How can wealthy nations stay rich in a rapidly changing global knowledge economy? This question is of central concern for many small open economies like Sweden’s. This report is commissioned by the Ministry of Enterprise, Energy and Communications and the purpose is to provide a first background analysis for an upcoming evaluation of Swedish innovation policy by the OECD.

The purpose of the report is to provide a background analysis for an OECD evaluation on the conduct and performance of the Swedish national innovation system (NIS). The OECD evaluation will be presented in June 2012.

The objective of the background report has been to critically assess the performance and challenges of the Swedish innovation system  in order to provide a platform for more specific analysis. Three overall themes have emerged.

First, we interpret evidence from different statistical sources that support the claim that the adaptation and performance of the Swedish NIS has been quite successful over the last 15 years. The allegations of a Swedish ―paradox seems to be based on either large (linear) expectations on the growth effects on the level of certain input factors, such as R&D, or an uncritical use of comparative innovation indicators which still have unclear linkages to  overall  business performance.  Thus, several other ways of measuring and assessing Swedish performance are presented.

Secondly, we find evidence that Sweden’s NIS has been reorganized in more complex value chains, which implies that the common propositions that ―large corporations do not contribute the same amount as they did earlier or ―Sweden lacks in high technology exports are not entirely true or at least reflect misconceptions about the structure  and importance  of value chains in the NIS. Assessing the performance of innovation in small, rich, open economies requires new frameworks,  and  a re-framing of challenges and various innovation policies when knowledge crosses technological, organization and geographical borders.

Thirdly, the abundance of combining new ―innovation indicators provides opportunities to detect areas where Sweden needs to reflect how to develop innovation policy. Our method  of focusing  on  a small sample of peer countries suggests from whom we can primarily learn. Our conclusions are that Denmark can teach Sweden how to develop policies that spur entrepreneurship, while  Switzerland,  the  Netherlands and Denmark together can inspire new ideas of how to develop our universities.