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Running head: BALTIC INNOVATION: A STRATEGIC MODEL

Baltic Innovation: A strategic model for competition and collaboration

Arizona State University

OGL 350: Cultural Diversity / Study Abroad / Digital Technology and Innovation in the Baltics

Jana Lee Cox

July 26, 2019

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Introduction:

In the years following the end of Soviet occupation in Europe, three countries have

emerged with surprisingly strong economic growth patterns, especially considering their recent

arrival on the scene; Estonia, Lithuania, and Latvia. Also known as the Baltics, these three

countries far outstrip all other former Soviet republics, have growth rates that compare

impressively against all of Europe (Destatis, 2019), and outperform other republics in national

GDP by as much as 10 times (Metcalf, Bergo & Holde, 2014). While their individual roads to

economic stability have been punctuated by challenges and setbacks, their resolve has been firm

in making necessary sacrifices to sustain and rebuild, and their model for success would provide

valuable insights by any who seeks a similar triumph.

Much of the Baltic economic strength can be traced to governmental policies and actions,

including “embrac[ing] the free market [and] tough austerity measures” (BBC, 2010). Ambitious

reforms in the business sector, however, also play a key role, including progressive attitudes

towards other organizations, including those identified with Russia, their former oppressors. All

this leads to the development of the Baltic nation’s secret weapons: innovation and technology.

According to financial writer Leah Hodgson in PitchBook: News & Analysis (2018), Estonia

alone (with only 1.3 million people) boasts “nearly 6 startups per 100,000 inhabitants, placing it

in 10th position for the whole of the continent. Both Latvia and Lithuania are in the top 20 in

terms of startups per capita with 3.6 and 2.6 per 100,000 people, respectively—beating giants

such as Germany and France,” (para. 2). These numbers are even more impressive, considering

the three nations have been free from Soviet occupation for less than 30 years. Yet serious

entrepreneurs looking to join the league of fast-growing, far-reaching enterprises idealized by

Baltic region startup companies would do well to consider the unique business culture
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surrounding Baltic companies’ atypical responses to conflict and competition, which proves that

businesses can support one another, moving past old grievances, and still be successful.

In the textbook, Organizational Behavior: Bridging science and practice, v3.0, Bauer

and Erdogan (2018) point out that an organization’s culture often reflects its national culture. As

part of the European Union, which, according to Pascal Fontaine’s Europe in 12 Lessons (2014),

“promote[s] humanitarian and progressive values, and ensure[s] that humankind is the

beneficiary, rather than the victim, of the great global changes that are taking place” (p. 5), it’s

not surprising that many organizations and businesses in the Baltic states likewise emphasize

respect for human rights, by promoting collaboration and cooperation. Such attitudes and

organizational culture influence not only how employers treat employees, but also how

businesses treat other businesses. While these attitudes fly in the face of common sense notions

that business growth requires aggressive action against competitors, they appear to accompany

remarkable growth and success. These results suggest that although cut-throat competition may

increase company value in the short term, it tends to have a negative impact on organizational

culture, affecting both internal relationships with members and external relationships with peer

organizations which, in the long term, limits cooperative growth.

One aspect of organizational culture that directly addresses attitudes regarding

competition and conflict is found in chapter 10 of Bauer and Erdogan’s text (2018). Here they

present five common conflict-handling styles, based on a grid framed by the entity’s level of

cooperation by the level of competitiveness (Figure 10.6). These styles include Avoidance (low

cooperation / low competitiveness), Accommodation (high cooperation / low competitiveness),

Compromise (medium cooperation / medium competitiveness), Competition (low cooperation /

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high competitiveness), and Collaboration (high cooperation / high competitiveness). (See figure

below.)

Figure 10.6.Conflict-Handling Styles. (Bauer & Erdogan, 2018)

In order to understand how this concept relates to business organizations in the Baltics,

the definition of competitiveness must first be examined, as Bauer and Erdogan (2018) use the

term interchangeably with assertiveness interchangeably. While competitiveness tends to imply

aggressively attacking or undercutting another business that provides similar products or services

in order to capture their share of the market, Bauer and Erdogan’s usage in this instance

corresponds more directly with official definitions of “having a strong desire to compete or to

succeed” (Dictionary.com, 2019); the “ability of a firm or a nation to offer products and services

that meet the quality standards of the local and world markets at prices that are competitive and

provide adequate returns” (BusinessDictionary.com, 2019); or, as described by Robert D.

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Atkinson in a 2013 article for the Globalist, “the ability of a region to export more in value

added terms than it imports” (para. 13. Italics added for emphasis).

