The Nordics: Partners in Innovation?
The Nordics:Partners in Innovation?
The Nordics: Partners in Innovation? 3
Table of contentsAbout the project “Innovative Nordics” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Innovative Nordics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Innovation Ecosystem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Cluster Industries in Norway and Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
The Norwegian story . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
The Swedish Story . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Success stories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Cluster competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Growth in Emerging Sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Industrial Linkages between Norway and Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Building a Nordic Industrial Knowledge Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Policy recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Building a common Nordic industrial knowledge base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Upgrading and globalizing existing cluster industries in both countries . . . . . . . . . . . . . . . . . . . . . . . .31
Transforming and greening existing cluster industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Creating new innovative knowledge industries with a Nordic base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Building Nordic knowledge bridges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Integrating Nordic research and education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Building Nordic innovation and entrepreneurship capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Developing Nordic corporations through alliance and M&A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Linking cluster organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
The Nordics: Partners in Innovation? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Data sources and measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
4 The Nordics: Partners in Innovation?
About the project “Innovative Nordics”THE CURRENT PROJECT – “Innovative Nordics” – was launched following a conference in Stock-
holm on 14 January 2015. A Steering Group Oslo has guided the work, co-chaired by Björn
Rosengren (former Minister of industry, employment and communications) and Harald Norvik
(former CEO - Statoil) in their capacity as chairpersons of the Norwegian-Swedish Chambers
of Commerce in Stockholm and Oslo. The other members of the Steering Group have been
Janne Log (EVRY), Björn Savén (IK Investment Partners), Johan Sandberg (DNV GL), ambassa-
dor Kai Eide and ambassador Axel Wernhoff.
This report – “The Nordics – Partners in Innovation?” – is based on a project proposal formu-
lated by Professor Torger Reve at the BI Norwegian Business School in Oslo and Professor Örjan
Sölvell at the Stockholm School of Economics and is a result of their subsequent research. They
have been assisted by: Marius K. Nordkvelde, Sergiy Protsiv, Amir Sasson and Albin Skog. We
are grateful for all their efforts.
The aim has been twofold; to identify potential areas of a more comprehensive cooperation be-
tween Norway and Sweden as well as to make policy recommendations for how to achieve such
enhanced cooperation in the field of innovation. These findings and recommendations could
also serve to stimulate greater cooperation in the wider Nordic region. The report is an abbrevi-
ated version of a text, which also contain further statistics.
Telenor Sverige AB, IK Investment Partners, DNV GL, EVRY, Nordea Bank AB, the Royal Nor-
wegian Ministry of Foreign Affairs, the Royal Norwegian Ministry of Trade, Industry and Fish-
eries, the Norwegian-Swedish Chamber of Commerce in Stockholm and the Norwegian-Swed-
ish Chamber of Commerce in Oslo have contributed to financing the project. Anders Ruud
Sørli has served as the project coordinator.
The Nordics: Partners in Innovation? 5
Executive SummaryTHE NORDIC COUNTRIES belong to one of the most competent, innovative and attractive regions
in the world. They score high on a number of industrial competiveness rankings as well as with
regard to quality of life and social development. Furthermore, they enjoy the advantages of a
generally high educational level, an egalitarian culture and flat organizational structures. This
constitutes a strong foundation for industrial innovation.
While each of the Nordic countries are relatively small, together they represent the world’s 10th
largest economy. In spite of innovation ecosystems that do not overlap, there is a great potential
for creating bridging mechanisms that would link Nordic industries into a larger industrial region.
This study takes account of the industrial challenges facing both Norway and Sweden and is
intended to help design an industrial map of Norway and Sweden combined to highlight the
scope of opportunities for cooperation. Nordic economies are in rapid transformation, requiring
innovation and entrepreneurship at a much higher speed than before.
In total, Norway and Sweden are linked in a strong and mutual dependency as trading partners
and in terms of foreign direct investments. Recent data also demonstrates strong linkages in terms
of ownership. While the two countries traditionally have different industrial structures and clus-
ters, they also have a similar set of competitive high profile ICT and digital related clusters.
We conclude that Sweden and Norway could develop a strong partnership in innovation that
would strengthen the ability of each to compete on the global market. This report makes a set
of policy recommendations in order to build this innovation partnership involving research
establishments and businesses in a broad alliance:
1. Building a common industrial knowledge base2. Upgrading and globalizing existing cluster industries3. Transforming and greening existing cluster industries4. Creating new innovative knowledge industries with a Nordic base
We have identified six fields of competence and technology that we see as critical in this respect,
Digitalization technology (ICT and big data), Sensor and robotization technologies (Indus-
try 4.0), Biotech (Life sciences), Cleantech (Renewables), Fintech (Banking) and Nanotech
(Materials).
Finally, we suggest four knowledge bridging strategies that would facilitate and support efforts
to implement our policy recommendations: To integrate Nordic research and innovation, to
build a common innovation and entrepreneurship capacity, to develop Nordic corporations
through alliances and M&A, and to link cluster organizations between the two countries.
This represents an ambitious and multi-faceted agenda, where each step is aimed at exploiting
the untapped potential for cooperation and would strengthen our ability to meet the accelerat-
ing pressure for constant innovation.
6 The Nordics: Partners in Innovation?
Innovative NordicsTHE NORDICS SHOULD position themselves as the most innovative region in Europe. The Nordic
region, what we here refer to as the Nordics, has a population of around 25 million inhabitants
and is the world´s 10th largest economy. The Nordics belong to one of the most competitive,
innovative and attractive regions in the world. Competitive and innovative firms and industries
are found across a range of sectors, and global talent and capital are particularly attracted to the
leading city regions.
The Nordic countries along with Switzerland score close to the top in industrial competitiveness
rankings (World Economic Forum 2015). They hold a strong position in digital industries, green
industries, life science industries, design industries, ocean industries and energy industries. The
Nordics also score highest in the world when it comes to life quality and social development.
What makes the Nordics particularly strong when it comes to innovation is a high educational
level, an egalitarian culture and flat organizational structures. The Nordics also have highly de-
veloped industrial clusters in several technologically advanced industries. Together, this consti-
tutes a strong foundation for industrial innovation.
The weakness of the Nordic region is that each country has innovation ecosystems with limited
overlap. Given the relatively small size of each of the Nordic economies, there is large untapped
potential for creating bridging mechanisms that link the Nordic industries into a larger indus-
trial region. One example of such a bridging mechanism is the physical bridge across Øresund
between Malmö and Copenhagen. This has led to a strengthening of the life science clusters of
Skåne and Copenhagen.
Several attempts have been made to build strong industrial bridges between Norway and
Sweden. Some of the most ambitious of them have failed. The most prominent example is the
so-called Volvo agreement in 1979 under Pehr G. Gyllenhammar’s leadership, where the Norwe-
gian state would obtain 40% ownership in Volvo, while Volvo in return would obtain a strong
position in the North Sea offshore oil industry. The private investors in Volvo, however, voted
against the Volvo agreement, and Sweden was left out of the offshore oil and gas industry.
The second attempt at high level industrial bridging between Norway and Sweden was the
agreement between Telenor and Telia to merge in 1998. Again, the industrial agreement failed.
We would argue that the time is over for building grand Nordic industrial agreements driven
by industrial strategists such as Pehr G. Gyllenhammar of Volvo and Tormod Hermansen of
Telenor, directly involving the governments. What we rather would look for are corporate and
investment linkages at the micro level to build cross-national clusters with high innovation
capacity. Harvard professor Michael Porter (2008) has described this as building competitive
neighborhoods where industrial clusters go beyond industrial borders to achieve scale and scope
economies. In this report, we will map the industrial clusters of Norway and Sweden, using the
same methodology, and we will identify the strongest clusters in the two countries. In particu-
The Nordics: Partners in Innovation? 7
lar, we will empirically assess the industrial linkages between Norway and Sweden using sev-
eral economic indicators: Import and export figures between the two countries, foreign direct
investments between Norway and Sweden, cross-border industrial ownership, and cross-nation-
al employment between the two countries. Clusters are central to the innovativeness of firms.
Firms based in large, dense and dynamic clusters tend to develop resources, knowledge and
capabilities allowing them to compete successfully in world markets. Clusters are relevant for
innovation by creating a critical mass in a location of a sector or industry, where different actors
can support each other, and new ideas can be formed in both planned and unplanned meetings,
interactions and mobility. Through interaction within the cluster, conditions are more likely to
emerge that are adapted to the needs of the firms and which are conducive to innovation. These
connections will not just happen spontaneously. However, with determined efforts to foster
coordination and collaboration – within and across national borders – major benefits could be
achieved.
In this report we aim at better identifying the current pattern of cluster linkages between
Norway and Sweden, but we will also see where there is room for potential knowledge linkages
strengthening the clusters in both countries. Finally, we will present policy proposals aimed at
creating stronger industrial linkages to boost innovation in both countries.
Business leaders and policymakers in Norway and Sweden must build a common agenda in mak-
ing sure that the Nordic region stays innovative and attractive in order to support good living
conditions for future generations. An important part of that agenda involves regional collab-
oration and coordination. Today, markets and value chains are global, but proximity in travel
distance and cultural distance between the Nordics offers synergies through intense interaction
and joint innovation agendas.
