aleksis Kivi’s tragedy, Kullervo, with genuine Chinese martial arts literature. Methodology: 1. Chapman Chen has translated the Finnish classic, Kullervo, directly from Finnish into Chinese and published it in 2005. 2. In Chen’s Chinese translation, cultural markers are domesticated. On the other hand, values, characterization, plot, and rhythm remain unchanged. 3. According to Gideon Tory, the translator has to strike a golden mean between the norms of the source language and the target language. 4. Lau Tingci lists and explicates the essential components of martial arts drama. 5. According to Ehrnrooth’s “Mentality”, equality is the most important value in Finnish culture. Findings: i. Finland emphasizes independence while China emphasizes bilateral relationships. ii. The Finnish people loves freedom, but Gai Sizung argues that the Chinese people is slavish. iii. Finns are mature while many Chinese are, according to Sun Lung-kee (“The Deep Structure of Chinese Culture”; “The Deep Structure of Chinese Sexuality”), fixated at the oral and anal stages. iv. Finnish society highly values equality while Chinese interpersonal relationships are extremely complicated and hierachical. If Kullervo were a genuine Chinese kungfu story, the plot would be much more convoluted. Conclusion: The differences between Finnish and Chinese mentalities are so significant that partially localized or adapted Chinese translations of Finnish drama may still be able to introduce Finnish culture to the Chinese audience.

Offshore Sourcing in Software Development: Case Studies of Finnish-Russian Cooperation

The study examines international cooperation in product development in software development organisations. The software industry is known for its global nature and knowledge-intensity, which makes it an interesting setting to examine international cooperation in. Software development processes are increasingly distributed worldwide, but for small or even medium-sized enterprises, typical for the software industry, such distribution of operations is often possible only in association with crossing the company’s boundaries. The strategic decision-making of companies is likely to be affected by the characteristics of the industry, and this includes decisions about cooperation or sourcing. The objective of this thesis is to provide a holistic view on factors affecting decisions about offshore sourcing in software development. Offshore sourcing refers to a cooperative mode of offshoring, where a firm does not establish its own presence in a foreign country, but utilises a local supplier. The study examines product development activities that are distributed across organisational and geographical boundaries. The objective can be divided into two subtopics: general reasons for international cooperation in product development and particular reasons for cooperation between Finnish and Russian companies. The focus is on the strategic rationale at the company level, in particular in small and medium-sized enterprises. The theoretical discourse of the study builds upon the literature on international cooperation and networking, with particular focus on cooperation with foreign suppliers and within product development activities. The resource-based view is also discussed, as heterogeneity and interdependency of the resources possessed by different firms are seen as factors motivating international cooperation. Strategically, sourcing can be used to access resources possessed by an industrial network, to enhance the product development of a firm, or to optimise its cost structure. In order to investigate the issues raised by the theoretical review, two empirical studies on international cooperation in software product development have been conducted. The emphasis of the empirical part of the study is on cooperation between Finnish and Russian companies. The data has been gathered through four case studies on Finnish software development organisations and four case studies on Russian offshore suppliers. Based on the material from the case studies, a framework clarifying and grouping the factors that influence offshore sourcing decisions has been built. The findings indicate that decisions regarding offshore sourcing in software development are far more complex than generally assumed. The framework provides a holistic view on factors affecting decisions about offshore sourcing in software development, capturing the multidimensionality of motives for entering offshore cooperation. Four groups of factors emerged from the data: A) strategy-related aspects, B) aspects related to resources and capabilities, C) organisation-related aspects, and D) aspects related to the entrepreneur or management. By developing a holistic framework of decision factors, the research offers in-depth theoreticalunderstanding of offshore sourcing rationale in product development. From the managerial point of view, the proposed framework sums up the issues that a firm should pay attention to when contemplating product development cooperation with foreign suppliers. Understanding different components of sourcing decisions can lead to improved preconditions for strategising and engaging in offshore cooperation. A thorough decisionmaking process should consider all the possible benefits and risks of product development cooperation carefully.

Can Ontario Be the Next Finland? Assessing Whether the Finnish Model Can Meet the Educational Needs of Ontario, Canada

This study examines the adaptability of the Finland model to meet the educational disparities currently observed in the education system in Ontario, Canada. A literature review and a database highlight key characteristics of the Finland model. From this information, Finland and Ontario’s systems are found to be similar in the areas of systemic structure and educational philosophies, and international testing and performance standards. The systems are found to be different in the areas of geography and demographics, social perceptions and attitudes towards education, school system structure, teaching philosophies, teacher education and professional status, and standardized and high-stakes testing. Discussion regarding use of Finnish philosophies to meet Ontario’s needs in the following areas takes place: social perceptions and attitudes towards education, our teaching philosophies, our teacher education and professional status, and our use of high-stakes and standardized testing. Opportunities for future research are also discussed and the major research paper includes a workshop and survey.

