dissertation in pdf-format - Aalto-yliopisto

400 J. Siikonen et al.
3.1 National-level data
The national data analysed in this study were collected by compiling data on growing,
profitable and successful firms in the ‘Successful Firms in Finnish Provinces’ database
published by Balance Consulting Ltd (2007) and data on the growth of firms published
by Suomen Asiakastieto Ltd, for the years 2003 to 2005 (based on accounting data from
the years 2002 to 2005). Businesses that grew during this period were defined as those
that consistently showed more than 10% growth of turnover in consecutive years during
the period. Consecutive turnover change was applied partly because it is a highly
market-led and widely used indicator for identifying growing firms in international
studies, and partly because it has a clear temporal perspective and direction. We
examined at least three years consecutive change in order to assure that the growth of the
identified firms was not coincidental or simply consistent with average performance in
the economy during the study period. Using this classification criterion 567 firms-based
in the two regions considered (101 in Eastern Finland and 466 in the Capital area of
Finland) were identified as growing firms (see Table 2).
In addition, our criterion for a fast-growth firm was that its turnover grew by more
than 30% in consecutive years in the period 2002 to 2005. This change indicator was
chosen because the turnover of such firms doubled during the study period. A firm
success variable was also defined, based on a success index constructed from variables
including the return on investment ratio, earnings before taxes ratio, current ratio, equity
ratio, net gearing ratio and repayment period of liabilities. We applied the success index
because it describes more holistically financial success perspectives such as profitability,
solvency and financial structure of single firms and reduces potentially complicating
factors related to financial success-related comparisons of different branches of industry.
In order to be classified as a highly successful business a firm needed at least 80 points
out of the maximum possible 100 success index points, and to be classified as a highly
successful business a firm needed a consecutive success index of at least 80 points during
the study years 2003 to 2005.
The definition of rural and urban areas follows the NUTS criteria (EC, 2003). We
used the population density of specific areas in relation to the population density in the
country as a criterion to classify areas as rural or urban. Our national data are based on
one rural area (Eastern Finland) and one urban area (the capital area of Finland), for
which we collected data from official databases.
Our data indicate that the service sector was the only fast growing branch of industry
during the years 2002 to 2005 in Eastern Finland, based on branch of industry total
sales growth during this period. In order to address the second research sub-question
presented above, we used exploratory logistic regression analysis (LR-analysis),
especially binary logistic analysis. The dependent variable in the model is the branch of
industry, which is divided into two distinct classes as follows: services firms = 0
and other branches of industry (including trade, manufacturing, construction and
transportation/telecommunication) = 1. The explanatory (independent) variables include
firm-related variables that are believed to be capable of differentiating the services sector
from other branches of industry, such as the age and size of the firm, its location (rural or
urban), growth of the branch of industry, innovativeness (e.g., numbers of patents and
trademarks produced by the firm during 1988 to 2005), and public R&D funding obtained
during 2000 to 2005. The model also included two dummy indicators of firms’ financial
performance: their success indices and growth classification (0 = high success/high