This study takes into account the current industrial challenges facing both Norway and Sweden.
High cost levels have led many companies to move manufacturing and other activities in the
value chains to lower cost countries in Eastern Europe and Asia. The challenges of increased
digitalization and globalization are the same in both countries. So is the impact of disruptive
innovations and new business models. There has been much talk about Uber and Airbnb as
new ways of doing business in simple industries like transportation and accommodation. The
question is how the Nordics can take advantage of, and perhaps lead, such industrial transforma-
tions. Norway in addition faces serious challenges in the offshore oil and gas industry due to the
drastic fall in oil prices, making fundamental transformations of the North Sea offshore oil and
gas industry required to stay competitive at lower price levels. The bottom line is that Nordic
industries are in rapid transition, requiring innovation and entrepreneurship at a much higher
speed than before.
The ability for Nordic firms to compete in world markets is both affected by traditional meas-
ures of competitiveness, measured as relative levels of inputs cost, global raw material prices,
labor costs, currency exchange rates etc., and the ability of firms to innovate and build sustain-
able businesses over the long run, i.e. the innovativeness of Nordic firms. This report puts its
focus on innovativeness.
8 The Nordics: Partners in Innovation?
Innovation EcosystemWHEN ANALYZING INNOVATION in the Nordic countries, a Triple Helix model is commonly ap-
plied. Triple Helix means that three groups of actors contribute together to produce innovation:
Corporations, Academia and Government. Innovation policies have been developed to fund
industrial R&D, provide incubators, offer early risk capital, and provide assistance in the com-
mercialization and internationalization process. Government innovation agencies such as In-
novation Norway and Vinnova play a significant role. The strong venture capital system that we
find in the United States is less prevalent in the Nordics. On the other hand, the Private Equity
sector is highly developed in the Nordics. Many entrepreneurs complain that it is difficult to
cross ‘the Death Valley’ where government innovation money ends and private investor money
has not yet been successfully obtained. There are also limitations in obtaining new equity from
the Stock Exchange through initial public offerings (IPOs)). Rather than finding private venture
investors, many entrepreneurs turn to foreign multinationals, which makes foreign takeovers of
innovation firms a favored option.
At the Massachusetts Institute of Technology (MIT) the Innovation Ecosystem is defined more
broadly than in the Nordics. The Innovation Ecosystem has five groups that need to interact
closely to produce successful innovation: Entrepreneurs, Investors, Corporations, Academia and
Government.
Figure 1: Innovation Ecosystem
The focus of American inno-
vation is much more on the
entrepreneurs and the venture
capitalists, and the government
plays a less important role than
in the Nordics. The small knowl-
edge based start-ups are at the
center, and much research is done
to identify scalable entrepre-
neurship (Delgado et al 2010), e.g.
small start-ups with a business
model that can be scaled to
achieve a global market position.
Most start-ups remain small, and
they have few incentives to grow
big. The ultimate entrepreneurial goal is to create Unicorn companies that achieve a market
cap value of $ 1 billion in less than five years. Therefore, the question is; which start-ups will
become the new Googles, Facebooks and Alibabas?
Entrepreneur
University Risk Capital
CorporateGovernment
Innovation Ecosystem
Stakeholder Model
The Nordics: Partners in Innovation? 9
Applying the Innovation Ecosystem model to stimulate regional entrepreneurship, the MIT
Sloan School has developed the MIT-REAP Program, which means Regional Entrepreneurship
Acceleration Program. Southwestern Norway (together with seven other international cities and
regions) participates in the MIT-REAP program this year, while Finland and Scotland partici-
pated in previous programs.
The innovation model has three components. The first component is the very foundation; the
focused clusters or Cluster Capacity that exist in a given region and nation. Such cluster data for
Norway and Sweden are presented in a later section of this report. Norway for instance, has well
established cluster programs at three levels: The Arena program for small and emerging clusters,
the National Centers of Expertise (NCE) programs for developed and mature industrial clusters,
and the Global Centers of Expertise (GCE) for the most internationalized clusters. The latter
programs have so far been awarded only to the offshore and maritime clusters at the West coast.
The second component is the called Innovation Capacity (I-Cap), and refers to universities,
R&D institutions, Labs and test facilities, Incubators, Technology transfer offices, Research and
Innovation parks, and to the large set of innovation funds and incentives provided by the gov-
ernment at the local, regional and national levels. Sweden and Norway score relatively high on
Innovation capacity, especially when it comes to government programs.
The third component is referred to as Entrepreneurship Capacity (E-Cap) and is measured by the
supply of entrepreneurial talent that comes from colleges and universities and by spin-offs from
established firms. Entrepreneurship Capacity captures such factors as entrepreneurship and risk
culture, entrepreneurship training, and the propensity to become serial entrepreneurs. Com-
pared to the United States (and in particular innovation clusters such as those in Boston, San
Francisco and San Diego), the Nordics score low on these dimensions. We should note how Fin-
land put large resources into entrepreneurship facilitation after the collapse of Nokia, and today
Helsinki, Berlin, London and Amsterdam have emerged as entrepreneurship hotbeds in Europe.
Both Stockholm and Oslo have considerable entrepreneurship capacity in many of the new
knowledge industries, while entrepreneurship at the Norwegian west coast has mainly been
concentrated in the offshore oil and gas cluster, the maritime cluster and the seafood cluster.
Figure 2: MIT-REAP Innovation and
Entrepreneurship ModelInnovation
Capacity
I-Cap
Entrepreneurship
Capacity
E-Cap
Cluster Capacity
C-Cap
10 The Nordics: Partners in Innovation?
Cluster Industries in Norway and SwedenNORWAY AND SWEDEN have quite different industries and industrial structures. For the moment
both economies are going through periods of severe challenges. Falling oil prices are putting
pressure on the Norwegian economy and enhancing the need for a transformation of the
industrial base into new industries, including renewable energy, subsea technologies and other
fields of innovation linked to traditional industries. The Swedish economy shows a remarkable
growth in GDP. However, traditional industries, including Automotive, show signs of weakness.
Governments in both countries push agendas of innovation, re-industrialization, entrepreneur-
ship and sustainable technologies.
The Norwegian story
Norway’s industrial strengths are based on natural resources, energy and technology, and servic-
es related to the ocean industries. The industrialization of Norway in the 19th century was due
to the development of hydropower that gave Norway an early lead in power, transmission, and
energy intensive industries. This gave rise to important export industries such as fertilizers, alu-
minum and other metals. The forest industries were important, but they never gained the same
competitive strength as in Sweden and Finland. The two other Norwegian export industries
were shipping and fisheries, both related to the long coastline and maritime traditions.
The large shift to economic prosperity, however, came with North Sea oil and gas and the devel-
opment of a global offshore technology and service industry. The rapid growth of the offshore
supplier industry was due to a successful transformation of traditional maritime industries, such
as shipbuilding, ship equipment, shipping and fisheries, taking Norwegian yards into building
drilling rigs, supply vessels and complex oil and gas platforms.
The Norwegian petroleum industry rapidly became Norway’s largest and the most profitable
industry, making Norway highly dependent on oil and gas production. Thus, when the oil price
in 2015–2016 dropped from $ 100/barrel to $ 30/barrel, an industrial crisis emerged, especially
along the west coast, which created rising unemployment among engineers and other highly
skilled workers.
The question is how Norway will be able to recover from the oil and gas crisis. Will other in-
dustries have enough growth potential to keep up economic prosperity? Will there be enough
innovation and entrepreneurship to create new related industries, that will make Norway less
dependent on oil and gas?
Several large empirical studies have been made, analyzing Norway’s industrial clusters (Reve
et al, 1992, 2002, 2012). Based on the most recent study, ‘A knowledge-based Norway’ (Reve &
Sasson 2012), a clear cluster structure is shown. There are, basically two sets of cluster indus-
tries: West Coast industries and Oslo industries, both related to energy and ocean activities. The
The Nordics: Partners in Innovation? 11
Offshore oil and gas industry is by far the strongest, in terms of value creation, employment and
productivity. The second West coast industry is the Maritime Industry, covering the entire value
chain from ship design, shipbuilding and equipment, to ship owners, operations and manage-
ment. The third West coast industry is the Seafood industry. The seafood industry grew out of
traditional coastal and ocean fisheries into advanced aquaculture, making Norway the largest
salmon exporter in the world.
The three West coast industries, offshore oil and gas, maritime and seafood, are all Ocean
industries, covering the entire value chain from R&D, technology, equipment and operations to
logistics and export. The three Ocean industries are almost entirely directed at the international
markets, also being Norway’s largest export industries. The fourth export industry would be
light metals, which does not have the same cluster nature at the three Ocean industries. Most
of the hydropower production also takes place in Western Norway. Hydropower should be seen
as a separate industry; it provides clean renewable energy to the Norwegian market, and has a
potential to serve as a green battery for Northern Europe.
The Oslo industrial clusters are Knowledge service industries that are directly or indirectly
related to the three Ocean industries of the West coast. The largest of the Oslo knowledge in-
dustries is the IT industry, also holding strong positions in other segments than in maritime and
offshore energy. Kongsberg Maritime is a global player in maritime IT, dynamic positioning, IT
control systems and remotely operated underwater vehicles (ROV). The software industry is in
rapid growth, including such companies as Opera Software (a spin off from Telenor), Acano (a
spinoff from Tandberg, now both acquired by Cisco) and Fast Technology (now part of Micro-
soft). These and other firms, headed by the international successful telecom operator, Telenor,
are all in the digital communication industry, which is a Nordic discipline in its own right,
including Ericsson, Telia, Nokia and many others.