Building the New Society in the Shell of the Old: Finnish-Canadian Hall Socialism and the Canadian Industrial Unionist Support League

The literature on Finnish immigrant working-class movements in North America frequently makes reference to the phenomenon of "hall socialism," so-called because of the central position that the socialist or labor hall occupied in the political, associational, and cultural life of many Finnish communities throughout the twentieth-century. In the 1930s, over 80 such Finnish halls were spread across Canada, and many people associated with these halls vigorously supported the mission of organized labor. This paper will examine the history, ideas, and practices of the Industrial Workers of the World-influenced Canadan Teollisuusunionistien Kannatus Liitto (CTKL; Canadian Industrial Unionist Support League), and its connections to Finnish Canadian hall socialism. The paper will consider the role of the CTKL in supporting workers' struggles, the significance of the hall as a part of the infrastructural bedrock that sustained this support, and the broader interaction between social and radical organizing commitments.

Relationship marketing in Latin American context: Implications for small Finnish software companies in Latin American B2B partnerships

After a productivity decrease of established national export industries in Finland such as mobile and paper industries, innovative, smaller companies with the intentions to internationalize right from the start have been proliferating. For software companies early internationalization is an especially good opportunity, as Internet usage becomes increasingly homogeneous across borders and software products often do not need a physical distribution channel. Globalization also makes Finnish companies turn to unfamiliar export markets like Latin America, a very untraditional market for Finns. Relationships consisting of Finnish and Latin American business partners have therefore not been widely studied, especially from a new-age software company’s perspective. To study these partnerships, relationship marketing theory was taken into the core of the study, as its practice focuses mainly on establishing and maintaining relationships with stakeholders at a profit, so that the objectives of all parties are met, which is done by a mutual exchange and fulfillment of promises. The most important dimensions of relationship marketing were identified as trust, commitment and attraction, which were then focused on, as the study aims to understand the implications Latin American business culture has for the understanding, and hence, effective application of relationship marketing in the Latin American market. The question to be answered consecutively was how should the dimensions of trust, commitment and attraction be understood in business relationships in Latin America? The study was conducted by first joining insights given by Latin American business culture literature with overall theories on the three dimensions. Through pattern matching, these insights were compared to empirical evidence collected from business professionals of the Latin American market and from the experiences of Finnish software businesses that had recently expanded into the market. What was found was that previous literature on Latin American business culture had already named many implications for the relationship marketing dimensions that were relevant also for small Finnish software firms on the market. However, key findings also presented important new drivers for the three constructs. Local presence in the area where the Latin American partner is located was found to drive or enhance trust, commitment and attraction. High-frequency follow up procedures were in turn found to drive commitment and attraction. Both local presence and follow up were defined according to the respective evidence in the study. Also, in the context of Finnish software firms in relationships with Latin American partners, the national origins or the foreignness of the Finnish party was seen to enhance trust and attraction in the relationship

BUSINESS NETWORKS IN E-COMMERCE INTERNATIONALIZATION –Two Finnish Companies Targeting Russia

With the proliferation of Internet, online shopping has become an increasingly essential part of global economy and thus, increasingly important field of research. While the internationalization process of a company has for long been in the focus of academic research, internationalization of e-commerce is a much newer field of study. The earlier empirical research has amply pointed out the difficulties of traditional internationalization models to explain the internationalization process of e-commerce companies. Conversely, business networks have been argued to play a major role in the e-commerce internationalization. The purpose of this study is to study how business networks influence the internationalization process of e-commerce companies. Conducted as a case study, this research studies the internationalization process of two Finnish e-commerce companies, Hong Kong and Hifi Studio, into possibly one of the most booming online markets - Russia. The empirical findings of the study concur with the earlier literature. The observed internationalization process differs from the assumptions of traditional international business models, and business networks are found influential for the process. However, the behavior of the two studied organizations is observed more independent than the network view to internationalization presumes. The trigger to internationalize rises from within the organizations and market potential is the primary explanation for selection of target markets. No network relationships were found to have an effect on foreign market selection, nor selection of mode of operations. This study indicates that exploring foreign markets is actually about investing in specific relationships within a business network, rather than overcoming economic, institutional, and cultural barriers. Companies utilize a wide array of relationships in their internationalization process and may effectively overcome disadvantages of operating in a foreign market by adopting partnerships with correct partners. However, building and maintaining operational business relationships is a demanding process, and organizations should prefer quality over quantity in their partner selection. Moreover, relationships where the focal party possess significant influence and leverage over other actor should be favored. Lastly, relationships need to be continuously evaluated and assessed in comparison with strategic business goals. Ultimately, e-commerce can be considered a new, low-risk, cost-effective, and relationship-oriented internationalization method, suitable especially in volatile market conditions as Russia today. This revolutionary new mode of international business activity calls for more profound focus of business managers and academia alike, as its weight on global trade continues to grow.

