The Capability of Swedish Municipalities to Attract New

The Capability of Swedish

Municipalities to attract New

Company Establishments

Bachelor’s Thesis 15 hp Department of Business Studies Uppsala University Spring Semester of 2021

Date of Submission: 2021-05-26

Nicholas Almerén Tobias Jenssen

Supervisor: Josef Pallas Abstract

During the last decades there has been an ever-decreasing number of jobs in the industry sector of Sweden. However, in more recent years there are indications that the trend has shifted, and jobs are now being moved back to Sweden, a phenomenon called reshoring. This gives opportunities for local municipalities to attract these companies to establish their operations within their territory. However, there is a general competition among the municipalities when it comes to attracting new company establishments, regardless of reshoring. Hence, the purpose of this study is to understand how Swedish municipalities can secure their appeal towards companies that are considering establishing themselves within their boundaries. To study this a multiple-case study is conducted on three Swedish municipalities where respondents responsible for business establishments have been interviewed. An analytical framework was developed where certain archetypes are assigned to the municipalities depending on their profile, Reactor, Insubstantial, Servant and Partner. The analysis looks at aspects between municipalities and companies from the perspective of level of value facilitation, level of interaction as well as drivers for reshoring. In conclusion the municipalities have an ambition of ensuring a high level of value facilitation by being responsive and securing high availability towards the companies and keeping a high level of interaction. There is room for improvement for municipalities to develop their strategies and capabilities related to reshoring to better capture these opportunities.

Table of contents

1. Introduction 4 1.1 Background and problem description 4 1.2 Research question 5 1.3 Purpose 6

2. Theoretical framing 6 2.1 Facilitating value creation 6 2.2 Municipal and Business interactions 7 2.3 Drivers for reshoring 9 2.4 Analytical framework 10

3. Methodology 12 3.1 Research design 12 3.2 Sample and respondent selection 13 3.3 Interview design 14 3.4 Question design 14 3.5 Validity, Reliability and Methodological discussion 15 3.6 Ethical discussion 16

4. Results 17 4.1 Municipal business policies 17 4.1.1 Municipal considerations for attracting company establishments 17 4.1.2 Service as a Strategy 18 4.1.3 Reactive and proactive municipalities 20 4.1.4 Types of companies and industries 21 4.1.5 Third-party co-operations 21 4.2 Municipalities inherent capabilities 22 4.2.1 Geographical location, size and infrastructure 22 4.2.2 Land available for development 24 4.2.3 Available competences 24 4.3 The business perspective 26 4.3.1 Ensuring simplified and swift municipal interaction 26 4.3.2 Subsidizing company establishments 29 4.4 Reshoring 30 4.4.1 Reshoring in a municipality context 30 4.5 Navigating legal aspects 30 4.5.1 Municipal legal considerations 30

5. Analysis 32 5.1 Level of value facilitation 32 5.1.1 Municipal business policies 32

5.1.2 Municipalities inherent capabilities 34 5.1.3 The business perspective 36 5.1.4 Reshoring 36 5.1.5 Navigating legal aspects 37 5.2 Level of Interaction 38 5.2.1 Municipal businesses policies 38 5.2.2 The business perspective 39 5.3 Municipality characterization 40

6. Discussion 42

7. Conclusion 44

8. Further Research 46

9. References 47

Appendix 51 Appendix 1 Data from Confederation of Swedish Enterprise business climate ranking, Svenskt Näringsliv (2020a) 51 Appendix 2 Interview questions 51 Appendix 3 Responses into operationalized subjects 54

1. Introduction

1.1 Background aneed problem description

During the past decades there has been an ever-decreasing number of jobs in the industry sector of Sweden, in 2016 there was an estimate that the number of industry jobs had halved in 20 years and as many as 140 000 jobs have disappeared in 10 years (Lindvall, 2016). To keep up in a competitive environment a great deal of rationalization of the production in Swedish companies has been undertaken and offshoring has been a major vehicle in this development, with a large number of industry jobs being moved to Asia, in particular China, or other closer destinations such as Poland and the Baltics (Fredriksson and Jonsson, 2009; Westkämper, 2013). However, since then there are indications that the trend has shifted and that an increasing number of industry jobs are being created in Sweden, either in completely new areas such as data centers, clean energy and logistics, or through jobs that once were outsourced to other countries that now are being moved back to Sweden (Sequeira and Vestin, 2017). The latter phenomena is referred to as reshoring, the opposite to offshoring, where companies move back production to their original location (Foerstl, Kirchoff and Bals, 2016). Given that an increasing number of companies are considering reshoring their operation, there should be opportunities for local municipalities to attract these companies to establish themselves within their territory (Sanandaji, 2016). However, municipalities are of course interested in attracting any company that is considering setting up new operations in order to drive growth. Growth can be defined as an increase of the economic standard within the municipality's geography and this is manifested by increases in employment levels as well as per capita income (Wolman and Spitzely, 1996). Hence, attracting new companies is typically a high priority for the municipalities since this would have positive effects, e.g., increased tax revenues that in turn gives the possibility to provide better services and infrastructure to the inhabitants (Business Region MidSweden, 2018).

In competing among themselves, municipalities will have to prove their attractiveness to entice companies looking to either reshore their production or simply start new

4 ventures or subsidiaries. The municipalities approach to this needs to be adapted based on local preconditions and what vision of growth they may have (Fjertorp, Larsson and Mattisson, 2012).

There is a yearly survey, conducted by Confederation of Swedish Enterprise (In Swedish: Svenskt Näringsliv), ranking the municipalities of Sweden in terms of how business friendly they are (see Appendix 1). This survey indicates potential areas for municipalities to improve as well as guidance to companies in terms of how business friendly municipalities are and where they could potentially establish new operations.

A recent study by Tillväxtverket (2020) on the importance of the location where a company might establish itself, indicate that there are a number of factors that are being considered by industries when choosing a location, such as access to land in close proximity to transport routes, adequate supply of sustainable energy, good living conditions for the employees and ample supply of a skilled well-educated workforce. So, companies may have a clear understanding of the demands they may put on municipalities to decide to establish themselves within their boundaries, however to the best of our knowledge, there seems to be fairly limited research both in general as well as from a reshoring point of view on the actual strategies and behaviours of the municipalities that are working to attract the companies.

Studying the different approaches a municipality may have was prompted by a 2020 proposition by the Swedish retailer Synsam to move parts of their production to Sweden, having previously moved it abroad (Synsam, 2020). Given that there were several municipalities vying to be selected by Synsam as the preferred location, three Swedish municipalities that were competing for this establishment were studied to provide a perspective on how municipalities' challenges of attracting companies are approached depending on different pre-conditions among them.

1.2 Research question

The quest for attracting companies to municipalities in Sweden, where they sometimes have been used to industries terminating their operations rather than starting new ones, is ongoing. These could be companies that either are looking to reshore their production or simply start new ventures or subsidiaries in a particular municipality.

Thus, the research question is; how do municipalities work to attract new company initiatives and do they have particular strategies to attract companies that are considering reshoring?

1.3 Purpose

Depending on what advantages and circumstances a municipality might have, different aspects and arguments and strategies can emerge when interacting with potential companies. The purpose of this study is to understand what makes municipalities attractive in relation to companies that can consider locating their business within their boundaries, and what alternative approaches there could be to attract and appeal such companies. Additionally, an analytical framework is proposed to analyse different municipalities based on defined archetypes.

2. Theoretical framing

2.1 Facilitating value creation

In order for municipalities to attract business establishments, there needs to be an enticing enough value proposition for companies. For this to exist municipalities need to facilitate value creation by providing adequate services, which is expanded upon below.

According to Grönroos and Voima (2013) there exists, within the context of value creation, a dynamic between a Provider and a User, each acting within their own spheres with the added possibility of interacting together in a joint sphere. In this

6 context, the municipalities are Providers and companies are Users and value creation is defined as a function of the perceived quality and the sacrifice, monetary, or otherwise, which the user suffers (Zeithaml 1988; Woodruff and Gardial 1996). The role of the Provider is that of a facilitator, laying the groundwork for the User to utilize as they best see fit and does not itself create value (Persson, 2010), or as Grönroos (2019, 779) puts it: “The service organization as a service provider strives to provide help to the service users’ relevant processes, using all its resources, processes and competences, with the aim to enable the service users to achieve some specific goals in a way that is valuable to them.”.

The Users goal, on the other hand, is to create value as they themselves define it. While it is entirely possible within the model for users, or companies in this case, to create value independently in the user sphere, the focus in this study is within the joint sphere and the value co-creation that can be created within. As stated by Grönroos (2019, 779) “The service users use all resources and processes available to them as help to their usage processes, with the aim to enable them to achieve some specific goals in a way that is valuable to them.”.

