Entrepreneurial Leadership in Sweden and China: A Comparative Study

Introduction

In recent years, researchers have identified different causes as responsible for the success of a country's economic system, and as a result, differing models for economic growth suggest multiple possible paths to success. Two countries of notable global success, each attributable in part to their entrepreneurial leadership, are Sweden and China. The world is changing rapidly, and China has become an important part of the global economy. Meanwhile, cooperation in Europe is growing closer and broader. Sweden is a small nation with a history of major success on the global market — success that has been attributed to the Swedish business sector's strong position and skilled company leaders. This paper offers a comparative study of the entrepreneurial leadership of both Sweden and China, taking into consideration such factors as their political and economic history, leadership styles, and regulatory changes. It concludes with an analysis of the factors that both entrepreneurial leadership styles have in common.

The fact that entrepreneurship is a catalyst for economic growth and development is well known. Small businesses in the United States, for example, account for 58% of the private workforce, 51% of GNP, and about 75% of net new jobs (Asel, 2003). Entrepreneurship is even more important to the growth of developing economies, where small businesses frequently account for 80% or more of employment and virtually all job growth (Asel, 2003). Differing economic, cultural, and political circumstances abroad also suggest the need for a better understanding of entrepreneurship within a local context (Asel, 2003). Fortunately, the ability to study entrepreneurship abroad is expanding rapidly as a result of the emergence of global private equity markets and microfinance. International entrepreneurship spans cultural boundaries and involves a variety of stakeholders, including the entrepreneur, investors, and policy makers (Asel, 2003).

Entrepreneurs operate at the margins of the economy, exploiting opportunities overlooked by incumbents. They innovate to develop promising but untested markets and flexibly manage scarce resources in an uncertain, often unforgiving environment (Asel, 2003). International entrepreneurship thus offers a rich tapestry for exploring many of the issues that are at the heart of business strategy and economic development (Asel, 2003). Companies play a key role in achieving long-term sustainable development based on economic growth, environmental considerations, and social commitment. An economically thriving society with low inflation creates an important base for business growth.

Entrepreneurial leadership is leadership based on the attitude that the leader is, in effect, self-employed. Leaders of this type take initiative and act as though they are playing a critical role in the organization. They energize their people, demonstrate entrepreneurial creativity, search continuously for new opportunities, pursue them, take risks, venture into new areas, and provide strategic direction and inspiration (Kotelnikov, 2005). These leaders also take responsibility for the failures of their team, learn from those failures, and use them as stepping stones toward ultimate success and strategic achievement. Entrepreneurial leadership involves instilling the confidence to think, behave, and act with entrepreneurship in the interests of fully realizing the intended purpose of the organization for the benefit of all stakeholders involved (Kotelnikov, 2005). In the new era of rapid change and knowledge-based enterprises, managerial work increasingly becomes a leadership task. Leadership is the primary force behind successful change, as leaders empower employees to act on the vision (Kotelnikov, 2005). They execute through inspiration and develop implementation capacity networks through a complex web of aligned relationships (Kotelnikov, 2005).

Venture values differ from established corporate shared values. Research indicates that entrepreneurial independence demands space for action and trust, while independence in a corporation implies responsibility and control imposed from above (Kotelnikov, 2005). Entrepreneurship is important because any country's economy demands agility, experimentation, adaptation, and rapid response in order to be first to market. Corporate experimentation comprises analysis, review, careful consideration of facts, and a willingness to sacrifice speed for thoroughness (Kotelnikov, 2005). Entrepreneurial paranoia — the persistent belief that competitors are catching up — is often overshadowed by the corporate need to build consensus and minimize perceived risk (Kotelnikov, 2005). Entrepreneurial leadership skills are therefore important because leading innovation is a delicate and challenging process.

