The Cutting Edge

The Cutting Edge

Innovation and Entrepreneurship in New Europe

Edited by Ruta Aidis and Friederike Welter

This original selection of case studies from eight new EU member countries looks at the ability of entrepreneurs to develop innovative and successful firms in an environment of turbulent social and economic change.

Chapter 4: Regio – A ‘Learned-Global’ Knowledge Company: A Case from Estonia

Tõnis Mets

Subjects: business and management, entrepreneurship, organisational innovation, innovation and technology, organisational innovation


Tõnis Mets INTRODUCTION The history of modern entrepreneurship in Estonia started with the transition of the economy after 1991. The disastrous effects of the 1940–91 Soviet heritage become evident if we compare the fate of Estonia to that of its neighbouring country, Finland. In 1940, Estonia and Finland were economically at the same level, but ‘according to estimates in 1988, per capita household income was 6 times higher in Finland than in Estonia’ (Laar 2004, pp. 4–5). The reason for that was that Estonia had suffered massive Russification and a drop in the share of Estonians in the population from 97 to 60 per cent during the Soviet period (Adamson 2002) – clear proof that the indigenous people had lost control over their own territory and fate. This meant that when Estonia regained independence in 1991, its starting position was far behind that of developed Western countries located in its neighbouring regions around the Baltic Sea. In 1992, the Estonian government embarked on a liberal economic policy, which is sometimes also referred to as ‘shock therapy’, and opened the Estonian market to foreign goods and capital. A large-scale campaign of privatization took place, resulting in the collapse of those industries that were not able to adjust to the new economic environment, and leading to a high rate of unemployment for a comparatively long period. This liberal policy supported the inflow of foreign direct investment (FDI), which reached US$4684 per capita (the highest among...

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