THE ROLE OF DYNAMIC CAPABILITIES IN THE INTERNATIONALIZATION OF MEDIUM SIZED FINNISH MANUFACTURING FIRMS - A case for Sormat Oy

A rapidly changing business environment has necessitated most small and medium sized enterprises with international ambitions to reconsider their sources of competitive advantage. To survive in the face of a changing business environment, firms should utilize their dynamic organizational capabilities as well as their internationalization capabilities. Firms develop a competitive advantage if they can exploit their unique organizational competences in a new or foreign market and also if they can acquire new capabilities as a result of engaging in foreign markets. The acquired capabilities from foreign locations enhance the existing capability portfolio of a firm with a desire to internationalize. The study combined the research streams of SME organizational dynamic capability and internationalization capability to build a complete picture on the existing knowledge. An intensive case study was used for empirically testing the theoretical framework of the study and compared with the literature on various organizational capability factors and internationalization capabilities. Sormay Oy was selected because it is a successful medium sized company operating in Finland in the manufacturing industry which has a high international profile. In addition, it has sufficient rate of growth in sales that warrants it to engage internationally in matters such as, acquisitions, joint ventures and partnerships. The key findings of the study suggests that, medium sized manufacturing firms have a set of core competences arising from their organizational capabilities which were identified to be employee know how and relationship with stakeholders which aid the firm in its quest for attaining competitive advantage, ensuring production flexibility and gaining benefits present in a network. In addition, internationalization capabilities were identified under both the RAT test and CAT test whereby the primary findings suggests that, firms that outperform their competitors produce products that meet specific customer and country requirements, foresee the pitfalls of imitation brought about by the foreign local companies and members of a particular network through joint ventures, acquisitions or partnerships as well as those firms that are capable to acquire new capabilities in the foreign markets and successfully use these acquired capabilities to enhance or renew their capability portfolio for their competitive advantage. Additional significant findings under internationalization capabilities were discovered whereby, Sormay Oy was able to develop a new market space for its products despite the difficult institutional environment present in Russia.

Capital structure of Finnish firms – Estimating the effects of firm characteristics on capital structure

One of the most disputable matters in the theory of finance has been the theory of capital structure. The seminal contributions of Modigliani and Miller (1958, 1963) gave rise to a multitude of studies and debates. Since the initial spark, the financial literature has offered two competing theories of financing decision: the trade-off theory and the pecking order theory. The trade-off theory suggests that firms have an optimal capital structure balancing the benefits and costs of debt. The pecking order theory approaches the firm capital structure from information asymmetry perspective and assumes a hierarchy of financing, with firms using first internal funds, followed by debt and as a last resort equity. This thesis analyses the trade-off and pecking order theories and their predictions on a panel data consisting 78 Finnish firms listed on the OMX Helsinki stock exchange. Estimations are performed for the period 2003–2012. The data is collected from Datastream system and consists of financial statement data. A number of capital structure characteristics are identified: firm size, profitability, firm growth opportunities, risk, asset tangibility and taxes, speed of adjustment and financial deficit. A regression analysis is used to examine the effects of the firm characteristics on capitals structure. The regression models were formed based on the relevant theories. The general capital structure model is estimated with fixed effects estimator. Additionally, dynamic models play an important role in several areas of corporate finance, but with the combination of fixed effects and lagged dependent variables the model estimation is more complicated. A dynamic partial adjustment model is estimated using Arellano and Bond (1991) first-differencing generalized method of moments, the ordinary least squares and fixed effects estimators. The results for Finnish listed firms show support for the predictions of profitability, firm size and non-debt tax shields. However, no conclusive support for the pecking-order theory is found. However, the effect of pecking order cannot be fully ignored and it is concluded that instead of being substitutes the trade-off and pecking order theory appear to complement each other. For the partial adjustment model the results show that Finnish listed firms adjust towards their target capital structure with a speed of 29% a year using book debt ratio.

Professional service productization and its implications to knowledge transfer in internationalization processes –Case: Company X in Finnish, Swedish and Norwegian markets

As a result of globalization, two thirds of the world’s business takes place nowadays in the service sector. In line, professional service firms are growing their share of the global service production. However, saturation of the professional service sector has forced professional service firms to search for more heuristic ways to conduct business in the international markets. By leveraging effectively the firm’s professionals, a professional service firm can lower its costs to clients and simultaneously generate additional value for the company and thus gain competitive advantage. Even though the academic field has shown growing interest towards services for decades, the fields of service productization and service internationalization are heavily understudied even today. Hence, the objective of this study was to contribute to the research on professional service internationalization and productization. The study concentrated on examining the impact that productization has on knowledge sharing and leveraging in professional service firms operating internationally. The research question focused on examining what implications productization has on knowledge transfer and leveraging during professional service internationalization by leaning on the existing research and on an empirical research. The empirical research was conducted as a single case study within a professional service firm operating in debt-related administrative service business. The case company is one of the leading operators in its field of business and therefore offered a fruitful environment to observe and analyze the topics in question. Additionally, the case company has a strong international presence and a large scale of operations in the selected markets, Finland, Norway and Sweden. Based on the previous literature and on the empirical research, this study found that for professional service firms to efficiently utilize individual, tacit knowledge, in its internationalization processes, it must be shared with the whole organization. By exploiting productization as a knowledge leveraging mechanism, a PSF can apply and transfer knowledge profoundly during its internationalization processes that would otherwise be difficult to tap into. Productization might not be sufficient alone, but by complementing it with a favorable organizational structure and culture, and by encouraging open communication, a PSF may take advantage of the whole potential that productization has to offer.