My 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.”
A brief summary of the book in pdf-format.
GOVERNMENT’S ROLE IN EARLY STAGE GROWTH COMPANIES – Brief Summary
– 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
– 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.
– 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.
– 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.