Entrepreneurial Leadership Theory

A true leader must encourage expansive thinking to generate new ideas, but must also filter those ideas to determine which ones to commercialize. "Loose-tight" leadership alternates between creating space for idea generation and free exploration, and a deliberate tightening that selects and tests specific ideas for further investment and development (Kotelnikov, 2005). Looseness usually dominates the early stages of the innovation process; in the later stages, tightening becomes more important in order to scrutinize concepts and bring selected ones to market (Kotelnikov, 2005). Those who remain loose too long generate plenty of ideas but have difficulty commercializing them. Those who lock into the tight mode too early choke off all but the most obvious ideas, confining innovation to incremental line extensions of existing products that add little value (Kotelnikov, 2005).

An examination of the literature on entrepreneurial leadership reveals that creativity is a continuous activity for the entrepreneur — a method of always seeing new ways of doing things with little concern for how difficult they might be or whether the resources are available. But the creativity of the entrepreneur is combined with the ability to innovate, to take an idea and make it work in practice (Kotelnikov, 2005). Seeing something through to the end, and refusing to be satisfied until everything is accomplished, is a central motivation for the entrepreneur. Indeed, once a project is completed, the entrepreneur seeks another challenge, because creativity and innovation are habitual — something he or she simply must keep doing (Kotelnikov, 2005).

An "entrepreneur" has been defined as a person who habitually creates and innovates to build something of recognized value around perceived opportunities (Kotelnikov, 2005). The best entrepreneurs have the ability to devise new combinations, dependent on their ability to discern relationships between seemingly disparate items. In other words, creativity is the juxtaposition of ideas previously thought to be unrelated, and it is the entrepreneur's ability to combine ideas in a unique way or to make useful associations among them. Entrepreneurial leadership includes creating an atmosphere in which both the leader and others are comfortable expressing new ideas — an atmosphere where ideas are not immediately evaluated and attacked (Kotelnikov, 2005).

The term "entrepreneur" is originally a French word — entreprendre — meaning "to undertake" (Mamede & Davidsson, 2003). According to Casson (1987), the term was introduced into economics by Richard Cantillon in 1755. It was through J.B. Say in the early 1800s that the expression became widely recognized, referring to a person who shifted economic resources out of an area of lower productivity and into an area of higher productivity and greater yield (Mamede & Davidsson, 2003). The term "entrepreneurship" was coined in the early 1900s to refer to the actions conducted by the entrepreneur. Wennekers, Thurik, and Buis (1997) defined entrepreneurship, for research purposes, as the ability and willingness of individuals — both on their own and within organizations — to perceive and create new economic opportunities (new products, new production methods, new organizational schemes, and new product-market combinations); to introduce new ideas in the market in the face of uncertainty and other obstacles, by making decisions regarding location, form, and the use of resources and institutions; and to compete with others for a share of the market.

Although economic growth and development have similar meanings and are sometimes used interchangeably, there are distinctions that should be considered. While economic growth mainly refers to the capacity of a nation to become wealthier through the production of more goods and services, economic development ultimately implies that citizens of that nation are better off (Mamede & Davidsson, 2003). Saemundson and Kirchhoff (2002) define economic growth and development as an expression frequently used to refer to improvement in social well-being within nations. In economic terms, development has traditionally denoted the capacity of a country — whose initial economic situation has been relatively static for a long time — to generate and sustain growth rates on the order of 5% to 7% or more of its gross national product (Todaro & Smith, 2003). According to Todaro and Smith (2003), before the 1970s, development was normally seen as an economic phenomenon in which rapid increases in gross national product would trickle down to the population in the form of jobs, other economic opportunities, or at least the proper conditions for distributing the economic and social benefits of growth.

Though different perceptions of the concept exist, the traditional economic vision of development was reconsidered during the 1970s (Mamede & Davidsson, 2003). The experience of developing nations during the 1950s and 1960s — in which achieving economic growth targets did not translate into improvement in the living standards of their populations — indicated that the existing definition of the term was inadequate (Mamede & Davidsson, 2003). As a result, economic development was redefined in terms of the reduction or elimination of poverty, inequality, and unemployment within the context of a growing economy (Mamede & Davidsson, 2003).

