How to Change the World: Conditions for Entrepreneurship in Sweden - Essay Example

Entrepreneurship In Sweden Analysis of conditions for Entrepreneurship in Sweden The term entrepreneurship stands for a process of identifying and establishing a business venture by organizing and sourcing the resources required for the venture, and taking both the risks and rewards that are associated with that specific business venture. Entrepreneurship may lead to formation of a new organization or in response to a business opportunity may revitalize a mature organization. There are different entrepreneurial activities depending on the creativity and type of the organization. It ranges from solo projects to even part-time projects to the scale of major undertakings that results into results into creation of many job opportunities. An entrepreneur is a French word that defines an individual who operates and organizes a business or businesses. An entrepreneur is the one who has the ability and willingness to convert a new idea into a successful innovation. An entrepreneur or the innovator is the generator of business processes and the new inventions. The leadership attributes that are essential for a successful entrepreneur is strong team building activities and management skills. International entrepreneurship is the method by which an entrepreneur conducts its business in other countries or across national boundaries. This is a process of executing his or her business in multiple countries. The term international entrepreneurship was coined in the year 1988 to establish new ventures in order to reflect a new cultural or technological environment across many untapped foreign markets. Sweden has emerged with the strongest public finances from the recent crisis. This in turn opens up various opportunities for supply side reforms stimulating small business, entrepreneurship and innovation (Fayolle, Kyro and Ulijn, 2005). Rapid technological changes and globalization are making the work organizations more flexible in Sweden. This leads to requirement of energetic individuals. The favourable economic conditions in Sweden trigger the requirement for individual’s ability to be creative, to have a problem solving ability, the ability to take initiative and to have self reliance. Sweden has a successful history of social and economic development. In the mid-nineteenth century Sweden started off with industrialization as a poor resource based country. In today’s scenario Sweden is ranked as the world’s most innovative country. Sweden through emergence of large Swedish enterprises has established a high degree of internationalization and overcame the limitations of a small domestic market (Bill and Johansson, 2010). Even before innovation started being considered as the social development and economic growth of Sweden it has been the pillar for Sweden’s development. The Swedish economy since the turn of the millennium has been very dynamic. The gross domestic product of Sweden expanded much more than the other advanced countries. Sweden like other small open economies is deeply integrated into the international markets (Fuchs and Shapira, 2005). It rebounded quickly from the sharp downturn where the GDP of the country contracted, but its economy grew significantly faster than the other comparator countries. The labour market condition has remained stronger during the economic crisis. The unemployment rate had fallen down whereas the employment rate remains high. Growth in Sweden remains modest than most of the other European countries and is projected to be much higher in the coming years. Sweden’s favourable economic conditions boost the entrepreneurship in this country. It has much more suitable institutional and economic conditions compared to other European countries (OECD, 2005). It has relatively strong public finances; this has allowed the governing coalition to introduce measures in the crisis period mainly focused on labour market. Even at the time of international economic crisis Sweden could inject additional stimulus with the help of abundant fiscal resources. It has a relatively robust banking sector which is due to the banking crisis that it faced in the early 1990s that helped it to strengthen its financial conditions. The government has introduced financial stabilization measures and broadened its deposit-guarantee scheme. There is a little exposure of the country to the sovereign debt that is associated with the euro zone economies. There is a recessive economic condition in most of the trading partners of Sweden which results into competitive exports or makes the export growth weak in Sweden (Fayolle, 2010). The external accounts of the country are overall healthy with surplus private sector and public sector savings. There is low price inflation in Sweden with consumer price index of 1.0% as recorded in 2012. The government of Sweden has its reform of improving economic incentives to work, and privatize some majority holdings in companies in order to reduce the state’s role in the economy. This reform of benefits will be brought forth by tax cuts and they even have intentions to open product markets to the wider competition. Sweden has projected sluggish growth with high life expectancy and low inequality, and it has the highest income per capita amongst the other European countries (Birley, 1995). For entrepreneurship favourable macro economic conditions are essential. The conditions mainly comprises of long term or medium horizon and a sufficiently stable environment. The macro economic conditions for entrepreneurship are very supportive in nature after the economic crisis. It comprises of low regulatory barriers, macroeconomic stability, declining corporate taxes, strong human capital are the conditions for entrepreneurship in Sweden (Hirsch, 2012). The economy of the country had the ability in reallocating the resources to higher productive uses from lower ones. Sweden has got a number of private venture capital funds; there is decrease in the corporate taxes and increase in product market policies. There is an indicator for product market regulation in the country that inhibits or promotes competition in those areas where there is viable competition. Here the barriers to competition have legal limitations on the scope of exemptions for public enterprises and entry barriers in network sectors mainly in professional services and retail sectors. There exists an inward and