Together, then, in the joint sphere the role of the Provider is to facilitate value creation through providing resources, processes and competences which are of assistance to the User in achieving its goals (Grönroos, 2011). For this to happen it is important to build and gain trust between the parties (Persson, 2010).

2.2 Municipal and Business interactions

When studying how municipalities work to attract new company initiatives, it is important to not only study how value can be created through facilitation, but it is also of equal importance to study whether such cooperation exists at all. To explore this, we will discuss how municipalities and companies can act either Autonomously or Integratively and how these behaviours integrate with each other.

Originally developed by Pierre (1992) within a Swedish context, businesses and municipalities can be placed in a framework by defining each actor as being either autonomous or integrative, creating different strategic models depending on how they

7 are defined. From the municipalities point of view, autonomy is defined as limiting their policy initiatives aimed at cooperation, simplifying company operations or removing barriers. Autonomy from the business point of view means having low expectations on what to expect from the municipality in regard to helpful industrial policies (Pierre, 1992; Persson 2010). Integration, meanwhile, entails municipalities actively working together with businesses in reaching common goals. From the business perspective, integration means having high expectations on what the municipality can do for them in reaching their objectives (Pierre, 1992). Combining these, then, creates a model that can be divided into four parts (see figure 1). In the Night-watchman model, both the municipality and businesses have elected to employ an autonomous strategy where expectations of cooperation are low from both parties. The second model, the Steering model, entails the municipality pursuing an active role with businesses remaining passive. Third, the Dependency model, is the opposite where businesses are more active with demands toward the municipality whilst the municipality remains inactive and uninterested. Finally, in the Mobilization model, both parties are both interested and active, working together toward common goals. (Pierre, 1992).

Figure 1. Pierre’s (1992) model of municipal and local business strategies (translated by the authors)

Once defined what kind of strategy applies the implementation of which can take three different forms. In the Simplified method, the municipality does not have a specialized department handling industrial or commercial matters and the matter is either left without anyone responsible or to a generalized department. Second, in the Secretariat method, the municipality has a specialized department working with developing

8 business relations. Finally, in the independent method, industrial or commercial matters are handled separately from the municipality’s organization (Pierre, 1992).

2.3 Drivers for reshoring

For municipalities to attract new business establishments from a reshoring perspective, there is a need to understand what drives these companies in order to have a good value proposition towards them.

There are a number of reasons a company may consider reshoring, such as reducing costs, where either cost levels have gone up in the current country of production or one can find that the productivity has gone up in the home country. This could include both labour costs and other factors of production such as availability of technology for automation and access to a better educated workforce (White and Borcher, 2016). Further there may be quality issues that could affect the cost of production, resulting in higher volumes than needed and capital being unnecessarily tied up (Kälvelid and Wulf, 2016). Another area of concern is supply chain risk, which could be mitigated by moving the production closer to the home market, since it would be in closer proximity to where the product is sold and thus reducing both time to market and lead times (ibid.).

There are in-country risk factors associated with having production offshored, such as new and potentially adversarial governmental trade policies, for instance import taxes, as well as political unrest or possible natural disasters (White and Borcher, 2016). Also, flexibility and lead times are factors to consider, if a company were to have a product where the design process is well integrated with the production process there could be an advantage of having these processes in close proximity. This would potentially have a positive effect on time to market for a product since there would be a shorter lead time between design and having the goods in production. This could also bring higher flexibility in terms of better control of the production facility; however it could also introduce a higher exposure to the risk of not utilizing the production capacity at all times (Kälvelid and Wulf, 2016). Further, there is the aspect of corporate social responsibility where increasingly companies consider making sure that their production and operations are environmentally friendly, using good labour practices

9 and that they are in accordance with the organization's core values. However, this may prove difficult to adhere to in countries with lesser standards concerning workers’ rights or that are lacking in environmental regulations (Haleem, 2017). Also, from an environmental perspective there could be potential gains of keeping production closer to the customers, both from reducing transport related emissions and ensuring more environmentally friendly production methods (White and Borcher, 2016).

2.4 Analytical framework

For this study, an analytical framework combining the works of Pierre (1992) and Grönroos and Voima (2013) has been constructed, the results of which are presented below.

When analyzing how municipalities can secure interests in new company establishments, we will look at how municipalities make themselves appealing given what value they seek to portray to a potential company and how active they are when interacting with a potential company. In this sense the analysis is based upon Grönroos’ and Voima’s value model and Pierre’s model on interaction as described above. In figure 2 these two models are combined into an analytical framework that will be applied in the analysis and further described below.

Figure 2. Analytical framework

The level of interaction is considered high if the municipality is geared towards the previously mentioned Steering model and Mobilization model whereas the level of

10 interaction is considered low if more geared towards the Night-watchman and Dependency models.

The level of value facilitation is considered based on the municipalities capabilities to facilitate through providing resources, processes and competences which are of essence to the companies they interact with.

The perspective of reshoring is considered in the analytical framework as a part of the level of value facilitation since whether municipalities consider the drivers for reshoring when interacting with companies can be seen as a way of enhancing their value facilitation.

Further, four archetypes are introduced (figure 3) to characterize the municipalities depending on where they fit into the quadrants of the analytical framework.

- Reactors: Municipalities who simply react to changing circumstances or opportunities without prior facilitatory preparation or interaction with the business community

- Servants: Municipalities that have facilitatory resources in place but have a low level of interaction by not working proactively towards the business community

- Insubstantials: Municipalities who actively seek out opportunities without being able to follow through on promises by not being prepared upfront to facilitate value.

- Partners: Municipalities who are both able to provide value facilitation and work integratively toward the business community giving them a more equal standing in their dealings with the businesses.

Figure 3. Analytical framework with municipality archetypes

The analytical framework will be used to understand how the municipality is characterized to understand how they can secure their appeal towards companies that are considering establishing themselves within their boundaries. By applying the analytical framework, it will assist in seeing potential differences between the municipalities that are studied.

3. Methodology

In this section, the research design is presented, followed by how the study was conducted and a discussion of the studies reliability and validity, concluding with a section on research ethics.

3.1 Research design This study explores how three different Swedish municipalities work to attract new company establishments. As all municipalities have this ambition whilst having varying preconditions and strategies to reach this goal, the authors elected for this thesis to take the form of a multiple-case study. According to Bryman and Bell (2011), this is a suitable method when wishing to analyze a common phenomenon from contrasting perspectives. The study is a qualitative study using semi-structured interviews. A qualitative method allows for a more in-depth understanding of the complexities and nuances concerning the research question while semi-structured interviews allow for a more free-flowing conversation, creating opportunities for follow-up questions where necessary (ibid.)

3.2 Sample and respondent selection

The study uses purposive sampling, where respondents or cases are selected strategically based on their relevance to the research question (Bryman and Bell, 2011). Initially, the municipalities were of interest due to their roles in a specific process by the Swedish company Synsam to select a site for a new production facility. However, despite the municipalities different sizes, history and geographical locations, they are similarly placed in the Confederation of Swedish Enterprises ranking of how business friendly Swedish municipalities are (See Appendix 1), where relevant subsets of data concerning specific areas will be used in this study. These contrasting conditions were thought to provide helpful insights toward answering the research question, where Ockelbo is a small municipality with mostly small businesses with few employees, Östersund is small with mostly white-collar businesses and Eskilstuna is medium-sized and has both types of businesses while also having some manufacturing industries.

To gain as much understanding as possible into the process of attracting new establishments, it was important to obtain access to individuals with insight and in central positions. For each municipality key decision makers were identified through publicly available sources and contacted for interviews. All individuals that were contacted accepted the requests for interviews.

Interviews were held with representatives from the three different municipalities. The respondents were responsible for managing establishment of new company ventures in their respective municipalities. The respondent from Östersund had the title Etableringsansvarig (Responsible for company establishments) and the respondent from Ockelbo had the title Näringslivsutvecklare (Business developer) and two respondents from Eskilstuna had the title Näringslivsutvecklare (Business developer).

The respondents were all directly involved in the process of attracting business establishments, having senior positions within each municipality's departments for industrial or commercial affairs with decision-making mandates. While often working in cross departmental teams the bulk of the responsibilities were within these departments. Although working in a political environment led by elected officials, the

13 respondents are civil servants holding apolitical positions, their jobs independent of current or changing political majorities.

3.3 Interview design

Due to the respondents being located within or near their respective municipalities, different from the authors and at geographical distances prohibitive to in person meetings and due to restrictions imposed by the, as of writing, ongoing Covid-19 outbreak all interviews were held by video conference with each interview lasting about an hour. Permission was sought to record the audio of each interview which was later transcribed and analyzed. The interviews were conducted by both authors, which according to Bryman and Bell (2011) allows for one interviewer to take the role of asking questions, taking notes and moving the interview along the planned structure while the other can listen more intently, looking for opportunities to intervene when it is felt that an answer needs to be elaborated or to make sure that the answers cover the questions. The interviews were semi-structured, with prepared questions covering the scope of the study (see appendix 2) but also allowing the respondents to elaborate on topics wherever they felt it necessary and for the authors to ask follow-up questions wherever applicable (Bryman and Bell, 2011). At the end of each interview all respondents were allowed the opportunity to speak freely should they feel they had anything to add not covered by the prepared questions.

