New book released

June 14, 2009

Government's Role in Early Stage CompaniesMy latest book is now available.

Government’s Role in Early Stage Growth Companies: An Austrian Perspective to the Finnish Innovation System

Professor Risto Harisalo (Department of Managerial Studies – University of Tampere, Finland) has written the following about the book:

“The current financial downturn emphasizes at least two important questions. The first is how to create favorable conditions in which new companies with great growth potential can emerge and develop. The second is how to sensibly analyze this process on which the future of society is so dependent.

The book of Petri Kajander grapples both of these theoretically and practically complex questions. He elaborates main features of how small companies are being originated and developed in market process. Then he goes on to evaluate to what extent this process is being supported by financial institutions in which, he shows, are some serious imperfections.

His analysis is well written and justified in the Austrian tradition which is gaining ground from traditional economic analysis which proved incompetent to predict the financial crisis and provide ideas and means to get out of it. He shows that there is continuous demand for spontaneous process of mutual discovery but it is not matched by financial support systems which are mainly public. He locates his analysis into the specific aspect of all areas of human behavior, the human choosing, in universal science, praxeology.

The author writes clearly and understandable. He provocatively challenges orthodox economic thinking. His book is worth reading even if a reader disagrees with his arguments.”

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1 Comment

  • Reply Petri July 1, 2009 at 11:22

    A brief summary of the book in pdf-format.

    GOVERNMENT’S ROLE IN EARLY STAGE GROWTH COMPANIES – Brief Summary

    Finnish Market

    – There is a fundamental problem in the Finnish society: lack of available
    capital…Considering the success and performance figures in market terms it
    becomes clear that Finland is not among the top countries in the world but part
    of the 3rd world: “What is lacking to the underdeveloped nations is not
    knowledge, but capital (Mises 1962, 127).” What are innovations worth if they
    are not ultimately reaching consumers and hence improve everyone’s standard
    of living?

    – The state is practically owner in every growth company that has accepted VC
    funding in the country… Venture Capital Association has 38 members, which
    means that almost all the private venture companies invest public funds. In
    some of the funds the government has 50% share of the overall fund, or very
    close to it. Therefore bureaucratic and political influence on private companies
    cannot be ruled out.

    Conclusions:

    Primary

    – If private individuals do not have enough after-tax earnings left after living
    and other necessary expenses they cannot save. And without savings there are
    no investments. And without investments there will be no new companies
    since they cannot get private capital for their ventures. In another words their
    services are not needed by the society—they are not valued. This is the true
    cost of government’s intervention: all the services and the prosperity that have
    never been produced.

    – To summarise it can be said that any government action (and especially
    taxation) will harm the growth company sector and reduce its opportunities
    and possibilities for future wealth creation. Government investments will
    distort the market and scare away the private investors. Government’s support
    system for growth companies destroys the private sector and turns it into an
    extension of bureaucracy that has no respect and capabilities for satisfying
    customer needs nor supply them with adequate services.

    Secondary

    – Business expertise and adequate resources are prerequisites for growth. Even
    the business expertise can be bought if there is enough capital available. But
    lack of capital can seldom be completely compensated by superior business
    skills. Finland is not a poor country per se. It has resources and capabilities but
    their current allocation does not support private market needs.

    – Finnish people prefer and value coercive aggression to the free market with its
    consequences. It does not come without high costs. With the recent study it
    has been shown that any action whatsoever by coercive force towards the free
    market will ultimately lower the standard of living for everyone to the degree
    of the aggression. Government’s intervention favours the inefficient at the cost
    of the efficient and increases the burden of the productive.

    – Coercive action divides and breaks the harmonious and peaceful society into
    dog-eat-dog competition where everybody is after the distribution and
    allocation of the confiscated wealth. Bureaucracy is the result that cannot be
    avoided if the free market profit-and-loss test is not used.

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