Research indicates that entrepreneurship can be both a cause and an effect of economic development in the sense of wealth distribution. Countries in which wealth is concentrated in the hands of a small fraction of the population face greater difficulties in coordinating the major components of progress (Mamede & Davidsson, 2003). These components are labor, capital, resources, and innovation. According to Mamede and Davidsson (2003), considering that the three driving forces of entrepreneurial success — founders, opportunity recognition, and resource requirements — are more likely to occur in combination, there are better prospects for prosperity in regions where wealth is more equitably distributed. These researchers have also observed that members of such societies are in a more favorable position to engage in entrepreneurial endeavors.

Research, Development, and Economic Growth

National and international research, development, and innovation policies are being improved around the world in order to increase economic growth and achieve higher living standards (Erskine, 2003). Understanding of the drivers of technological progress and the key factors underlying successful research, development, and innovation is intensifying (Erskine, 2003). A review of a large number of studies assessing what has driven successful research and development in innovation-leading countries confirms several general conclusions. First, it is very difficult to determine exactly what underlies a successful national research and development effort, and it is easy to conclude that everything depends on everything else. However, it is clear that innovation systems and processes must be considered, not just specific technical issues related to the promotion of research and development (Erskine, 2003). Culture — and in particular an entrepreneurial spirit and a willingness to risk failure — is vital to innovation (Erskine, 2003).

Research indicates that it remains unclear how to change a nation's culture, but all available evidence confirms that incentives rewarding particular behaviors tend to produce results and that education in processes not yet well understood matters. Private expenditure on research and development in any country will be insufficient to maximize the nation's productivity potential unless it is subsidized through taxes, grants, or some other mechanism (Erskine, 2003). International studies suggest that the social return on such subsidization is high. Research and development expenditures are likely to have a greater commercial impact when funds are allocated with commercialization potential as a key criterion (Erskine, 2003). This is best achieved through competitive, market-driven, or industry-driven mechanisms for allocating research and development funds (Erskine, 2003). Research also indicates that education, tax, and immigration policies ensuring the availability of skilled and motivated labor are a feature of nearly all leading countries. A review of the literature reveals that the pace and intensity of global innovation is accelerating and that leadership from the top can make a critical difference.

Difficulties faced by poor countries — where low average income limits savings and investment — tend to reinforce each other in what is known as the vicious cycle of poverty, in which low savings and investment leads to low capital formation, which results in low productivity, which in turn prevents improvement in average incomes (Mamede & Davidsson, 2003). The consequences of such cycles, usually worsened by significant inequalities in the distribution of wealth, negatively affect the level of entrepreneurial activity of a nation or region (Mamede & Davidsson, 2003). Baumol (1993) argues that even if entrepreneurs are not in complete control of their economic destiny, they influence its direction as few others are able to do. Baumol (2003) also sees the entrepreneur as responsible for a significant portion of the historic growth of modern society, and views entrepreneurial talent and motivational mechanisms as one of the main explanations for the successful growth of some economies over others.

It is now well accepted that innovation and research and development are positively associated with productivity growth. Research and development provides an important contribution to output and total factor productivity growth (Erskine, 2003). Empirical evidence typically shows that a 1% increase in the stock of research and development leads to a rise in output of 0.05–0.15% (Erskine, 2003). There is also evidence that research and development may play a different role in small and large economies (Griffith et al., 1998). In smaller economies, it primarily serves to facilitate technology transfer from abroad. The belief that less advanced countries would catch up with technological world leaders as knowledge diffused globally has been severely challenged over the past decade by a widening productivity gap between countries (Erskine, 2003).