3.4 Question design

To answer the research question within the scope of the theoretic framework, questions were formulated that would allow the respondents to elaborate on each topic while still being steered towards discussing the chosen subject. When, for example, asked about reshoring the questions were fairly straight forward, such as whether they were aware of the phenomena in general and if they had any specific strategies in place to attract businesses, while when discussing the municipalities strategies on attracting new business establishments in general, broader questions were chosen to allow the respondents to put themselves in a wider context, such as asking what secondary effects an establishment might bring or what in their view characterizes the optimal co-operation with businesses. The aim was to in part cover what we predicted could be relevant aspects and factors in each municipality's process of attracting 14 companies. Adding to this, more open-ended questions were included to encourage elaborative answers which could assist in realizing what the prepared questions might not cover while also potentially offering data and information that could be useful in either narrowing or widening the study (Bryman and Bell, 2011). Each question and answer were then operationally defined by being sorted into different areas, see appendix 3, and then judged to concern either integration or value facilitation or both as per the analytical framework. Based upon the respondents’ answers to each question together with the data from the Confederation of Swedish Enterprise, each answer was assessed to be either indicative of creating value facilitation or integration or not, where all the answers then are summarized into a total score.

3.5 Validity, Reliability and Methodological discussion

To understand or judge the quality of a bachelor's thesis, it is important to take into consideration its validity and reliability (Bryman and Bell, 2011). One definition of validity is that research studies what it claims to study, or put differently, if it measures accurately what is set out to measure (Esaiasson et al., 2017). As a multiple-case study consisting of three cases, it could be argued that the sample is too small to draw any general conclusion from the findings (Bryman and Bell, 2011). As a qualitative study, the depth and reach of the collected data can compensate for the sample being small (ibid.) which, in the authors opinion, is the case of this study. However, interviewing individuals in such key positions as in this study is both a strength and a weakness. While their insights are unique and otherwise impossible to obtain through public or other sources, they are still all part of the process being studied which potentially could mean that responses are made with hindsight or that negative outcomes and poor decisions are underplayed, affecting the validity of the research (ibid.).

As to reliability, or whether the data collection has been conducted in a dependable manner (Esaiasson et al., 2017), audio of all interviews was recorded and transcribed later. This ensures that the collected data can be analyzed without risk of it being corrupted by insufficient notetaking or on the spot interpretations clouded by the interviewer's attention being divided between conducting the interview whilst transcribing it at the same time. It also means that the authors are given time and

15 opportunity to reach consensus by discussing the respondents' answers, ensuring consensus on how to construe the data (Bryman and Bell, 2011). Although the interviews were semi-structured, there was a rigid questionnaire. Thus, it is not unreasonable that the same results would be reached should the study be repeated (ibid.)

It should be noted that due to the time constraints and scope of a bachelor's thesis, the framework constructed for this study lacks somewhat in granularity yet is robust enough to be able to draw some conclusions from. It would also be prudent to note the author's humbleness to the fact that the complex issues and structures discussed in this study does not easily translate into a simple model, however the framework developed should suffice to adequately analyze the different municipalities.

The methodology used when giving the various scores in the analytical framework around how the municipalities are rated on the topics are somewhat crude by only using a “high” or a “low” score. However, when doing this exercise, it was considered not only how they rate among them comparatively but also objectively how they rate against the criteria whether they had a capability in place or not.

3.6 Ethical discussion

In a report regarding ethical considerations at the bachelor’s level, Nikku (2012) contends that students should follow the ethical research requirements of consent and confidentiality. Consent means that those actively partaking in the study should assent to doing so (Vetenskapsrådet, 2002) and confidentiality, where the identity of individuals is anonymized as far as reasonably possible (ibid.). The participants voluntarily elected to take part in this study and were for instance not, as Nikku (2012) describes it, part of a “weak group” which could have raised concerns whether participation was out of free will. All individuals were offered anonymity. Furthermore, Nikku (2012) argues that a bachelor’s thesis should not be undertaken if, where it research conducted at a doctoral level or higher, would have been required to undertake an ethical review as defined by Swedish law1. This study does not concern

1Lag (2003:460) om etikprövning av forskning som avser människor 16 any research area that falls under that law. As a finishing note, the study was undertaken jointly and was written concurrently by the authors.

4. Results

This section summarizes the results from the interviews and where applicable also introduces data from Confederation of Swedish Enterprises recent study on how the municipalities are viewed from different perspectives by the companies that are present today within each municipality.

4.1 Municipal business policies

There are factors that municipalities can affect, or put differently, there are ways to make the best out of their respective situations. Here we discuss some of these factors.

4.1.1 Municipal considerations for attracting company establishments

There is no intrinsic value of attracting businesses to a municipality, rather it is the secondary effects that follow an establishment that are of interest (Fjertorp, Larsson and Mattisson, 2012). Often, they lead to new employment opportunities that potentially could attract people with new competencies and skills which leads to greater tax revenues with the follow-on effect of strengthening the municipal welfare (Bartik, 2005).

There are also fewer tangible effects such as creating a more positive view of the future among its municipality members, that it is important that a municipality is something more than just a place to live but also needs to provide work and social opportunities (Bjørnå & Aarsæther, 2009). This implies that for a municipality to be attractive there is a need to provide all essentials that would be required by society (Ibid). The respondent from Eskilstuna points out that the more companies that establish themselves in the municipality, the more companies will consider coming as well thus creating a multiplying effect.

Östersund mentioned that they were aware of potential secondary effects company

17 establishments would give them, however it was not part of any calculation when trying to attract them. However, Ockelbo and Eskilstuna was very much taking tax effects as well as job opportunities into account in their endeavours to attract companies, Eskilstuna even mentioned that they would not sell land to a company that would not plan to use it in the near term since they saw the land as a vehicle to create job opportunities and later tax revenues.

The respondents felt that a company establishing themselves in a neighbouring or nearby municipality is not necessarily a missed opportunity. This since synergy effects through job creation and migration to the region could have positive effects even if the municipality in question was not selected (Persson, 2010). For instance, if a company establishes itself in a neighbouring municipality this could still be beneficial in the form of individuals electing to settle in a different municipality and instead commuting to work as income tax is mostly collected at the municipal level this could lead to added tax revenues despite not having the business establish itself in the municipality (Persson, 2010).

4.1.2 Service as a Strategy

Municipalities can gain a competitive edge by focusing on and improving the factors that they themselves can influence (Persson, 2010). This, according to the respondents, includes lowering the thresholds of availability of the municipal civil servants, minimizing process times, and trying to ensure that appropriate municipal services are in place early on in the process of attracting businesses and, in general, having a flexible mindset whilst early on earning trust and building relationships when working together with potential establishments so as to be viewed as a partner rather than an opponent. In Eskilstuna, the respondents described their processes as well- functioning and well-funded due to the availability of resources where they even had set up a specific company dedicated to service the companies present in the municipal business park. While both Östersund and Ockelbo, much like Eskilstuna, were all eager, willing, and able to help and facilitate as much as possible, the respondents from these municipalities expressed that available resources and budgets limit what is feasible. However, being a smaller municipality can have its advantages too, Ockelbo thought there was a value of showing that they can take the lead by ensuring short communications lines and not being too formal. 18

Figure 4 shows how the existing companies in the municipality rate the Municipal service and treatment in the Confederation of Swedish Enterprises study. It seems that all municipalities are congruating towards a similar rating in this area where Eskilstuna with all its resources does not seem to be rewarded for its efforts compared to the others. However there has been quite some fluctuation during the years where Ockelbo stands out as having improved the most.

Figure 4. Municipal service and treatment (Svenskt Näringsliv, 2020a)

Figure 5 indicates how satisfied a company is when receiving advice and guidance related to approvals, oversight, or supervision. However, in this sense approvals are more relevant from the perspective of companies looking to establish themselves in the municipality but give at least an indication on what service they may expect. All municipalities are rated fairly well on average, however Ockelbo stands out with some exceptionally poor ratings where some companies believe they have not received any advice and guidance at all.

