Sectoral specialisation in the EU a macroeconomic perspective

Table A Composition of the ICT Sectors of Finland, Sweden and Ireland

(percentages of total ICT GVA)

Source: NCBs.

Note: The composition of the ICT sector in Sweden is given for 2000, 2001 proving atypical owing to the effects of the slump in the
telecommunications sector.

single market, the availability of a young, relatively well-educated workforce, a favourable
regulatory environment for business as well as the language. In Finland the development of
home-grown technology met with huge international demand in the 1990s. Supply conditions
were facilitated by spare (labour) resources, particularly engineers, in the mid-1990s when
Finland was in deep recession. The Swedish economy was also in recession in the early 1990s.
With its high levels of technical expertise, gained through the development of telecom
equipment and defence technology, Sweden
was also well placed to benefit from the ICT
boom of the 1990s.

The R&D intensity of the technology sectors
gives some insight into whether key functions
are located in each country. In Ireland, for
example, because most output is produced by
US firms, the R&D intensity of the ICT sector
is low for this sector, accounting for only
1.4% of output compared with an OECD
average of 5.6% (see Table B). Both in Sweden and Finland R&D intensity is higher than the
OECD average. The Finnish government has used horizontal state aid mainly to promote
investment in research and development.

There is some evidence of spillover effects of the technology boom to the rest of the economy.
In Ireland, the expansion of the ICT sector contributed to strong aggregate productivity growth
during the late 1990s. There is also some evidence of beneficial linkages between the foreign-
owned ICT sector and indigenous industry (as measured by expenditure on Irish raw materials
and services as a percentage of sales) and increased start-ups of Irish tech firms, often by
entrepreneurs in the software sector with experience in US multinational firms. In Finland,
although the technology sector is very concentrated, it has added to the diversity of the economy
as a whole and has reduced the dependence on forestry products. Empirical studies indicate that
R&D has advanced the aggregate level of productivity in Finland. The advances are largest in
the traded sectors and are typically brought about by plant level changes in the operation of
existing companies. Geographically, labour productivity growth has been concentrated on the
main business regions. In Sweden, other sectors of the economy have benefited from the
telecom boom. The rapid growth of the internet coincided with and contributed to this boom.

ECB

Occasional Paper No. 19
July 2004

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