The public sector is involved in a number of ways in activities intended to promote investment in knowledge-intensive operations. The various participating stakeholders, their missions, collaborations, tools and governing regulatory frameworks might collectively be referred to as an investment-promoting system. The effectiveness of such a system is significant to the success of “large knowledge-intensive investments” (hereafter SKI) on which this study focuses.

Purpose: a more effective system

The purpose of this study is to identify the preconditions for, and present suitable measures that may lead to, a more effective investment-promoting system for SKI. To this end, we have examined investment processes as they look in practice, including which stakeholders are involved, their roles and how they interact. We have also studied what the stakeholders perceive to be the attractions and potential stumbling blocks of investment, as well as proposals for improvement.

The analysis is based on case studies. Based on this empirical data and out analysis, we also offer a number of policy relevant suggestions that we feel may be of interest to both the Government Offices of Sweden and other investment-promoting stakeholders at a national, regional and local level.

Investment promotion takes place under competitive conditions

SKI have a significant impact on economic development and growth. States and regional and local authorities all over the world are involved in various investment-promoting activities aimed at both attracting investors and maximising the impact of investment. Investment-promoting activities are therefore conducted under conditions of fierce international competition.

Attractive framework conditions as a point of departure

The foundation of successful investment-promoting activities is attractive framework conditions, whether that be access to relevant skills provision, robust research environments, protection of intellectual property rights or the growth potential of the market. In addition to these necessary conditions, to varying degrees there may be policy scope for specific investment-promoting initiatives; for example, relevant information must reach potential investors. The investment process itself must also function without unnecessary hindrances. Many stakeholders are in various ways involved in the process both before, during and after investment. Given that such investment-promoting initiatives are indeed underway, it is important to organise and implement these efforts as efficiently as possible in order to achieve a successful outcome.

How have we gone about the study?

This is a qualitative study and it is based on case studies of four different SKI. We have conducted some 40 interviews with key stakeholders in four Swedish cases. We have also studied a number of documents to extract relevant background information. In all four cases, and especially in the two cases involving start-ups, this approach has elicited deep insights and detailed experiences of what actually happens during these investment processes. That said, we are not in a position to comment on whether these insights are generally applicable to all such investments in Sweden. The merits of the method are primarily the opportunities for reflection, learning and formulating questions that are suitable for further study.

The four case studies

We have studied the following cases:

• The establishment of Northvolt in Skellefteå. This involves an investment of approximately SEK 30 to 35 billion in a new battery factory. Once completed the factory is expected to provide as many as 3,000 new jobs. The construction of the factory and recruitment of labour are currently underway (December 2020).
• The establishment of Lalandia in Motala. This is the largest ever direct foreign investment in the Swedish tourism industry, in the form of an experience centre for water activities, sports, dining and accommodation. This investment, estimated at approximately SEK 1.3 billion, is market-driven and expected to create about 300 new jobs and increase the municipality’s annual revenue from tourism by approximately SEK 415 million. In December 2020, the legal process with the detailed development plan is taking place.
• Valneva. This is an investment to expand a global biotech company that develops and commercialises vaccines. Prior to a possible expansion, the company considered the relative merits of Sweden (Solna) or the United Kingdom. Eventually, it was decided to expand through partnership rather than investment.
• HCL Technologies. This case relates to the 2015 acquisition of parts of Volvo’s external IT business in Gothenburg by Indian technology company HCL for SEK 900 million, in a deal that included an outsourcing partnership with other parts of the Volvo Group.

The cases can be divided into two groups based on their character; the two start-ups in one group, with very clear involvement at the local level and much more clearly described processes, and in the other group investments in expansion and acquisition involving processes of a different nature in which local stakeholders played a smaller role. The latter are also described in more general terms.

International cases related to Northvolt and Lalandia

As a supplement to two of the case studies, we have also examined two international cases: Kotka-Fredrikshamn in Finland and Søndervig in Denmark. Both cases are directly linked to the Swedish start-ups. Kotka-Fredrikshamn competed with Skellefteå to attract the Northvolt battery factory. It is therefore of interest to describe the region’s candidature process and the Finnish investment-promotion system. In the case of Søndervig, Lalandia made a “twin” investment at roughly the same time as it established itself in Motala. We briefly describe the establishment process, focusing on the Danish spatial planning system, including the country’s appeals process. These cases are summarised in Appendix 1 (Finland) and Appendix 2 (Denmark).

Main conclusions

Based on our case studies, we offer the following reflections and possible suggestions on policy measures.

Heterogeneous stakeholders mean different preconditions and needs

We observe significant heterogeneity in the regional and local components of the investment-promoting system in terms of resources, preconditions and working methods. It is important to take into account such disparities and the subsequent need for flexibility when discussing and evaluating the functions and roles within the system.