Figure 5. The company receives the advice and guidance it needs related to approvals, oversight or supervision (Svenskt Näringsliv, 2020a)

4.1.3 Reactive and proactive municipalities

Analyzing the data, for all three municipalities there was a clear emphasis that they wished to be more proactive in finding new companies in general, but due to restrictions in time and resources they found this difficult to accomplish. However, for Eskilstuna it was easier to be proactive given its size and thus available resources and manpower. The respondents emphasize that it is key to create a good environment for the local companies to thrive in, given that if existing businesses are doing well this in itself could attract new companies. It was also clear from the respondents replies that it is particularly difficult to work proactively being a smaller municipality like Ockelbo, as it is difficult to stand out against larger municipalities with more far- reaching capabilities and who have the resources to make investments of a proactive nature. The municipalities clearly stated they were being more proactive with certain sectors, typically ones that were the same or adjacent to the types of companies already established within the municipalities, since these relationships were already established.

4.1.4 Types of companies and industries

Regardless of the existing mix of industries in the municipalities, the data indicates an emphasis on the importance of building a good mix of different companies in order not to become too dependent on any particular industry and also to benefit from finding synergies across them. Based on the data, we can give some examples. Ockelbo were more active towards their existing businesses, hoping their potential success would attract new companies while the other two were more active towards industries that had been defined as focus areas for new establishments. For Östersund this was with data centers and energy intensive industries such as paper pulp production, whilst for Eskilstuna the focus was within logistics, warehousing, and data centers.

One fact to consider is the composition and size of existing businesses within the municipality, as this can have an effect on attracting other businesses. The respondents’ municipalities all have different individual preconditions to attracting new companies. Historically, the respondents tell us, Eskilstuna was a centre for manufacturing and although there has been a decline still retains some of that kind of companies. Currently there is an added focus on the logistics and warehousing industries. Östersund has never been particularly industrialized, starting out, as put by the respondent, “...as an agricultural economy, skipping the industrial revolution and going straight to the service industry and white-collar jobs”. Ockelbo, according to the respondent, profiles itself as being a small entrepreneurial municipality with many small businesses. This in combination with their individual size and geographical locations leads to the municipalities having very different starting points when it comes to attracting new businesses.

4.1.5 Third-party co-operations

In a wider context, a municipality is a comparatively small actor, thus creating a need to find opportunities to cooperate and collaborate with other actors to assert themselves (Persson, 2010). All of the respondents mentioned working through regional municipal networks. Eskilstuna stated they cooperate with the greater Mälardalen region, including Stockholm, resulting in a major advantage in terms of the

21 number of companies they can interact with. Ockelbo and Östersund stated they also cooperate on a regional level, however on a smaller scale given the size of the regions. Also, cooperation was ongoing with third-party organizations such as Business Sweden, a venture owned jointly by the Swedish state and the Swedish business sector whose purpose is to help companies gain access to the Swedish market (Svenskt Näringsliv, 2020b). According to the respondents they also, together with companies looking to establish themselves, organize procurement-like bid processes where they sometimes work as a neutral intermediary coordinating both outside interests, ranging from simple requests for information to complete business proposals to collecting and distributing municipalities' responses. This, they feel, creates the possibility of reaching out to a far greater number of contacts and opportunities than if they only worked isolated within their municipality whilst avoiding the need for companies to reach out to individual municipalities or for the municipalities to keep staff or maintain departments for this specific purpose.

4.2 Municipalities inherent capabilities

There are factors that, up to a point, are beyond a municipalities ability to immediately affect and are of a more inherent nature. Below we explore some of these factors.

4.2.1 Geographical location, size and infrastructure

The size and geographical location of a municipality is, perhaps, one of the most difficult factors to change. Population size and thus access to the workforce and proximity to transport networks, natural resources and other population centers were all believed important by the respondents when selecting a location for a business and useful arguments when promoting a municipality. In this regard, Eskilstuna with around 100 000 inhabitants is well situated in the centre of Sweden, near many other mid- sized cities and about an hour west from the capital Stockholm. It also has access to important highways and railways. Ockelbo, about two hours north of Stockholm, has good communications being located near an important highway, having access to railway and being near both the port of Gävle and Sweden's main airport Arlanda. Sizewise it is the smallest of the studied municipalities with about 6000 inhabitants. Östersund has 63 000 inhabitants, placing it in the middle of the three municipalities regarding population size, and is in the northern part of Sweden near the Norwegian

22 border. Whilst having access to both highways and railways, neither are major. It is, compared to the other municipalities, far from major cities of commercial or industrial importance. Östersund sees an advantage in being able to offer the personnel of the companies a good quality of life in terms of having nature in the vicinity as well as low cost of living. Ockelbo also highlights the importance of offering a good quality of life to the personnel that might move there. So, one could say that the small to medium size municipalities are, to a certain degree, pushing what they have based on their inherent conditions, e.g. cost levels, closeness to nature and communication based on their geographical location. Eskilstuna emphasized that they were close to everything, both when it comes to access to nature as well as the benefits of being a larger city.

Figure 6. Road and Rail Networks and airlinks (Svenskt Näringsliv, 2020a)

As figure 6 shows, existing businesses consider Eskilstuna to be well situated and connected to the wider transportation network. Ockelbo scores higher, albeit only slightly, than the national average while Östersunds connections to transportation networks score below the national average.

4.2.2 Land available for development

Whilst, according to the respondent, Östersund has land available for development they begin working on detailed development plans only when a company has committed to establish themselves within the municipality. Ockelbo struggle in this area as they have limited suitable land available, which the respondent brings up as a major disadvantage. as this means that the municipality has limited possibilities to work proactively in regard to developing land for private ventures to further refine. At the same time local businesses lack the willingness and ability to invest in real estate that then could be leased to other private actors, which would be a non-issue in a larger municipality where there would be real estate companies willing to invest in land and premises and then find tenants. The respondents from Eskilstuna, however, currently expect no major issues in the foreseeable future when it comes to available land, given that they recently completed major investments in developing land to ensure availability. For instance, in Eskilstuna they, according to the respondents, have invested time and personnel resources in ensuring that land is available with a completed detailed development plan in place in order to have a finished concept to offer any interested companies. They refer to it as having land “shovel ready”, meaning it is already developed from a power, water, sewage and infrastructural perspective, ensuring preparedness to start construction of new company premises in a comparatively short time frame. In Östersund, the respondent explained that if a company wishes to construct a factory, due to internal bureaucracy planning is begun and permissions are sought only when a company has committed to the project, thus prolonging the process. According to the respondents this holds true in general, that unpredictable costs and lengths of projects and uncertainty around planning and permits could have an impact on decisions where to place an establishment.

4.2.3 Available competences

The data shows that a common theme among all studied municipalities is that they keep an inventory on what competencies are available among the unemployed, often through working together with the local branch of the Swedish unemployment agency. There is also the matter of matching individuals with openings or making sure that companies are aware of what competencies might be available in each municipality.

The respondent from Eskilstuna mentioned taking it a step further by establishing Eskilstuna Competency Services, a joint project between the municipality, the Swedish unemployment agency and private staffing agencies. In general, the respondents from Eskilstuna viewed it as a need to ensure that the right resources need to be in place at the right time, resulting in initiatives around vocational training by the municipalities being put in place before the need arises. Additionally, it is more important to understand what skills and competencies exist in already established companies, since it is common that new companies would recruit staff with an already established skill set from the already existing companies (Hermelin and Westermark, 2015). The respondents indicated that in most cases it would not be enough to only recruit from an unemployment pool, which is understandable given that in theory the most suitable people would already be employed elsewhere. This was referred to by the respondent from Eskilstuna as the “work chain effect”, meaning that when a new company arrives, this results in a chain effect with the new company recruiting from existing ones creates vacancies in existing companies that need to be filled. Östersund mentions the ease of recruiting competent personnel with high staff retention as a major benefit they can offer companies, as well as lower cost levels in terms of salaries, office rent and so on. Ockelbo mentions that they have a cooperation with the various departments within the municipality and the local branch of the government employment agency to have a good understanding of competences available to give a swift response to enquiring companies.

As can be seen in figure 7, only Eskilstuna score slightly higher than the national average concerning availability of labour and relevant competences with Östersund scoring slightly lower and Ockelbo considerably lower, indicating difficulty for local businesses to fill positions with suitable individuals.

Figure 7. Availability of workforce and relevant competence. (Svenskt Näringsliv, 2020a)

4.3 The business perspective

To understand what municipalities can do to attract new business establishments, it is important to understand the business perspective as, in the end, the decision on where to move their business is up to the companies.

