New blood in the woods

By Sami J. Anteroinen
Editor-in-Chief

This article was published on NORDICUM 2/2008

The present stagnation of the forest industry is not an easy issue to address. Even the socalled gurus of the sector remain divided on what is the right medicine in this situation. And even if the medicine works, it might kill the patient, the most pessimistic argue.

The discord of the industry experts is quite visible in the recent forest sector study by the University of Joensuu. According to the study, there was one point in particular that everyone seemed to have a different opinion on. The viewpoints altered from each other quite radically with regards to this issue.

The subject in question was industry entry barriers – do they pose a significant threat to the revival process of the forest cluster?

Almost one quarter of the interviewed experts stated that there are no significant entry barriers, quite the contrary – the problem is that new players keep entering the market while the old companies are hard pressed to decrease production or get out of the business altogether. In this regard, exit barriers can be more problematic than entry barriers.

Nevertheless, the clear majority of the experts analysed that there are, indeed, entry barriers in the industry. Some viewed these barriers to be mostly psychological, rooted in old attitudes, while others still insisted that the barriers are quite real and concrete. The less-than-dynamic operating routines of the sector, stiff structures of timber trade or high regulatory level of forest policy were cited as examples.

Many experts stated that the forest industry requires large capital which smaller companies simply do not have – at least in the initial phase. However, these small players could find new ways to nurture forest-based innovation and thrive in partnerships with the industry giants.

The big forest corporations do not exactly encourage their personnel to start up companies based on new ideas. But at the same time, they are not very interested in the sidestreams outside the core business, either. For smaller companies, these sidestreams could well represent a king’s ransom, so to speak.

Small may hit the wall, however, if there is no sufficient R&D funding. The national innovation system faces a tough challenge in finding the true contenders from the legions of the hopeful. The big industry players, on the other hand, could help themselves by helping out the start-ups.