The lack of private capital in the Finnish fashion ecosystem: A case study of Finnish fashion start-ups and investors

Abstract

Objectives: The Finnish fashion industry has not been able to produce competitive companies with strong global sales for decades. At the same time, neighboring countries Sweden and Denmark, with similar socio economic conditions than Finland, have been able to grow their fashion industry with many young brands. Although Finnish design in general is highly praised globally, and Helsinki was recently appointed as the World Design Capital, the lack of Finnish fashion in the international market is peculiar.

A major reason for this odd situation is the lack of private money in the Finnish fashion ecosystem. The purpose of this study is to examine why the level of private investments in Finnish fashion industry is so scarce.

Methodology: I selected a qualitative case study as the research method for this study. The empirical part of the thesis examines four Finnish fashion start-ups and four investors in the fashion industry. The focus is to explore how entrepreneurs and investors see a successful fashion start-up ought to be run, and what are the factors determining success in this industry. The cases in the study were examined using effectuation theory by Saras D. Sarasvathy to compare their decision making and thinking processes. Data was collected through semi- structured interviews with the selected fashion entrepreneurs and private investors.

Results: The findings of the study indicate that Finnish fashion entrepreneurs are more prone to using effectual logic in business practices. On the other hand, private investors were identified to prefer more causal logic in solving similar business problems. Main differences between the two parties of the study were entrepreneurs' considerably lesser amount of planning and budgeting, investors' more commercial mindset in target setting, and the conflicting views on usage of trend analyses and customer feedback. These key strategic differences may explain why the fashion startups and investors do not seem to find mutual understanding in investment deals in Finland.