4.3.1 Ensuring simplified and swift municipal interaction

According to the Confederation of Swedish Enterprise (Svenskt Näringsliv, 2020b), one of the most important things for creating a prosperous local business climate is that municipalities offer a good service when handling permits and applications, assisting as to which forms must be filled in and to understand what is needed to comply with all rules. The municipality needs to make things easy for companies through clear information, short processing times and good service (ibid.). It can be difficult for companies to find the right official within the municipality. Many companies would like to have a “one stop shop” contact that helps them navigate the municipality's bureaucracy (ibid.) The studied municipalities, according to the respondents, have therefore introduced the role of a business pilot (In Swedish: Företagslots), that help companies navigate through municipal bureaucracies, ensuring a good service. The

26 business pilot should, according to the respondents, inform interested companies about how the process works, what information must be submitted, how long it will take and what it will cost. The business pilot can be compared to the concept of the Secretariat method, as discussed by Pierre (1992), where the municipality has a specialized department working with developing business relations. Also, coordination within the municipality is key, so that issues have clear owners and in this way speeding up the process so that the company can start operations without unnecessary delay. It is also crucial that a business pilot has an entrepreneurial approach and understands the realities of running a business (Svenskt Näringsliv, 2020b). All municipalities indicated they have adopted some sort of business pilot concept, however at various degrees due to resources at hand. Eskilstuna were more mature in this sense where the others were still developing the role and concept. This is of course also linked to the previous section related to service as a strategy.

In order to ensure good service levels, the Confederation of Swedish Enterprise stress the fact that the municipality needs to continuously evaluate their customer satisfaction and invest in competence development of their staff, as well as securing that handling times should have a set service guarantee for the companies. As mentioned earlier, the Confederation of Swedish Enterprise also runs a survey on how well the municipalities perform their services towards the local companies and are scored according to multiple criteria. When asking the municipalities if they used their individual results in the survey of Confederation of Swedish Enterprise they all responded yes. However, Östersund used it more as a tool to understand the reasons for the result with no proactive work in trying to get a better score. Ockelbo stated they want to have the best business climate in Sweden, however not there yet but actively working towards their goal. For Eskilstuna it was more seen as an indicative target, but not seen as the main driver of what they do. In order for municipalities to facilitate businesses with these services it is important that the municipality have a digitalization strategy in place in order for the companies to have easy access to all services (Svenskt Näringsliv, 2020b). The impression of the studied municipalities was that companies appreciated responsiveness to requests from both new and existing companies to capture opportunities as they arise rather than getting bogged down in unnecessary bureaucracy.

However, as can be seen in figure 8 and 9 there are major differences in how the companies rate the services they receive in their interaction with the municipalities related to processing times and how easy it is to contact the municipalities administrators. Eskilstuna can in general be seen as being in the lead in relation to the others, Östersund somewhat above average and Ockelbo is rated far below average.

Figure 8. The municipalities processing times are considered reasonable (Svenskt Näringsliv, 2020a)

Figure 9. It is easy to contact the municipalities administrators (Svenskt Näringsliv, 2020a)

4.3.2 Subsidizing company establishments

In the study, the municipalities were asked whether companies asked for or expected special treatments or any services in return for establishing themselves within a municipality. None of the participants expressed that that was the case, however they believe that it is fairly common among companies, that seek to find a new location to establish themselves within, play them against each other in the sense of comparing what benefits might be available and then creating a shortlist where they optimize their decision based on what is offered in the various locations. It was also mentioned that if a company is too interested in potential grants this could be a sign that they are not necessarily a serious enough actor which could result in the municipality putting less focus on them. There are however certain types of grants available. The respondents from Eskilstuna brought up government grants as one reason a company might not choose their municipality, since they are not located in a rural area where this can be available. Even though not mentioned directly by Östersund and Ockelbo, such grants would potentially be available to them since they are located in areas where this could be applicable (Tillväxtverket, 2020). Östersund had noticed that, in general, companies operating in the northern parts of Sweden were more likely to expect or ask for assistance, the other municipalities made no such remarks.

4.4 Reshoring

To attract companies looking to reshore their operations it is important for municipalities to understand what might be needed to be able to attract these opportunities.

4.4.1 Reshoring in a municipality context

The respondents in the studied municipalities were all aware that reshoring, relocating parts of a business back to its original country from overseas, is an ongoing trend and had been for some time. Yet, preparedness, strategies, and resources to act on this insight varied across the municipalities. The respondent from Ockelbo stated that they had a strategy in place, as they had identified reshoring as a strategic area of improvement, however they were unable to divulge any specifics. While the respondents from Eskilstuna and Östersund did not have a specific strategy in place, they felt that their existing practices and methods were adequate. That is, that regardless of the source of the interest they would in general not change their work methods. Although the respondents expressed that certain cases could warrant making special arrangements thus departing from the standard operating procedure, this was not due to a company reshoring, but rather circumstances and opportunities in itself regardless of the source or reason for the interest. It was also mentioned by the respondents that opportunities within reshoring may not necessarily come directly to them, but through the regional level or directly from Business Sweden.

4.5 Navigating legal aspects

Municipal understanding of how to navigate legal aspects is key to comply with laws and regulations while at the same time avoiding needless self-limitation in not being able to provide the necessary capabilities needed to attract companies.

4.5.1 Municipal legal considerations

All respondents also noted the limitations brought by legislation, which restricts the room for manoeuvre available to the municipalities (Persson, 2010) as they are prohibited from favouring individual companies or individuals in any way that would

30 give an unfair advantage2. However, this doesn’t mean that municipalities are entirely restricted on taking steps or action to entice companies to set up operations, as long as the measures taken are of benefit to businesses in general and not specific companies (ibid.). The respondents indicated that this could be a problem when a company would have specific demands to establish operations and the municipality had not in advance invested in certain capabilities that would be needed to entice the company. It was the view of the respondents that, in any case, companies in general were not interested nor expected specific or tailored solutions to meet specific demands. Instead, companies expected that the municipalities worked towards ensuring a positive business environment, expeditious processing, and prompt communication from civil servants. Although it would seem that companies have limited expectations on what municipalities can offer them this is only true in the sense of specific exceptions and special treatment.

In figure 10 the municipalities application of laws and regulations indicate that Eskilstuna and Östersund are similar and on par with average, however Ockelbo is lagging behind somewhat.

Figure 10. The municipalities application of laws and regulations (Svenskt Näringsliv, 2020a)

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5. Analysis

In order to understand the municipalities efforts to entice company establishments, the analysis will be made based on the structure in the results section and analyzed from the two perspectives of the analytical framework: Level of value facilitation and Level of interaction. Under these two main headings the perspectives brought forward in the Result section will be analyzed. Depending on how the municipalities are scored within the two perspectives will determine the basis for later characterization of the municipalities according to the archetypes of the analytical framework. A partial summary of the analysis can be seen in figure 11 and figure 12. A total summary of the analysis can be seen in figure 13.

5.1 Level of value facilitation

In this section level of value facilitation is investigated and the municipalities are individually scored by topic, resulting in a total score based on the number of highs or lows (figure 11).

Figure 11. Summary of analysis result related to the perspective of level of facilitation

5.1.1 Municipal business policies

Value facilitation in the context of municipal considerations can be seen as a way for the municipality to understand how they can be seen as more attractive to a company

32 for them to consider moving there, e.g., the more company establishments that occur the more thriving the municipality will become in terms of being able to provide different services for the company as well as for future employees and hence appear more attractive. For this to happen it is key that there are clear strategies in place to guide the municipalities in what future value they may be able to facilitate regarding potential municipal services they will be able to market when there is an opportunity for a new company establishment. Secondary effects as a result from increased tax revenues could be anything from available housing, excellent childcare services, accessible recreational areas, high speed broadband, good schools etc.

Östersund did not consider secondary effects when interacting with companies, however they are still seen as “high” on value facilitation when it comes to municipal considerations for attracting company establishments since they were very much aware of potential effects. Eskilstuna and Ockelbo score “high” on value facilitation because they had a well thought through strategy that may be presented to potential target companies. The strategy would depict what effects related to job opportunities and tax revenues and subsequent effects that would occur depending on their success in attracting companies. Eskilstuna also mentioned multiplying effects, meaning that being successful in attracting one company would also lead to that others would follow.

In general, there was an ambition in all municipalities of facilitating value by keeping a high service level by being responsive and lowering thresholds in availability, minimizing process times, and trying to ensure that appropriate municipal services are in place early in the process of attracting businesses. However, resource-wise, a larger municipality has the possibility of facilitating better municipal services and hence Östersund and Ockelbo scored “low”, however they would probably be seen as good looking at comparable municipalities, and Eskilstuna scored “high” due to its size and thus greater resources, from a services as a strategy point of view. However, this is not supported by the scoring of Municipal service and treatment in the Confederation of Swedish Enterprises ranking, where all municipalities score similarly by the existing companies as per figure 4. This may potentially be explained by companies having a perception of the rendered municipal services based on prior expectations, since the findings in this study indicates that Eskilstuna provided a far more superior service.