The second Knowledge service industry with international reach, operating out of Oslo, is
Advanced business services of both technical and commercial nature. The leading knowledge
service provider targeting the maritime and offshore energy industries globally, is DNV GL,
which is the world’s largest ship classification agency. Similarly, leading knowledge service pro-
viders can be found in marine insurance, marine law, maritime brokering services, and all type
of analysts and consulting firms.
The knowledge intensive service sector is closely associated with the financial cluster, which
again has an international competitive position is the maritime industry, the offshore energy
industry and the seafood industry. DNB is the largest shipping bank in the world, followed by
Nordea, which also runs its shipping and energy operations from Oslo. Pareto is a leading invest-
ment banker in the same sector, and Oslo Stock Exchange is the leading stock exchange in the
Ocean industries.
The three knowledge service industries concentrated in Oslo employs professionals with high
level academic degrees, high wages and some of the highest productivity figures of Norwegian
industries.
12 The Nordics: Partners in Innovation?
Finally, there are three emerging knowledge industries gradually forming competitive clusters.
The health life-science industry has some high potential start-ups, related to cancer diagnostics
and cancer treatment, e.g. Algeta that was recently acquired by German Bayer. There are also
many small life-science companies with a forest or agricultural base, but only Borregaard has so
far reached international scale. There are many promising companies in Renewable energy, such
as solar, wind, thermal and bio energy, although the two largest solar companies, Elkem Solar
and REC, are now both Chinese.
The Swedish Story
Sweden has a long industrial heritage in larger clusters tied to mining, steel/materials, forest-
ry and paper. A combination of inherited natural factors and institutional changes in the 19th
century, created a platform for entrepreneurship, innovation and economic growth. During the
industrial revolution a large number of engineering firms were established.
The emerging clusters used more specialized and advanced factors of production, including
skilled workers, R&D laboratories, and modern financial infrastructure. Sometimes selective
factor disadvantages would drive innovation among Swedish firms. Common demand traits
across a whole range of sectors would push Swedish suppliers to include more environmentally
friendly products and processes, more ergonomically designed and safer products, such as safe
cars and trucks. Swedish demand in many segments anticipated world demand, and thus drove
Swedish-based firms to constantly upgrade their competitive advantages, to mechanize, auto-
mate and to innovate.
Furthermore, over time, the more central firms and industries – tied to particular regions in
Sweden – stimulated entry of upstream and downstream industries, leading to some of the more
dynamic Swedish clusters that still are in existence today.
As Sweden moved into the EU, pressures for structural change pushed firms and industries to
improve efficiency, outsource and innovate. The banking crisis of the early 1990s and the finan-
cial crisis in 2008 put renewed pressure on Swedish industry.
Traditional industries are now cutting down on employment in Sweden, at the same time as
they introduce new digital technologies to offer smart connected products. Also, new digital
industries such as Digital games and Fintech (payment services, mobile wallet, peer-to-peer
lending, new currencies etc.) are emerging. The health care sector is transformed through new
digital and connected solutions. In fields such as Robotics, 3D Printers and Sensors, Swedish
firms show a good level of patenting.
Stockholm – One of the Leading Hubs for ICT & Digital Industries
Stockholm consists of a number of related clusters which are top ranked in Europe, including
Telecom, Software and Games, and has during the last decade fared well in many rankings as
a hub for innovation, making Stockholm an IT and digital city. The fact that this ecosystem is
gaining momentum today is rooted in a long tradition. The roots can be traced back to three
main sources:
The Nordics: Partners in Innovation? 13
1. Telecom equipment that emerged already in the late 19th century, with Ericsson as the an-
chor company.
2. Mobile telecom systems and services that took off in the 1980s with the advent of the NMT
system and entry of new companies such as Comviq and Tele 2.
3. The home computer/internet access/dotcom era from the 1990s.
These long roots have now created a soil for innovation where a large number of people in
Stockholm are highly networked and have strong social capital. This in turn allows for rapid
redeployment of resources and ideas within the ecosystem and for novelty creation and emer-
gence of new business models. With success follows success, and now Stockholm experiences a
period of a strong inflow of highly qualified people. For example, in the period 2009 – 2013 some
11,000 IT specialists received work permits to move into the region, and investors from around
the world are looking for the next high potential start-up.
On the factor side Stockholm had an advanced research infrastructure and highly educated hu-
man capital. Sweden and particularly Stockholm has been in the forefront regarding new infra-
structure for radio, TV and telephony, and later data communication and fiber optic networks.
On the demand side Stockholm has been in the forefront, first in the areas of fixed telecom and
later mobile telecom with high penetration rates of mobile phones and later smartphones. A
cluster of corporate actors emerged in the region around Ericsson (SRA, later ERA), Magnetic,
AGA-Sonab, Technophone, Allgon, Spectronic and many others. Today, Kista, just north of
Stockholm, is a dynamic center for many firms in the area of ICT technologies.
The larger ecosystem houses a range of institutes and organizations. ICT & Digital related
research and education is offered through several universities, colleges and applied research
centers. Risk capital with a large presence in Stockholm included Creandum, Northzone, GP
Bullhound, Index Ventures and Dawn Capital.
The first 4G mobile network in the world opened in Stockholm in 2009. Stockholm had offered
the world´s first ATM in 1968 and Bankgirot (1959) and Postgirot allowed for swift payments
for consumers. The first telephone bank was introduced in the early 1990s and the first Inter-
net-bank in 1995.
Why did Stockholm become a hub for emerging ICT & Digital industries? The answer can be
found in the combination of three fundamental forces:
1. Deterministic forces, including well-established roots in Telecom, Mobile telecom systems
and early Internet access.
2. Constructive forces in the microeconomic environment with limited direct policy interven-
tion, but many bridge builders.
3. Voluntarist forces, i.e. entrepreneurship, start-ups and spin-offs feeding the clusters with new
ideas and vision.
This combination enabled Stockholm to developed into one of the more competitive, innova-
tive and attractive hub for ICT & Digital Industries in Europe.
14 The Nordics: Partners in Innovation?
Success stories
Both countries have seen a number of success stories over recent years. The following are a few
that illustrate our innovation potential within high tech industries.
Case Sweden: Eltel
Stockholm-based Eltel is one of the leading providers of critical infrastructure network services
in Europe. Within its three main business segments, power, communication, and transport &
security, Eltel offers a broad range of services. These involve project planning, installation ser-
vices as well as operations, maintenance and upgrading services. Currently, Eltel employs almost
10,000 people, of which 550 are employed in their eleven offices across Norway. Within Norway,
Eltel is particularly strong in the telecommunication cluster, working on the infrastructure for
both mobile as well as fixed-line communication. Further national operations are located in the
Baltics, Denmark, Finland, Germany, and Poland.
Case Sweden: Spotify
Spotify was founded in 2006 in Stockholm. The company was one of the first companies to
disrupt the music industry with its streaming technology. The application was launched in 2008
with a “freemium” business model, where the consumers could stream all their favorite music
completely free if they accept commercial breaks. Premium subscriptions (99 NOK monthly
fee) remove the commercials and allow for offline and mobile usage. By 2015 total users had
reached 75 million (20 million paid) that could choose between more than 30 million different
songs. Spotify reached revenues of €1,08bn in 2014, making the company the biggest music
streaming service in the world. Spotify paid almost €900m in royalties and distribution fees in
2014, which constituted 81.5% of their annual revenues. Regardless, Spotify is a huge Scandina-
vian success. Since its foundation in Stockholm 10 years ago, it has grown to become the most
popular streaming music service worldwide.
Case Norway: Video Valley Unicorn
The Video Valley – which is not really a valley, but the Lysaker-Fornebu area just west of Oslo
– is home to some of the most promising video conferencing companies in the world. Its origin
dates back to Tandberg, a pioneer in radio and TV technology, most famous for its excellent
sound quality in commercial tape recorders. Tandberg came to an end, as most European radio
and TV manufacturers, but the many Tandberg spin-offs have been able to compete in modern
digital communication systems. As radio and TV manufacturing ended, Tandberg became a pi-
oneer in video conferencing systems, and the company was in 2009 acquired by Cisco for NOK
19 billion. Three of the young Norwegian top executives of Tandberg left Cisco and established
Acano, developing a new type of integrating platform for video conferencing. In late 2015, the
three founders (who were Norwegian business school graduates) sold Acano to Cisco for NOK 6
billion. The start-up was only three years old, thus Acano should be classified as a Unicorn com-
pany. There are 8–10 other software companies working in the same niche at Lysaker-Fornebu.
The Nordics: Partners in Innovation? 15
Case Norway: Algeta
Algeta was founded in 1997 in Oslo building on the cancer research developed at Oslo Uni-
versity Hospital. The idea was to use radium material to spot cancer cells and develop a more
efficient treatment for prostate cancer. Algeta was listed on the Oslo Stock Exchange in 2007,
and two years later, it entered into a joint venture with German Bayer. In 2014, Bayer acquired
Algeta, and the stock market value increased to NOK 16 billion. The main owner is now well
into his second promising new venture, Nordic Nanovector, a biotech company that some see
as having even higher potential than Algeta. The University of Oslo is now building its largest
research facilities ever in Life Sciences.
