"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.


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.


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-


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.


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


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


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


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.


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:


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.


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.


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.


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


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


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.


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.


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


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


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%


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%


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


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


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


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,


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


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.


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)


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,


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.


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


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


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


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.


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


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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"The Nordics: Partners in Innovation?"

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