5.1.2 Municipalities inherent capabilities

All municipalities have advantages and disadvantages that they need to manage and either maximize or minimize the effect of to attract businesses, it is key that municipalities manage to convince companies that their location is the best suited for any new establishments. Given Eskilstuna´s central geographical location in the vicinity of Stockholm, its size as well as well-built out infrastructure they are given a “high” score on value facilitation related to Geographical location, size and infrastructure. Östersund and Ockelbo on the other hand are scoring “low” on value facilitation in this context even though they are having decent infrastructure in place and at least Ockelbo is fairly close to major transport hubs they cannot compare to Eskilstuna. Also, their smaller relative size is a factor to consider in this context. This is also supported by the Confederation of Swedish Enterprises ranking per figure 6, in terms of Eskilstuna being in the lead among the municipalities, Östersund rated slightly below average and Ockelbo slightly above average which is in line with the findings of this study.

All municipalities stressed the fact they could provide a good quality of life, which is very much linked to their geographical location, which they saw as a key differentiator when trying to attract companies. They all had closeness to nature as a selling point as well as for Eskilstuna who stressed that they also had the benefit of being a larger city. As mentioned earlier, there appears to be an inherent size advantage when it comes to facilitating a good service, both in the power of attraction of a municipality but also in what time and resources are available to companies. However, smaller municipalities can also use their size to their advantage where shorter decision-making routes and access to power could be used as a value facilitating argument as to why a business should establish itself there. While it could become an issue later for the municipality, some companies might be attracted to the idea of being the biggest employer and thus largest player in the municipality to have greater influence. There is also a risk involved for the municipality to have all its eggs in the same basket by selecting as a strategy to steer all its efforts toward one larger company resulting in being too dependent on a single player. However, to enable growth, they must start

34 somewhere with the thought being that attracting one larger company could lead to multiplying effects with more establishments further down the line.

Eskilstuna had the resources and political will to proactively facilitate value by preparing detailed development plans, making sure that there was land available for development so that companies more or less could start construction immediately after their decision had been made, which leads to a “high” score related to this topic. Östersund and Ockelbo instead required businesses to make their decisions first before the planning process could begin thus weakening their value facilitation and leading to a “low” score. However, Östersund had a well-developed cooperation with local real estate companies to facilitate as much as possible the availability of land for development which gives them a “high” score in the end anyway. Also, Eskilstuna had their own land they could offer, which was less so for the other municipalities. Another aspect is that Eskilstuna are selective with which companies they attract on their land in order to create the most value for both the company and the municipality, given that they don't want companies sitting on the land and not using it as well as ensuring that they create as many job opportunities as possible.

The size of the municipality in itself means, naturally, that more people reside there and thus extending the possibility that the right available competencies are in place. If this attracts a company establishment it could create movement opportunities for people already employed in businesses already existing within the municipality. It also generally means that there is a wider mix of industries operating in the council, reducing the risk of becoming over-reliant on a single employer or industry thus making the local economy more resilient to shocks affecting a particular company or industry. All municipalities had good value facilitation in place, by actively working together with employment agencies etc., when it comes to supporting potential companies with understanding what available competences there may be, this leads to all municipalities scoring “high” related to facilitation around available competences. However, having good facilitation in place does not necessarily mean that there is ample supply of relevant competences, which can be noted in figure 7 in the Confederation of Swedish Enterprises ranking related to availability of workforce with relevant competences, where only Eskilstuna is perceived by the business community to have an above average supply.

5.1.3 The business perspective

In terms of availability of government grants there is a clear advantage for the two northern municipalities since they are located in more rural areas of Sweden where such support is available (Tillväxtverket, 2020) for companies that may choose to locate themselves there. This is a clear selling point for the municipalities where they can incorporate these types of Incentives for company establishments in their value facilitation. Since this is not available for Eskilstuna they would score “low” related to this and Östersund and Ockelbo would score “high”.

5.1.4 Reshoring

A part of the research question was to examine whether municipalities had particular strategies in place to address opportunities related to reshoring. This turned out not to be the case, however it is still possible to draw some conclusions based on the results. It was clear that all municipalities were aware of this as a phenomenon. However limited specific strategies were put in place to catch reshoring opportunities. These were handled more in general as any other company request, rather than facilitating value by working proactively and trying to appear on the radar of companies endeavouring on such a path. For the municipalities to be attractive and facilitate value from a reshoring perspective it would be good practice for the municipalities to have a clear understanding of what the drivers are for companies considering doing so, such as labour costs, workforce education etc. During the interviews with the respondents many of the perspectives that companies look into during a reshoring project came up from a general perspective and hence would be a good starting point when describing what value they could offer and facilitate. As mentioned, it was not always clear if the municipalities would be contacted directly on reshoring opportunities, but rather through third parties, such as Business Sweden. This means that the municipalities are not in control of their own destiny when it comes to being on the company's map of possible contenders for this business, but rather trusting third parties to have these opportunities come their way. Here it is of course key for the municipalities to build a strong network with these third parties to ensure it is clear and what they can offer any company that is considering reshoring and that they are keen to have the potential cases come their way. In general, value facilitation in terms of reshoring in a

36 municipality context is considered “low” for all municipalities and hence add no or little differentiation among them.

5.1.5 Navigating legal aspects

While all municipalities are bound by laws and regulations limiting how and what advantages they can give to individual businesses, some are more skilled or adept at managing and navigating the restrictions that these regulations entail. For instance, Eskilstuna, by placing some of the responsibility of developing land and co-operating or offering incentives to businesses in a fully owned but private company, were able to circumvent some of the red tape and bureaucracy but still operating within the confines of the law thus scoring “high” for value facilitation in the topic Municipal legal considerations by ensuring a smooth process for interested businesses. Östersund, by choosing a slightly different route by establishing relationships with businesses and landowners within the municipality, has circumvented the legal aspects in that way instead, acting as a conductor between existing and potential businesses without benefitting any particular business more than others, also scoring “high” for facilitation in Municipal legal considerations. Ockelbo, on the other hand, was not as creative when it came to finding these kinds of solutions, which is mostly due to the fact that its resources are limited compared to larger municipalities. They do not own land ready for construction or premises ready for tenants to move into nor does the local business community, which puts them at a disadvantage as when opportunities arise, they would not be able to construct or lease land without breaking or circumventing the law. It would seem that, like many other aspects in this study, that it is a luxury that smaller municipalities cannot afford. Nevertheless, they score “low” in this topic.

Upon embarking on this study, the authors were curious as to how common of an occurrence it was for companies or businesses to ask for services in return for establishing themselves in a particular municipality outside of what would be available to other businesses would open expectations on the municipalities to perhaps break the law, but since this was not what businesses wanted or expected it becomes a moot point.

The scoring of the municipalities is supported by the Confederation of Swedish Enterprises ranking related to the municipality’s application of laws and regulations in figure 10, where Ockelbo scores significantly lower than the others.

5.2 Level of Interaction

In this section level of interaction is investigated and the municipalities are individually scored by topic, resulting in a total score based on the number of highs or lows (figure 12).

Figure 12. Summary of analys result related to the perspective of level of interaction

5.2.1 Municipal businesses policies

While all the studied municipalities were keen to provide services and to help and support companies looking to establish themselves, size, again, appears to matter. Eskilstuna with its larger resources in personnel, specialized staff and streamlined and integrated processes across departments were able to respond quicker and more efficiently to business requests, thus placing them in the “high” category of interaction. As mentioned Ockelbo and Östersund wish and strive toward the same but as resources are comparatively scarce, they are unable to fulfill these goals, leading to constraints in the ability to respond and act in a timely manner.

Whether operating proactively or reactively, the answers given by the respondents can give a clue as to how interactive they are in their different approaches. Within the context of this study, working proactively means that a municipality will reach out to potential businesses and advertise their particular advantages while operating in a reactive fashion means that they instead wait for companies to approach them. All respondents expressed this as an optimal approach but, yet again, sheer size dictates what resources and manpower are available to work in this fashion. This means that

38 only Eskilstuna were able to proactively seek out potential new business establishments. For these reasons Eskilstuna scores “high” on Interaction related to reactive and proactive municipalities and Ockelbo and Östersund score “low”.

Interestingly all respondents mentioned how they encourage or use existing businesses to entice new establishments. While perhaps this could be seen as “cheating”, as perhaps some or most of the work is left to others, it is still through an initial effort by the municipalities that new establishments might arrive at a later point. Eskilstuna and Östersund both seek to encourage and highlight existing industries, looking to create clusters or centres within niches. In doing so, while indirectly, is a form of interaction as they intend to act as a conduit between existing businesses and industries and potential new establishments and hence, they both score “high” on what types of companies and industries they are looking to attract. Ockelbo is generally unable to do so, and therefore grants them a “low” score, as most local companies are small businesses or are run as sole proprietorships and elect instead to promote this fact, however this according to the authors is not as interactive as Eskilstuna and Östersund since to promote local industries or clusters, one needs to actually exist.

