recipe for success

It’s not just long winters that push Swedes to innovate

March 29, 2013
March 29, 2013
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Sweden has found the recipe for success.(Getty Images/Al Bello)

Innovation is a difficult quality to measure, but, by all accounts, Sweden is an innovative place and only getting more so, with top rankings in innovation surveys from the Legatum Institute, the World Intellectual Property Organization, and the World Economic Forum.

The foundation for this economic strength seems to transcend the absolute terms by which many people view Sweden—either as socialist nightmare or a capital of cool or a place scarred by long winters and Lutheran angst.  In fact, Swedes seem to be pragmatically pulling from their entire heritage—a culture of entrepreneurship going back a century, the social stability of the welfare state, and that sense of pop culture—to reach forward into a globalized future.

This is most obvious in a recent slew of stories on the vibrant Stockholm startup scene, headlined by Skype and Spotify, but now including hot companies like iZettle, Klarna and Wrapp.

But innovation in Sweden is not limited to techy startups. Sweden is a world leader in life sciences, with clusters in both the Stockholm area and in southern Sweden, in conjunction with Denmark. And it’s also long been considered on the cutting edge of clean tech, largely inspired in practice and principle by its vast natural resources—meaning its rivers, wind, seas and forests. The country actually imports 800,000 tons of trash a year to fuel efficient waste-to-power plants and gets more of its energy from biomass than oil, has set a goal to be oil-free by 2020, and is the leader within the EU in renewable energy.

All this creates a welcoming ecosystem for Swedish clean tech companies like gasification firm Chemrec and solar company ClimateWell. In the World Wildlife Fund’s 2012 Clean Tech rankings, Sweden ranked third behind only Denmark and Israel. From the report:

Sweden and the USA show a common pattern, scoring well on “evidence of emerging cleantech companies” and “general innovation drivers”. Sweden edged out the USA by scoring stronger (on a relative basis) on the “evidence of commercialised cleantech innovation” factor mainly due to its relatively strong deployment of renewable energy.

But Sweden and other Nordic countries across the board need to raise their manufacturing rate and be careful to avoid getting stuck as boutique innovators who never reach a larger scale.

So why does Swedish business “punch above its weight” in terms of innovation, as Skype founder Niklas Zennström recently put it?  Like anything connected to a buzzword like innovation, it’s almost impossible to pin down, but a few things do pop up regularly in analyses of both the Swedish clean tech industry and Swedish innovation in general:

  • Global outlook, including engagement with China
  • Emerging (or re-emerging) culture of entrepreneurship
  • Government support, from regulation to infrastructure to international promotion
  • Strong commitment to R&D, as well as links between universities, government and business
  • Forward-looking national market that serves as a good testing ground
  • Long, dark winters that leave Swedes with little to do but work

Innovation is often linked to a spirit of entrepreneurship but Sweden faces significant challenges in this department. It’s hard to give stock options, there’s not a lot of venture capital for startups, taxes are high and the local market is small. These factors, among others, have driven innovative companies like Spotify out of the country.

Then there is the big question: What about the welfare state?  You’d think the tired image of Sweden as a stagnant socialist backwater would have been kicked to the curb long ago. But it reared its ugly head recently after publication of an academic paper that claimed to show that Swedish “cuddly” innovation was dependent on the “cutthroat” innovation of places like the US.

This caused a minor fuss, with Chris Farrell, in Bloomberg Businessweek, highlighting a host of evidence to the contrary, that the welfare state actually encourages risk taking and innovation, and that the fraying safety net in the US is hindering innovation there:

Fledgling entrepreneurs without family wealth to tap would have every incentive to try their hand at starting their own business if they were confident the risk of entering old age without retirement savings is hedged and knew that their children would have decent health insurance.

I moved to Sweden for the first time in 2004, when the once all-powerful Social Democrats were still in power and long before the Economist started penning paeans to Scandinavian pragmatism. And I could never understand why Sweden was not filled with state-educated entrepreneurs leaping to take risks, knowing they would be caught to some degree if they fell.

I assumed at the time that there was some deep cultural resistance to risk in Sweden, and that maybe you had to be an American in Sweden to see the opportunities. Clearly, Swedish culture is moving fast to fill the gap, and it bodes well for Sweden’s place in a globalized world—especially in clean tech, which seems poised to break through after some tough years—that at least a subset of Swedes are catching up with their opportunities.

 You can follow Nathan on Twitter at @NathanHegedus. We welcome your comments at ideas@qz.com

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