16 The Nordics: Partners in Innovation?
Cluster competitivenessA TRADITIONAL MEASURE of cluster strength is the Location Quotient (LQ), which reflects how
overrepresented, or underrepresented, an industry is in a region compared to overall distribution
of this industry in Europe. While rather intuitive and robust, LQ does not consider the pro-
ductivity of a given worker as it treats all employees equal. To account for this, we use another
measure called cluster competitiveness (CC rank), which combines LQ with average real wages
in a cluster as a proxy for worker productivity. CC ranks for a particular sector then varies from
1 (top cluster in Europe) to 300 (bottom cluster in Europe). In Figure 3 and Figure 4 the Europe-
an average LQ is marked by value 1 along the x-axis.
Norway
The Norwegian economy is specialized in sea-based industries: Fishing and Aquaculture, Mar-
itime, and Oil and Gas. All of these industries employ at least five times as many employees as
in Europe on average, which to a large degree be explained by the topographical characteristics,
and the fact that nearly all of Norway’s population lives on the Atlantic coast
Figure 3: Cluster Portfolio: Norway (2015)
There are also relative strengths in Biotechnology and Natural Sciences, IT Services and Soft-
ware, particularly in the city regions. Together with Business and Financial services, Pharmaceu-
ticals, and Oil and Gas, these sectors represent the high-wage part of the Norwegian economy.
Overall, Norway has 17 clusters that are within top-10 in Europe in their respective sectors. This
mainly reflects a combination of IT Services, Software and Games, and Creative Industries in
Oslo, with natural resource driven industries along the Atlantic coast.
0.1
100.000
90.000
80.000
70.000
60.000
50.000
40.000
30.0001
Specialization
Financial IT Services Oil and Gas
Maritime
Fishing and Aquaculture
Ave
rag
e w
age
10
Source: CSC – The Cluster Observatory
The Nordics: Partners in Innovation? 17
Norwegian regions are clear European leaders in Maritime and Fishing-related industries, and
are only matched by small and highly specialized island regions like Åland and Iceland. The
Oil and Gas sector, which has been one of the main drivers of the Norwegian economy, is only
rivaled in Europe by Aberdeen in Scotland.
Sweden
Compared to Norway, Sweden as a whole is much more homogenous with only two industries
having twice as many employees as in Europe on average: Software and Games and Paper and
Packaging (Figure 4, same horizontal scale as Figure 3). Other specialized industries include
Telecommunications, IT Services and Business Services.
Figure 4: Cluster Portfolio: Sweden (2015)
High-wage sectors in Sweden (Pharmaceuticals, Biotechnology and Natural Sciences, and Finan-
cial Services) are less specialized and all have a lower share of employment than in Europe on
average.
While the capital region Stockholm is very strong in Digital, Creative, and Financial sectors,
other Swedish cities, Gothenburg and Malmö, have competitive IT clusters and in particularly
E-Commerce clusters. Swedish Automotive and Aerospace clusters, which have long been the
trademark of Swedish manufacturing, are still strong with locations in Västsverige and Östra
Mellansverige.
The Swedish clusters outside the main cities are related to Forestry: Paper and Packaging in
Mellersta Norrland, Norra Mellansverige, Östra Mellansverige, and Övre Norrland, as well as
Wood Products and Furniture in Småland med Öarna and Norra Mellansverige. In these areas
the Swedish clusters remain European leaders.
0.1
70.000
65.000
60.000
55.000
50.000
45.000
40.000
35.000
30.0001
Specialization
Ave
rag
e w
age
10
Pharmaceuticals
Telecommunications
Software and Games
Paper and Packaging
Business Services
Source: CSC – The Cluster Observatory
18 The Nordics: Partners in Innovation?
In terms of cluster strengths Norway and Sweden have a very different set of “traditional” clus-
ters, but a rather similar set of competitive high profile ICT and Digital related clusters.
Figure 5: Summary of Cluster Strengths in Norway and Sweden
NORWAY SWEDEN
High Profile Clusters Traditional Clusters High Profile Clusters Traditional Clusters
Creative Industries Fishing and Aquaculture Creative Industries Automotive & Aerospace
IT Services Maritime IT Services Telecom
Software and Games Oil and Gas Software and Games Production Technology
Biotech and Natural Sciences
E-CommerceWood Products and
Furniture
Paper and Packaging
The pharmaceutical industry in Sweden is well established, with multiple clusters. In recent
decades, however, the merger of Pharmacia into American Pfizer and later the reorganization
of AstraZeneca has affected the state of the industry in Sweden. Overall employment fell from
21,000 employees in 2003 to 12,000 in 2014. The spatial distribution has also been affected with
West Sweden steadily increasing its employment at the expense of Stockholm and South Swe-
den.
In the Automotive sector Sweden has also lost substantial employment after the peak years
around 2006. In the West Sweden cluster around Gothenburg, employment has shrunk from
around 40,000 to around 30,000. Most jobs have been lost among blue-collar workers, but also
white-collar jobs have disappeared. The region had a LQ for Automotive of almost 4 around the
peak years, but this has shrunk to around 2.5, and the cluster rank (CC Rank) in Europe is down
to 20 from a high ranking as number 4.
The Nordics: Partners in Innovation? 19
Growth in Emerging Sectors
The picture in the new industries that emerge as the new backbone of the economy points in
the directions of major growth in Sweden and more modest growth in Norway.
For example, the Software and Games sector that has become one of the fastest growing and
most sought after industries, shows great dynamics in Sweden. It nearly doubled between 2002
and 2014, adding 25,000 jobs, many of them in the most dynamic segments such as Digital
Games and Fintech1.
Conversely, the Software industry in Norway, while relatively large, has grown considerably
slower in the last 10 years and has mostly grown outside of Oslo. It is also dominated by large es-
tablished players, such as Opera – the developers of a Web browser active since 1994. The trend
in the most recent two years, however, has been positive, though game development (one of the
most fast-growing industries in Sweden) still has a modest employment growth in Norway.
The growth patterns in other ‘new’ categories, such as Creative Industries and IT Services, are
broadly similar in the two countries. Both have witnessed substantial growth over the last dec-
ade, and most of the growth happened in urban regions.
Thus, even if the current situation is rather similar in the two countries, the dynamics have
been rather different. While Norway has kept a fairly static industrial structure in the past
decade and concentrated on its traditional strengths, Sweden has undergone strong upheaval in
sectors like Pharmaceuticals and Automotive, while compensating for this in new sectors like
Software and Creative Industries.
In sum, structural change takes many forms. Data for traded industries and main clusters in
Norway and Sweden suggest that Norway during the last decade has kept stable positions (em-
ployment levels, specialization and European ranking) in both more traditional industries (Oil
& Gas, Maritime) and in digital and emerging service industries, whereas Sweden has lost posi-
tions in its more traditional industries (Automotive, Pharmaceuticals) but has grown in digital
and emerging service sectors.
1) See Sölvell, Ö., Protsiv, S., and Fohlin, C. (2015) Ekosystemet ICT & Digital – Kartläggning av styrkeområden i Stock-holmsregionen. Stockholm: Länsstyrelsen Rapport 2015:16.
20 The Nordics: Partners in Innovation?
Industrial Linkages between Norway and SwedenWHEN ANALYZING THE cross-national linkages between Sweden and Norway, we rely on exports and
imports data, foreign direct investment data, accounting data, employment data and ownership data.
We already know how highly integrated the Norwegian and the Swedish economy are based
on available data from Statistics Norway (SSB) and Statistics Sweden (SCB). In terms of total
exports, Norway is the number one trading partner for Sweden, with one of the highest growth
numbers regarding export for the last four years. Sweden is the fourth most important trading
partner for Norway in terms of total export, but number one with oil and gas excluded. Sweden
is by far the most important country for Norway in terms of total imports, meaning Norway
have their highest import share from Sweden among its trading partners.
Swedish firms account for around 20% of all foreign direct investments (FDI) in Norway, more
than twice as much as any other country. At the same time, the increase in the number of
Norwegian companies in Sweden is higher that of any other foreign countries. In total, Norway
and Sweden have the strongest mutual dependency as trading partners both in terms of relative
share of exports/imports and in terms of FDI.
While we know how highly integrated the two economies are in terms of imports/export and
FDI, we have insufficient information on how Norway and Sweden are interconnected through
ownership and clusters. What kind of Swedish firms and industries owns what in Norway and
vice versa? How important is this ownership in terms of value added within specific clusters?
In order to address these issues, we have tried to utilize comparable statistical data from the two
countries, based on balance sheet accounting data, assessing total capital employed in the vari-
ous industries, and on ownership data (see attachment for a more precise description of the data
sets used in this section). In the following, value is always measured in terms of value added.
(All data in this section are 2012 figures.)