The opportunities for wealth creation in knowledge-based industries have heightened the need to understand the processes underlying technological progress (Erskine, 2003). Firms, industries, and countries are now engaged in direct competition to produce technological progress, create wealth, generate jobs, and improve human and social well-being. Innovation and research and development have become vital activities in an increasingly knowledge-based world (Erskine, 2003). No country leads in every sphere of innovation, but some dominate in particular industries. Research indicates that the USA is the global leader in research and development; the UK also ranks highly (Erskine, 2003). Other countries of interest include Singapore, South Korea, Taiwan, and China, where research and development effort is intensifying most rapidly and the policy framework is developing fastest (Erskine, 2003).

The question of whether East Asia can compete in global markets was evaluated in a 2002 World Bank report. According to that report, the factors determining whether countries such as China can compete include: the building of research and development capital; the business environment, including ease of firm entry, level of competition, and protection of intellectual property; the effectiveness of the education system in producing skilled technical workers; and the links among businesses, universities, and public and private research institutes that stimulate innovation and its commercialization (Yusuf & Evenett, 2002). Also relevant are interactions among firms and agglomeration economies in industrial clusters; the extent of technology generation and absorption through firms' own research and development, licensing, and equipment purchases; access to an international pool of professionals; and the development of production networking, supply chain management, and logistics (Erskine, 2003).

According to Stern et al. (2000), innovative capacity depends on the overall technological sophistication of an economy and its labor force, but also on an array of investments and policy choices by both government and the private sector. Innovative capacity is related to, but distinct from, non-commercial scientific and technical advances that do not necessarily involve the economic application of new technology (Stern et al., 2000). Differences in national innovative capacity reflect variation in both economic geography and innovation policy.

Other researchers have examined finance and its influence on economic growth and technical progress, concluding that the fundamental financing problem for firms undertaking research and development is uncertainty over research outcomes. The firm and any financier suffer from significant information asymmetry about the prospects for future income flows, and a financier will typically be unwilling to accept research and development as collateral for debt (Hall, 2002). Equity finance is thus essential for research-and-development-intensive firms. According to Hall (2002), this is an obvious limitation in economies with underdeveloped venture capital markets. Finance and access to finance have become more important determinants of research and development effort as international capital has become more mobile across borders and as research and development costs per invention have increased (Hall, 2002).

Evidence on the funding gap for research and development has been surveyed, with a focus on financial market reasons for under-investment that persist even in the absence of externality-induced under-investment (Hall, 2002). The conclusions are: (1) small and new innovative firms experience high costs of capital that are only partly mitigated by venture capital; (2) evidence for high costs of R&D capital for large firms is mixed, though these firms prefer internal funds for such investments; (3) there are limits to venture capital as a solution to the funding gap, especially in countries where public equity markets are not highly developed; and (4) further study of governmental seed capital and subsidy programs using quasi-experimental methods is warranted (Hall, 2002).

Entrepreneurial Leadership in Sweden

According to Bass (1985), the transformation of followers can be achieved by raising awareness of the importance and value of desired outcomes, getting followers to transcend their own self-interests, and altering or expanding followers' needs. Bass (1985) defined the transactional leader as one who recognizes what followers want from their work and tries to ensure they receive it if their performance warrants it; exchanges rewards for appropriate levels of effort; and responds to followers' self-interests as long as they are performing adequately. Numerous research studies have demonstrated that leaders described as charismatic, transformational, or visionary have positive effects on their organizations and followers, with effect sizes ranging from .35 to .50 for organizational performance and from .40 to .80 for follower satisfaction, commitment, and organizational identification (Fiol et al., 1999).

Studies conducted across many different countries show that transformational leadership is perceived as closer to ideal leadership than transactional leadership. As Lord and Maher (1991) note, being perceived as a leader is a prerequisite for being able to go beyond a formal role in influencing others. They hold that leadership perceptions can be based on two alternative processes. First, leadership can be inferred from the outcomes of salient events, with attribution being crucial in these inference-based processes (Lord & Maher, 1991). For example, a successful business turnaround is often quickly attributed to the high-quality leadership of top executives or the CEO (Hartog et al., 1999). Leadership can also be recognized based on the fit between an observed person's characteristics and the perceiver's implicit ideas of what a leader looks like (Hartog et al., 1999).

