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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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2 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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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4 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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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5 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
What Creates Sustainable Prosperity?
ProductivityProductivity
Innovative CapacityInnovative CapacityInnovative Capacity
Competitiveness
ProsperityProsperityProsperity
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6 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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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7 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
Context for
FirmStrategyand Rivalry
Context forFirm
Strategyand Rivalry
Related andSupportingIndustries
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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8 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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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9 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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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10 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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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11 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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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12 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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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13 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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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14 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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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15 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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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16 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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
Source: Groningen Growth and Development Center, The Conference Board, 2006
EU-15
United States
Sweden
Catch-Up Stagnation New Growth
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18 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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
Source: Groningen Growth and Development Center, The Conference Board, 2006
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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21 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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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22 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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
Country Ranking, Arrowsindicate a change of 5 or more
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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29 Copyright 2007 Professor Michael E. PorterSweden Globalization Council 2007 04-17-07.ppt
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
Competitive DisadvantagesRelative to GDP per Capita
Competitive AdvantagesRelative to GDP per Capita
Centralization of economic policymaking 65
Decentralization of corporate activity 25
Cooperation in labor-employer relations 18
Country Ranking, Arrowsindicate a change of 5 or more
ranks since 2001
Country Ranking, Arrowsindicate a change of 5 or more
ranks since 2001
Context forFirm Strategyand Rivalry
Context forFirm Strategyand Rivalry
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.
D d
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Demand ConditionsSwedens Relative Position 2006
Competitive DisadvantagesRelative to GDP per Capita
Competitive AdvantagesRelative to GDP per Capita
Country Ranking, Arrowsindicate a change of 5 or more
ranks since 2001
Country Ranking, Arrowsindicate a change of 5 or more
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
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.
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
Competitive DisadvantagesRelative to GDP per Capita
Competitive AdvantagesRelative to GDP per Capita
Country Ranking, Arrowsindicate a change of 5 or more
ranks since 2001
Related andSupportingIndustries
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
Country Ranking, Arrowsindicate a change of 5 or more
ranks since 2001
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.
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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
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$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
Source: Groningen Growth and Development Center, The Conference Board, 2006
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
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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
Source: Global Competitiveness Report (2006)
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
Source: Global Competitiveness Report (2006)
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
High-incomeMiddle-incomeLow-income
BCI Value, 2006
Finland
SWEDEN
Source: Global Competitiveness Report (2006)
Business Competitiveness Ranking Over TimeS d
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Sweden
2001 2002 2003 2004 2005 2006
BCI
NBE
COS
Rank
1
5
10
15
Source: Global Competitiveness Report (2006)
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
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Swedens Relative Position 2006
Competitive DisadvantagesRelative to GDP per Capita
Competitive AdvantagesRelative to GDP per Capita
Country Ranking, Arrowsindicate a change of 5 or more
ranks since 2001
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.
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
Country Ranking, Arrowsindicate a change of 5 or more
ranks since 2001
Wage Gap EU dataWage gap 2004:Actual versus expected wage
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-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
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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
High-incomeMiddle-incomeLow-income
SWEDEN
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U.S. Patents by Sweden-based Institutions
Patentor Number of patents 2000 04
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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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Doing Business 2006 RankingSweden
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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
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,
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.