You don’t hear of these places often, but Estonia, a small East European nation with a population of between 1 and 1.5 million, is showing the world a thing or two about rapid adoption of technology, says the New York Times (free registration required).
The article describes Estonia’s success with technology in the light of Skype which (although registered in Luxemborg) has it chief developers in the capital Tallinn. From the article:
Estonia is developing an efficient technology industry that generates ingenious products – often dreamed up by a few friends – able to mutate via the Internet into major businesses.
These entrepreneurs grow out of an energetic, youthful society, which has embraced technology as the fastest way to catch up with the West. Eight of 10 Estonians carry cellphones, and even gas stations in Tallinn are equipped with Wi-Fi connections, allowing motorists to visit the Internet after they fill up.
Internet penetration is estimated by the telecommunications industry to be 49 percent of the population.
Estonians use mobile phones to pay for parking, among other things. Most conduct their banking online, and more than 70 percent file their taxes on the Internet. The state issues a digital identification card, which allows citizens to vote from their laptops.
Estonia is also home that (in?)famous peer-to-peer file sharing revolution, Kazaa, as also Playtech, which “designs software for online gambling services”.
However, being new to the world of capitalism (it is a former Soviet Socialist Republic) also brings a few problems:
Part of the problem for Estonia’s entrepreneurs is the nation’s inexperience in capital markets. It regained its independence only in 1991, after the collapse of the Soviet Union. Estonia’s entrepreneurs do not yet have the Rolodexes of their Scandinavian counterparts. Recently, Tallinn got its first high-tech venture capital firm.
What is interesting, is how Estonia’s technology industry has adapted to the problems that its lack of scale bring:
…Estonia’s labor shortage has contributed to its success. Companies here are extraordinarily efficient. And they tend to focus on niche products or on business models – like Skype’s or Kazaa’s – that can expand from a small base by word of mouth.
I wonder if India’s corresponding success in IT services (which is more manpower-intensive than niche-market product companies) is due in part to the fact that we face the exact opposite situation – an abundance of labour. How much of the country’s success is because we were able to supply the large number of workers that the market needed? Put another way, if we did not have this large population, would we have attained a similar amount of success with products? Is our success based on the fact that we were able to supply quantity for a market that did not place a huge premium on quality?
Negative questions, no doubt, but which will nevertheless yield interesting answers.