Cultural groups may vary in their conceptions of the most important characteristics of effective leadership, so different leadership prototypes would be expected to occur naturally in societies with differing cultural profiles (Bass, 1990a; Hofstede, 1993). Historical research indicates that in some cultures one must take strong, decisive action to be seen as a leader, whereas in other cultures consultation is a more effective approach. The evaluation and meaning of many leader behaviors and characteristics may also vary strongly across cultures. In a culture that endorses an authoritarian style, leader sensitivity might be interpreted as weakness, whereas in cultures endorsing a more nurturing style, the same sensitivity may prove essential for effective leadership (Hartog et al., 1999).

Research indicates that leadership exists in all societies and is essential to the functioning of organizations within them (Wren, 1995). Because individuals have their own ideas about the nature of leaders and leadership, they develop idiosyncratic theories of leadership. An individual's implicit leadership theory refers to beliefs held about how leaders behave in general and what is expected of them. This type of attribution process provides a basis for social power and influence (Lord & Maher, 1991). The way in which the social environment is interpreted is strongly influenced by the cultural background of the perceiver, which implies that the attributes seen as characteristic or prototypical for leaders may also vary strongly across different cultures (Hartog et al., 1999).

Hunt, Boal, and Sorenson (1990) propose that societal culture has an important impact on the development of superordinate category prototypes and implicit leadership theories. They hold that values and ideologies act as determinants of culture-specific superordinate prototypes, depending on their strength. Research in this area identifies three elements attributable to the leadership styles of different cultures: a stress on market processes, a stress on the individual, and a focus on managers rather than workers. As a result, there is a growing awareness of the need for a better understanding of how leadership is enacted in various cultures, and for an empirically grounded theory to explain differential leader behavior and effectiveness across cultures (House, 1995).

Hofstede's dimensions of culture — uncertainty avoidance, power distance, masculinity-femininity, individualism-collectivism, and future orientation — yield many hypotheses regarding cross-cultural differences in leadership. High uncertainty avoidance cultures, with their emphasis on rules, procedures, and traditions, may place demands on leaders not expected in low uncertainty avoidance cultures (Hartog et al., 1999). According to Hofstede, innovative behaviors may therefore be expected in low uncertainty avoidance cultures. Cultures that are more masculine are probably more tolerant of strong, directive leaders than feminine cultures, where a preference for more consultative and considerate leaders appears likely (Hartog et al., 1999). Research also indicates that a preference for low power distance in societies may result in different desired leader attributes than a preference for high power distance (Hartog et al., 1999), and that managers in high power distance countries report more use of rules and procedures than do managers from low power distance countries.

The most cited study, by Gerstner and Day (1994), focused on cross-cultural comparisons of leadership prototypes. In that study, respondents completed a questionnaire assigning prototypicality ratings to 59 leadership attributes. Comparing ratings from a sample of American students (n = 35) with small samples (n = 10–22) of foreign students from seven countries, they found that the traits considered most, moderately, or least characteristic of business leaders varied by the respondent's country or culture of origin. However, this study had several limitations: small sample sizes, student samples, reliance on foreign students currently in the US to represent other cultures, and use of a non-cross-culturally validated, English-language trait-rating instrument (Hartog et al., 1999). Despite these limitations, reliable differences in leadership perceptions among members of various countries were found.

A new study focusing on the entrepreneurial leadership characteristics of Sweden and China would no doubt be useful, because sampling is a problematic issue in cross-cultural research. As has been noted, using national borders as cultural boundaries may not be appropriate in countries with large subcultures (Hartog et al., 1999). In large, multicultural countries such as China, it is not even clear which sample would be most representative. As a result, samples from all countries need to be relatively homogeneous within countries. An ideal sample would consist of representatives from the financial, food, and telecommunication industries, which are fairly universal and could be identified in participating countries. Additionally, these industries differ in terms of the rate of change typically experienced.

