Startup nation Sweden, a success story for others to follow?

There is just something about Sweden.

I will confess I have had the fortunate opportunity to visit Sweden, Malmo to be precise, on vacation while studying for my Masters in law in the UK. It is a small but lively city in a very nice country. This was back in 2005 and even back then there was just something about Sweden.

Start up nation Sweden

The ecosystem that the Swedes have created to support start ups like any other ecosystem is complex web of factors ranging from their very culture to laws to physical infrastructure to social structure and protections. So in trying to explain how they did it we must always bear in mind that it is not one thing but many things. Let’s take for example their Right to Leave to Conduct a Business Operation Act a brilliant piece of legislation that gives a employee the right to request from their boss time off to go start a business and return if it doesn’t work out.

Yes, your heard that right, Sweden has on its law books a law that allows people time off from work without the risk of being fired to go and start their own business. There are of course rules around who, when and how this is done.

However, the key feature of this ecosystem is that it supports and is supported by the wider social protections that Sweden has developed over many years. It is part of what is known as the Nordic Model.

Promoting entrepreneurship by making it less insecure

Unquestionably entrepreneurship is about taking risks. This is unavoidable.

However, what the Swedish social protections offer entrepreneurs is a de-risking mechanism which does not eliminate risk all together, a near impossible task in entrepreneurship. In fact far from it, these social protections actually encourage people to step forward and take the risk of starting business and becoming an entrepreneur.

That is because:

The fear of losing a stable professional career if their start-up fails is a major thing holding many people back. “Many countries subsidise financing to entrepreneurs. However, reducing career risk can be just as important, and is often ignored by policy makers.” — Ting Xu, an assistant professor at the University of Virginia

Sweden has not ignore this human reality and it has the results to prove it.

The results

Needless to say this ecosystem of social protections has yielded positive results, unquestionable Sweden is a start-up nation.

This start up nation status is particularly true in technology sector. Sweden’s capital, Stockholm, has been described as a unicorn factory. Stockholm is second only to Silicon Valley for producing unicorns, a privately-held startup worth $1 billion or more, per capita.

But is this just a Swedish thing?

Could other countries model Sweden and produce same or similar results? Or is there some thing about Sweden that makes it unique?

One thing is for sure the Swedish law — Right to Leave to Conduct a Business Operation Act — appears to be quite unique to Sweden. According to post-doctoral researcher in entrepreneurship and information systems at Stockholm School of Economics, Claire Ingram Bogusz, makes Sweden to the best of her knowledge “the only country that offers a legally-enshrined right to take a leave of absence for entrepreneurship.”

While I do not believe that this start-up nation status is just a Swedish thing there is definitely some thing about Sweden.

Therefore I would urge a word of caution to policy makers around the world seeking to replicated Sweden’s start-up success in their own countries. It is not enough to graft wholesale or in part a few policies or legal tweaks here and there and expect Swedish like success. Simply borrowing the Swedish Right to Leave to Conduct a Business Operation legislation, without more, would in all likelihood be a recipe for disaster.

To achieve Swedish like success would require much more than mere imitation.

What is called for, by serious policy makers, is a systematic approach of national examination before adoption and adaption of Swedish or another nation’s policies into their own. One has to examine, among other things, the the socio-economic, socio-political, cultural and historical nature of a country to see how best to move forward.

It is important to note that while the social protections ecosystem of Sweden is an important part of their start-up success, it is not the only part. It must always be remembered that Sweden also enjoys, among other things:

  • A great education system
  • A highly skilled skilled labour force
  • Strong adherence to the rule of law
  • Low crime
  • High political stability
  • Robust infrastructure

The Swedish start-up nation success must be contextualized and viewed through through the prism of:

Sweden has developed a human, social, educational and corporate infrastructure that supports start-ups. — Exequiel Hernandez, Wharton management professor

The Swedish start-up success story from a policy perspective is then best viewed as a framework in which social protections are not simply viewed as improving the welfare of ones citizenry but as a critical plank in a nations economic development strategy.

Therefore, policy makers perusing an adoption and adaption strategy ought to craft their own start-up nation policies based on their own national circumstances but be guided by the principles of Sweden’s start-up nation success.

I tell ya there is just something about Sweden.

Originally published at http://www.commerciallawinternational.com on January 11, 2020.

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Ainsley Brown

Ainsley Brown

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