Figure 6: Largest Clusters in Norway, in terms of value added
0
50.000
100.000
150.000
200.000
250.000
Oil and
Gas
Busine
ss Se
rvice
s
NO
K b
illio
n
IT Se
rvice
s
Mari
time
Telec
ommunica
tions
Finan
cial S
ervic
es
Met
al Pr
oducts
Biotech
nology
Fishin
g and A
quacu
lture
Produc
tion T
echn
ology
Creati
ve In
dustri
es
Softw
are
Source: SSB, Brreg and BI
The Nordics: Partners in Innovation? 21
Figure 7: Relative Importance of Clusters in Norway
As displayed in Figure 6, the Norwegian economy is highly dependent on oil and gas in terms
of contribution to value creation, with a total value creation of around 200 bill NOK. The next
most important clusters are business services (72 bill NOK), IT services (54 bill NOK), maritime
(52 bill NOK), telecommunications and financial services (both 32 bill NOK). Smaller in size (in
value added terms) – ranging from 26 bill NOK to 14 bill NOK – are metal products, biotech-
nology, fishing and aquaculture, production technology, creative industries and software. These
data show that oil and gas and business services account for almost 50% of all value added within
Norway. The majority of the value added activities (more than 75%) are concentrated within the
six largest clusters mentioned above (see Figure 7).
The Swedish economy displays a less concentrated picture than the Norwegian (figure 8 and 9).
Besides a larger share of 36% of total value added, which is generated by business services and
financial services combined, there is no single industry contributing more than 9%. The third
largest cluster (metal products) thus contributes 9%, while all following clusters (production
technology, telecommunications, IT services, automotive, and software) each account for around
6%. Taken together the four largest clusters account for around 50%, while the largest eight clus-
ters sum up to around 75% of the total value added.
Figure 8: Largest Clusters in Sweden in terms of value added
Oil and Gas
Business ServicesIT Services
Maritime
Telecommunications
Financial Services
Metal Products
Biotechnology
Fishing and AquacultureProduction Technology
Remaining Clusters
0
50000
100000
150000
200000
250000
Busine
ss Se
rvice
s
Finan
cial S
ervic
es
NO
K b
illio
n
Met
al Pr
oducts
Telec
ommunica
tions
Produc
tion T
echn
ology
IT Se
rvice
s
Automotiv
e
Softw
are
Creati
ve In
dustri
es
Phar
maceu
ticals
Paper
and Pa
ckag
ingW
ood
Source: Bisnode AB
Source: SSB, Brreg and BI
22 The Nordics: Partners in Innovation?
Figure 9: Relative importance of Clusters in Sweden
Adding Norwegian ownership into this picture (figure 10 and 11) demonstrates the importance
of telecommunications, IT services, and business services to the interconnection within the
Nordics. These industries show a Norwegian ownership in Sweden of 4.7 bill NOK, 4.4 bill
NOK, and 4.1 bill NOK respectively. All other clusters have a value below 2 bill NOK, where
metal products, software, and creative industries are the next important ones.
Figure 10: Relative Norwegian ownership in Sweden
Source: SSB, Brreg, BI and Bisnode AB
As Figure 10 shows, relative to the total cluster size, the Norwegian influence is particular strong
in fishing and aquaculture (14.7% Norwegian ownership), Telecommunications (9.8% Norwe-
gian ownership), IT services (9.4% Norwegian ownership) wood (5.8% Norwegian ownership),
and software (4.0% Norwegian ownership).
Swedish ownership in Norway in general follows a similar pattern. The largest Swedish own-
ership is found in oil and gas (20 bill NOK). The other most important industries are business
services, financial services and IT services, with a combined Swedish ownership of 7.3 bill NOK.
Finally, the maritime cluster and the wood cluster account for 1.3 bill NOK and 0.8 bill NOK
respectively.
Business Services
IT Services
Telecommunications
Financial Services
Metal Products
Automotive
Software
Production Technology
Remaining Clusters
Pharmaceuticals
Creative Industries
Source: Bisnode AB
IT Se
rvice
s
Telec
ommunica
tions
Swedish Ownership Norwegian OwnershipFis
hing an
d Aqua
cultu
re
Creati
ve In
dustri
es
Softw
are
Wood
75%
80%
85%
90%
95%
100%
The Nordics: Partners in Innovation? 23
Figure 11: Relative Swedish ownership in Norway
Source: SSB, Brreg, BI and Bisnode AB
In relative terms (Figure 11), Aerospace stands out with an ownership of 97%. However, this
relatively small cluster is highly influenced by one strong Swedish company, Saab. Among the
others, the largest relative influence is found in the automotive cluster (10.8% Swedish own-
ership), the oil and gas cluster (9.8% Swedish ownership), as well as the paper and packaging
cluster (9.2% Swedish ownership) and the wood cluster (8.7% Swedish ownership).
Overall, both the Swedish and the Norwegian economy show strong interconnections when
considering value added activities. Figure 12 displays clusters as High if they are within the eight
most important clusters in the respective country in terms of value added. Cross-comparing the
relative importance of clusters, five clusters emerge as being particularly important for both
countries: Financial services, business services, IT services, telecommunications, and metal prod-
ucts. Within both countries, these five clusters are among the eight largest clusters. Further-
more, the oil and gas cluster is highly important, both because of its importance to Norway, but
also due to the high share of Swedish ownership. Finally, the interconnection in the paper and
packaging as well as the wood industry are notable due to the high ownership of Swedish firms
in Norway, and the relative importance of these clusters to the Swedish economy.
Oil and
Gas
Automotiv
e
Aerosp
ace
Electro
nic C
ommerce
Wood
Paper
and
Pa
ckag
ing
Swedish Ownership Norwegian Ownership
0
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
24 The Nordics: Partners in Innovation?
Figure 12: Interconnection, value added
Figure 13 displays cross-country ownership. A cluster is considered as High, if more than 8% lie
within the control of the respective other country. Medium control is present when the foreign
control lies between 7.9% and 2%, while low control is any control below 2%. The strongest
cross-ownership clusters emerge as the three ‘high-medium’ clusters; being wood, telecommu-
nications, and IT services. There are seven more cluster within the ‘medium-medium’ category
displaying a moderate cross-ownership.
Figure 13: Interconnection, ownership
Medium/low
//Maritime Oil and Gas
Biotechnology
Financial ServicesPaper and Packaging
Production Technology
Pharmaceuticals
Automotive Software Telecommunications
Business Services
Metal Products
IT Services
Med
ium
/low
SWE
DE
N
NORWAY
Hig
h
High
42%of Swedish economy is in high clusters
85% of Norwegian economy
is in high clusters
Low High
// Oil and Gas
Oil and Gas
Wood
Biotechnology
Creative Industries
Automotive
Aerospace
Paper and Packaging
Fishing and Aquaculture Telecommunications
Maritime
Software
Financial Services
Electronic Commerce
Business Services
Metal Products
IT Services
Low
NO
RW
EG
IAN
CO
NTR
OL
IN S
WE
DE
N
SWEDISH CONTROL IN NORWAY
Med
ium
Hig
h
Medium
The Nordics: Partners in Innovation? 25
Finally, considering the Swedish labour force in Norway (Figure 14), there are several knowledge
intensive clusters, which have a high share of higher educated people (Biotechnology, Software).
The largest clusters in terms of Swedish employees are Business Services, Creative Industries, IT
Services, Oil and Gas, and Software.
Figure 14: Number of Swedish Employees in Norway
Source: SSB and BI
0
200
400
600
800
1000
1200
1400
1600
Biotech
nology
Busine
ss Se
rvice
s
Creati
ve In
dustri
es
Finan
cial S
ervic
es
IT Se
rvice
s
Mari
time
Med
ical D
evice
s
Met
al Pr
oducts
Oil and
Gas
Phar
maceu
ticals
Produc
tion T
echn
ology
Softw
are
Telec
ommunica
tions
Wood
Higher Education No Higher Education
26 The Nordics: Partners in Innovation?
Building a Nordic Industrial Knowledge BaseIN THIS SECTION, we develop a knowledge based industrial development model for the Nordics,
in order to integrate the insights and data presented in the previous sections. At the core of this
model is the shared industrial knowledge base that all Norwegian and Swedish industries can
build on. This common knowledge base is a combination of experience-based knowledge and
more formal R&D based knowledge. The shared Nordic knowledge base consists of six know-
ledge fields, often referred to as Enabling technologies. These reside in existing knowledge indus-
tries, and the knowledge fields are embodied in the innovation ecosystem surrounding them.
The first of these core knowledge fields, we refer to as DigiTech, or information and digital-
ization technology, and this knowledge field is the strategic core of the Nordic IT and ICT
industries. Both Norway and Sweden have taken strong positions in telecommunication, in
software and information technology, and the ICT industry is concentrated in strong IT clusters
in Stockholm and Kista in Sweden and in Oslo and Fornebu in Norway. The value creation of
this industry remains strong in both countries. The cluster attractiveness dimensions are high,
including R&D and innovation attractiveness and ownership attractiveness. Norway has some
limitations in terms of educational and talent attractiveness, but this deficit is largely compen-
sated by a high proportion of foreign experts working in the ICT industry. There are several IT
companies actively operating in both countries, examples being EVRY and Visma and most of
the international IT companies.
DigiTech is not simply software and IT, and other forms of digitalization technologies. It also
includes the rapidly emerging field of Big Data, where huge amounts of digital information are
analyzed and utilized in new ways.
