How connected are Swedish regions and small firms to global value chains? Using unique data, this report shows that small and medium sized Swedish firms in populous regions are increasingly defining Swedish participation in global value chains.

Over the past three decades Swedish firms have to an increasing degree become involved in global value chains. Iconic Swedish firms, such as Ikea or Ericsson, coordinate global networks of sub-contractors and partners from around the world that contribute crucial inputs in their final goods. Other major Swedish industries sell their goods into production chains that stretch across the globe, as when SKF provide ball-bearings for Danish wind-mills for the Indian market. It is not only the large firms that are becoming more global, but so are their smaller suppliers. For every Volvo car that is sold in China, a number of small and medium sized Swedish firms provide essential inputs.

A question of importance to policy makers as well as the general public is what this increased use of global production systems means for Sweden and the Swedish economy. A broad conclusion from our earlier studies is that involvement in global value chains means an increased specialization in activities (PM 2014:03).

In this report we investigate how this specialization is expressed across firms of different sizes and across the regions within Sweden. The main results show, in line with what has been suspected in other studies, that firm-size matter to the level of involvement in global value chains as does region. Small and medium size firms have, in the period 1995–2011, increased their Swedish employment levels in global value chains while large firms (more than 500 employees) have reduced their Swedish employment levels in global value chains. A significant part of the Swedish GVC jobs are thus in small and medium sized firms, located in populous regions such as Stockholm and Gothenburg. Among the small firms, business service activities stand out as a particularly important provider of GVC jobs.

Taken together with earlier findings (PM 2014:10), this suggests that the Swedish economy has successfully adapted to competing in a fragmented global economy, but that this adaptation has brought about structural changes in the labour markets – both in terms of demand for specific skills and the geography of labour demand.