outward FDI flows and openness to trade that facilitates knowledge flow from abroad and reinforces competition. There is a regulatory burden that exists on trade which indicates the propensity of exporting by small firms. These firms are more sensitive to this regulatory burden than the large firms. In Sweden most of the enterprises depends on the commercial banking sectors for the external finance. Capital gain taxes and corporate taxes are very vital in entrepreneurial activities (Dana, 2004). The rate of capital gain taxes is low which rises high share of technology, commitments to new venture capital funds, and the early stage investments. This decrease in level of the corporate taxes initiates an increase in the supply of investment opportunities through an increase in the incentives of the worker’s to become entrepreneurs. There are certain features in the tax systems that motivate entrepreneurs such as tax exempt intra group dividends, capital gains exemptions on the sale of subsidiaries, the absence of thin capitalization rules, full tax relief on interest, and to avoid double taxation with many countries the presence of comprehensive tax treaties. But the way the stock options are taxed limits entrepreneurship (Kumar, 2003). Swedish law for stock options is not best suited for early stage ventures but for large listed companies because of the risks and uncertainties that are associated with the early stage ventures. Swedish investors because of this law holds too little ownership in early stage ventures for their investments as there is no value given to the preference shares in this stage. The Sweden’s infrastructure supports the various entrepreneurial and innovation activities (Jones And Dimitratos, 2004). The conditions of establishment legislation, competition policy, taxation policy, labour market regulation, and the cultural norms of Sweden are the major issues for entrepreneurship in this country. There are certain supportive conditions and some factors affect the venture at the early stage, all the conditions should be considered in entrepreneurship in this country. Social Entrepreneurship in Sweden Social entrepreneurship is a method of solving social problems with the help of some innovative solutions. To create and sustain social value are the main mission of the social entrepreneurs. Their mission is achieved through continuous learning and adaptation. Social entrepreneurship is typically associated with not for profit and voluntary sectors by broadening social, environmental and cultural goals. They operate in all kinds of organizations that are new and old, large and small, non-profit, for profit, religious and secular and hybrid sectors (Bornstein, 2007). A social entrepreneur combines entrepreneurial logic to solve the problems faced by the society in new ways. In Sweden social entrepreneurship is not only a way of solving injustices and great challenges but also has created growth and new business opportunities. This includes areas of medical care, health care, green industries and education. Social entrepreneurship is one of the different types of entrepreneurship culture. Since this kid of entrepreneurship requires a lot of investment in the initial stage and is not a profit driven activity so it is not adopted as a method of entrepreneurship by many individuals. This kind of entrepreneurship is mainly concerned with the welfare of the society, to bring a drastic change, and to bring in some innovative ideas to face the major issues related to the society (Berglund, Johannisson and Schwartz, 2012). The society in Sweden is moving towards betterment and there have been improvements towards the common problems faced by the society because of these social entrepreneurs. There have been great social innovations in Sweden in areas such as an aging population, youth employment, energy, environment, and urban development. The Knowledge Foundation had launched in 2008 in Sweden an initiative to promote Social entrepreneurship. There still is a need of regional and national policies to promote in a systematic way the concept of social entrepreneurship in Sweden so that it becomes an area of growth. In order to achieve it cross sector collaboration and partnerships are needed (Bornstein and Davis, 2010). There is even a need for new methods of financing for the social entrepreneurship. There has been development of some social investment funds by some municipalities in Sweden. But there is a need of involvement of government institutions to advice and guide on social innovations that promote the development of trade, enterprise and business on a national level. Some Swedish social entrepreneurs are Bjorn Soderberg of Fair Enterprise & Watabaran, Dr. Karl-Henrik Robert of The Natural Step, Solvatten, and Telge Tillvaxt (Mair, Robinson and Hockerts, 2006). Though Social entrepreneurship is a new term in the country but Swedes have been innovators especially in digital markets and clear examples are of Skype, Sound cloud, Ericsson, Volvo, IKEA etc. Though the country’s most pressing social challenges are solved through policy making traditionally by the Swedish government and the people but in a shorter period of time there is awareness spread across Sweden about social entrepreneurship, realizing that this concept can societies and systems (Nicholls, 2006). This initiative has resulted into a number of an increase in the social entrepreneurs and an improvement in the support structure. The Swedish agency for economic and regional growth is one of the government initiatives that provide financial support to these social entrepreneurs. Social entrepreneurships are gaining much more acknowledgements in institutions and are on the rise in Sweden. Social entrepreneurship has been launched as a subject for specialization by many universities in Sweden to spread more awareness about this new concept and to highlight the need beyond such an innovation. There are some municipalities in Sweden that makes it easier to create public private partnerships for many social entrepreneurs. Johan Wendt through his social entrepreneurship venture of Mattecentrum provides free tutoring to those students who wants to improve their skills via online learning forums after-school. Wendt by his initiative is helping those children who cannot afford to take private tuitions and thus creating a social change. Founder of MittLiv Sofia Appelgren for financial support has entered into