By Matthias Deschryvere and Younghwan Kim, presented at the 18th TCI Global Conference, Daegu, 2015.

1. Ecosystem Impact in Start-up Firms: A
Comparative Analysis between South-
Korea and Finland
Parallel Session 1.2: Analysis of Cluster Models and Cluster Ecosystems
Matthias Deschryvere (VTT)
Younghwan Kim (STEPI)

2. Ecosystem Impact in Start-up
Firms: A Comparative Analysis
between South-Korea and Finland
M. Deschryvere (VTT) & Y. Kim (STEPI)
TCI2015, DAEGU, 4th of November 2015

3. 3
Business areas
1. Forest machines (harvesters, forwarders, dual
harwarder, harvester heads, cranes and
loaders, Ponsse bioenergy = energy wood
harvesters)
2. Information systems: Information system
products are an essential part of modern CTL
wood harvesting.
3. Services: Differentiating ourselves through our
customer service is an integral part of the
Ponsse strategy.
Bear
Scorpion
Examples of
models
Buffalo

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What will I talk about
1. How do YIC think about ecosystems (ecosystem awareness)
2. How do YIC participate in ecosystems (ecosystem residence)
3. How do ecosystems affect YIC (ecosystem impact)

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Introduction
 Both in academic and policy circles the strategic importance of
innovation ecosystems received increased attention.
 However, only limited empirical evidence exists on the importance of
these ecosystems from the perspective of niche firms.
 This analysis focuses on the role of ecosystems for young
innovative companies (YIC) and is based on a unique set of
telephone survey data from Finland and South-Korea.
 The empirical analysis improves our understanding on the role of eco-
systems for start-ups from a broad range of industries in two bench-
mark countries. We fill the research gap on how ecosystems impact
niche firms. Policy makers are discovering the potential of ecosystems,
but few is known on ecosystem impact (beyond some anecdotal
evidence)

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The evolution of frameworks and analysis of knowledge and innovation
driven business activities
 “An economic community supported by a foundation of
interacting organizations and individuals – the
organisms of the business world.
 The economic community produces goods and services
of value to customers, who are themselves members of
the ecosystem.
 The member organisms also include suppliers, lead
producers, competitors, and other stakeholders. Over
time, they co-evolve their capabilities and roles…
 Those companies holding leadership soles may change
over time, but the function of ecosystem leader is valued
by the community because it enables members to move
toward shared visions to align their investments, and to
find mutually supportive roles.”
The original definition of James Moore in HBR article
“Predator and Pray: A New Ecology of Competition”
(1993).
* Adapted from the presentation of C. Palmberg, Tekes, June 2013.
Industrial sector analysis
 Comparative advantage and
specialization
 Analyzing industrial branches (SIC)
Industrial clusters
 Diamond model of Porter
 E.g. forest industries and ICT clusters
Value chains
 Vertical integration vs outsourcing
 E.g. building industries, pharmaceutical
industries
Global value chains
 Strategic partnerships, “alliance
capitalism”
 E.g. telecommunication, pharmaceutical
industries
Eco-systems
 Dynamic, experimental, endogenously
developing
 E.g. software, mobile industries

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Definition ecosystem
 In essence and for this paper the three defining characteristics
of an innovation ecosystem are (Nambisan and Baron 2013):
1. the dependencies established among the members
2. a common set of goals and objectives and
3. a shared set of knowledge and skills.

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Analysing ecosystem impact
 Research question of interest: What is the role ecosystems play
for innovative start-ups?
 Key issue
 Measuring ecosystem impact
 Solutions to the key issue
 Use the additionality framework developed by Falk (2007)

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Issue: how to measure ecosystem impact
 Issue: it may take a long time before the benefits of ecosystem
residence translate in objectively measurable performance
changes (growth, sales, employment)
 Need to incorporate intermediate impact through perceptual
measures (Falk, 2007)
 3 types of additionality:
 Input additionality (e.g. more investments in R&D)
 Output additionality (e.g. more products, increase in market share)
 Behavioural additionality (e.g. learning or network effects)
We focus on output and behavioural
additionality

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Types of additionality (and items) included
1. Network additionality
 By belonging to this ecosystem, my company could collaborate
with knowledge centres such as universities and research centres
 Without belonging to this ecosystem, the network of the company
would be less extended
2. Competence additionality
 By belonging to this ecosystem, my company was better able to
innovate
 Without belonging to this ecosystem, my company would not have
developed the same level of skills

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3. Scope and scale additionalities
 By belonging to this ecosystem, my company could engage in
more ambitious projects
4. Speed additionality
 Without belonging to this ecosystem, the progress of my company
would have been slower
 (Belonging to this ecosystem limited my company’s growth)
5. Output additionality
 By belonging to this ecosystem, my company could enter new
markets
 By belonging to this ecosystem, my company could increase its
market share

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Data
 Firm-level telephone survey data on how CEO’s perceive the role
of ecosystems and corporate governance
 Survey data linked to ORBIS data
 Firm population in both countries:
 FI: All applicants of the Finnish funding agency for Innovation
between 2009 and 2013
 ROK: certified Venture firms and Innobiz firms
 Final sample: 424 young innovative firms (FI: 240 and ROK: 184)

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Key characteristics of the firms in sample
 Size distribution: Majority of firms in sample are small (FI: average of
39 employees, ROK: 16 employees). More medium sized firms in
Korean sample.
 Age distribution: sampled firms from FI slightly younger than those
from ROK (averages of 4.63 versus 5.23 years)
 Industry distribution: More service firms in FI and more manufacturing
firms in ROK. Both samples have similar share of ICT firms (30%).
 IPR: In both samples 75% report not to have patents. ROK average
slightly higher. Trademarks quasi absent in ROK and share of 18% in
FI.

