20070427 global is at ion council sweden

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1 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt

Competitiveness in the Global Economy:Swedens Position

Professor Michael E. PorterDr Christian Ketels

Institute for Strategy and CompetitivenessHarvard Business School

Globalization CouncilStockholm, Sweden

April 27, 2007

This presentation draws on ideas from Professor Porters articles and books, in particular, The Competitive Advantage of Nations (The Free Press,1990), Building the Microeconomic Foundations of Competitiveness, in The Global Competitiveness Report 2006 (World Economic Forum, 2006),Clusters and the New Competitive Agenda for Companies and Governments in On Competition (Harvard Business School Press, 1998), and

ongoing research on clusters and competitiveness. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in anyform or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of Michael E. Porter.Further information on Professor Porters work and the Institute for Strategy and Competitiveness is available at www.isc.hbs

.edu


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A Changing Global Competitive Environment

Fewer barriers to trade and investment

Rapidly increasing stock and diffusion of knowledge

Competitiveness upgrading in many countries

Globalization of markets

Globalization of value chains

Internationalization of capital, especially portfolio investment

Increasing knowledge and skill intensity of competition Value increasingly in the service component of activities

Productivity increasingly determines success

Competition among nations need not be zero-sum

Economic success depends on providing unique value, not

just meeting best practice benchmarks

Driver

Marketreaction

Implications


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Long-Term Trends in Prosperity

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

EU-15

United States

GDP per capita, US-$,

PPP-adjusted

Source: Groningen Growth and Development Center, The Conference Board, 2006

Sweden

Countries that have surpassed Sweden

in terms of prosperity:

1970s: Canada, Iceland, Norway1980s: Austria, Denmark1990s: Australia, Ireland, UK


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What Creates Sustainable Prosperity?

ProductivityProductivity

Innovative CapacityInnovative CapacityInnovative Capacity

Competitiveness

ProsperityProsperityProsperity


6/64


Microeconomic CapabilitiesMicroeconomic Capabilities

Quality of theBusiness

Environment

Quality of theQuality of theBusinessBusiness

EnvironmentEnvironment

Sophisticationof CompanyOperations and

Strategy

SophisticationSophistication

of Companyof CompanyOperations andOperations and

StrategyStrategy

Determinants of Productivity and Productivity Growth

Macroeconomic, Political, Legal, and Social ContextMacroeconomic, Political, Legal, and Social ContextMacroeconomic, Political, Legal, and Social Context

A sound context creates the potential for competitiveness, but is not sufficient

Competitiveness ultimately depends on improving the microeconomic capabilityof the economy and the sophistication of local companies and local

competition


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Context for

FirmStrategyand Rivalry

Context forFirm

Strategyand Rivalry

Related andSupportingIndustries


Factor(Input)

Conditions

Factor(Input)

Conditions

DemandConditions

DemandConditions

Improving the Business Environment

Successful economic development is a process of successive economic upgrading, in whichthe business environment in a nation evolves to support and encourage increasinglysophisticated ways of competing

Sophisticated and demanding

local customer(s) Local customer needs that

anticipate those elsewhere Unusual local demand in

specialized segments that can beserved nationally and globally

Presence of high quality,

specialized inputs availableto firmsHuman resourcesCapital resourcesPhysical infrastructureAdministrative infrastructure

Information infrastructureScientific and technological

infrastructureNatural resources

Access to capable, locally based suppliersand firms in related fields

Presence of clusters instead of isolatedindustries

A local context and rules thatencourage investment andsustained upgrading

e.g., Intellectual propertyprotection

Meritocratic incentive systemsacross all major institutions

Open and vigorous competitionamong locally based rivals


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The Boston Life Sciences Cluster

Research OrganizationsResearch OrganizationsResearch Organizations

BiologicalProducts

BiologicalBiological

ProductsProducts

Specialized Risk CapitalVC Firms, Angel NetworksSpecialized Risk CapitalVC Firms, Angel Networks

Biopharma-ceutical

Products

BiopharmaBiopharma--

ceuticalceutical

ProductsProducts

Specialized BusinessServices

Banking, Accounting, Legal

Specialized BusinessServices

Banking, Accounting, Legal

Specialized ResearchService Providers

Laboratory, Clinical Testing

Specialized ResearchService Providers

Laboratory, Clinical Testing

Dental Instrumentsand Suppliers

Dental Instrumentsand Suppliers

Surgical Instrumentsand Suppliers

Surgical Instrumentsand Suppliers

Diagnostic SubstancesDiagnostic Substances

ContainersContainersContainers

Medical EquipmentMedical Equipment

Ophthalmic GoodsOphthalmic Goods

Health and BeautyProducts

Health and BeautyHealth and BeautyProductsProducts Teaching and Specialized HospitalsTeaching and Specialized Hospitals

Educational Institutions

Harvard University, MIT, Tufts University,Boston University, UMass

Educational Institutions

Harvard University, MIT, Tufts University,Boston University, UMass

Cluster OrganizationsMassMedic, MassBio, others

Cluster OrganizationsMassMedic, MassBio, others

Analytical InstrumentsAnalytical InstrumentsAnalytical Instruments


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Institutions for CollaborationSelected Massachusetts Organizations, Life Sciences

