The Atlantic

Why Does Sweden Have So Many Start-Ups?

How a tiny country with high government spending bred a large number of vibrant young businesses

Source: Jonathan Nackstrand / AFP / Getty

STOCKHOLM—This is a high-tax, high-spend country, where employees receive generous social benefits and ample amounts of vacation time. Economic orthodoxy would suggest the dynamics of a welfare state like Sweden would be detrimental to entrepreneurship: Studies have found that the more a country’s government spends per capita, the smaller the number of start-ups it tends to have per worker—the idea being that high income taxes reduce entrepreneurs’ expected gains and thus their incentive to launch new companies.

And yet Sweden excels in promoting the formation of ambitious new businesses, on a level that’s unexpected for a country whose population of roughly 10 million puts it at 89th in the world in population size. Global companies like Spotify, the music-streaming service; Klarna, the online-payment firm; and King, the gaming company, were all founded here. Stockholm the second-highest number of billion-dollar tech companies per capita, after Silicon Valley, and in Sweden overall, there are 20 start-ups—here defined as companies of any size that have been around for at most three years—per 1,000 employees, compared to just five in the United States, according to from the Organization for Economic Cooperation and Development (OECD). “What you see is that start-ups have a high survival rate in Sweden, and they have relatively fast growth,” Flavio Calvino, an OECD economist, told me. Sweden also ranks highest in the developed world when it comes to perceptions of opportunity: Around 65 percent of Swedes aged 18 to 64 think

You're reading a preview, sign up to read more.

More from The Atlantic

The Atlantic6 min read
Rick Perry Wants to Bail Out the Coal Industry
WASHINGTON, D.C.—If the United States is going to have even a chance of meeting its climate-change goals under the Paris Agreement, there are few actions more pressing than taking coal plants offline. Coal-burning power plants emit more heat-trapping
The Atlantic4 min read
Soot-Covered Bird Corpses Cough Up Environmental Secrets
It’s a story about mystery, grime, and a phoenix rising from the ashes—so of course it started in Chicago. The Field Museum, a Greco-Roman citadel of natural history on the shores of Lake Michigan, is famous for its Egyptology exhibit and for display
The Atlantic7 min readFashion & Beauty
The Underclass Origins of the Little Black Dress
The upper classes once imposed the fashion staple on their servants—then they stole it back from them. An Object Lesson.