The Swedish Paradox

This paper sums up the debate about the Swedish ‘paradox’ and provides new evidence. The paradox thought has emerged in different versions, which share the common basics that Swedish R&D expenditures are high, but do not produce sufficient economic results. This empirical paradox is part of a more general debate concerning relations between R&D and growth. We show that the theoretical underpinnings of the paradox are rather weak. There is a long chain of different gears between R&D, high-tech and growth, which should lead to expectations of high variation among countries. Previous evidence suggests that Sweden appears to have problems in two of these gears, the entrepreneurial climate and innovation to high-tech production. We support this conclusion on new empirical results. First, we show that the high persistence in concentration of R&D to a few multinationals remains, which in itself is an indication of weak entrepreneurship. Second, Sweden is still behind the OECD in high-tech and medium-high-tech exports, given her R&D intensity, although she is catching up. Moreover, employment figures in the high-tech sectors point to a more favorable development. Academia has been suggested to be another weak component for interaction with business, but the empirical evidence is here scant and less transparent.