Economic Development InitiativesEconomic Development Initiatives

Massachusetts Technology Collaborative

Mass Biomedical Initiatives

Mass Development

Massachusetts Alliance for EconomicDevelopment

Massachusetts Technology Collaborative

Mass Biomedical Initiatives

Mass Development

Massachusetts Alliance for EconomicDevelopment

Life Sciences Industry AssociationsLife Sciences Industry Associations

Massachusetts Biotechnology Council

Massachusetts Medical Device IndustryCouncil

Massachusetts Hospital Association

Massachusetts Biotechnology Council

Massachusetts Medical Device IndustryCouncil

Massachusetts Hospital Association

General Industry AssociationsGeneral Industry Associations

Associated Industries of Massachusetts Greater Boston Chamber of Commerce

High Tech Council of Massachusetts

Associated Industries of Massachusetts Greater Boston Chamber of Commerce

High Tech Council of Massachusetts

University InitiativesUniversity Initiatives

Harvard Biomedical Community

MIT Enterprise Forum

Biotech Club at Harvard Medical School

Technology Transfer offices

Harvard Biomedical Community

MIT Enterprise Forum

Biotech Club at Harvard Medical School

Technology Transfer offices

Informal networksInformal networks

Company alumni groups Venture capital community

University alumni groups

Company alumni groups Venture capital community

University alumni groups

Joint Research InitiativesJoint Research Initiatives

New England Healthcare Institute

Whitehead Institute For BiomedicalResearch

Center for Integration of Medicine andInnovative Technology (CIMIT)

New England Healthcare Institute

Whitehead Institute For BiomedicalResearch

Center for Integration of Medicine andInnovative Technology (CIMIT)


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TradedTraded LocalLocalLocalNatural

Resource-Driven

NaturalNatural

ResourceResource--DrivenDriven

29.3%

0.7%

$49,367

137.2%

4.2%

144.1

23.0

590

29.3%

0.7%

$49,367

137.2%4.2%

144.1

23.0

590

70.0%

2.4%

$30,416

84.5

3.4%

79.3

0.4

241

70.0%70.0%

2.4%2.4%

$30,416$30,416

84.584.5

3.4%3.4%

79.379.3

0.40.4

241241

0.7%

-1.2%

$35,815

99.5

2.1%

140.1

3.3

48

0.7%0.7%

--1.2%1.2%

$35,815$35,815

99.599.5

2.1%2.1%

140.1140.1

3.33.3

4848

Share of Employment

Employment Growth Rate,1990 to 2004

Average Wage

Relative Wage

Wage Growth

Relative Productivity

Patents per 10,000Employees

Number of SIC Industries

Note: 2004 data, except relative productivity which uses 1997 data.Source: Prof. Michael E. Porter, Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School

The Composition of Regional EconomiesUnited States, 2004


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Specialization of Regional EconomiesSelect U.S. Geographic Areas

BostonAnalytical InstrumentsEducation and Knowledge CreatioCommunications Equipment

BostonAnalytical InstrumentsEducation and Knowledge CreationCommunications Equipment

Los Angeles AreaApparelBuilding Fixtures,

Equipment andServices

Entertainment

Los Angeles AreaApparelBuilding Fixtures,

Equipment andServices

Entertainment

ChicagoCommunications EquipmentProcessed FoodHeavy Machinery

ChicagoCommunications EquipmentProcessed FoodHeavy Machinery

Denver, COLeather and Sporting GoodsOil and GasAerospace Vehicles and Defense

Denver, CO

Leather and Sporting GoodsOil and GasAerospace Vehicles and Defense

San DiegoLeather and Sporting GoodsPower GenerationEducation and KnowledgeCreation

San DiegoLeather and Sporting GoodsPower GenerationEducation and KnowledgeCreation

San Francisco-Oakland-San JoseBay Area

CommunicationsEquipmentAgriculturalProductsInformationTechnology

San Francisco-Oakland-San JoseBay Area

CommunicationsEquipmentAgriculturalProductsInformationTechnology

Seattle-Bellevue-Everett, WAAerospace Vehiclesand DefenseFishing and FishingProductsAnalytical Instruments

Seattle-Bellevue-Everett, WAAerospace Vehiclesand DefenseFishing and FishingProducts

Analytical Instruments

HoustonHeavy Construction ServicesOil and GasAerospace Vehicles and Defense

HoustonHeavy Construction ServicesOil and GasAerospace Vehicles and Defense

Pittsburgh, PAConstruction MaterialsMetal ManufacturingEducation and Knowledge

Creation

Pittsburgh, PAConstruction MaterialsMetal ManufacturingEducation and Knowledge

Creation

Atlanta, GAConstruction MaterialsTransportation and LogisticsBusiness Services

Atlanta, GAConstruction MaterialsTransportation and LogisticsBusiness Services

Raleigh-Durham, NCCommunications EquipmentInformation TechnologyEducation andKnowledge Creation

Raleigh-Durham, NCCommunications EquipmentInformation TechnologyEducation andKnowledge Creation

Wichita, KSAerospace Vehicles and

Defense

Heavy MachineryOil and Gas

Wichita, KSAerospace Vehicles and

DefenseHeavy MachineryOil and Gas

Note: Clusters listed are the three highest ranking clusters in terms of share of national employmentSource: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School


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Plastics

Oil andGas

ChemicalProducts

Pharma-ceutical

PowerGeneration

AerospaceVehicles &

Defense

Lightning &ElectricalEquipment

FinancialServices

Publishingand Printing

Entertainment

Hospitalityand Tourism

Trans-portation

andLogistics

InformationTech.

