Does Swedish R&D payoff?

Abstract: According to the Globalizations Council the most important task Sweden has is to assess the opportunities and challenges presented by the global economy to a small, open country like Sweden. There has been dual competition, some has been able to sell the resource services of human and physical knowledge capital, and others offering to sell unskilled labor at wages way below Swedish standards. This thesis will examine the changes in market position in the manufacturing sector, and how comparative advantage and the role of technology have impacted the changes. The empirical analysis is based on the relative international competitiveness index to examine how market position in different sectors has changed during the time-period 1985-2003. In the regression measures for human and physical capital has been included as well as R&D expenditure for both Sweden and the OECD countries. The results show that the changes in market position for most products are relatively small. What can be concluded is that it is not the sector as a whole that experience improving market positions instead it is certain products such as pharmaceutical, sulphate and electronic components among others. Sweden ranks very high in terms of resources dedicated to production of new technology and there are proofs on both side of the "Swedish Paradox"; which states that high technology exports are low given the high R&D investment. The result also indicates that Sweden has a labor-intensive disadvantage, i.e. indications that the market position for industries with high total capital-intensity has increased.