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As Their Lead Slips, Nordics Look to Revitalize Growth

In a world of economic uncertainty, Nordic countries have stood apart. The countries’ gross domestic products have continued to grow strongly. Nordic equity markets have done well. And the countries have a good track record of building sustainable growth companies.

That these accomplishments have not come at the expense of equality, trust, and collaboration—bedrock values in the Nordics—has increased the world’s admiration for the countries. Tiny Denmark, Finland, Norway, and Sweden have been able to increase their standards of living, maintain their social benefit systems, and retain political stability for the better part of 50 years.1


Iceland and other territories including Greenland are considered “Nordic,” but have some economic differences that put them outside the scope of this article.

Funding the Journey

The sort of change needed in the Nordics requires investment. Companies and countries must both retrain existing workers, embrace digital technology, foster more of an entrepreneurial spirit (in some cases by attracting high-skill immigrants), and buy what they can’t build. This all takes money.

Nordic companies must find ways to preserve margins even while they’re growing. They must also generate cash flow in order to have the resources they’ll need to invest in growth initiatives. The 73 sustained growth Nordic companies we studied (the list was derived from an analysis of 1,301 public companies headquartered in the Nordics) have clearly performed well in this regard. Their average free-cash-flow yield rose by a factor of 2.5 over the last five years, versus a cash-flow decline for other Nordic companies.  

For their part, Nordic countries—which with the exception of Norway have run deficits since the financial crisis of 2008—must do a better job of managing their public expenditures and of improving productivity. If they don’t, they won’t have the flexibility to contribute to private initiatives and to support research in promising new industries.

Winning in the Medium Term

The Nordics’ shrinking lead in innovation and R&D shows up in metrics like R&D intensity (that is, R&D spending as a percent of GDP) and in the number of patents applied for in the Nordics versus elsewhere (see Exhibit 2). If Nordic companies excelled at commercializing their ideas, the weakening R&D numbers might not be so worrisome. Unfortunately, R&D commercialization isn’t a strength. More coordinated efforts are needed, including public-private innovation partnerships.

As Their Lead Slips, Nordics Look to Revitalize Growth