Communi-cations

Equipment

MedicalDevices

AnalyticalInstruments

Educationand

KnowledgeCreation

ApparelLeather

andRelatedProducts

AgriculturalProducts

ProcessedFood

Furniture

BuildingFixtures,

Equipment

andServices

Note: Clusters with overlapping borders or identical shading have at least 20% overlap (by number of industries)in both directions. Clusters in which Stockholm has a strong position within Sweden are in bold

Sportingand RecreationGoods

BusinessServices

DistributionServices

Fishing &

FishingProducts

Footwear

ForestProducts

HeavyConstruction

Services

Jewelry &Precious

Metals

ConstructionMaterials

PrefabricatedEnclosures

Textiles

Tobacco

HeavyMachinery

AerospaceEngines

Automotive

ProductionTechnology

Motor DrivenProducts

Metal

Manufacturing

Related Clusters in the U.S. EconomySchematic Representation


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Cross-National Collaboration of Cluster Initiatives

FINLANDCentre of Expertise, Gene Technology

and Molecular BiologyFIVDIC, In Vitro Diagnostics Industry ClusterCulminatum, Medical &Welfare Technologies

Technology Centre Teknia Ltd

FINLANDCentre of Expertise, Gene Technology

and Molecular BiologyFIVDIC, In Vitro Diagnostics Industry ClusterCulminatum, Medical &Welfare Technologies

Technology Centre Teknia Ltd

NORWAY

BIOINNBCNorth

NORWAY

BIOINNBCNorth

SWEDEN

Biotech UmeUppsala BIO

Biomedical Development, West SwedenLivets Nya Verktyg

Healthcare Technology AllianceBioMedley

SWEDEN

Biotech UmeUppsala BIO

Biomedical Development, West SwedenLivets Nya Verktyg

Healthcare Technology AllianceBioMedley

NORTHERN GERMANY

Life Sciences SH & HHBioCon Valley

medRegio Luebeck

NORTHERN GERMANY

Life Sciences SH & HHBioCon Valley

medRegio Luebeck

DENMARK

bioTEAMsouthBioMedico Forum

DENMARK

bioTEAMsouthBioMedico Forum

ESTONIA

Estonian Biotechnology Association

Tartu Biotech Cluster

ESTONIA

Estonian Biotechnology Association

Tartu Biotech Cluster

CROSS-BORDER EFFORTS

ScanBaltMedicon Valley AcademyMedCoast Scandinavia

CROSS-BORDER EFFORTS

ScanBaltMedicon Valley AcademyMedCoast Scandinavia


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The Process of Economic DevelopmentShifting Roles and Responsibilities

Old ModelOld Model

Government drives economic

development through policy

decisions and incentives

Government drives economic

development through policy

decisions and incentives

New ModelNew Model

Economic development is a

collaborative process involving

government at multiple levels,

companies, teaching andresearch institutions, and

institutions for collaboration

Economic development is a

collaborative process involving

government at multiple levels,

companies, teaching andresearch institutions, and

institutions for collaboration

Competitiveness must become a bottom-up process in which many individuals,companies, clusters, and institutions take responsibility

Every region and cluster can take steps to enhance competitiveness

Successful competitiveness efforts set clear priorities reflecting the specificbarriers companies face


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Swedish Competitiveness 2007

Prosperity driven by solid levels of productivity and labor mobilization

Labor productivity still below EU-15 average but closing the gap

Labor mobilization advantage relative to EU-15 stable after

significant drop in 1990s; little job creation in the private sector

Strong integration into global markets, driven by core of multinationals

Export market share broadly stable, shifting to services

Significant presence of foreign companies

Strong outward investment, especially in the Baltic Sea Region

Low domestic investment rate

High but falling patenting rate

Universities leading in the region, but not globally


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Productivity versus Working HoursSelected Countries

0

10

20

30

40

50

60

70

500 600 700 800 900 1000 1100 1200

Real GDP per Hour Worked, PPP adjusted, 2005

Hours worked per Capita, 2005

Latvia

Estonia

Finland

Lithuania

Russia*

Germany

Poland

Norway*

Note: Affected by oil revenuesSource: Groningen Growth and Development Centre and The Conference Board (2006), authors calculations

DenmarkSWEDEN

Japan

S Korea

Mexico

United States

Australia

New Zealand

IrelandFrance

Iceland

UK

NL

SwitzerlandItaly

Belgium

Spain

Portugal

Canada

Czech Republic

Hungary

Slovakia

Slovenia

Greece


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Long-Term Trends in Labor Productivity