On the other hand, assertiveness is defined in the Merriam-Webster online dictionary as

“disposed to or characterized by bold or confident statements and behavior” (2019); and in

Psychology Today, as, “clearly and respectfully communicat[ing one’s] wants, needs, positions,

and boundaries to others” (2019, para. 1).

Thus, Bauer and Erdogan’s (2018) conflict-handling styles referred to in Figure 10.6 or

chapter 10 are based on the level of cooperation and the level of competitiveness/assertiveness,

or, in other words, the ability to confidently communicate one’s boundaries and needs while

offering value added products / services that bring in more money than they cost to manufacture

or produce. Using this definition, the categories that most often describe innovation and startup

companies and accelerators in the Baltics are Competition (low cooperation / high

competitiveness), Compromise, or reciprocal cooperation (medium cooperation / medium

competitiveness), and Collaboration (high cooperation / high competitiveness).

Competition:

Given these definitions as they apply to the Baltic organizations under study, the conflict-

handling style of Competition differs somewhat from the label in Bauer and Erdogan’s (2018)

text, which states, “People exhibiting a competing style want to reach their goal . . . regardless of

what others say or how they feel” (chapter 10.4, para. 12). Rather, the high competitiveness in

this context as outlined above justifiably modifies the definition of Competition to infer a desire

to succeed in an assertive manner while exhibiting low cooperation—not necessarily a disregard

for others, but rather a higher regard for one’s own organization. The Baltic companies reviewed

for this paper did not exhibit aggressive competitiveness in the sense of attacking or undercutting
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other businesses, but rather a strong desire to succeed, provide value added products and

services, and assertively maintain and strengthen intellectual boundaries.

Considering recent political events in the region, this focus on protecting boundaries is

not surprising. From the long-awaited freedom from the 50-year Soviet occupation to the more

recent voluntary application to and inclusion in the European Union, the Baltic nations have had

to carefully balance their national identity and values. In addition, as reported in a guest lecture

by Dr. Kristina Jakutyte-Anciene (2019, presentation), at Vilnius University, which actively

promotes the development of technology and innovation, their continued economic stability

depends on their ability to innovate. She explains that Lithuania made an agreement to perform

economically upon entry into the European Union, and that “Lithuania must be innovative if we

want to stay” (Jakutyte-Anciene, 2019). Thus, the Baltic nations are highly motivated to excel in

order to maintain and grow their economic standing, and protect their intellectual boundaries by

developing their economy.

With a focus on building their respective nation’s economy rather than undercutting any

real or perceived competitors in the region, many of these Baltic companies grow in strength

through specialization, a form of competition that leads them to develop and offer what

competitors can’t or won’t do—or simply do it better. At the Vilnius Tech Park, Giedrius

Muckus, COO of Contrarian Ventures, describes his aim to “build and improve Lithuania

startup’s situation” (Muckus, 2019). Contrarian Ventures, an early stage venture capital firm,

invests in pre-seed and acceleration of tech startup companies with a core focus on energy and

mobility. Of course, Contrarian Ventures is selective about which companies they invest in.

Interested startups must be related to energy and mobility, demonstrate ability to make a

difference in the industry, have effective teams in place, and show commitment. Contrarian
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Ventures promotes collaboration between clients, offers mentoring and guidance, a relaxing park

environment ideal for “destressing” and idea creation, and financial assistance. When asked how

he responds to the threat of competition, Muckus is quick to point out that Contrarian Ventures is

much more than an investment company, and interested startups are looking for more than

money. “Lots of big companies have money—we offer more than money, we offer value,”

including the beautiful Tech Park location and atmosphere, support, and opportunities for

collaboration (Muckus, 2019). It is this specialization that gives a small company like Contrarian

Ventures its competitive edge, and allows it to sponsor such innovative startups as Bolt and

FuseBox. (See website at cventures.vc)

In Estonia, a customer relationship manager company called Pipedrive, also specializes in

a significant way. Pipedrive was founded to provide a sales tool that would track the sales

process from beginning to end, guiding sales teams step-by-step along the way, ideal for

companies with large potential deals to close. According to company representative and guest

lecturer Külli Haasma (2019), Pipedrive sports a company culture with a low power distance and

a flat hierarchy. Its headquarters, based in Tallinn, sees to every imaginable comfort of its

employees in order to promote innovation, collaboration, and optimal support for productivity.