The proposed study would consist of interviews with Swedish and Chinese entrepreneurs responding to questions organized around five roles, each with two to three competencies. These roles address: (1) designing, including recognizing opportunities for value creation, turning ideas into specific action plans, and developing a clear and convincing vision for the venture; (2) assembling, including creating high-performing organizations and teams, demonstrating high emotional intelligence, extracting value from social networks, and developing others. Additional questions would address topics such as leading by example, enthusiasm for the venture, role models, rules, and interacting with people at different levels of the organization and outside of it. Other topics would include goals, determination, focus, distractions, risks, and external events, as well as social interaction, constructive disagreement, and performance strengths and weaknesses.

Criteria would then be established for items to be considered universally endorsed as contributors to outstanding leadership. Possible criteria would include requiring that 95% of country scores exceed a mean of 5 on a 7-point scale for that attribute, and that the grand mean score across all countries exceed 6. In addition to examining universally endorsed attributes, the results would also identify which attributes are universally seen as impediments to outstanding leadership and which are culturally contingent. It is predicted that the results support the hypothesis that specific aspects of charismatic or transformational leadership are strongly and universally endorsed across cultures. Sweden and China would then be compared utilizing this proposed study framework.

Research indicates that there is strong commitment and determination among entrepreneurs throughout Sweden to work for growth and increased prosperity. When companies produce goods and services, they generate jobs and tax revenue and are responsible for research and employee training. For new Swedes, employment in companies and self-employment are important pathways into Swedish society (Advantage Sweden, 2005). Productivity is high, the labor force is well-trained, research and development is world class, and the global business network is extensive (Advantage Sweden, 2005). In an international perspective, however, Sweden has a low investment level, which undermines its future competitiveness. Over one million Swedes of working age are on sick leave, have taken early retirement, are unemployed, or are living on social allowances (Advantage Sweden, 2005). There is also an imbalance in the age structure: after 2010, the number of people over 80 will increase faster than the number in gainful employment (Advantage Sweden, 2005). Sweden's dependency burden is increasing as the proportion of entrepreneurs has never been as low as it currently is (Advantage Sweden, 2005).

Research indicates that Sweden faces several significant challenges, including those related to international cooperation. According to Advantage Sweden (2005), trade and personal relations bind people from different cultures together and build peace and tolerance. Business affirms a freer and more open world in which democracy and market economies lay the foundations for better living conditions. International cooperation is therefore necessary to counteract environmental problems, poverty, and terrorism (Advantage Sweden, 2005). Closer and broader European cooperation is important to enable Swedish business to be competitive at the global level (Advantage Sweden, 2005). EU enlargement creates new possibilities but also sets new challenges regarding competitiveness, growth, and jobs (Advantage Sweden, 2005).

Sweden appears to have a distinct advantage in the context of potential global competition. Many Swedish companies, both large and small, are world leaders. Sweden has a strong foundation on which to build, access to important raw materials, a well-trained labor force, and a good level of research. There is strong environmental commitment, and at the local level, there is generally good consensus between unions and employers and between business people and politicians (Advantage Sweden, 2005). Wage formation, state finances, and inflation have stabilized in recent years. Research indicates that to create better conditions for favorable development, both companies and the public sector must continuously improve their operations and raise skills and quality (Advantage Sweden, 2005). International competition has never been as intense as it is today. For example, in 1997, one million vacuum cleaners were manufactured in China; by 2005, that number had grown to 25 million (Advantage Sweden, 2005). More and more overseas companies and owners are nonetheless choosing to invest in Sweden, as conditions for trade improve through the removal of trade barriers and harmonization of regulations.