The second knowledge field of key importance in both countries is referred to as SensorTech.
This field is closely related to IT, but includes sensors and remote control technology that allows
companies to develop robots, ROVs and drones. Much of this technology was originally devel-
oped in the defence industry and in aerospace, but it is today disseminated into most advanced
manufacturing. SensorTech plays for example a pivotal role in the offshore oil and gas industry,
especially in subsea technology, which is a key industrial sector in Norway. Digitalization and
robotization are key requirements in order to transform existing manufacturing industries into
Industry 4.0 manufacturing.
The third knowledge core element is BioTech that largely resides in the various life science
industries, most notable in health related biotech and in pharma. This industry has traditionally
been stronger in Sweden and Denmark than in Norway, but large efforts are today undertaken
to build an innovative life science cluster in Oslo. Often, the broader terms, Bioindustries or
Bioeconomy, are used. They include not only health sector biotech, but also marine biotech that
is strong in aquaculture and seafood industry, industrial biotech that is related to the forest and
The Nordics: Partners in Innovation? 27
biomass industries, as well as agricultural biotech related to the food industry and plant and
animal genetics.
The fourth knowledge core element included, CleanTech, is not as precisely defined at the three
first enabling technologies. CleanTech refers to the large repertoire of environmental technolo-
gies that can be found within renewable energy, most notably hydropower, solar and wind, but
also energy saving technologies in construction, manufacturing, transportation and other indus-
tries. Battery technology is a prime example of a technology with transformational characteris-
tics. The purpose is to develop processes that reduce the climate footprints and other emissions.
The goal is to create a climate neutral society, reducing the dependency of fossile fuels. It also
includes new growth areas, such as water technology and clean air technology.
The fifth knowledge element of large importance for Nordic industries is FinTech, which is
about to transform banking, financing and payment systems, creating new business models. The
Nordic countries have a competitive and competence advantage in this area, as measured by the
penetration of internet banking and the use of mobile phone solutions in more and more areas.
The Nordics may well be the first cash free societies in the world, and disruptive technologies
may change our financial system in a fundamental way. Telecom plays a key role in this sector,
as banking is challenged by telecom operators, Facebook and Google.
The sixth knowledge field included is NanoTech, that can be applied in a variety of industries,
most notably in the materials and metals industry, creating new advanced materials and new
ways of manufacturing. Some observers also point to EdTech as a seventh enabling technology,
changing our educational system in fundamental ways, but the Nordics still have some way to
go before they take a lead position in this area. Furthermore, EdTech is closely related to digital-
ization.
These six core technologies, perhaps most importantly digitalization and robotics, are closely
linked to the major cluster industries in both countries. Take Norway as an example: The Nor-
wegian IT industry, in addition to serving the Norwegian market, has developed lead positions
in applications of IT technology to the offshore oil and gas industry, the maritime industry and
the seafood industry. Examples are dynamic positioning technology applied for oil platforms
and drilling vessels, subsea technology and drones for underwater operations, and environmen-
tal surveillance systems for monitoring the ocean environment. In Sweden, there is a similar
integration of software and IT solutions for the auto and aero industries, as well as in the elec-
tro-technical and telecom industries, led by such multinationals as SKF, ABB and Ericsson.
Similar international positions have been developed by the Norwegian finance industry that
dominates such sectors as energy and maritime finance, while the Swedish finance industry has
a broader industrial base, much consistent with the broader manufacturing and business services
base of Sweden. Thus, finance is a global enabler for the cluster industries, much the same way
as ICT and advanced business services.
It should be noted, however, that job creation is still highest in the major industrial clusters in
each country, and the enabling technologies serve to protect and advance such employment,
28 The Nordics: Partners in Innovation?
when faced with intensified global competition. There is a strong interdependency between an
advanced knowledge base and advanced industrial clusters, and furthermore, there is important
cross learning between clusters, as has been well documented for the three major ocean indus-
tries in Norway.
Figure 15: Nordic Industrial Knowledge Base
The horizontal axis in Figure 15 represents the upgrading of the major existing industrial
clusters in both countries. As was pointed out in the previous empirical section, the major
traditional Norwegian and Swedish industrial clusters do not overlap much. Thus, in order to
develop a Nordic innovation hub, we need to look in other directions. The map of Norway-Swe-
den industrial interconnections discussed in the empirical section shows the areas for potential
innovation enhancement and growth.
The innovative dimensions are better captured by the vertical development axis in the model
advanced above. One innovation direction is the transformation and greening of other cluster
industries by the application of new technologies from the knowledge core. Examples include
transformation of retailing into e-Commerce, the transformation of the housing and construc-
tion industries into smart homes, smart cities and smart infrastructure, and the transformation
of the renewable energy industry by smart grids and new types of renewable energy, such as
Major Norwegian Clusters
Offshore Oil and Gas
Electromechanical
Software Industries
E-commerce
Health Industries
Smart Cities
Creative Industries
Renewable Energy
MaritimeAuto/Aero
SeafoodPaper and Packaging
Major Swedish Clusters
Nordic Industrial Knowledge Base
DigiTech (ICT)
SensorTech (Mftr)
BioTech (LifeScience)
FinTech (Banking)
CleanTech (Renewables)
NanoTech (Materials)
New Emerging Clusters
Transformed Clusters
The Nordics: Partners in Innovation? 29
solar and wind power, batteries and power grid systems balanced by hydro power. In order to
achieve these transformations of industries, we need to combine different types of core tech-
nologies, and draw insights from related clusters. Creating smart infrastructure, for instance,
combines knowledge from construction and roads, transportation and logistics, autos and trains,
electricity and grids, as well as better understanding of human living.
So far, we have discussed how existing industries can be transformed and made greener, by the
application of new technology, and by combining insights from related clusters. What remains
to be discussed is how new knowledge-based industries can emerge from the existing knowl-
edge base. The best example is probably how the Nordic ICT industries have become a strong
global cluster in its own right, by taking positions in such industrial sectors as mobile telecom,
internet search technology, computer games, video conferencing and payment systems. The key
to this development seems to be a strong software environment in Stockholm and Oslo, with
important R&D support from i.a. KTH, NTNU, universities and more specialized computer
science labs like Simula.
The other large development vector is health tech, health biotech and pharma. The health sec-
tor is one of the fastest growing industries in the world, driven by a growing elderly population
and the life science revolution. Sweden and Denmark were able to develop global pharma com-
panies several years ago, but several of these companies have been absorbed by multinational big
pharma. The same happened in Norway, where Nycomed was bought by Amersham and later
by GE Health Care. We now witness a new phase in the biopharma area, where small innovative
companies emerge from university research hospitals and become the new drivers. The medical
cluster around Karolinska University Hospital is a prime example, and Oslo University Hospital
now tries to copy this trend in Norway. A related development takes place within health tech
and welfare technology, where DigiTech and SensorTech find important applications. The key
is to combine life science and digitalization creating completely new concepts, products and
services. A constraining factor in developing a global health cluster is the lack of competition
at the buyer side due to the almost monopoly role of the government in hospitals and health
provision in the Nordic countries.
The third example of a promising new cluster development in the Nordics can be seen within
Creative industries. This includes a large specter of creative industries, ranging from Scandina-
vian design in furniture and home furnishing (IKEA), to architecture (Snøhetta), sports, music,
literature, media, film, TV shows and computer gaming. Thus, it should not surprise anyone
that Spotify was developed in Sweden. The creative industries play a key role in Richard Flor-
ida’s ideas for urban development, and it serves as an enabler for other industries by creating
attractive urban locations. We are not including travel and tourism in this category, as the value
creation from these industries tend to be low.
30 The Nordics: Partners in Innovation?
Policy recommendationsIN THIS REPORT, we have presented a knowledge-based model of innovation and industrial
development for the Nordics, and we have added new empirical data of the Nordic business
linkages that currently exist between the two countries. Based on these two pillars, four sets of
policy recommendations for the two governments emerge:
1. Building a common Nordic industrial knowledge base2. Upgrading and globalizing existing cluster industries in both countries3. Transforming and greening existing cluster industries4. Creating new innovative knowledge industries with a Nordic base
Building a common Nordic industrial knowledge base
Building a common Nordic industrial knowledge base is a question of developing enabling
technologies that industries in both countries can jointly draw upon. This requires much closer
cooperation between the two countries in research and innovation, both at university and cor-
porate levels. Concrete examples would be joint Nordic industrial research programs where the
Research Councils of the two countries cooperate more, and joint university degrees between
Norwegian and Swedish universities, including industrial partners.
A competitive and competence advantage of both countries is the ability to transform knowledge
into innovation, while there may be constraints on the entrepreneurial capacity in both countries
(Figure 2). Traditionally, experience based knowledge has been most important for innovation in
the Nordics, but today research based knowledge emerges as increasingly important for innova-
tion, as we see in life sciences and other fields. Innovation in the Nordics has traditionally come
from the corporate sector, either through intrapreneurship in corporations or through business
spin offs where people with corporate experience have started their own innovative businesses.
In the new knowledge industries, we find more innovation from universities and labs, and we see
more ‘born global’ firms, rather than firms following in the footsteps of the major corporations.
The software industry provides many relevant examples of this new pattern of innovation.