Investment promotion is dependent on the category and phase of the investment

Which stakeholders are important to an investment process depends on which category of investment one is studying and at what phase. In the two start-up cases, we see major involvement on the part of the public-sector investment-promoting system, initially especially on the part of municipalities. We can however identify other stakeholders. New issues must be dealt with in the various phases of the investment process, meaning that over time other stakeholders such as regions, county administrative boards, The Swedish Transport Administration, universities, courts among others, become involved. In the cases involving expansion and acquisition, we see that the companies deal with a great deal of the work themselves and/or engage the assistance of other private-sector stakeholders. The public-sector investment-promoting system thereby plays a smaller role than in the two start-up cases. In the acquisition and expansion cases, we also encounter fewer viewpoints regarding the investment-promoting system and process.

Active, risk-taking municipalities

We note that the respective municipalities have been highly active in the two start-up cases. While their primary motive is to attract new jobs, they also see opportunities to attract new investment in future. At the same time as their development and growth-oriented objective is clear, we see a clear element of risk-taking, with considerable resources committed to various types of analysis, planning and similar activities. In the final analysis, this kind of risk-taking may leave the municipality, especially a smaller municipality, facing difficult prioritisations between its basic remit and investing in development.

Increase knowledge about the organisation of local investment promotion

Generally speaking, local efforts to promote investment are conducted within business organisations, often municipally owned. Work has been organised in varying ways in all of our case studies, both in Sweden and abroad, in all likelihood with varying pros and cons. We see internal municipal solutions, external organisations and municipality-wide solutions but what does the overall Swedish picture look like? What experiences can be gleaned from a development and growth perspective? Can increased learning offer gains in efficiency?

Possible policy measure:

• Investigate variations in and the pros and cons of different organisational forms and working methods in a specific study of municipally-owned businesses in Sweden.

From local/regional experiences to national resources

It is important that we make the most of the accumulated experiences gained in the local and regional investment-promoting system in a structured manner. The system should facilitate learning and the exchange of experiences irrespective of geographical and organisational boundaries. Our interviews suggest that there are opportunities for improvement.

Possible policy measures:

• Promote and simplify the dissemination of accumulated experiences gained locally and regionally beyond geographical and organisational boundaries, so that these become more of a national resource.

Clarified roles

An effective, functioning investment-promoting system requires clear and well-known roles for the various stakeholders. This will avoid unreasonable expectations, overlapping areas of responsibility and issues slipping through the net. The interviews conducted in the two start-up case studies indicate that clarification is needed.

Possible policy measures:

• Clarify the role of each stakeholder in the system.
• Examine whether the composition of group of public-sector stakeholders that are currently formally tasked with promoting investment needs to be altered and whether their assignment descriptions need to be adjusted.

Stronger regional interaction

The regional investment-promoting system is based on active interaction between municipal, regional and national stakeholders (especially Business Sweden). This interaction requires that the parties take a long-term view and commit resources. We see that the conditions for achieving this vary greatly; for example, many regional investment-promoting stakeholders are often heavily reliant on short-term project funding. The regions lack any formal investment-promoting mandate. Business Sweden allocates relatively small resources to the major task of coordinating, collaborating on and implementing investment-promoting initiatives in Sweden’s 21 regions and 290 municipalities. These circumstances make SKI difficult given that, by nature, these are more complex than other types of investment.

There also appears to be a lack of structured public-sector support within the investment-promoting system for municipalities in the final phase of the investment process, as they approach concrete negotiations with the investing companies. Depending on the size of the municipality and how much experience it can call on, a lack of financial and human resources – analytical or legal expertise, for example – may pose the risk of the municipality finding itself in a weak negotiating position.

Possible policy measures:

• Improve the conditions for regions to work long-term to promote investment by:
  • securing long-term, basic central government funding for such work; • introducing an ongoing assignment to promote investment in the Government’s directions to regional authorities;
• Improving Business Sweden’s ability to work regionally by allocating greater resources to coordination, collaboration and competence-enhancing initiatives in regional investment promotion;
• Assisting municipalities and regions once they get down to brass tacks, i.e. in the final phase of the investment process; by: • explicitly tasking the Swedish Agency for Economic and Regional Growth [Tillväxtverket] with supporting the investment-promoting process. This can be viewed as a parallel to the agency’s previous assignment to assist in the event of large-scale redundancies and retraining, although here the focus is reversed in that municipalities will be assisted once there are concrete investment proposals on the table.

A structure to deal with especially strategic SKI

Investment processes can be complex, involving many areas of expertise and stakeholders. Our interviews reveal a demand for coordination in terms of contacts with government agencies and other stakeholders – a “door in”, so to speak.

Furthermore, the system for dealing with spatial planning issues and environmental assessments has a significant impact on investment processes due to the long lead times for decisions.

Possible policy measures:

• Hold a commission of inquiry into the possibility of classifying a specific SKI as strategically important. The assignment of such a commission should also include:
  • proposing who should be responsible for such a classification and the criteria on which it should be based;
  • investigating the possibilities and possible consequences of temporarily allocating increased (or reallocating) resources to public authorities reviewing planning and environmental issues related to these investments, so as to reduce the time taken to reach decisions while maintaining legal certainty; and
• Appointing special coordinators for any such large knowledge-intensive investments. A “door-in” principle with regard to contacts with government agencies and other stakeholders.