Petri Rouvinen (ETLA Economic Research)

A corporate failure as a source of entrepreneurial creative destruction: Case Nokia mobile phones in 2008–2014

Abstract: The Economist  suggests that at its peak in 2000, Nokia’s role in Finland set a world record for a single company, excluding those in oil- and resource-dependent countries. Between 2008 and 2014, Nokia downsized by an amount equivalent to 1.5% of Finland’s private sector employment in 2008. Given the small size of the country and the magnitude of the collapse, Finland and Nokia provide a unique case study on how corporate misfortune can spur new entrepreneurial activity. A comparison of Nokia to the other top 10 tech firms in Finland indicates that former Nokia employees were about twice as likely to become startup entrepreneurs. However, there is little evidence of a “Nokia treatment effect” in the sense that startups founded by ex-Nokia employees grew faster in terms of employment or sales (in fact, estimates hint a handicap associated with past experience at Nokia). This is likely due to two factors: Nokia did not provide “excess” learning opportunities, and the skills acquired at Nokia were not easily transferable to an entrepreneurial context.