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Findings

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Firm participation in networks
 How often firms participate into networks?
 Network residence: Firm states to belong to a network of external
firms that actively depend on each other to be able to offer their clients
the maximum value.
 Roughly half of the firms report to participate in networks. These
shares are not significantly different for Finnish and Korean firms.
 The networks of start-ups can be at all stages of development
(pioneering, growing, maturing, declining).
 On average the networks where Finnish firms reside are further
developed than the Korean ones.

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Network development phase distribution of innovative
start-ups in Finland and Korea

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Firm participation in ecosystems
 Key issues:
 How much firm leaders are thinking in terms of ecosystems
 How often firms participate into ecosystems?
 Ecosystems are characterized by (a) dependencies between the members, (b)
common goals and objectives and (c) a shared set of knowledge and skills.
Members can be firms but also other stakeholders such as universities, research
institutes, financers, community groups, standards setting organizations or
professional associations.
 Finnish firms report to participate more often in ecosystems than Korean firms.
 In the Finnish sample one third (ROK: half) of the firms report not to belong to an
ecosystem! They are stand-alone firms. What is their value and performance?
 If a firm reports to belong to an ecosystem, it is more common a firm belongs to
multiple ecosystems (2/3) than to a single ecosystems (1/3).

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The business support system for innovative
start-ups and its level of internationalisation
 Finnish start-ups receive a more diverse external support
 In both samples national subsidies are the most important support
channel and more than half of the firms benefit. This shows the
important role the public sector plays in supporting start-ups
 In Korea start-ups do not receive international support, neither from
public sources nor private sources (VC). The difference with Finland is
surprising given the global markets start-ups are facing
 The role of support from family friends and fools in Korea is quasi
absent, unlike the situation in Finland
 Finnish YIC participate more often in global ecosystems

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The use of start-up supporting measures
0 %
20 %
40 %
60 %
80 %
100 %
Public
research
National VC International
VC
Family and
friends
National
subsidies
International
subsidies
Accelerator
or incubator
Finland Korea

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Impact of the innovation ecosystem
 Participation in ecosystems as to get access to complementary resources.
Reasons why to participate can be different. So lots of heterogeneity can be
expected
 Korean YIC have a less positive view on the impact of ecosystems compared
to Finnish YIC
 Korean YIC top three impact: (1) Ambitious projects, (2) innovate better, (3)
collaborate with knowledge centres
 Finnish YIC top three impact: (1) Extending networks, (2) Ambitious projects,
(3) Growing faster / entering new markets
 Finnish firms record impacts in the start-up phase while Korean firms notice
more impacts in the growing phase of the firm development.

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92 %
57 %
75 %
62 %
80 %
54 %
79 %
43 %
65 %
49 %
81 %
69 %
37 %
62 %
67 %
48 %
7 %
0 %
-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%
Less extended network without ecosystem
Finland
Korea
Innovate better
Finland
Korea
Slower progress without ecosystem
Finland
Korea
Enter new markets
Finland
Korea
Increase market share
Finland
Korea
More ambitious projects
Finland
Korea
Collaborate with knowledge centres
Finland
Korea
Not developing same skills without ecosystem
Finland
Korea
Limited the growth of the company
Finland
Korea
DISAGREE AGREE

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Contribution and diversity of board of directors
 Key issue: Relation between board composition, board performance
and ecosystems
 One third of the firms state that most important organizations of
ecosystem are represented in their board of directors
 The service performance of the board of directors (enhancing
reputation, establishing external contacts and giving counsel and
advice) is reported to be more positive for Korean firms in sample. In
the manufacturing sector scores are higher than in the ICT sector
 Diversity of board of directors is higher in Korean sample
 Advisory board seems to be more common in Finland than in Korea.

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Service performance of the board of directors
in Finnish and Korean innovative start-ups

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Conclusions
 Our descriptive results show that while at first hand the business
network activities of Finnish and Korean start-ups look similar,
Finnish start-ups have more (complex) innovation ecosystem
activities
 On average, the reported impact of innovation ecosystems is
higher in the Finnish sample than in the Korean sample. Finnish
firms record impacts in the start-up phase while Korean firms
notice more impacts in the growing phase of the firm development
 Unlike the ecosystem impact, board performance and board
diversity is reported to be higher in Korean firms than in Finnish
firms
 Overall Korean firms show more narrow networks with strong ties
while Finnish firms show more broad networks with weak ties

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BUSINESS FROM TECHNOLOGY
co: matthias.deschryvere@vtt.fi