Foreign investment in Swedish industry on the eve of World War One

During the half-century before World War One (WWI), Sweden was one of the fastest-growing economies in the world, but also one of the most indebted. While the role of foreign capital for public investments during this period is emphasised in previous research, its importance for the funding of Swedish industry is commonly de-emphasised. The conventional view is that since public investments could be financed by foreign money, this relieved pressure from domestic financial markets and made it possible to fund Swedish industry through domestic savings. Using balance sheet data for a large sample of Swedish industrial joint-stock companies in 1908 we show that, while it is true that only a small percentage of Swedish industrial shares were owned from abroad, foreign investments were much more important for new and dynamic industries (e.g. pulp and paper, electromechanics, and chemicals). Companies with foreign-owned shares were also more profitable, and had a much lower risk of bankruptcy over the ensuing decades. In fact, out of the 230 companies with foreign-owned shares in 1908, 103 (45 percent) were still in business fifty years later. This suggests that foreign capital was considerably more important for Swedish industrial development than what is commonly argued.