The Continent's Hottest Small Companies

Northern European countries are catching up as havens for small businesses on the march

The Nordic region boasts some of the world's leading brands: Ericsson, (ERIC) Ikea, Lego, Nokia (NOK). Over the years, those companies thrived in a climate that favored big government and big business—a model that spurred the global giants to greatness but was tough on less established players. But now, thanks to a slew of reforms, the region's small fry are starting to prosper as well.

While Britain, Germany, and France have long dominated BusinessWeek's European Hot Growth ranking of small companies, the Continent's northernmost reaches are becoming increasingly hospitable to small business. Sure, the three stalwarts occupied 186 of the 500 companies on this year's list, including No. 1 Webhelp, a French call center operator. But the Nordics—Sweden, Finland, Denmark, Norway, and Iceland—are home to 162 companies on the list, up from just 37 last year. The list, compiled by Brussels-based advocacy group Europe's 500-Entrepreneurs for Growth, ranks companies on their job-creating power over the past three years.

Just as surprising, many of these Nordic growth champions are in traditional industries. They range from Swedish pharmaceutical maker Meda (No. 8) to Danish timber giant Dalhoff Larsen & Horneman (No. 25) to Finnish heavy equipment rental firm Cramo (No. 43)—all of whom have benefited as growth in the region has picked up. "The Scandinavian model was in disrepute 15-20 years ago," says Klas Eklund, an economist with Stockholm-based bank SEB. "But in the past decade there has been an economic revival."

Ask Anders Althin. When he started his first company, in 1985, Sweden had a top marginal income tax bracket of 87% and one of Europe's least flexible labor markets. Now Althin is chairman of Esalp Invest (No. 36), with interests in real estate, prefab homes, medical devices, and financial services. Esalp has a workforce of 331, up from just 16 three years ago—growth that Althin says was helped by lower taxes and a society that's more open to entrepreneurship. "Today it's acceptable to strike out on your own, fail, and start again," he says.

THE GREAT BEYONDWith relatively small domestic markets, Nordic companies have long sought growth abroad. Now global expansion isn't limited to big players. In less than five years, Sweden's Meda has turned from a primarily Nordic outfit into a global one through acquisitions, such as the July takeover of U.S. rival Medpoint for $520 million. Finnish mobile-phone charger maker Salcomp (No. 10) has built factories in Brazil, China, and India. And Finland's PKC Group (No. 46), a maker of wiring harnesses and cabling, started manufacturing in Russia and Estonia in the early 1990s and has since added plants in Brazil, Mexico, and China. Says PKC President Mika Kari: "We've had to follow our customers."

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