0

10

20

30

40

50

60

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

GDP per hour workedUS-$, PPP-adjusted


EU-15

United States

Sweden

Catch-Up Stagnation New Growth


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Long-Term Trends in Labor MobilizationSweden versus EU-15

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Employees as % of Population

Hours per Employee

Gap in %,

Sweden versus EU-15

Unemployment


Net Gap


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Entrepreneurship

0%

5%

10%

15%

20%

25%

30%

G

reeceIta

ly

Port

ugal

Polen

CypernSp

ain

Irelan

d

CzechRe

publi

c

Lithu

aniaMa

lta

Hungary

Belgium

Slov

akiaUK

Austria

Finlan

d

Nethe

rland

Ge

rman

y

France

Swe

denLatvi

a

Slov

enia

Luxem

bourg

Denm

ark

E

stonia

N

orway

Share of Entrepreneurs in the

Labor Force, 2005

Source: NUTEK (2007)

Sweden


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SwedenCluster Export Portfolio, 1997-2005

Change in Swedens world export market share, 1997 2005Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School;Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database and the IMF BOP statistics.

Swedensworldexportmarketshare,

2005

0%

1%

2%

3%

4%

5%

6%

7%

8%

-3.5% -2.5% -1.5% -0.5% 0.5% 1.5% 2.5%

Change In Swedens Overall

World Export Share: -0.05%

Swedens Average World

Export Share: 1.44%

Exports of US$2 Billion =

Forest Products

Business Services

Communications Equipment

Furniture

Communications Services

ConstructionServices

(1.32%,-4.37%)

Biopharmaceuticals

Power and PowerGeneration Equipment

Fishing andFishing ProductsFinancial

Services

Medical Devices

Aerospace Engines

Aerospace Vehicles and Defense

Publishing and Printing

Sweden


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SwedenCluster Export Portfolio, 1997-2005 (continued)

Change in Swedens world export market share, 1997 2005Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School;Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database and the IMF BOP statistics.

Swedensworldexportmarketshar

e,

2005

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

-0.5% -0.3% -0.1% 0.1% 0.3% 0.5%

Change In Swedens Overall

World Export Share: -0.05%

Swedens Average World

Export Share: 1.44%

Publishing and Printing

Automotive

Metal Mining andManufacturing

Transportationand Logistics

Production Technology

Hospitalityand Tourism

Oil and Gas Products

Plastics

Motor Driven Products Heavy Machinery

Chemical Products

Analytical Instruments

Processed Food

Information Technology

Building Fixtures and Equipment

Entertainment andReproduction Equipment

Lighting andElectrical Equipment

Agricultural Products

Prefabricated Enclosures and Structures

Textiles

Apparel

Construction MaterialsMarine

Equipment

Jewelry, Precious Metals and Collectibles

Sporting, Recreational and Children's Goods

Leather and Related Products

Footwear

Tobacco

Exports of US$2 Billion =


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Foreign Direct InvestmentSelected Countries

0%

20%

40%

60%

80%

100%

120%

140%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Inflows of Foreign Direct Investment, in % of Domestic Capital Formation, 2001 - 2005

Stock of ForeignDirect Investment, in

% of GDP, 2005

SWEDEN

Czech Republic

Estonia

New Zealand

Chile

UK

US

Australia

Japan

Iceland

Hungary

Italy China

India

ThailandDenmark

Slovakia

Switzerland

Netherlands

GermanyFinland

Ireland

Belgium

Source: World Investment Report (2006), authors analysis.


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0

50

100

150

200

250

300

-10% -5% 0% 5% 10% 15%

Patents per 1000 Capita, 2005

Growth of Patents per Capita, CAGR, 2000-2005

Innovation PerformancePatenting in the United States

Source: USPTO (2006), authors analysis.

Denmark

Finland

Germany

Russia

SWEDEN

Norway

United States

Japan

Taiwan

France UK

Canada

Switzerland

Italy

South Korea

Australia

Israel

Singapore

Hong KongIreland

Austria

NL Iceland

New ZealandSpain

MalaysiaSouth Africa Hungary

China (.3, +27%)India (.3, +22%)


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Sweden in the Business Competitiveness IndexKey Observations

Sweden ranks 7 on the Business Competitiveness Index and has beenconsistently among the top 10 in most years

Changes over time

Sweden has in the medium-term lost ground on critical competitivenessfactors relative to its peers, despite the positive current results

Wages

Swedish wages are broadly in line with the level of competitiveness butwage growth has recently been stronger than the speed ofcompetitiveness upgrading

Challenges Sweden continues to suffer from an imbalance between sound

macroeconomic policies and strong companies on the one hand and aweaker business environment conditions on the other

Key weaknesses are educational quality, government efficiency, andinfrastructure


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BCI Value, 2006

Dynamism Score, 2002 - 2006

India

China Pakistan

Italy

Finland

Australia

SWEDENNorway

Hong KongJapan

Portugal

Malaysia

Turkey

El Salvador

Peru

United StatesGermany

Chad

Mali

Vietnam

Malawi

Zimbabwe

High-incomeMiddle-incomeLow-income

EstoniaChile

Switzerland

Iceland

Ireland

Paraguay

Dominican Rep.

