False Economics? University Expansion and Entrepreneurial Growth

Sweden's spending on R&D tops the OECD league table. No other OECD country produces as many PhDs. And according to London-based think tank Demos, Sweden leads the Euro-Creativity Index, which ranks countries according to talent, technology, and tolerance--three factors supposed to indicate a country's creative potential.

So the Swedish economy must be booming then, the country teeming with new companies and filled to the brim with hopeful new entrepreneurs, right?

Not Much Entrepreneurial Activity

Well, no. According to the yearly Global Enterpreneurship Monitor, just 4% of the adult Swedish population is involved in enterprise, either just starting a new business or having launched one in the last 42 months. Although this makes Swedes more entrepreneurial than the French (2%), the country lags behind Finland (almost 7%), Norway (7.5%), and the U.S. (almost 12%).

Homing in on talent and technology doesn't improve the picture. A study of 222,000 technology, science, and medicine graduates showed that between 1990 and 2000 they started 49,000 new companies--a proportion no higher than among the adult population at large. What's more, many of the companies were part-time activities, often in areas unrelated to the founder's degree, such as restaurants, hotels, and retail. Even worse, half of the companies folded within a couple of years.

And according to a study by economist Roger Svensson, even though Swedish universities account for a third of all the country?s R&D, in the medicine and hygiene sectors university-related scientists and companies own only 10% of recent patents.

Why is this? The philosophical gulf between academia and industry is often given as an explanation, as is the lack of an entrepreneurial tradition in Sweden, where a handful of large companies have played an extremely important role as employers.

To turn this tide, Minister of Education and Research Thomas Östros recently told the academic world to put more emphasis on innovation and commercialisation. Scientists should be encouraged to move between industry and academy, and all universities should create special units to foster research ideas with possible commercial value.

In fact, this is already happening. At Lund University, for instance, units such as LU Innovation, a technology transfer office, and the business incubators Venture Lab and The Greenhouse have been created. Their aim is to help students and researchers develop their ideas with the help of experienced entrepreneurs.

Lund University also boasts two new undergraduate courses in entrepreneurship and innovation, as well as a new research centre called the Centre for Innovation, Research and Competence in the Learning Economy, or CIRCLE. Lund, as Sweden's largest university, may have more of this kind of activity than others, but similar efforts are being started all over.

Östros also proposes abolishing the so-called lärarundantaget, the "teachers' exception." This clause gives university researchers exclusive rights to the commercialisation of their findings. Today, researchers may choose between developing their patents with the help of their university or going it alone. Östros would prefer a model more like that in the U.S., where researchers would have to inform their employer of findings with commercial potential and split the gains (if any) with their universities.

Would this make a difference? Opinions are mixed. "I think abolishing the teachers' exception is a good idea. That way, commercialisation of research ideas would be in the common interest of both the university and the scientist," says Helen Dannetun, dean of technology at Linköping University. But her colleague Christer Svensson, professor of electronic devices at Linköping and a holder of many patents, disagrees. It's his opinion that most universities still don't have the resources and the competence needed to take a patent all the way to the market.

Less Seed Money to Go Around

Others point at the lack of seed money as the main problem. Whereas private sources provided new companies with around SKr 250 million (?27 million) in 2001, this dropped to only SKr 80 million (?8.6 million) in 2003. And instead of compensating for this loss, public finance too has been decreasing.

"You used to be able to get seed money to tide you over the first year's work on a new idea," says Johnny Öberg, project manager at the IT company Notegra. "Now inventors must try to make a living from other sources--research grants, scholarships, unemployment benefits, half-time employments. ... It's a tough situation, especially if you have children to support!"

Kista Innovation & Growth CEO Pär Hedberg agrees. According to him, new initiatives are sorely needed at both central and regional level. Without them, many new and promising companies will fold, he warns.

Meanwhile, despite the lack of evidence that higher education leads to greater entrepreneurship, the government is sticking to its goal of sending 50% of young people to university. Might not this money be put to better use elsewhere?

London-based professor Alison Wolf suggested just that in the leading Swedish daily Dagens Nyheter last summer, but her proposal didn't spark any general discussion.

Surprisingly enough, though, the National Agency for Higher Education seems ready to question the value of mass university education. A report published last autumn points out that the Swedish labour market's need for such a high number of university graduates has been overestimated. The report suggests that government efforts should be geared not only towards academically-minded young people, but also towards the large number of high school graduates who want to start working rather than go on studying.

Given its position in national life, one might expect the agency's report to have an impact on official policy or at least to have started a policy discussion. So far, however, it hasn't. Questioning the goal of mass university education remains politically incorrect, and the link between this expansion and economic growth is still taken for granted.

So for now it's business as usual in Sweden ... which might mean still not getting very much business for your money.

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