a deal with the city of Gothenburg. Such a partnership is the first in the region that is a partnership between a social entrepreneur and a major Swedish city. Solvatten is another social entrepreneurship venture of providing clean and hot water to households by harnessing sunshine with the help of a portable container. With the growing concern regarding the areas of youth employment, aging population, environmental problems, inclusion and poverty there is a need for such social innovations to come forward (Lyons, 2012). Though the economic conditions of Sweden is very favourable for other kinds of entrepreneurship measures but there is a group of young fellows in Sweden who takes the initiative of helping the society. Through there different partnerships and strategic ventures they initiate a change in the society. Social entrepreneurship has gained its importance over a couple of years and is on the rising trend (OECD, 2010). This kind of entrepreneurship has not helped in creating a change in the social conditions of Sweden but even contributes towards helping the backward classes in the society. It is a reform that will indulge some fresh innovators and entrepreneurs to think at a different angle of bringing social reforms in Sweden and not be only just profit oriented as most of the entrepreneurial activities involve but to act as a non-profit mode of entrepreneurship. Factors affecting the development of Entrepreneurship in Sweden There has substantial development in entrepreneurship in the recent years in Sweden. This development is largely based on some key factors that can trigger as well as bring down the entrepreneurial growth. The factor that affects the entrepreneurship development is social, cultural and political factors. The social factors mainly comprise of the needs of the business to access those resources essential for establishing a business and are not available internally. The resources that are available internally in a business are the knowledge, competence and ideas to run a business. The resources that business needs to acquire externally are financial capital, labour and information (Adam, 2005). The businesses can only acquire these resources through their contacts. If these social factors of acquiring these resources are not obtained then the development of an entrepreneurship can be affected. It requires effective contacts which are not an easy task at the early stage of entrepreneurship. The cultural values are on the basis of difference in thinking’s and values of one group of humans from the other. Some people in Sweden might find it beneficial to work independently and some may find it beneficial to work in organizations in terms of risk (Zucchella and Paolo, 2007). Setting up of an organization involves many risk and investments which may not be an effective measure for many individuals (Muffatto and Giacon, 2012). The distinct institutional orders that are the major domains of life have an impact on the entrepreneurial behaviour. These orders mainly include the religion, market, family, state of the corporation and professions. These orders have consequences for discouraging and supporting entrepreneurial behaviour that embodies conflicting and competing sources of norms, justifications and legitimacy of worth. These cultural norms affect the development of entrepreneurship in Sweden. There is majority population in Sweden that finds it more beneficial to go for permanent employment. This kind of approach will bring down the level of entrepreneurs in the country. There are favourable economic conditions in Sweden than the other European countries that have helped the country to revive from the euro zone crisis (Fritsch, 2011). These conditions have supported the growth of entrepreneurship over the years but the cultural norms which describe the background of the citizens can hinder the sustainable development. Entrepreneurial activities the ability of individual to think in a different way and the cultural dimensions that is reflected through their business activities. There exists a strong competition on exports in Sweden which requires proper regulatory measures from the government to allow the entrepreneurs to overcome the entry barriers to other nations. If the government regulations are strong on trade barriers it would create more opportunities for the entrepreneurs. These new business opportunities will lead to sustainable entrepreneurship development in Sweden. There exists a need for some financial support from the government at the early stage of entrepreneurship. This political support is highly dominated by the people belonging to larger organizations or by the larger enterprises. Thus this dominating factor posed by big scale entrepreneurs could affect the growth of small scale entrepreneurs and in turn result in overall decrease in development in entrepreneurship in Sweden (Sanandaji, 2012). There is a need of sustained regulatory on the corporate taxes. As the corporate taxes gain has created an entrepreneurship development. Entrepreneurship in Sweden has gained a prominent development in recent years. But it depends on the various rules and regulations from the government in respect to labour market, taxes etc. The entrepreneurial activities depend on even strategic partnerships across the national boundaries which require the political environment of the country to be strong enough. Hence as there has been a drastic growth in the Swedish entrepreneurship but it still requires effective handling of the social, cultural and political factors to sustain the entrepreneurial growth in Sweden for a long run. References Adam, F. (2005). The Challenges of Sustained Development: The Role of Socio-cultural Factors in East-Central Europe. Hungary : Central European University Press. Muffatto, M. and Giacon, P. (2012). Entrepreneurial Strategies and Policies for Economic Growth. Italy: libreriauniversitaria.it Ed. Fritsch, M. (2011). Handbook of Research on Entrepreneurship and Regional Development: National and Regional Perspectives. UK: Edward Elgar Publishing. Sanandaji, N. (2012). The Swedish Model Reassessed.UK: Eetos kustannus. OECD, (2005). OECD SME and Entrepreneurship Outlook 2005. Australia: OECD Publishing. OECD, (2010). OECD Territorial Reviews OECD Territorial Reviews: Sweden 2010. Sweden: OECD Publishing. Berglund, K., Johannisson, B. and Schwartz, B. (2012). 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