EthiopiaBolivia

Mozambique Nicaragua

HondurasBangladesh

Nigeria

Brazil

Trinidad

Slovenia

Russia

Spain

New Zealand

Colombia

Jordan Greece

South Africa

Ukraine

Thailand

Uruguay

Argentina

Mauritius

Slovak Republic

Lithuania

High

Low

Below average Above average Average

Medium-Term Dynamism in Competitiveness

Source: Global Competitiveness Report (2006)


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$0

$5

$10

$15

$20

$25

$30

$35

$40

Hourly Wage inManufacturing, 2004

Brazil

Finland

Denmark

Canada

Hungary

Italy

Mexico

Korea

Norway Germany

Hong KongTaiwanSingapore

Source: Global Competitiveness Report 2006, Eurostat, Bureau of Labor Statistics

Business Competitiveness Index 2004 HighLow

Australia

Austria

Belgium

Bulgaria

Cyprus

Czech RepublicEstonia

France

Greece

Iceland

Ireland

Israel

Japan

LithuaniaLatvia

Malta

Netherlands

New Zealand

Portugal

Poland

Romania

Slovenia

Slovakia

Spain

SWEDENSwitzerland

UK

United States

Sri Lanka

Locational Value: Competitiveness and Wages

F t

Factor


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University/industry research collaboration 3

Local equity market access 3

Ease of access to loans 5

Efficiency of legal framework 6

Venture capital availability 9

Quality of scientific research institutions 9

Financial market sophistication 10

Availability of scientists and engineers 10

Telephone/fax infrastructure quality 11

Railroad infrastructure development 12

Port infrastructure quality 14

Competitive DisadvantagesRelative to GDP per Capita

Competitive AdvantagesRelative to GDP per Capita

Quality of math and science education 35

Reliability of police services 26

Quality of public schools 25

Quality of management schools 25

Air transport infrastructure quality 23

Quality of electricity supply 18

Overall infrastructure quality 17

Country Ranking, Arrowsindicate a change of 5 or more

ranks since 2001


ranks since 2001

Factor (Input) ConditionsSwedens Relative Position 2006

Factor(Input)

Conditions

Factor(Input)

Conditions

Note: Rank versus 121 countries; overall, Sweden ranks 7th in Business Competitiveness and 18th in 2005 PPP adjusted GDP per capita.Source: Global Competitiveness Report 2006-2007.

C t t f

Context for


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Context for Firm Strategy and RivalrySwedens Relative Position 2006

Efficacy of corporate boards 2

Prevalence of trade barriers 4

Intellectual property protection 8

Business costs of corruption 9

Intensity of local competition 11

Favoritism in decisions of government 11officials

Effectiveness of antitrust policy 14



Centralization of economic policymaking 65

Decentralization of corporate activity 25

Cooperation in labor-employer relations 18


ranks since 2001


ranks since 2001

Context forFirm Strategyand Rivalry

Context forFirm Strategyand Rivalry


D d


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Demand ConditionsSwedens Relative Position 2006




ranks since 2001


ranks since 2001

Stringency of environmental regulations 5

Presence of demanding regulatory 5standards

DemandConditions

DemandConditions

Laws relating to ICT 18

Government procurement advanced 18technology products

Buyer sophistication 16


R l t d d S ti I d t iRelated and

Related and


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Related and Supporting IndustriesSwedens Relative Position 2006




ranks since 2001


e ated a dSupportingIndustries

Local supplier quality 7

Local availability of specialized research 9and training services

Local availability of process machinery 10

Local supplier quantity 11


ranks since 2001



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Action Priorities

Further strengthen physical and communication infrastructure toconnect better to the neighborhood and the world

Educate the public on the benefits of globalization for Sweden

Sustain focus on education and skill upgrading

Increase attractiveness for human capital from abroad

Create a better environment for entrepreneurship

Achieve world-class in science areas tied to cluster strengths

Integrate the environmental and competitiveness agendas

Create a strategy for economic integration of immigrant groups

Pursue deep integration in the Baltic Sea Region


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Moving Towards a New Model for SwedenKey Themes

Sound macroeconomicpolicies, solid institutions,and high skills are the basis

of competitiveness

Capital-intensivemultinationals drive the

economy

Innovation is based on largecompany R&D, drawing on

university research

National governmentdefines and executes policy

Strong microeconomicfoundations and regionalspecialization add critical

strengths to competitiveness

Knowledge-intensiveclusters of entrepreneurs

drive the economy

Innovation emerges in opennetworks of academia and

firms of all sizes

Policy design and executionin triple helix partnership


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B k d D


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Background Data

C ti E i P f


36/64


$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

Comparative Economic PerformanceSelected Countries

Compound annual growth rate of real GDP per capita, 1998-2005

GDP percapita(PPP

adjusted)

in US-$,2005

Iceland

Czech Rep.

