Estonia top performer of knowledge nations in Central and Eastern Europe


Many European countries saw their positive trend of growth of brain business jobs since 2012 broken. One of few exceptions was Estonia, which instead added 6 600 knowledge-intensive occupations during the year. That is according to the 2021 edition of The ECEPR and Nordic Capital Brain Business Jobs Index, which measures the share of the working-age population across Europe employed in highly knowledge-intensive enterprises. It shows that Estonia is one of only two countries in Central and Eastern Europe to increase its number of brain business jobs during the year.

Since 2012, Estonia has added 60 700 brain business jobs. Due to this development, the concentration of people employed in knowledge-intensive firms have risen to 7.5 percent. 

Estonia top performer of knowledge nations in Central and Eastern Europe

  • Estonia was one of only two countries in Central and Eastern Europe which did not lose brain business jobs during 2020, but instead added 2 300 knowledge-intensive jobs during the year.
  • Only a handful of other countries in Europe managed to increase their number of brain business jobs during 2020
  • Estonia has several strengths compared to the rest of Europe, especially in IT-services

The ECEPR and Nordic Capital Brain Business Jobs Index, measures the share of the working age population across Europe employed in highly knowledge-intensive enterprises, in 31 countries and 284 regions.

Estonia continues long growth of brain business jobs

Before the corona crisis, Estonia experienced a significant boost in brain business jobs. Between 2012 and 2019, Estonia added 12 500 jobs in knowledge-intensive companies. By adding a further 2 300 brain business jobs during, 2020, Estonia keeps this strong trend going. Because of this, the concentration of the population employed in knowledge-intensive occupations increased during the year, from 7.1 percent in 2019 to 7.5 in 2020.

Central and Eastern Europe experienced significant loss of brain business jobs in 2020

In Central and Eastern Europe as a whole, approximately 58 400 brain business jobs were lost between 2019 and 2020. While Estonia and Poland were successful in adding jobs during the turbulent year, the rest of the area suffered significant setbacks. Notably, Romania lost a large amount of brain business jobs during the year.

Fostering brain business jobs important aspect of reducing regional unemployment

The region with the highest concentration of brain business jobs, the Slovakian capital region of Bratislava, has an impressive unemployment rate of 2.4 percent. This does not seem to be a coincidence.  A comparison of 281 European regions shows that a strong link exists between high brain business jobs concentration and low unemployment, and that this link is driven by regions with low brain business jobs concentration. Amongst regions with up to 50 brain business jobs per 1 000 working age population, a straight-forward linear regression shows that 28 percent of the variation of unemployment can be explained by differences of brain business jobs concentration.

Geographical equalization of brain business jobs taking place in Europe

According to Dr. Nima Sanandaji, President of the ECEPR, the overall trend is that Central and Eastern European countries are catching up to Northern and Western Europe. Knowledge-intensive firm occupation is also growing in several Southern European countries, such as Cyprus, Portugal, and Malta:

“Since 2014, Cyprus has had an almost 50 percent increase of brain business jobs per capita. Slovakia, Hungary, Poland, Latvia, Portugal, and Bulgaria have experienced a growth of a third or more. Cost of labor is a main driving force. Brain business jobs are growing in places which combine an ample supply of talent with lower wage costs”.

Estonia ahead of Essex, Tirol, and Hannover in region ranking

In the regional comparison, Estonia is categorized as one single region due to its size.  With a concentration of 7.5 percent of its working age population employed in knowledge-intensive firms, Estonia places ahead of Essex, Tirol, and Hannover.

Examples of innovative Estonian start-ups is Solve.Care, which offers solution for health care delivery and coordination, and Mercuryo, which offers cryptocurrency payment solutions. Strengthening research and development is important for to Estonia continuing growing as a leading European knowledge hub.

Warsaw is the fastest growing region, alongside Bratislava and three German regions

On a regional basis, the most significant increase of brain business jobs has occurred in Warsaw, the Polish capital region, followed by the Slovakian capital region of Bratislava, and the German region of Braunschweig. This German region was an important center of commerce already in medieval Germany and is one of several strongly growing German regions.

Successful new European firms often combine service innovations with digital platforms for service delivery

A study of 150 innovation companies, founded in the top-30 leading European brain business jobs hubs, finds that the most common forms of innovations are business service innovation, consumer service innovation, and digital infrastructure/platform innovation. Often firms rely on digital platforms for service delivery. The least common form of innovation is manufacturing technology.

Investments in Central and Eastern Europe still lags behind

The average company in Eastern and Central European brain business hubs, founded in 2015, has attracted 10 million Euros in investment, compared to 23 million in Southern Europe, and 35 million in Western Europe. The innovation firms of the Nordic regions on the top-30 regional list, have on average attracted 85 million Euros in investments, far outstripping firms in other parts of Europe.

”Knowledge is the foundation for attracting investments and creating value in a long term sustainable way. As a leading investor in Europe it is natural for Nordic Capital to support research on how knowledge strengthens good investment conditions”, says Klas Tikkanen, Chief Operating Officer at Nordic Capital Advisors.

”The study confirms that high knowledge intensity gives resilience in a time of crisis. Sweden and the Nordic countries still stand strong despite the pandemic. But now is the time for reforms and developing the regulatory frameworks in order to get back to the level before Covid-19. That will lead to increased investments, and the increase of brain business jobs again”, Klas Tikkanen adds.

Estonia’s weaknesses and strengths

Compared to the rest of Europe, Estonia has several strengths. The main strength is in IT-services, and high-tech manufacturing, where Estonia has nearly twice the concentration of brain business jobs than the European average. The main weakness is pharmaceuticals followed by engineering & architecture.

The main challenge of Estonia is that Tallin, due to its small size, lacks some of the large scale benefits of other brain business hubs, with larger populations. Tallinn still however succeeds as a leading brain business hub and is internationally unique in achieving this despite the relatively limited population.

by Benjamin Juhlin

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