Challenges to the Nordic Model: a Swedish perspectivePontus Braunerhjelm

Societal Challenges and Clusters: the Scandinavian Model vs other Models

6 September 2013

TCI Annual Global Conference 2013

Challenges to the Nordic Model: A Swedish perspective

Pontus Braunerhjelm, Managing Director Swedish Entrepreneurship ForumProfessor in Economics, The Royal Institute of Technology

• International trends• What makes a cluster?• The Nordic model/position• Cluster policies

Global manufacturing shares, 1970-2010

1990, G7

65%

China, 3%

6 risers,

5%

RoW

0%

10%

20%

30%

40%

50%

60%

70%

80%

1970

1975

1980

1985

1990

1995

2000

2005

2010

Wor

ld m

anuf

actu

ring

sha

re

Source: unstats.un.org; 6 risers = Korea, India, Indonesia, Thailand, Turkey, Poland

1990, G7

65%

3%

6 risers,

5%

RoW

47%

China, 18%

9%

0%

10%

20%

30%

40%

50%

60%

70%

80%

1970

1975

1980

1985

1990

1995

2000

2005

2010

Wor

ld m

anuf

actu

ring

sha

re

Source: unstats.un.org; 6 risers = Korea, India, Indonesia, Thailand, Turkey, Poland

•7 ‘losers’.•7 ‘risers’.•RoW = little change

… and a growing role for services ...

4Source: OECD-WTO, Trade in Value Added database,

Share of service value added in total gross export, 1985-2009

Patent applications 1995-2009

Japa

nU.S

.

EU15

China

Kore

a

Russia

Canad

a

Isra

el

Indi

a

Brazil

0

50000

100000

150000

200000

250000

300000

350000

400000

450000

Business investment in KBC and tangible assets (% adjusted GDP, 2010)

Source: OECD calculations based on INTAN-Invest, Eurostat and multiple national sources.

Increasing investments in KBC

6

New firms matter – they account for 35-65% of job creation The role of young firms (less than 5 years old) for job creation, average from 2001

to 2011.

Employment growth in internationally traded sectors, Sweden, 2005-2015

Källa: Bjorvatn m fl. (2008)

”Silicon Valley is probably the only place on earth not trying to copy Silicon Valley”

Robert Metcalfe, 1998

What makes a cluster?

Copycats – but what about the igniting spark and growth potential for clusters?

Serendipity?

Role for policy?

Limited to providing the infra-structure of the cluster?

What makes a cluster?

3-stage processes – Knowledge base, entrepreneurs and service providers (VC, legal competencies, etc.)

Variety, heterogeneity and selection mechanisms - dynamics

Pre-existing conditions – unpredictable whether it leads to agglomeration and consolidation of clusters. Once seed is planted – is the local system fit to emerge and grow?

Highly influenced by policy - not only climate (Hollywood) or individual brilliance (Silicon Valley)

Immigration and growthIncome per person and predicted openness to migrants

Stage

Share of value added

Pre-fab services Post-fab servicesFabrication

1970s & 1980s value distribution

‘Smile curve’: Distribution of value

Post-1990 value distribution

Economy Ease of Doing Business Rank

Starting a Business

Dealing with Construction

PermitsRegistering

Property Getting Credit Enforcing Contracts

Denmark 5 11 2 2 9 20

Norway 6 13 7 3 25 4

Finland 11 17 12 8 16 9

Sweden 13 19 8 13 16 17

Iceland 14 15 15 5 16 3

Average , Norden 9,8 15 8,8 6,2 16,4 10,6

Averrage, OECD- high income 29,3 16 16 16 14,4 15,9

The Nordic ModelAn international comparison

-20

-15

-10

-5

0

5

10

15

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

Real

GD

P gr

owth

, per

cent

Expenditures on R&D in relation to GDP, percent

R&D-investments and Growth, 2001-2009OECD-countries

Business opportunities and abilities

Expected employment growth in new firms, 2010–2012

20 or more employees in the coming five years

Change of Share of Chinese Imports

Selected European Countries

2000 2005 20100.00

0.50

1.00

1.50

2.00

(Source: UNCTAD (2011), Ketel 2012.)

Sweden

Germany

Switzerland

Finland

NorwayDenmark

Share of Country in Chinese Imports, Level in 2000 = 1

Cluster Policy FrameworkHolistic

Knowledge accumul/upgradin

g

Knowledge conversion

Knowledge critical mass

Policy-areas

• Education

• R&D

• Academic e-ship

• Autonomy

• IPR

• Mobility

• Evaluation

Policy-areas

• Entrepreneurship

• Growing firms, gazelles, iFDI

• Links to universities, collaboration, partnership

• Public sector

• Mobility

• VC, IPRs

• Internationalization

Policy-areas

• Mobility

• Infrastructure

• Universities – local feedback

• Partnership

Lessons for policy-makers

“at every step of the way, there were choices – political and economic – that provide real alternatives…path dependency ..is not a story of inevitability…”

North 1990