Another avenue available to the municipalities is that of using third party co-operations. All municipalities are very active in this area both through local or regional municipal co-operations and that of Business Sweden. Particularly in Ockelbo and Östersund this is a good way of overcoming their lesser resources, being able to focus on already interested businesses rather than wasting time on creating leads or hunting opportunities when a greater leverage can be achieved by instead focusing on those interests that appear through other avenues. Eskilstuna also has an advantage through being part of a network consisting of municipalities in the greater Stockholm area and thus the interest generated simply by being approximate to the nation's capital. Thus, in this topic, all the municipalities score “high”.

5.2.2 The business perspective

It would seem that if a municipality is able to work proactively - thus laying the groundwork early on and meeting companies more than halfway in the early stages of any establishing process - this ensures that businesses quickly and efficiently can achieve their goals. This would then mean that a municipality will score “high” on

39 interactiveness in this topic. For Eskilstuna, again, the size difference proves to be to their advantage. All municipalities expressed a willingness and an aspiration to work proactively however once more Eskilstuna has an edge through having more and larger resources at their disposal which enables them to, for instance, prepare land or permits without necessarily having a tenant in place as working that way creates more interest through efficiency and quicker processing times. As businesses often are eager to start construction or operations as quickly as possible this certainly is to Esklistunas advantage and places it in the “high” category when it comes to ensuring simplified and swift municipal interaction. In Ockelbo and in Östersund, it is comparatively quick and easy to reach municipal civil servants but despite this the actual processing and handling of each case is slower than businesses would like, often since these processes tend to start only when a business has committed to establishing themselves in the municipality, placing them in the “low” category of this topic. Ockelbo in particular make a poor showing here, supported by the fact that local businesses are displeased with processing times and ease of reaching municipal administrators as shown in figure 8 and 9. On balance, this places both Östersund and Ockelbo in the “low” category of interaction pertaining to the topic Service as a Strategy.

5.3 Municipality characterization

In this section the total scores related to Level of value facilitation and Level of interaction is combined into a combined result.

Given where the studied municipalities score on the level of value facilitation and level of interaction (figure 13) it is possible to characterize them according to the archetypes of the analytical framework, as can be seen in figure 14.

Figure 13. Summary of total combined scores related to level of value facilitation and level of interaction

Östersund, scoring “high” in level of value facilitation and “low” in level of interaction, places in the archetype of a Servant, defined as having facilitatory resources in place but having a low level of interaction by not working proactively towards the business community.

Ockelbo, scoring “low” in level of value facilitation and “low” in level of interaction places them in the archetype of a Reactor, defined as municipalities who simply react to changing circumstances or opportunities without prior facilitatory preparation or interaction with the business community.

Eskilstuna, scoring “high” in level of value facilitation and “high” in level of interaction places them in the archetype of Partners, defined as Municipalities who are both able to provide value facilitation and work integratively toward the business community giving them a more equal standing in their dealings with the businesses.

Figure 14. Analytical framework populated with the municipalities by archetype

The municipalities' different levels of value facilitation and levels of interaction result in clear differences among them that result in being assigned different archetypes (figure 14) pointing at having contrasting characterizations that indicate their strengths and weaknesses. When having populated municipalities into the analytical framework a pattern evolves that shows that the studied municipalities work in different ways to attract new company initiatives that are considering establishing themselves within their boundaries.

6. Discussion

This research, having looked at the studied municipalities, point to the fact that there are different levels of value facilitation and levels of interaction that take place and thus leading to different positions (archetypes) in the analytical framework. This encourages a discussion on the position a municipality currently has relative to their future wanted position. However, it is not necessarily something bad being in one of the archetypes compared to another, given for instance that it might suit a smaller municipality to be a Reactor rather than being a Partner since they potentially would not have the resources, financial or otherwise, to make such a move or sustain such a position. So, what is the wanted position for a municipality? In this sense it would be easy to think that the wanted position for any municipality would be to be a Partner. Depending on the current status of a municipality, size etc., it may be prohibitively costly to get to this position given the investments needed to be able to facilitate value

42 and the budget required to have a big enough organization to reach a high level of interaction. As an example a mid-sized municipality may be content to be in the Servant position due to the fact that they can not afford to support a substantial department to keep in contact with all potential companies.

Regardless of which conditions a municipality may have, being an Insubstantial may be the worst position to have, due to this most likely not leading to anything other than high costs of keeping up an interaction for the municipality while again having limited assets in terms of value facilitation and hence will not entice the potential companies regardless of how much effort they put in. Also, in this sense it is difficult to attract companies if municipalities have not done any investments upfront in terms of value facilitation due to the mentioned legal aspects that prohibits them to directly favor any specific company.

If a municipality is “high” on value facilitation they should in theory have done substantial investments beforehand, given this, it should be substantially easier to move from being a Servant to become a Partner than move from being a Reactor or Insubstantial to become a Partner. Increasing the level of interaction is in theory more of a short-term budget issue, securing enough operational budget is in place, while increasing the level of value facilitation is more about having a long-term investment plan in place.

Given that size was a major differentiator it could be discussed if it could have been more viable to compare similar municipalities to reach a fairer comparison. However, the choice of survey objects was inspired by the event of the Swedish retailer Synsam, looking to reshore its operations, having shortlisted the three municipalities as potential locations. Instead, the study gave insight on how much size matters when it comes to how well developed municipal capabilities are, and became a result in itself.

A part of the research question was to understand whether municipalities had particular strategies in place to attract companies that are considering reshoring, this part was seen as an aspect of the level of value facilitation in the analysis. Since all municipalities scored “low” related to this topic it can be concluded to be quite limited in focus. For the municipalities to be on top of reshoring they need to better understand 43 some of the key drivers, e.g. cost levels, levels of productivity and access to a well- educated workforce (White and Borcher, 2016). Here it would be of value for the municipality to understand what can be offered, from a benchmarking point of view compared to the most common offshoring locations, not necessarily only in Asia but potentially also related to other nearshore locations e.g., Eastern and Central Europe. This would be fairly easy to investigate further, at least for larger municipalities, since they already see cost levels and education levels as a competitive advantage when dealing with the companies looking to establish themselves within their boundaries.

7. Conclusion The aim of this study was to understand how municipalities can work to secure their appeal towards companies that are considering establishing themselves within their boundaries Specifically, the question was how municipalities work to attract new company initiatives and if they had particular strategies towards companies that are considering reshoring. To do so an analytical framework was developed, based on theories mainly by Grönroos & Voima (2013) and Pierre (1992), that enabled the possibility to categorise the municipalities into different archetypes based on scores around various topics related to various capabilities and how they work.

There are some varieties in how the chosen municipalities operate when trying to attract new companies. This appears driven from a large degree due to their individual size and hence financial capacity. However, their intention on how the municipalities want to interact with potential companies is very much the same.

It was concluded that Östersund categorized as a Servant due to its high level of value facilitation and low level of interaction. Further It was concluded that Ockelbo categorized as a Reactor due to its low level of value facilitation and low level of interaction. Finally, it was concluded that Eskilstuna was categorized as a Partner due to its high level of value facilitation and high level of interaction. As a result, the developed analytical framework was tested in the sense that it proved possible to use as a tool to distinguish the various traits the municipalities had and thus serve as a basis for the categorization.

There is some variety in how the chosen municipalities operate when trying to attract new companies. The insight is, as mentioned, that this appears to be driven from a large degree due to their individual size and hence financial capacity resulting in different levels of capabilities from a level of value facilitation point of view. However, their intention on how the municipalities want to interact with potential companies is very much similar but does not materialize in the same level of interaction which is also driven to a certain degree by individual size.

Also, another insight is being a small municipality can also have its advantage from the aspect of being able to be nimble with short decision paths and from the perspective that a major company establishment would mean that they would become a dominant local actor and not only one out of many and thus more likely receive a more focused attention from the municipality. This was also proven by the fact that it was possible for smaller municipalities to compete given that they were shortlisted by Synsam.

The municipalities are somewhat limited by external circumstances on what they can offer a company, for example that they are located where they are and expanding infrastructure or other long-term projects takes time to have an impact. However, there are things that they can impact, such as ensuring they have vivid municipal business policies that have a clear plan on what type of companies they would like to attract and then building a strategy around it. Here it has proven to be key to have a certain proactiveness in place, especially when it comes to having available land with detailed development plans in place that is “shovel ready”, when attracting new company establishments. All municipalities showed signs of having an ambition to be integrating in their approach towards the companies, where they all had, in various degrees, implemented a business pilot concept, as advised by the Confederation of Swedish Enterprises, by having dedicated resources to manage new company establishments.

