Rise and fall of the giants? Innovating firms in Sweden, 1890-2016

This study investigates patterns of innovation during two successive industrial revolutions in Sweden. “Genius engineering firms”, such as L M Ericsson, SKF and ASEA (ABB) have dominated narratives about Sweden’s industrial and innovation success. Using new long-term data series of innovation output, 1890-2016, we observe several patterns. First, we document inverted U-shaped patterns during the course of the 20th and 21st centuries of the average age of innovating firms and the share of innovations produced by the genius engineering firms. At most, the genius engineering firms accounted for slightly less than half of innovations in the 1960s, followed by a drop to less than 10% towards the end of the period. To explore potential reasons behind the decline in innovation rates, we interviewed 10 large firms and surveyed important events in their company histories. Our findings suggest that vertical disintegration, internationalization, and increased servitization are partial explanations for these patterns. Our quantitative and qualitative results also stress that the extent to which large firms have been able to reorient themselves towards digitalization and ICTs has been a key aspect of long-run innovation patterns.