High level of digitalisation makes Nordic companies productive

26.04.2023 7 min read time

Productivity is one of the main economic indicators, and its positive development is the key to improving economic growth and welfare. In practice, productivity measures the level of real increment value created towards each working hour.

According to Mika Maliranta – professor at the University of Jyväskylä and director of Labore, The Labour Institute for Economic Research in Finland – the productivity of Nordic companies, on average, is on a good level – or even top class. Compared to other countries, Finland is an underachiever.

– Sweden and Denmark have done some excellent work, especially since 2010. With regards to productivity, the countries are at the forefront globally, compared to any other developed country.

Sweden and Denmark have outshined major countries in Europe, such as France and Germany. Norway, one of the richest nations in the world, is also among the top performers, albeit for slightly different reasons. Maliranta notes that the country’s oil-based wealth makes it complicated to compare Norway to other Nordic countries.

Maliranta notes two possible reasons causing the productivity of a nation to be, on average, at a lower level. Productivity can be caused either by a large number of low-productivity companies, or the lack of high-productivity businesses.

In the case of Finland lagging behind its Nordic counterparts, it’s the latter reason: the country has a shortage of highly productive enterprises. Up until 2008, Finland had managed to close the gap with Sweden and Denmark, but the positive development ended with a global recession and the weakening of Finland’s star performer, Nokia. Sweden and Denmark made it out of the recession relatively easily and continued to improve their productivity almost straight away.


Innovation increases productivity

 So how do companies view productivity? The global recession of 2008 has been left behind, but other causes for grief have since occurred. The COVID-19 pandemic, Russia’s war of aggression on Ukraine and its economic impacts have forced many businesses to make savings, tighten their budgets and cut down on R&D, all actions that hinder the growth of productivity.

However, Maliranta still believes that companies continue their daily efforts to increase productivity.


Every Nordic company should now consider which new technologies would best help to streamline their business operations


– The issue of productivity may be discussed in different terms, but when a company aims to ensure its profitability or maximise its profit, it is looking to increase productivity.

According to Maliranta, the single most tangible way of enhancing profitability is simple: every Nordic company should now consider which new technologies would best help to streamline their business operations. One option is to develop products and solutions in-house, but also ready-made technological solutions can be implemented.

– The growth of productivity is based on innovation, that is the way technologies are developed and used.

However, the opportunities for introducing new technologies are not equal in all fields and in every workplace. For example, the use of advanced tools is determined by the level of digital skills of the workforce. When the competition gets tough, certain companies will fall behind and disappear.



Mika Maliranta says that Nordic companies have a strong capacity to implement digital technology.

Productivity has a slow effect on the national economy

It takes a significantly longer period to create productive jobs. Maliranta considers this to be the main reason for Finland’s productivity dragging behind the other Nordic countries. Following the decline at the beginning of the millennium, companies need to go through certain phases before productivity can boost the economy.


– The first phase includes increasing R&D-related operations and innovating, which is a relatively slow process. For example, patents are typically created only after three to five years of investments into R&D.

It may take up to 20 years for a company to shift from the innovation phase to a situation where its productivity affects the economy

Maliranta calls the second step the “Slush phase”, where companies begin piloting new technology and create a positive buzz that is visible also externally. The third step is the scaling phase when the idea begins to bear fruit. Companies expand their operations, recruit more employees and increase production.

Maliranta estimates that it may take up to 20 years for a company to shift from the innovation phase to a situation where its productivity affects the economy. Only a small fraction of companies reach this phase, as the majority is eliminated early on from the high productivity game.


Digitalisation index indicates high productivity

Maliranta believes that Sweden, Denmark and Norway will remain among the high performers in productivity, and Finland will join them at the top before long. His view is based on statistics: according to the Eurostat index charting the digital skills of the workforce, Finland, Iceland and Norway take the top positions. Eurostat’s digitalisation index, in turn, presents businesses’ uptake of digital technologies. Sweden leads the pack in this case, with Finland, Denmark and Norway occupying the following spots.


– We have clear evidence of a strong correlation between the digital skills of the workforce and a company’s level of digitalisation. Consequently, Nordic companies can implement more advanced technologies than businesses operating elsewhere.

Although Finland is still dragging behind, Maliranta has no reason to doubt that the country will see digitalisation leading to a high level of added value.

– Otherwise, Finland is so similar to Sweden and Denmark that it would be very surprising if it wasn’t able to join the group over time.


Lowell Focus Nordic

Lowell Focus Nordic