Growth means attitude, competence, motivation and planning

In the KASVA project, we asked municipal publicly funded business service operators to define growth companies. These operators owned or managed by municipalities encounter numerous companies in their everyday work. We asked them to define growth companies. In our interviews, almost everyone described growth through revenue growth, defining a growth company as a company whose turnover has grown by 20% annually over the past three years. However, this definition used by the OECD does not take a stand on micro-enterprises at all, and growth is limited to enterprises employing more than 10 people. In the MY statistics I mentioned, growth is defined as the share of micro-enterprises with a turnover growth of more than 10% and, for micro-enterprises with strong growth, an increase in the number of employees by 3.31 person-years during 2019-2022. In micro-enterprises, percentage growth can be high, which is why it alone is not a good indicator to use.

In sparsely populated, rural areas, it has been observed that companies traditionally seem to emerge to meet some local service need. When examining the industry structure, there are many service sector businesses in North Ostrobothnia (source: Economic and demographic structure of North Ostrobothnia). Services are often produced in the form of sole proprietorships, and growth takes place through networking with other sole entrepreneurs.

The interviewees found it difficult to identify indicators predicting future growth, and they were told that companies have quite different attitudes towards growth. For some, it is part of their operations from the start, and others do not even want to grow. These publicly funded operators described growth more broadly as growth, expansion and development.

Operators recognize attitude, competence, motivation and planning as important factors in achieving growth. In the future, growth, development and expansion could be predicted and planned more diversely through the company's various capitals. The examination of human capital would focus on measuring competence, the development of which can take place either by recruiting, purchasing or developing competence. The development of intellectual capital, on the other hand, would be indicated by, for example, the number of patent applications, patents granted and various copyrights. The growth of social capital, in turn, would be examined in terms of the number of new networks and relationships created. Development with partners is indicated by jointly developed new service products or joint products produced for customers with a subcontracting network.

It may be useful to examine growth not only with the number of employees or turnover growth, but also with other indicators. Research has shown that human, intellectual and social capital influence an organization's performance. By managing this capital in a smart and human-centric way, it is possible to increase financial capital, i.e. turnover, profit or, for example, the amount of equity. Thus, the growth and development of economic capital is both the result and an enabler of future growth. The generated financial capital can be utilized for operations that enable future growth. This creates a circle in which profitable and sustainable moderate growth is produced for the benefit of customers, companies and personnel.

The KASVA - Sustainable growth for micro and small enterprises through regional cooperation between RDI actors and business services is a group project of low-threshold business service operators, entrepreneurs, researchers and innovation actors operating in different parts of Northern Ostrobothnia, the main objective of which is to promote the sustainable growth, renewal and development of companies in the region, the ability to change, and the living and retention power of the regions.

Author: Henna Väätäinen, D.Sc., Project Manager of the KASVA project, researcher, Kerttu Saalasti Institute, University of Oulu, Microentrepreneurship Research Group MicroENTRE