We also argue that the Nordic model of organization and management, with highly empow-
ered employees and relatively flat organizational structures, is well adapted to innovation and
knowledge-based firms. Rather than copying Anglo-American principles of organization and
management, we should develop a Nordic management style that allows more for creativity and
innovation, rather than simply following rules and procedures and meeting standardized KPIs.
In the Nordic Innovation Model presented above, we have identified six fields of competence
and technology that we see as critical in building a common Nordic industrial knowledge base:
• Digitalization technology (ICT and big data) • Cleantech (Renewables)
• Sensor and robotization technologies (Industry 4.0) • Fintech (Banking)
• Biotech (Life sciences) • Nanotech (Materials)
The Nordics: Partners in Innovation? 31
These are key technological areas where the Nordics have taken some lead positions in selected
areas. The dominant positions are held by the major knowledge nations, most notably the Unit-
ed States, China, Japan and Korea, as well as some EU nations. What the Nordics need to do is to
match our best universities with our key cluster industries, taking lead positions in niches and
go global from there. This requires an extreme form of globalization where Nordic corporations
and universities have close knowledge ties with the leading knowledge clusters of the world.
Innovative knowledge ties are not developed over the Internet; they require close face-to-face
interactions in advanced knowledge settings. This points to the importance of developing global
centers of excellence in the Nordics in key industrial areas. The economics of neighborhoods are
especially important as the Nordics should jointly develop and share such centers of advanced
research and innovation. By following such policies, the Nordics may emerge as the European
innovation hubs in key areas.
Upgrading and globalizing existing cluster industries in both countries
The principles of knowledge upgrading and globalization apply to all industries, but knowledge
externalities only exist in agglomerations and strong industrial clusters. For Norway, the challenge
is to upgrade and globalize the Ocean industries, and the downturn in the offshore oil and gas
industry makes this a challenging task. Lead positions in such areas as exploration, drilling and
subsea technology are weakened by declining world markets in offshore oil and gas, and the new
and emerging Ocean industries are not developing fast enough to compensate for the decline in
oil and gas. For Sweden, the challenge is a weakened position in traditional manufacturing export
industries (e.g. the forest, metal, machinery and electro technical industries), as manufacturing is
moving to lower cost locations in Asia and Eastern Europe. The advanced knowledge functions
and the related business services remaining in Sweden, are not enough to compensate for the
decline in manufacturing jobs. Thus new knowledge industries need to be developed.
Upgrading existing cluster industries requires large investments in new technology and continu-
ing education targeting people who work in the cluster industries, rather than simply educating
students. The governments need to implement programs and incentives to upgrade existing hu-
man resources in key business sectors, and that include the whole spectrum from vocational to
engineering to business training. Joint Nordic life-long learning programs targeting the corpo-
rate sector as well as SMEs may be an effective way of linking Nordic industries. Thus, Innova-
tion Norway and Vinnova and similar agencies may find new ways of cooperating in innovation
and business development across Nordic boundaries.
Transforming and greening existing cluster industries
In addition to upgrading and globalizing existing industrial clusters, the common Nordic
knowledge base should be used for transforming and greening existing clusters. In the Nordic
innovation model advanced above, we refer to this as Transformed Cluster Industries. Examples
include the digitalization of retailing and trade into e-commerce formats, and the transforma-
tion of electricity companies into other renewable energy companies, also developing smart
grids and energy optimization programs. An integrated Nordic market for electric power,
32 The Nordics: Partners in Innovation?
including the Nordic market for green certificates, has served to speed up this process. If we
consider traditional industries such as the building and construction industries, these industries
are developing smart cities and smart infrastructure, which is an area where the Nordics may
well become the test lab of the future. We already see great interest from Asia in green city liv-
ing in Scandinavia. To develop smart cities and smart transportation systems we need to apply a
combination of new technologies, which means cutting across industrial boundaries and use big
data to find intelligent new solutions.
To make these cluster transformation processes happen, we need government incentives for
innovation and transformation, and sometimes the government need to create infant markets, like
we have seen for solar energy in Germany. Much care should be taken not to create permanent
protective measures, as all industries eventually have to meet international competition. Thus, in
developing the transformed cluster industries, we should always invite international actors, a strat-
egy which was successfully applied when Norway developed the offshore oil and gas industry.
Creating new innovative knowledge industries with a Nordic base
The perhaps most exciting scenario for Nordic industrial development is to create new and emerg-
ing cluster industries from the existing Nordic industrial knowledge base. Often new industries
emerge when related industrial knowledge is combined in new and unexpected ways. The Nordic
IT industry with its base in mobile telecommunication has created software industries that now
stand on its own feet, e.g., in search technology, in computer games, in music streaming and in
video conferencing technology, to mention only a few. Many of these new clusters emerge from
dense knowledge fields in Stockholm and Oslo, most notably at Kista and Fornebu/Lysaker. The
Nordic issue is how we combine these IT clusters in an efficient way. The merger between Telenor
and Telia failed, but there may be new and more decentralized ways of creating links between
dense clusters. Firms operating in both clusters relying on employees from both countries may
well be the best way to start. Ownership linkages may have the same effect.
Another area of great potential is the health industries, not only in biotech and pharma, but for
the whole specter of medical and welfare technology. Again, the government can play a key role
as buyer, given its dominance in the provision of health and welfare services, but it is important
that we always allow for the participation of private actors and entrepreneurs. Key university
hospitals in Stockholm, Uppsala, Lund, Oslo, Bergen and Trondheim should be drivers in this
development, but traditionally the ties between hospitals and business have been weak.
Creative industries cover a large range of services, from advanced knowledge services in design
and architecture to popular demand services in entertainment and arts. The value creation of
these industries vary from marginal performance to extremely high performance. The main
issue is scalability and ability to create a critical mass of creative actors, not only a handful of
superstars. As in all industry development, the focus should also be on the suppliers and the
knowledge service providers. This is where most of the jobs are created, and this is the infra-
structure that makes such industries prosper. Much is due to international branding. We should
also note positive spillover effects between creative industries and other industries, building
total location attractiveness.
The Nordics: Partners in Innovation? 33
Building Nordic knowledge bridgesIN THIS RESEARCH report, we have taken an economics of neighborhood approach, mapping the
cluster portfolio of Norway and Sweden, and empirically identifying the integration of the two
economies, in terms of imports/exports, foreign direct investments, cross ownership in cluster
industries and cross-national employment. What we find is two highly integrated economies,
but we also identify a large potential for building more knowledge bridges between the two
countries in order to stimulate further innovation and entrepreneurship capacity. What is
particularly important is to apply a common Nordic industrial knowledge core for transforming
cluster industries and for creating new and emerging clusters. In the previous section we pre-
sented four areas for Nordic industrial policies for strengthen the Nordic innovation neighborhood.
In this concluding section, we will briefly present four knowledge bridging strategies that
should further enhance the Nordic innovation neighborhood of Norway and Sweden. These
include:
1. Integrating Nordic research and education2. Building Nordic innovation and entrepreneurship capacity3. Developing Nordic corporations through alliance and M&A4. Linking cluster organizations
Integrating Nordic research and education
There are surprisingly few linkages between Norwegian and Swedish universities and research
institutions. Norway has traditionally built knowledge bridges to the Anglo-American world,
while Sweden relatively has built more knowledge bridges to Continental Europe. EU Research
programs has only to a limited extent compensated for this difference. We propose large-scale
R&D programs between Norwegian and Swedish universities and research institutions, involv-
ing the Research Councils of both countries as well as major corporations. As the main cluster
industries of Norway and Sweden are rather separate, we see the research potential to be highest
in the areas of enabling technologies, as discussed above. Industrially, we should focus on the
transformed cluster industries and on the new and emerging clusters that build on the common
Nordic industrial knowledge base.
This means focusing on research and innovation programs in areas such as banking and finance,
software and digitalization, renewable energy, cities and infrastructure, health and life sciences,
as well as in the creative industries. What is needed to develop more efficient knowledge bridg-
es between the two countries, is a Nordic labor market for advanced knowledge workers, as we
already see emerging in software and life sciences. This requires more educational integration
at all levels of the educational system, building large-scale exchange programs, and developing
34 The Nordics: Partners in Innovation?
joint Nordic university programs in key knowledge areas. There may be a minor language barri-
er in reaching this goal, but many universities now use English as their academic language both
in teaching and in research.
Nordic firms with operations in both countries play a key role in integrating Nordic research
and education. These firms are primary recruiters of candidates with a cross Nordic education.
They may provide internships and trainee opportunities for young candidates. Furthermore,
they should be key participants in joint Nordic R&D programs. In both countries we have seen
a preference for going beyond the Nordics in research and education. The Nordics is “too much
home”. The UK, US and Asia have greater appeal among students, and corporations also have a
market horizon that is more global than the Nordics. The same applies when corporations build
a more globally diverse knowledge employment base.
Nordic R&D is not developed by just being Nordic or because politicians like it. Nordic R&D
is build when Nordic linkages create global excellence and attracts talents and technology on a
global scale. We should learn from such places as Cambridge, US and Cambridge, UK. The re-
search should be focused in our areas of scientific and industrial strengths, not in our weak areas
or in areas where only one of the countries has world class industrial performance.