Estonia

Hungary

LatviaPolandSlovakia

Slovenia

Denmark

FinlandFranceGermany

India

Japan

S Korea

NL

Norway

Australia,Canada,

U.K.

China

U.S.

SWEDEN

Switzerland

Ireland

Greece

Source: Groningen Growth and Development Centre and The Conference Board (2006), authors calculations

Lithuania

Spain

Mexico

Turkey

Portugal

New ZealandItaly

Austria

L T T d i L b M bili ti


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Long-Term Trends in Labor Mobilization

0

200

400

600

800

1000

1200

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Annual hours workedper capita


EU-15

United States

Sweden

Domestic Purchasing Power


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Normalized Purchasing Power Across Countries

0

1

2

3

4

5

6

IndiaChina

Russia

South

KoreaBr

azil

Slovak

Rep

ublicLa

tviaChile

Hungary

Eston

ia

Lithu

ania

Mexic

o

Polan

d

Czech

Republic

Taiw

an

Slovenia

Gree

ce

Portu

gal

Spain

HongK

ongS

ARItaly

United

Stat

es

Canada

N

ewZealan

d

Australia

Singap

ore

Luxemb

ourg

Irelan

d

Austria

Belgi

um

Nethe

rland

s

Germ

any

Fran

ce

United

King

dom

Finlan

d

Swed

en

Denm

ark

Icelan

dJapan

Norway

Switz

erlan

d

Source: IMF (2006), authors calculations

Purchasing PowerFactor, 2005

S edens E port Performance


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Swedens Export PerformanceWorld Export Market Shares

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Goods

ServicesTotal

Source: WTO (2006)

World exportshare in %

SwedenLeading Goods Export Industries 2005


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Industry Cluster

WorldExportShare

Change inShare,

1997-2005Export Value(in US$1,000)

1 Passenger transport vehicles Automotive 1.72% 0.19% $8,122,269

2 Miscellaneous medicaments Biopharmaceuticals 3.18% -2.49% $5,321,590

3 Petroleum Oils Oil and Gas Products 1.58% 0.01% $5,095,941

4 Parts for telecommunication equipment Communications Equipment 4.47% -4.10% $4,693,454

5 TV, radio transmitters Communications Equipment 3.06% -10.94% $4,242,399

6 Flat-rolled products of alloy steel Metal Mining and Manufacturing 8.74% 1.09% $3,532,018

7 Wood of conifer, sawn Furniture 12.63% -0.69% $2,808,103

8 Line telephone or telegraph equipment Communications Equipment 6.21% 3.48% $2,182,022

9 Miscellaneous paper and paperboard, coated Forest Products 10.66% 1.31% $2,051,603

10 Kraft paper and paperboard, uncoated Forest Products 20.19% -0.83% $1,726,457

11 Paper and paperboard, uncoated Forest Products 8.48% 1.08% $1,678,481

12 Chemical wood pulp, soda, bleached Forest Products 9.65% 0.38% $1,580,115

13 Other parts for motor vehicles Automotive 1.32% -1.09% $1,562,860

14 Internal combustion engines for vehicles Automotive 2.81% -0.23% $1,443,783

15 Road tractors, semi-trailers Automotive 6.14% 1.49% $1,240,373

16 Iron Ore and Concentrates Metal Mining and Manufacturing 4.18% -1.68% $1,123,839

17 Iron or steel bars, rods, angles, shapes and sections Metal Mining and Manufacturing 2.24% -0.94% $1,120,379

18 Medicaments containing hormones Biopharmaceuticals 5.57% -1.04% $1,100,424

19 Other parts of vehicle bodies Automotive 2.52% -0.67% $1,085,385

20 Newsprint, rolls, sheets Forest Products 9.99% -1.74% $938,702

21 Motor vehicle bodies Automotive 15.43% -1.00% $868,325

22 Fish, fresh, chilled, or frozen Fishing and Fishing Products 2.77% 1.68% $850,010

23 Polymers of ethylene Plastics 2.19% 2.02% $788,119

24 Work trucks, tractors, and parts Production Technology 6.54% 0.87% $778,778

25 Other plastics in primary forms Plastics 1.26% 0.70% $764,654

Leading Goods Export Industries, 2005

Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School;Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database and the IMF BOP statistics.


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FDI Inflows over Time


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FDI Inflows over Time

0%

20%

40%

60%

80%

100%

120%

140%

160%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

European Union

SWEDEN

Source: UNCTAD (2006), authors analysis.

FDI Inflows as % of GrossDomestic Investment

WorldU.S.