This environment pays off in a competitive business model that attracts and retains highly

talented employees with a low, 4% turnover rate. (Haasma, 2019, presentation). With “over $90

million in funding; 16 languages, multiple currencies; over 170 countries covered; over 85,000

customers; 500+ employees; [and] 6 offices in 5 countries” (Haasma, 2019, powerpoint, slide 2),

it’s not likely that Pipedrive has much to worry about when it comes to competition. When

asked, Haasma responded simply, “We just try to be better, faster and prettier . . . [and] to have

that special ingredient that sets us apart” (Haasma, 2019, presentation). With members of the
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audience eagerly attempting to arrange for job interviews, it appears Pipedrive is reaching its

goal.

Cooperation (compromise):

Ask any innovative Baltic company about competition, and you’re likely to get a puzzled

look. It seems obvious that competition isn’t high on the list of concerns, and doesn’t seem to

carry much importance among this demographic. Instead, you may hear much more about

cooperation. But although Bauer and Erdogan’s (2018) conflict-handling styles use cooperation

as a parameter, they don’t use it as a style, in and of itself. Instead, the styles ranking high in

cooperation are termed Accommodation (a style that is “cooperative and unassertive,” in which

the person “gives in to what the other side wants, even if it means giving up one’s personal

goals” [chapter 10.4, para. 10]); Compromise (“a middle-ground style, in which individuals have

some desire to express their own concerns and get their way but still respect the other person’s

goals” [chapter 10.4, para. 11]); and Collaboration (a highly cooperative and highly competitive

style which will be explored in the next section). As Accommodation is, by definition, low in

assertiveness, it doesn’t match the Baltic model examined here. Instead, the idea of Cooperation

most closely aligns with Bauer and Erdogan’s conflict-handling style of Compromise, which is

framed in moderate levels of both cooperation and assertiveness. The Baltic model appears to

incorporate a positive aspect of cooperation that focuses not on what is lost in the exchange, but

what is gained on both sides. While both sides may make concessions, the results are mutually

beneficial and are greater than what could have been accomplished by one party acting alone.

This concept of compromise is described by many Baltic companies simply using the

term cooperation. Innovative companies especially are quick to embrace a culture of cooperation

as it reflects the national and social culture of the region as well. Unique to this region, though, is
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the degree to which cooperation is practiced, even among competing companies. In guest lecture

on July 12, 2019, Diana Bogrova, spokesperson for Investment and Development Agency of

Latvia (LIAA) asserts that “competitors often use each other’s services” in building their

businesses. She describes an attitude among competing companies where, if one company has

something the other needs, they will approach and purchase from them without any hesitation or

concern. Likewise, the first company will sell to the other in a mutually supportive mindset.

Interestingly enough, Director Andris Ozols (2019) states on the company’s website that LIAA

“aims at increasing export and competitiveness of Latvian companies, facilitating foreign

investment and implementing tourism development and innovation policies” (para.1). These

statements highlight the delicate balance between cooperation and competition for companies

like LIAA who rely on competitors, in this case foreign investors, in order to grow and bring

growth and economic stability to their business and their nation.

Another example of gaining strength through cooperation is that demonstrated by Vilnius

University’s Open R&D Lithuania network. From the website (2019), we learn how this network

promotes “cooperation between open access R&D centres / laboratories of 12 Lithuanian

Universities, 13 Public Research Institutes as well as 7 Science and Technology parks. All these

institutions united their high-level R&D intellectual potential, infrastructure and resources in

order to provide scientifically based solutions to the problems raised by business and society”

(paras. 1-2). Consider the cooperative power of a business being effortlessly connected to the

necessary research and development that can turn brilliant ideas into reality. While dealing with

potential competitors, focusing on the cooperative opportunity can open a win-win situation that

will benefit business owners, researchers, and society.

Collaboration:
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Perhaps the most emphasized conflict-handling style among Baltic startup companies and

incubators is that of collaboration, a style that powerfully reinforces the Baltic economic

standing, placing it on the forefront of innovation and business leadership globally. As described

by Bauer and Erdogan (2018), this style is “high on both assertiveness and cooperation . . . [in

which] both sides argue for their position . . . while listening attentively to the other side. The

objective is to find a win–win solution to the problem in which both parties get what they want.

They’ll challenge points but not each other. They’ll emphasize problem solving and integration

of each other’s goals” (chapter 10.4, para. 13). While collaboration appears to be similar in some

respects to compromise (cooperation), it differs by increased intensity, and appears to be an

underpinning core value throughout the region.