Building Nordic innovation and entrepreneurship capacity
International comparisons show that both Sweden and Norway have relatively high innovation
capacity (See figure 2), both in terms of university and corporate research and in terms of gov-
ernment measures to stimulate research and innovation. What remains weaker in both coun-
tries is the entrepreneurship capacity (See figure 2) and the supply of young entrepreneurs who
want to start up new companies and who have the ability to grow new ventures into large-scale
operations. At MIT this is described as the shift from start-ups to scale-ups. Much can be done
by developing a stronger venture capital industry in the Nordics, but often we make the mis-
take that this can be done by government funding rather by private risk capital investors. New
mechanisms for funding start-ups and scale-ups, such as crowd funding, have not gained much
foothold in Scandinavia. We need to develop new business models that require less venture capi-
tal and shorter incubation time from innovation to commercialization.
We also need a stronger focus on developing entrepreneurial talent from young age to university
level. At MIT 20% of the graduates start their own company or start working for new ventures.
In Oslo and Stockholm, the young university graduates go to work for the large corporations or
into finance and consulting. Entrepreneurship programs, especially at engineering schools, have
proved useful, but we need Nordic entrepreneurship programs, cutting across disciplinary and
national boundaries.
In the same way as we proposed joint action by the Norwegian and Swedish Research Councils in
R&D, we propose that the government innovation agencies in Norway and Sweden, such as Inno-
vation Norway and Vinnova, develop joint programs and innovation schemes to allow cross-border
ventures. This could also be done at the regional level, where two regions in the two countries
have matching industrial clusters. The large Swedish research foundations could play a similar role
The Nordics: Partners in Innovation? 35
at the Nordic level. So could major Nordic corporations like the major banks and energy compa-
nies, and also some large industrial groups. We would like to point to the Private Equity communi-
ty as a Nordic actor, given the Nordic portfolio of the major P/E companies.
Developing Nordic corporations through alliance and M&A
The large Nordic corporations have a special responsibility to developing stronger Nordic
knowledge linkages. The problem is that there are not so many large Nordic corporations
operating in both countries. The Swedish multinationals have their main market focus on EU
and Asia, while the Norwegian multinationals operate in energy and maritime industries. What
remains are the sectors of finance and investments, software and IT, construction and hous-
ing, retailing and service industries. Typically, these industries, with the exception of IT and
life sciences, have not spent much resources on R&D, and they have no tradition of serving as
knowledge locomotives in the same way as the major manufacturing multinationals, like Erics-
son and ABB, have done in the past. We also see the same tendency in the Nordics as in the rest
of the world; that large corporations scale down their R&D activities and rely more on acquiring
R&D from the outside through alliances and acquisitions. This opens promising new knowledge
opportunities for small innovative tech firms; such small innovation firms form alliances across
boundaries. There is room for an innovation matchmaking program between innovation parks
in Norway and Sweden, in order to create knowledge ties between small knowledge companies.
The window for developing stronger Nordic corporations may be right now, as many corpora-
tions may be up for sale at a low price. In finance and banking, we had major Nordic M&As in
the past, and we have seen similar M&A activity in resource industries like the forest and wood
industry and in the energy sector. We also see Nordic corporations being formed in food, con-
struction, housing, retailing and some of the new service industries. From our empirical analysis
above we find the IT and software as particularly promising for Nordic alliances and M&As, but
there may also be future opportunities within health and life sciences.
Linking cluster organizations
Both Norway and Sweden have a large array of cluster organizations within many industrial
sectors. These cluster organizations may find cluster partners on the other side of the border,
either by strengthening their knowledge base within their own industry, or by combining with
clusters with a complementary knowledge base. We know from research that innovation takes
place when related clusters are overlapping. A good example is the development of offshore
wind energy, where three Norwegian clusters (renewable energy, offshore oil and gas technology
and maritime) provided insights that gave Norway a lead in base structures of offshore wind
farms in the UK. Denmark leads in wind turbines, Sweden leads in electricity generation and
Norway leads in wind farm foundation structures. Together, we could build develop new renew-
able energy technologies that could make a significant difference for the climate and become a
strong export industry.
Linking cluster organizations in Norway and Sweden – and other Nordic countries – may
give better innovation outcomes than European cluster match making. Cultural and language
36 The Nordics: Partners in Innovation?
similarity makes exchange and learning easier, and often there are firms with operations in
both countries. Cluster linkage programs may be in areas of competence development, contract
strategies, supplier development, commercialization programs, internationalization efforts and
several other topics.
The objective of cluster linkage programs is not simply to create new knowledge bridges, but
also to create Nordic clusters in several areas operating in the same markets, but with no linkag-
es between the two countries.
The Nordics: Partners in Innovation?THIS REPORT PRESENTS a set of policy recommendation aimed at creating a dynam-
ic cross-border innovation neighborhood between Sweden and Norway. Further-
more, it identifies areas of cooperation that are particularly promising in order to
achieve this objective. Finally, the report suggests element of a strategy to build a
stronger and common innovation capacity.
This mapping represents a first phase of the project. Further mapping will have
to be undertaken - including by turning the exercise into a truly Nordic effort. In
parallel, steps should be undertaken between Sweden and Norway to stimulate the
second phase: to shape models of cooperation and set examples of how to exploit
the untapped innovation potential that we believe exists.
The Nordic area is already a highly integrated region. Among the Nordic coun-
tries, Sweden and Norway have the most interdependent economies. On this basis,
governments, businesses and research establishments, should stimulate and engage
more broadly in cooperation that would enable the Nordic area to become a lead-
ing knowledge hub on a global scale.
The Nordics: Partners in Innovation? 37
AppendixData sources and measurement
THIS REPORT IS based on data that is highly comparable between the two countries. It should,
however, be noted that accounting law and reporting requirements are similar, but not identi-
cal in Sweden and Norway. For this end, we primarily rely on three different data sources: Firm
accounting Database, Firm Ownership Database and Employee-Employed Matched Database.
To ensure consistency and the most up-to-date information, we provide the results as evident at
the end of the 2012 accounting year. This implies that the recent effects of falling oil prices and
a weaker Norwegian kroner, are not reflected in our data.
The Firm Accounting database provides detailed information on all limited liabilities firms. The
information includes firm balance sheet and profit and loss statement, the industry in which the
firm operates, its geographical location, founding year and CEO characteristics. As described
above, we utilize firm industry affiliation to indicate its cluster membership. From the Firm
Accounting Database, we construct the following measures: firm total assets defined as the sum
of total current assets and total fixed assets; Turnover defined as total revenue, and value added
defined as income before tax minus payroll expenses where payroll expenses are equal or lower
than zero.
The Firm Ownership Database provides information on all owners of limited liabilities firms.
This is an individual level dataset. It provides information on the share, magnitude of and type
of ownership that each owner has in each firm. Ownership type is divided into individual, firm
and foreign. Individual owners are identified by a unique individual ID code, which is consist-
ent over time and observations. Firm owners are identified by a unique firm ID code, which is
consistent over time and observations. Foreign owners are identified by the country in which
they are registered.
Summing the share of ownership of foreign owner registered in Sweden, would have resulted in
under-estimation of the actual stake the Swedish owners hold in Norwegian firms. In order to
provide a more accurate calculation, we examine ultimate ownership. Ultimate ownership of a
firm is the sum of both direct and indirect ownership stakes. For example, if an individual own-
er owns 10% of firm A, a firm, B owns 40% and a Swedish owner owns the remaining 50%, direct
ownership of Swedish owners is 50%. However, a Swedish owner owns 50% of firm B, which has
40% ownership of firm A. An individual owns the remaining 50% of firm B. Thus, the share of
Swedish ownership in firm A is 0.5 (direct ownership) + 0.4 × 0.5 (indirect ownership) = 0.7 or
70% of firm A is owned by ultimate Swedish owners. We utilize this identification of ultimate
ownership procedure up to 10 nested ownership levels (e.g., Firm E owns 10% of Firm D, which
owns 20% of firm C, which owns 50% of firm B and so on). Hence, we construct a measure of
Swedish ultimate ownership, not just merely direct ownership, of all Norwegian firms.
Having established the accurate percent of Swedish ownership in each Norwegian firm, we sum
38 The Nordics: Partners in Innovation?
for each cluster, firm total assets, turnover and value added multiplied by the percent of ultimate
Swedish ownership. We also sum these measures by cluster irrespective of ownership. Hence,
we measure the percent of total assets, turnover and value added controlled by Swedish owners
out of the sum of each of these values per cluster. Differences between the percent of control
of total assets and sales and the share of control of value creation allow us to examine whether
foreign owners who control assets extract more or less value relative to non-Swedish owners.
In addition to connectivity between clusters at the ownership level, only the Norwegian data
allows us to examine the distribution of Swedish employment in Norway. The Employee-Em-
ployed Matched Database provide demographic information for all employees in limited lia-
bilities firms in Norway. The demographic information includes data on both passport holding
by country and immigrant status by the country of origin. Similarly, we measure the percent of
Swedish employees out of total number of employees for each cluster. In accordance with our
knowledge perspective, we use individual highest education obtained to classify all employees
into university graduate or non-university graduates. Using this classification, we calculate the
percent of Swedish employment in Norwegian clusters in accordance with the attainment or
lack of university degree.
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