Inward FDI Stock as % of GDP, 2006

SWEDEN: 47.8%

European Union: 33.5%

World: 22.7%

U.S.: 13.0%

Regional Integration


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Foreign Direct Investment Flows

0%

10%

20%

30%

40%

50%

60%

70%

80%

Lith

uania

Finlan

d

Eston

ia

Norway

Denma

rk

S

weden

NPola

nd

NWRussia

Icelan

d

NGerm

any

Sweden

FinlandDenmark

Estonia

N Germany

Norway

LatviaIceland

Lithuania

NW Russia

N Poland

Share of inward FDI from other

BSR countries, 1999 - 2004

Source country

Source: UNCTAD, national statistical offices, authors calculations

BSR average

Prosperity


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European Regions

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%

GDP per Capita, Euro(PPP adjusted), 2002

Annual Growth Rate of GDP per Capita (PPP adjusted), CAGR, 1995 2002

Sweden

Swedish regionsOther EU-15 regionsEU accession country regions

Source: Eurostat, 2005

Sweden

Stockholm

Composition of the Traded EconomyStockholm Cluster Portfolio


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Stockholm Cluster Portfolio

0%

10%

20%

30%

40%

50%

60%

-15% -10% -5% 0% 5%Change of Share in National Cluster Employment, 1995-2003

StockholmShare ofNationalClusterEmployment,2003: 22.9%

Change in Stockholms overall share of

National Cluster Employment: -0.5%

Note: Bubble size is proportional to employment levelsSource: Statistics Sweden (2005), authors calculations

Biopharmaceuticals

Financial Services

Business ServicesCommunication Equipment

Information TechnologyDistribution Services

Education & Knowledge Creation

Heavy Construction Services

Tourism

Publishing & Printing

AnalyticalInstruments

Transportation & Logistics

Share in NationalCluster Employment,

2003


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Swedens Profile in the Global Competitiveness Report


47/64


p p

GCI Efficiency

Enhancers

Innovation

Drivers

Basic

Requirments

BCI Company

Operations &

Sophistication

Business

Environment

Quality

Rank

1

5

10

15

20

3

7

2

57

2

8


Global Competitiveness Index Business Competitiveness Index

Global Competitiveness Index


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pSweden

Efficien

cyEnhan

cers

Technolog

y

High

erEd

ucation

Markets

Innovation

Drivers

Busin

ess

Innovation

B

asicRe

quirm

ents

Health,

Education

Infrastru

cture

Institu

tions

Macro

econ

omics

Rank

1

5

10

15

20


Country Context


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49 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.pptSource: Global Competitiveness Report (2006)

Top 25

Top 25 Country Change

Business Competitiveness Index 2006


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123456

789

1011121314151617

181920212223

2425

123456

789

101112

1314151617

181920212223

2425

Top 25Top 25 Country

000

+4-1+1

+4-30

+7-50

+3+5-1-6+1

-5+3+3-6-1-3

+3-1

United StatesGermanyFinland

SwitzerlandDenmark

Netherlands

SWEDENUnited Kingdom

JapanHong Kong SAR

SingaporeAustria

IcelandNorwayCanadaFranceBelgium

AustraliaIsraelMalaysiaTaiwanIreland

New Zealand

EstoniaKorea, Rep.

Change

Note: Constant sampleof countries

Business Competitiveness Index 2006R l ti hi ith GDP P C it


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0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

United States

Switzerland

Italy

DenmarkIceland

Ireland

India

Business Competitiveness Index

2005 GDP per Capita(Purchasing Power Adjusted)

Malaysia

Source: Global Competitiveness Report 2006

SWEDEN

Canada

FinlandGermany

Qatar

Norway

HighLow

UAE

Spain

Israel

Brazil

Estonia

Chile

Indonesia

Greece

Bahrain

Argentina

Slovenia

SingaporeTaiwan

New Zealand

S Korea

South Africa

Thailand

JordanChina

Trinidad & Tobago

Turkey

Jamaica

Australia

Cyprus

Relationship with GDP Per Capita

Variation in BCI score explains morethan 80% of variation in GDP per capita

Economic Sustainability of Current Prosperity


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-15000 -10000 -5000 0 5000 10000 15000 20000

GAP (Actual Expected GDP per Capita), 2006

Sustainability in questionUntapped potential

United StatesGermany

India

Malaysia

Qatar

Norway

Italy

Chile

Argentina

Indonesia

EstoniaTunisia

Ireland

Iceland

Greece

U.A.E.Spain

Kenya

Tanzania


BCI Value, 2006

Finland

SWEDEN


Business Competitiveness Ranking Over TimeS d


53/64


Sweden

2001 2002 2003 2004 2005 2006

BCI

NBE

COS

Rank

1

5

10

15


Wage Differentials by Country


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-$20

-$15

-$10

-$5

$0

$5

$10

$15

$20

Belgi

umItaly

Norway

Denm

ark

Austria

Icelan

d

Nethe

rland

s

Germ

any

Gree

ce

Fran

ce

Switz

erlan

d

Finlan

dSp

ain

Irelan

d

Cypru

s

Swed

en

Unite

dKing

dom

Polan

dMa

lta

Slovenia

Cana

da

Bulga

ria

Australia

SriL

anka

Roma

nia

SlovakR

epublic

Hung

ary

Korea

,Rep

.

