The Innovation Powerhouse

Sweden is widely regarded as an innovations powerhouse. Even though Sweden is a small country, we have one of the world’s highest patent growth rates, some of the highest spending on research and development in Europe, and one of the world’s highest rates of trained engineers per capita. These, among other things, have been instrumental in Sweden’s effort to bless the world with such innovations as the pacemaker and the three-point seatbelt. Looking ahead, Swedish business and government is now focusing its collective brain power on medicine and bioscience, technology, and climate.

But, what is it that fundamentally drives – or even enables – innovation? According to the annual report on national innovative capacity released by the Harvard Business Review, important factors include the number of engineers and scientists per capita, policies encouraging innovation, the extent of business clusters and the quality of linkages between the common innovation infrastructure, and a nation’s industrial clusters. When it comes to innovation policy, Sweden fares rather poorly. On the other hand, we are second only to Japan in producing engineers and scientists. It is the two latter cases that, in Sweden, make for especially interesting cases. What is the extent of and relationship between innovation and industry clusters?

First off, it is worthwhile to note that among the companies, counted by Forbes as the twenty largest in Sweden in 2013, there was only one with a history of less than half a century, excluding mergers. In other words, the top-20 club in Sweden is basically a Jurassic menagerie. In addition, twelve of these twenty companies can be counted to the corporate empires controlled by the Wallenberg family and Svenska Handelsbanken, through Investor and Industrivärden respectively. Moving a bit further down the ladder, we also find industry titans such as Melker Schörling, Fredrik Lundberg and Gustav Douglas, as well as powerful groups including the Ax:son Johnson Group, the Stena Group and the Stenbeck Group. Ostensibly, the Swedish corporate climate does not really seem compatible with the democratic and Jante-inundated social fabric of Sweden, or its sprawling innovations infrastructure.

However, rather than impeding the growth and emergence of new innovations, I think that the Swedish corporate might be a powerful catalyst for launching innovations. A country may have an abundance of innovations, but if it does not have the structural qualities to let the innovation grow into successful enterprises, it does not really matter. For example, VCR technology was originally developed in the United States, but it was companies in the Japanese consumer electronics cluster that managed to commercialize the innovation and take it to the global stage. In the same way, the major players in Swedish enterprise have massive resources and capabilities to finance, adopt and integrate new innovations. A new innovation emerging somewhere in the vast Wallenberg portfolio can potentially send ripples through industrial behemoths such as Atlas Copco, Ericsson and Electrolux.

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