In a representative sampling of businesses and organizations, all embrace collaboration to

some degree, but Startup Estonia applies aggressive collaboration as an overarching value that,

for all intents and purposes, replaces the entire concept of competition, not only in business but

between nations. Startup Estonia, according to the website (n.d.), “is a governmental initiative

aimed to supercharge the Estonian startup ecosystem in order to be the birthplace of many more

startup success stories to come. For that, we are working on making Estonia one of the world's

best places for startups, partnering with and uniting the best of startups, incubators, accelerators,

private and public sector” (para. 1). Startup Estonia focuses on four main objectives, two of

which are creating international relationships and supporting the local community. Because

Startup Estonia has government status, it can affect public policy to facilitate the process of

doing business in Estonia; for instance, e-Residency makes it possible to do “business remotely

by using Estonian e-services” (Org, 2019, powerpoint slide 15) so businesses outside the country

can enjoy the Estonian ecosystem without having to physically relocate. This level of
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collaboration is rare on the global scale, and the typical capitalist might wonder if having open

borders on this scale is wise. Yet Startup Estonia’s significant success rate argues that such a

move is not only wise, it’s exceptional. When asked about the role of competition in their

business model, Startup Community Development Manager Liisi Org (2019) related Startup

Estonia’s potential to aid and assist any business from any nation, viewing all companies and

nations as potential clients, and collaborative partners, not competitors; with a goal to help

companies get off “government support [and become] more independent” (2019, presentation).

Org points to Startup Estonia’s inclusive and collaborative relationship with Latvia, Lithuania,

and others, including India, Pakistan, Russia, Turkey, Iran, and Ukraine, and even the United

States. She continues, “We happily share our experiences and knowledge. We collaborate, not

compete. We want to work with all—we don’t [deny entrance] to any because of their country. . .

. [We want] to get startup mindset everywhere” (2019, presentation). This revolutionary concept

of collaboration, not competition, makes Startup Estonia and other organizations in the Baltic

regions unique in their treatment of those outside their organization and present innovative ideas

about the role of competition and collaboration in entrepreneurial innovation.

History:

The prevalence of cooperative attitudes in Baltic organizations is especially revolutionary

when one considers the historical context of the region. Until the early 1990’s, Latvia, Lithuania,

and Estonia were under the imposed rule of the Soviet Union. According to the Museum of

Occupations and Freedom Fights in Vilnius, Lithuania, 50 or so years of enemy occupation had

“destroyed . . . the sovereignty of the state, . . . implemented communist ideology, and deported

and imprisoned people” (2019, exhibit 1). Foundation bricks outside the structure bear the names

of Lithuanians who perished in the former KGB prison.

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Latvia and Estonia faced similar challenges. Margret, docent of the Viru Hotel & KGB

Museum in Tallinn, Estonia (July 19, 2019), tells of family members deported to Siberia, never

to be seen again. She relates, “People learned how to be to survive . . . they learned it was better

to not see and to not know the things they saw and knew. . . . Everybody had to be afraid. It was

a system of fear.” These and other events of the occupation left citizens with bitter memories of

unwarranted arrests, torture, executions, and intimidation, long after the occupational forces had

been removed. Estonian tour guide Külli Koiv points out the deep anger towards those of

Russian background, especially among older people who experienced the ill treatment first-hand

(personal communication, July 18, 2019).

Given the many abuses suffered by the Baltic peoples, it is truly remarkable that

organizations like Startup Estonia and others see past their dark history, grasping a vision of

global unity and proactively incorporating values and actions to make that vision reality. As tour

coordinator Lena Sozinova asserts, it is the younger generation who see past the lingering

animosity and see only people—not ethnicities (personal communication, July 11, 2019).

Perhaps it is no coincidence that Startup Estonia and other innovative Baltic startups are headed

by younger leaders with courage to let go of bitterness and take hold of a better future.

Conclusion:

The Baltic states surprised the world with their enterprise and courage after 50 years of

oppression. In the nearly three decades since gaining their independence, the Baltic states are

growing and emerging as world leaders because of their ability to see the world in new and

innovative ways, while other European countries continue to struggle socially and economically.

While their approach may seem counterintuitive, their obvious success sets them as a beacon for

organizations and nations who also desire a better future. These can learn from their unique
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attitude regarding competitors, not as enemies, but as future clients, partners, and associates. Far

from being vulnerable, their ability to move past old abuses and embrace their vision of a global

economy and the greater good, places them in a position of strength from which they will

continue to operate proactively—not looking back on the past, but pressing forward to reach

their goals. As they do so, their actions will lead to increased peace in the region as other

organizations follow their lead.

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