Legislation in the European Union is implemented effectively in Sweden through the removal of duplicate regulation and the harmonization of legislation, so that competition between companies is free and fair. This is important because a stable and competitive legislative framework, implemented consistently and smoothly, creates an advantage (Advantage Sweden, 2005). Regulations that are difficult to navigate, an increasing number of public bodies, and unpredictable implementation place unnecessary constraints on companies (Advantage Sweden, 2005), hampering their performance and competitiveness. Since Sweden is a sparsely populated country located far from the major markets on the continent, there is a need for a well-constructed and fully functioning infrastructure, as well as a competitive transport network (Advantage Sweden, 2005). If Sweden's growth is to continue, there is also a need for secure, long-term access to energy at competitive prices (Advantage Sweden, 2005).

According to Advantage Sweden (2005), the use of information technology creates many new opportunities and is an important base for enterprise in the future and for continued growth in productivity and competitiveness. An effective capital supply for the start-up and expansion of companies is also important. For companies to start and expand, there is a need for both a technological and a mental infrastructure that makes it attractive and straightforward to be an entrepreneur. In Sweden, attitudes toward business have become increasingly favorable (Advantage Sweden, 2005). Every year, Swedish companies complete 73 million forms for submission to 75 different authorities (Advantage Sweden, 2005). It is difficult to start companies in Sweden due to the high tax rate on labor, which acts as a deterrent to both existing and new service-sector companies, while the informal sector is simultaneously expanding. Good quality in basic education and good opportunities for adults to acquire new work skills are important to a strong and competitive business sector (Advantage Sweden, 2005).

To encourage increased entrepreneurship, the Confederation of Swedish Enterprise will work in the coming years to ensure that it is economically worthwhile to work, to save, and to invest in companies; that the legal framework is changed to give entrepreneurs better conditions for expansion in the private service sector; and that entrepreneurship and enterprise become a self-evident part of all education (Advantage Sweden, 2005). Additional goals include improving collaboration between schools and business, permitting workforce immigration, and ensuring the active integration of immigrants. The end result will be that people have reasonable prospects of saving enough start-up capital to realize their ideas. To strengthen Sweden's competitiveness, investment in development and innovation is needed, and conditions for research and development must be given high priority (Advantage Sweden, 2005).

A clearer link is needed between state research investments and the needs of the business sector, making it easier for research results to reach the market as new products and services, and helping to create more growth companies (Advantage Sweden, 2005). The legislation governing public companies, intellectual property rights, and venture and capital markets must be developed to encourage and facilitate enterprise, innovative business development, and the production of goods and services in Sweden (Advantage Sweden, 2005). Competition stimulates new ideas, new methods, and efficient production, and also benefits consumers through lower prices and better quality (Advantage Sweden, 2005). In Sweden, considerable knowledge exists within the public sector that, through private enterprise, could reach overseas markets and generate new jobs. Today, a number of obstacles stand in the way of this process. It is crucial that these obstacles be removed and that public procurement always take place openly, simply, and through sound competition (Advantage Sweden, 2005).

In a comparison of 28 countries in terms of the number of new companies started, Sweden ranked 21st (Advantage Sweden, 2005). Sweden also needs more people to work and pay income tax. Too many people of working age do not work, having instead taken early retirement, obtained sick leave, or become unemployed or enrolled in labor market schemes (Advantage Sweden, 2005). Young people, the elderly, and immigrants often have difficulty finding employment in Sweden. Outdated labor market regulations and rules governing taxation and allowances reduce mobility on the labor market (Advantage Sweden, 2005). Complicated rules and tax regulations lead to undeclared work. High payroll costs, along with significant risk factors for companies — such as costs related to employee sickness and extensive legislation — have created high recruitment thresholds (Advantage Sweden, 2005). The labor market of tomorrow demands increased mobility, working hour regulations that lead to greater work input, and solutions suited to both companies and employees (Advantage Sweden, 2005).