Mexic

oJapa

n

Portu

gal

Unite

dStat

es

CzechR

epublicIsr

ael

Lithu

aniaBr

azil

NewZe

aland

Latvi

a

Eston

ia

Singa

pore

Taiw

an

Hong

Kon

gSAR

Wages higher thanjustified by competitiveness

Source: Business Competitiveness Index, 2006

Wage advantagegiven competitiveness

Estimate

dabsolutegapin

hourly

wageinm

anufacturing,

US

-$,

2004

Company Operations and StrategySwedens Relative Position 2006


55/64


Swedens Relative Position 2006




ranks since 2001


Willingness to delegate authority 1

Reliance on professional management 1

Capacity for innovation 2

Breadth of international markets 3

Extent of staff training 3

Company spending on research and 5development

Extent of regional sales 5

Extent of incentive compensation 5

Nature of competitive advantage 7

Production process sophistication 7

Value chain presence 9

Degree of customer orientation 9

Control of international distribution 9

Extent of marketing 10


ranks since 2001

Wage Gap EU dataWage gap 2004:Actual versus expected wage


56/64


-20

-15

-10

-5

0

5

10

15

20

-15 -10 -5 0 5 10 15

ItalyBelgium

DenmarkAustria

Germany

Finland

Netherlands

France

Spain

UKHungaryPortugal

Czech Republic

Note: Countries in the grey area have changed their sign between 201 and 2004Source: Global Competitiveness Report 2006 and Eurostat

Actual versus expected wage

Change in wage gap 2001 - 2004

Wages above

productivity levelindicated by BCI

Wages rising more quicklythan productivity growth

indicated by BCI

Iceland

Greece

Poland

SloveniaBulgaria

Romania Slovakia

Lithuania

Latvia

Estonia

Malta

Changed signsince 2001

Changed signsince 2001

SWEDEN

Business Environment and Company Sophistication


57/64


Stronger on company sophistication

Stronger on business environment quality

United States

SwitzerlandFinland

Germany

Australia

Botswana

Brazil

Bulgaria

Chad

Costa Rica

Cyprus

Estonia

FranceHong Kong

IndiaIndonesiaIreland

Japan

Jordan

S Korea

Malta

Mexico

Morocco

New Zealand

Nigeria

Philippines PortugalQatar

Singapore

U.A.E.

Venezuela

Zambia

Algeria

Zimbabwe

Source: Global Competitiveness Report 2006


SWEDEN


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U.S. Patents by Sweden-based Institutions

Patentor Number of patents 2000 04


59/64


Patentor Number of patents, 2000-041 TELEFONAKTIEBOLAGET LM ERICSSON 1698

2 SANDVIK AKTIEBOLAG 226

3 ASEA BROWN BOVERI AB 179

4 SCA HYGIENE PRODUCTS AB 164

5 ASTRAZENECA AB 142

6 TETRA LAVAL HOLDINGS & FINANCE S.A. 121

7 SIEMENS ELEMA AB 90

8 AKTIEBOLAGET ASTRA 88

9 VOLVO LASTVAGNAR AB 75

10 AB VOLVO 74

11 AKTIEBOLAGET ELECTROLUX 64

12 KVAERNER PULPING AKTIEBOLAG 64

13 AKZO NOBEL NV 5714 SCANIA CV AKTIEBOLAG 56

15 PHARMACIA AKTIEBOLAG 51

16 VALMET FIBERTECH AKTIEBOLAG 50

16 VOLVO CAR CORPORATION AB 50

18 ALLGON AB 49

18 VOLVO PERSONVAGNAR AB 4920 DELAVAL HOLDING AB 48

21 ALFA-LAVAL AB 47

22 AUTOLIV DEVELOPMENT AB 43

22 SECO TOOLS AB 43

24 PACESETTER AB 39

25 ERICSSON, Inc. 38Source: USPTO (2006), authors analysis.

Knowledge CreationTop Universities in the Baltic Sea Region


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60 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.pptCopyright 2005 Institute of Higher Education, Shanghai Jiao Tong University

Doing Business 2006 RankingSweden


61/64


Source: World Bank Doing Business (2007), authors analysis.

Category Rank

Enforcing Contracts 2

Registering Property 7

Trading Across Borders 9

OVERALL 13

Closing a Business 17

Dealing with Licenses 17

Starting a Business 20

Getting Credit 33

Paying Taxes 39

Protecting Investors 46Employing Workers 94

Index of Economic Freedom1996 - 2006


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1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Hong Kong

Singapore

Ireland

Iceland

UK

Estonia

DenmarkUnited States

Canada

Finland

Chile

Switzerland

Germany

Sweden

Lithuania

Japan

Norway

SpainSlovakia

Taiwan

Slovenia

Latvia

Poland

Free

Source: Index of Economic Freedom (2006), authors analysis.


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Business CompetitivenessIncentive Effect of Taxation, Selected Countries


64/64


,

Hong

KongIce

land

Singapore

Ireland

Estonia

Unite

dStatesIndia

Taiwan

Unite

dKing

domChileLatviaNo

rway

Germ

anyCa

nadaMe

xico

Lithu

ania

Korea

,Rep.Po

landFin

landRu

ssiaSw

eden

Denm

arkBrazil

Positive

Negative

111

Note: Number refers to rank among 124 countriesSource: Global Competitiveness Report (2006), authors analysis.

20070427 global is at ion council sweden

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