Rate of new firm start-ups Another indicator of the rate of renewal in an economy is the frequency of new firm start-ups, since establishing new firms is one of several channels for the economic exploitation of innovations. Sweden shows low levels of start-up firms compared to most other countries. Also the rate of shut-down is relatively low in Sweden, which means that a high proportion of the small firms tend to survive a relatively long time. However, start-ups in Sweden generally tend to remain very small, with only 1.5 employees on average after two years. This is a low rate of employment expansion compared to most other European countries. 20 In terms of the number of individuals that are annually engaged in starting new firms, Sweden is ranked 33 in the world. Sweden is clearly behind all the other Nordic countries and most other EU member states, with the exception of Belgium, Finland, the Netherlands, Italy and France, 21 figure 6.4. Most new firms in Sweden are started in the service sector, particularly in the trade, hotel and restaurant industries. <strong>The</strong> construction industry also shows a high level of start-ups. Apart from traditional service industries, knowledge-intensive services such as financial services and business services show high levels of start-ups. <strong>The</strong>re is a clear trend towards an increasing proportion of start-ups in knowledge-intensive service industries. 22 New technology-based firms New technology-based firms (NTBFs) are important agents of radical renewal, variety and dynamics in innovation systems. <strong>The</strong>y are generally assumed to be important in the early commercialisation stages of new knowledge, of which the creation of new markets, or niches, is an important part. While large firms generally have large financial, technological, production and network resources, they often have vested interests that tie them to existing technological trajectories. 23 Measures of the creation of NTBFs and their growth effects are therefore key indicators of the capacity of innovation systems to generate potential for radical industrial renewal and growth. Sweden, Denmark and Finland show a similar level of spin-offs from high-technology industries, while Norway lags behind the other Nordic countries. Of all spin-off firms in Sweden during 1999–2000, 17.5 per cent were spin-offs from high-technology sectors. <strong>The</strong> corresponding figures for Denmark and Finland were 17.5 and 17.3 per cent respectively, but only 11.2 per cent in Norway. Finland and Sweden show considerably higher levels of spin-offs from high-technology manufacturing industries, which is a reflection of the greater size of these industries in those countries compared to the other Nordic countries. Despite a broader high-technology manufacturing industry in Sweden, Finnish spin-offs from the high-technology manufacturing industry are about 50 per cent larger than in Sweden. This is primarily related to the comparatively high spin-off rates from the Finnish telecommunications industry. Most of the high-technology spin-off firms in Sweden are generated from the computer consultant industry, figure 6.5. Sweden shows higher levels of university spin-offs than any other Nordic countries. However its overall share of such spin-offs is very low. Further, spin-offs from universities generally grow at a considerably slower rate than spin-offs from industrial firms or other NTBFs. 24 <strong>The</strong> rate of spin-offs from research institutes – and indeed the subsequent growth of such firms – is higher than for university spin-offs in Sweden. However, since the institute sector is very small in Sweden, the quantitative role of institute spin-offs is quite limited, figure 6.6. Moreover, researcher-initiated or researcher participation in high-technology start-ups is very low. Only about 1 per cent of all new firms in Sweden are researcher-initiated. Despite the large research system in Sweden, this is considerably lower than in Finland, but somewhat higher than in Norway. Most researcherinitiated start-up firms are generated from hightechnology manufacturing firms, figure 6.7. In Sweden, the proportion of higher educated individuals starting and running SMEs is about the same as the overall proportion of higher educated people in the country’s population. <strong>The</strong> majority of NTBFs in Sweden started by people with a higher education in engineering, medicine or natural science were part-time firms. Most of these firms were started by people whose higher education was in medicine. A majority of the businesses started by people with a higher education were wound up within four years of start-up. 25 Growth patterns in new technology-based SMEs Not all NTBFs contribute significantly to economic growth, though when they do, the growth mechanisms involved may be one of several types. One concerns the direct growth of NTBFs themselves, another is growth within larger firms, subsequent to mergers, and a third mechanism is growth effects through their role in industrial networks. Not many NTBFs grow to be large by themselves. Of all <strong>Swedish</strong> high-technology spin-offs from 1996, about 63 per cent were still running in 2000. However, only about 28 per cent of the spin-off firms started in 1996 had generated any employment growth in the period 1996–2000. <strong>The</strong> proportion of surviving spin-off firms that generate employment growth is considerably higher in Finland than in Sweden, but much lower in both Denmark and Norway, figure 6.8. 22 THE SWEDISH NATIONAL INNOVATION SYSTEM <strong>1970</strong>–<strong>2003</strong>
6.1 Multi-factor productivity growth estimates 1980-2000, average annual growth rates, adjusted for hours worked 6.2 Economic turnover generated by products that are new to the market 2000 6.3 Economic turnover generated by products that are new to firms 2000 6.4 Percentage of active population engaged in starting new firms <strong>2003</strong> THE SWEDISH NATIONAL INNOVATION SYSTEM <strong>1970</strong>–<strong>2003</strong> 23
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