IVA's President: Some thoughts on Technological Strength

Dear IVA Friends, 

If there is one thing that characterizes our time, it is how crucial technological strength has become to the success and prosperity, security, and influence of a country or region. Historically, it was natural resources or raw materials, but today almost everything revolves around technology.

Not just technological developments, but also – or perhaps mainly – the use and dissemination of new technologies in society and business – let's call it breakthroughs. Over the past week, I have had the opportunity to discuss the global positions of the EU, China, and the US on three crucial aspects of technology policy: speed, volume, and breakthroughs. The EU is not done for, if anyone should think so. But we have much to do.

Is the answer to Europe's declining competitiveness a more federalist EU? If Mario Draghi is to be believed, the answer is yes. In a speech at the prestigious KU Leuven university in Brussels last week, he put forth the concept of pragmatic federalism. According to him, this would break the stalemate we face today, without anyone having to subordinate themselves.

Draghi’s proposal is a kind of federalism that member states can choose to join. The door remains open to others, but not to those who would undermine the common purpose. He raises an important issue – one I think we can no longer avoid. In many ways, the EU is paralyzed by its own structure. Just see how Hungary is blocking strong joint action against Russia. This is not sustainable in the long term.

We are now seeing creative and solution-oriented “side tracks” from several quarters, with member states joining forces to solve problems in constellations other than the EU27. Last week saw the Franco-German initiative for a “two-speed EU,” where finance ministers from a handful of states took the initiative to fast-track defense investments. Another example that bypasses the bureaucratic and sometimes paralyzing EU machinery is the broad support for Ukraine among countries in the “Coalition of the Willing.” Our Nordic heads of government are arguing for closer Nordic cooperation, not as a replacement for the EU, but as a speedboat that can strengthen European cooperation by taking the lead with initiative and action.

No one benefits from a divided EU. But what is worse than an EU that moves at different speeds? An EU that allows the slowest to set the pace.

I believe Draghi is correct about strengthening federalism in the union. We must increase the pace of change, and in this, Sweden can take on the role of “speedboat.” If Sweden – as the EU's most innovative country – were to set the direction and pace going forward, it would seriously help strengthen the EU's future competitiveness.

One area where the EU really needs a speed boat impact is in research and development. The European Commission recently published the 2025 issue of The EU Industrial R&D Investment Scoreboard, which looks at the 2,000 companies across the world that invest the most in research and development (R&D). Together, these account for over 90% of all R&D carried out by the business sector globally. European company rankings indicate how the EU compares with the US, China, and the rest of the world in terms of competitiveness.

The report shows that the R&D investment by companies in the EU last year grew by 0.1% (adjusted for inflation), the lowest since the pandemic. US companies have an R&D investment growth rate of 5.2 percent, roughly the same as 20 years ago.

The report clearly shows the dominance of the US. Twenty-six of the 50 companies at the top of the list are American. In the EU, Germany and France have the most companies investing the most in R&D, but what is really interesting is Sweden. Sweden ranks third among EU countries – both in terms of the number of companies on the list and the size of their R&D investments. The dominant sector in Sweden is telecommunications, where Ericsson and other large companies play an incredibly important role. But dynamic start-ups are also significant.

European industry must increase its investment in R&D. Why is the growth rate of R&D investment among European companies – across all sectors –  essentially zero, while their global competitors are growing rapidly? We should not look for the reason at the level of individual companies. I believe both the will and the initiatives are there. Instead, we should examine which regulations and obstacles are hindering companies' R&D investments. A dysfunctional internal market and excessive EU regulation are hitting European companies hard.

In this regard, Sweden can lead the way.

EU institutions and member states need to act more swiftly and effectively. Could the answer be in a more federalist EU? Or a two-speed EU, where some countries take the lead and set the direction and pace for the others? Sweden has the prerequisites, but does it have the political will and ability?

We will continue this discussion!

Some thoughts from IVA´s President are published in Swedish in IVA's newsletter, and in English on IVA's LinkedIn.