The Swedish National Innovation System 1970-2003 - Vinnova

4 Economic Competitiveness
The long-term Swedish economic competitiveness
weakened considerably during the period 1970–
2003, particularly in the early 1990s. The Swedish
national innovation system is characterised by a
shrinking, but still comparatively large, knowledgeintensive
and export-oriented manufacturing sector,
an increasing, but comparatively small, business
service sector and, by international standards,
a large public service sector. A relatively high
manufacturing labour productivity rate has not been
able to offset a declining overall share of value added
from manufacturing. This was a consequence of a
general trend towards increasing service shares in
modern economies and of increasing relocations of
manufacturing production value from Sweden to
newly industrialising countries, closer to large markets
and with a much cheaper, qualified labour force. In
relation to many other countries, Sweden has shown
relatively low average productivity levels in both
business sector services and public sector services.
Important structural changes have generated rapidly
increasing manufacturing and service knowledge
intensities, together with increasing foreign ownership
of knowledge-intensive manufacturing and service
firms.
Long-term economic development
Swedish long-term economic performance has been
rather weak in international comparison. During the
period 1970–1990, GDP growth was somewhat slower
in Sweden than in other EU and OECD countries. In
the 1990s, GDP growth slowed down considerably in
most OECD countries, and Swedish growth was among
the slowest in the OECD. Economic growth in Sweden
improved in the second half of the 1990s, when it was
faster than that of most other EU countries, albeit far
lower than that of the most rapidly growing countries.
In the early 2000s, Swedish economic growth has
continued to be faster than the largest EU countries, but
somewhat slower than several other EU and OECD
countries, figure 4.1.
As a consequence of the slow Swedish long-term
economic growth, Sweden fell in the OECD’s rankings
for GDP per capita from fourth place to fifteenth
1970–2003. Swedish national economic performance
deteriorated substantially in the early 1990s, when
Sweden fell considerably in international GDP
comparisons. In the second half of the 1990s, when
Swedish economic growth improved, Swedish GDP per
capita improved somewhat in international comparison.
In the early 2000s, Swedish GDP per capita resulted in
the country’s position fluctuating between thirteenth and
seventeenth in the OECD’s list. The main reason for
these large changes in GDP rankings is that the distance
between positions 12 and 19 is very small in terms of
GDP per capita. Therefore, even relatively small annual
changes may change positions considerably. On the
other hand, the distance from the Swedish real GDP per
capita to the top of the OECD has become significant.
The long-term deterioration of Swedish economic
performance, culminating in the severe economic crisis
in the early 1990s, was the result of gradually increasing
structural problems in the Swedish economy. The rapid
economic improvements in the late 1990s were primarily
the result of a considerably improved macroeconomic
situation, achieved by a drastic consolidation of public
finances. It was also a result of rapidly increasing exports,
as a result of the sharp currency depreciation in 1992. 6
The major route to improved productivity gains in
the late 1990s was substantial rationalisation in both the
private and public sectors. Decreasing labour-intensity
resulted in considerable improvements in overall labour
productivity. 7 The downside of these productivity
gains was rapidly increasing unemployment levels and
increasing pressure on the active work force, which is
likely to have contributed to the increasing tendencies
towards health-related work absence in the late 1990s
and early 2000s.
It should also be noted that annual average hours
worked continuously have been falling in Sweden.
Compared to 1960, average hours worked in Sweden are
15 per cent lower. As a consequence, Swedish employees
on average work fewer hours than employees in most
other OECD countries. One explanation for this is
higher shares of part-time work within the work force
than in other countries. 8 This could be one of the factors
behind the relatively slower long-term economic growth
in Sweden compared to several other OECD countries.
Swedish economic structure
The Swedish economy is dominated by large organisations,
both in manufacturing and services. A small
number of large multinational industrial groups
dominate manufacturing employment, production and
value added. By international standards, the public sector
occupies a large share of the service sector. The public
sector is also dominated by large organisations.
Since World War II, the Swedish national
innovation system has been dominated by a regime based
on advanced manufacturing technology led by a small
number of multinational industrial groups. The Swedish
manufacturing structure of R&D-intensive and exportoriented
industrial groups has also been instrumental
in generating what by international standards is a quite
advanced Swedish structure of subcontracting SMEs. In
this industrial system there has been a general division
12 THE SWEDISH NATIONAL INNOVATION SYSTEM 1970–2003