What may be the most competitive stock exchange company in the world is based in a huge, renovated former Ford Motor Co. (F) plant in a suburb of Stockholm. "To succeed, we need to do something special," says Jenny Rosberg, president for company services at OMX, owner of the Stockholm exchange. OMX is so good that it operates six other bourses in nearby countries and now provides cutting-edge trading technology to more than 50 markets spread from Switzerland to Singapore. OMX itself is pulling away from the New York Stock Exchange (NYX) and NASDAQ (NDAQ) in trading volumes of Finland's Nokia (NOK) and Sweden's Ericsson (ERICY) -- companies with a large number of U.S. shareholders.
Cities, too, need to offer something special to succeed in the 21st century, and Stockholm has hit on a potent combination of livability and highly valued skills. Stockholm is a safe, pastel-shaded place of nearly 2 million built around a harbor so clean that you can catch salmon from footbridges downtown. It's also a talent mecca for key technologies, especially telecommunications, thanks to the presence of phone-equipment giant Ericsson, innovative telecom operators like Tele2, and startups such as Nanoradio, where Ericsson alumni develop chips to turn mobile phones into entertainment centers. Such companies have helped push Sweden's research and development spending to 4% of gross domestic product -- among the world leaders.
With its international outlook, fluency in English, and strong science and engineering schools like the Royal Institute of Technology, Sweden was always going to be a global player. But in recent years the government has taken some specific steps that have paid off handsomely. Policymakers deregulated the telecom industry, awarded so-called third-generation mobile licenses cheaply, and subsidized personal computers and broadband networks. The moves helped boost Sweden to near the top of the global charts in computer ownership, fiber-optic networks, and mobile-phone penetration. The government also welcomed foreign capital, leading to the late-1990s takeovers of Volvo by Ford (F) and drugmaker Astra by Britain's Zeneca (AZN). From 2001 to 2004, Sweden attracted $65 billion in foreign investment, a strong showing for a nation of 9 million. And while Sweden has a reputation for being pricey and high-tax, its cost of living and salary range are actually near the bottom of the scale for the West. Swedish telecom and IT engineers come about 40% cheaper than their counterparts in Japan and earn 24% less than those in the U.S., according to compensation consultants Watson Wyatt Worldwide (WW).
Sweden, says Karl-Henrik Sundstrom, Ericsson's executive vice-president and chief financial officer, is "one of the most expensive [locations] for unskilled labor and one of the most inexpensive for skilled labor."
Stockholm's tolerant, nonhierarchical culture is particularly suited to responding to the rapidly changing demands of the 21st century marketplace. "We have a 'just do it' approach to everything; titles are not so important," says Mikael Schiller, managing director of Acne Jeans, a Stockholm-based designer label that sells in high-end stores such as Barneys (JNY) in New York.
This can-do approach has helped apparel makers like Acne and Cheap Monday build international businesses with just a few employees. Web advertising shop Farfar competes for global accounts such as Nokia with a fraction of a New York or London staff. The payoff of this activity is strong growth. While Sweden's GDP is expanding at 4%, Stockholm's is probably cruising along in the 6%-to-7% range, estimates Peter Egardt, president of the Stockholm Chamber of Commerce.
The new wealth is transforming the once-dowdy city as well. One example is Sodermalm, the old manufacturing district where designers and architects now have their offices in renovated factories. American Reed Kram, a senior partner in the Sodermalm design firm of Kram/Weisshaar, has worked on everything from changing rooms for Prada's Beverly Hills store to the podiums for the convention of Sweden's ruling Socialist Party. While Stockholm has top creative people, he says, you don't get overwhelmed the way you might in New York. "It's nice to be avant-garde in a place that is a little more traditional."
By Stanley Reed