The study found that reshoring is a phenomenon that the municipalities were well aware of although they did not have any particular strategy to capture these opportunities compared to any other company establishment. Having said this the authors believe that, based on the findings in general and looking back at the purpose 45 and the research question there is an opportunity for the municipalities to work more actively toward reshoring.

A conclusion from this study is that it is key for a municipality to have a clear insight into “who they are” to be successful in attracting companies, meaning that they need to have a full understanding of their current and wanted capabilities as well as their limitations together with their ability to execute.

Finally, a contribution of this study is if a municipality were to believe that they should improve their efforts to attract companies, there is then a possibility to utilise the analytical framework presented in this study to analyse which strengths and weaknesses they currently have, by assessing the various topics and what needs to be changed for a municipality to move from one archetype to another.

8. Further Research

Reshoring is an area that we believe could be investigated further to better understand how municipalities could play a more active role in capturing these opportunities and even push them to happen.

For smaller municipalities there could be an opportunity to understand how they could better be assisted from a regional development perspective. This given that the successful municipalities are very much proactive when it comes to, for instance, having land with a prepared detailed development plan available and other facilitating services. However, this is resource intensive which can be difficult to handle for smaller municipalities which could qualify for further research on how they could work together with other parties to gain scale advantages.

This study focused on the municipal perspective and how they can work to attract company establishments. It would be interesting to examine the process from the business perspective and how businesses might reason when shortlisting and selecting locations to establish themselves to get a better picture from the company perspective.

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Appendix

Appendix 1 Data from Confederation of Swedish Enterprise business climate ranking, Svenskt Näringsliv (2020a)

Appendix 2 Interview questions

Hej xxx ! 51

Vi skulle vilja intervjua dig kring hur ni jobbar i kommunen kring att attrahera företag för etablering hos er.

På senare tid har det varit en trend att svenska bolag tittar på att flytta tillbaka produktionen till sverige från lågkostnadsländer. Till exempel Synsam, Thermia, Atlet, Östnor, Husqvarna, Atlas Copco, Stiga, Unicarriers. Vi kommer in mer på detta senare i intervjun.

1. Kan du kort förklara vad din roll är?

2. Vad har ni för näringslivspolicy i allmänhet, är den aktiv eller passiv? På vilket sätt tar det sin form?

3. Hur skulle ni beskriva interaktionen med företag som ev kan etablera sig i er kommun a. Bedriver ni uppsökande verksamhet mot företagen? b. Är det företagen som kontaktar er, utan att ni kanske innan känt till att det fanns en möjlighet? c. Eller är det en mer ömsesidig modell där ni aktivt tillsammans kommer fram till ett samarbete?

4. Har ni exempel på företag som etablerat sig, eller etableringar som inte blev av?

a. Om ja , varför valde företagen er kommun? b. Om nej, varför valde man att inte etablera sig hos er kommun?

5. Vilka förväntningar gällande t.ex. service, stöd, lokaler, investeringar etc. har företagen på kommunen hos er?

6. Hur gynnas kommunmedlemmarna av kommunens näringslivspolitiska arbete?

7. Analyserar ni hur många som faktiskt kommer att flytta till kommunen vid en företagsetablering? Tittar man på sekundära effekter, tex minskade transfereringskostnader?

8. Har ni koll på vilken lokal kompetens och tillgänglig arbetskraft som finns i kommunen, dvs. kan ni hjälpa företagen att förstå att er kommun är en lämplig etableringsort utifrån ett kompetensperspektiv?

9. Är ni medvetna om att re-shoring är en process som blir mer och mer vanlig i takt med att svenska företag vill flytta hem produktion?

a. Om så, har ni en strategi för att få företagen att komma till er, tex förberett er att visa på hur ni är mer konkurrenskraftiga gentemot andra kommuner? b. Om inte, är det något ni tror behövs?

10. Hur vanligt är det att företag “konkurrensutsätter” kommuner gentemot varandra, dvs att man nästan har en tävling kring var de kommer att etablera sig ?

11. Hur tror ni att företag tänker kring vad som är viktigt för dem vid val av etableringsort?

12. Vikten av personliga relationer a. Hur viktiga är personliga kontakter för att skapa möjligheter till företagsetableringar? b. Vikten av personliga kontakter för att möjligheten sedan leder till faktiska etableringar?

13. Svenskt näringsliv har en ranking kring kommuners företagsvänlighet, är det något ni jobbar aktivt kring att klättra i denna ranking?

14. Er kommun var ju med på Synsams kortlista kring möjliga etableringsorter, vi tänkte ställa några specifika frågor kring det som vi hoppas ni kan svara på om möjligt. a. Vem initierade processen kring att XXX kommun kom med på Synsams lista av möjliga etableringsorter? b. Hur fick ni reda på att Synsam var intresserade? c. Skickade Synsam ut ett förfrågningsunderlag? d. Vad var er strategi för att få Synsam att välja er? e. Hur såg arbetet ut för att försöka komma fram till ett avtal? f. På vilket sätt tror ni att ni kunde påverka Synsams beslut ? g. Vad tror ni det var konkret som gjorde att Synsam valde just XXX kommun istället för er kommun?

15. Hur tror ni att ett optimalt samarbete med ett företag ser ut, tex skall man ha mer symbiotiska samarbeten som att kommunen är hyresvärd för lokaler etc.

Appendix 3 Responses into operationalized subjects

Operationalized Östersund Ockelbo Eskilstuna subjects Municipality Municipality Municipality

Characterize Semi Active - creates Active - a lot of close Active, principle that If current Business policy good conditions for interaction with local companies are doing well, it companies, Active reg. companies. Want to be attracts new companies. certain industries, responsive. Established Eskilstuna Logistik, a passive reg. finding company working actively to new companies in attract new companies with general specific focus on logistics and other areas. Examples, such as Amazon, Coop Storlager, Footway etc. Important to build a mix of different companies.

Proactive, Proactive with certain Reactive, difficult to Proactive in general. Working Reactive or sectors, otherwise stand out against bigger with Business Arena to show Mutual Reactive municipalities, working what is available for new interaction with through the region and companies. Ensures there is a potential new Business Sweden, contact person in place with a candidate somewhat networking team tailored to respond to a companies initiatives to find ideas company's requests. However, for potential companies. working more reactively to find companies outside of Eskilstuna Logistik. Part of Stockholm Business Alliance (part of greater Stockholm with over 50 municipalities that cooperates) resulting in requests for possible new company establishments.

Reasons for Easier to recruit Being a green Detail plans in place, resulting in companies that competent personnel, municipality and a quick process to give permits. chose to lower cost, better sustainable thinking is The available land is “shovel establish personnel retention, key. Good ready” i.e already prepared to business in quality of life and cost communication, roads, start construction. Also the land is municipality of living railroad, harbour and affordable. General infrastructure close vicinity to Arlanda already ready, i.e power, water, and Stockholm. Green sewage etc. Good geographical energy through location with railways, highways windparks. Quality of and closeness to all major cities life. in mid Sweden. Good availability of competent workforce.

Reasons for Herd mentality (fear to Not enough land and Lack of power supply for more companies that deviate from norms), preparedness on detail energy intensive industries like did not chose to companies don't want planning. Companies Northvolt. This especially since establish to be far from other want fast response from they already had industries with business in company clusters the municipality. The major power needs, such as municipality local business is Amazon. Major reason also if they somewhat lacking the would not have enough land to capacity to invest in real build would result in companies estate to be available choosing not to come. for new establishments. Working with power optimization project to overcome this problem. No grants available in this region.

Expectations Strong help from the Quick response, can’t Ensuring right conditions in place, from companies municipality, especially promise anything more i.e available detail plans.Being on municipality in northern parts of than the laws allow us. proactive with the companies, Sweden Also similar reasons as supporting them with applications per above response. for permissions etc. in order to speed up the process. Sometimes there is a response to a RFI needed, that needs to be handled diligently. However they are limited to the municipality laws, but try to be as agile as possible.

Understanding of Employment Employment Employment opportunities, the benefits for opportunities, opportunities give more companies that come...the members of strengthening of synergy effects and more attractive the municipality

55 municipality from infrastructure (fiber create a positive view becomes. This gives a multiplying a new company build out, streets etc) on the future. Becoming effect leading to more tax establishment due to new something more than revenues etc. establishment just a place for living and working somewhere else.

Analysis of Not directly, however Yes, looking at tax Yes, the “work roundabout” when secondary there are secondary revenues and a new company arrives results in municipality effects but not part of possibilities also for less a chain effect, when recruiting benefits of a new calculation complicated jobs, giving from existing ones that creates company people with vacancies in existing companies establishment unemployment that need to be filled. Restrictive opportunities. to sell of land that would not be used in the near term to start construction, this in order to use the land as a vehicle to create employment opportunities.

Inventory over Yes, good Yes, good idea through Yes, competence supply in place, local skills and understanding of working between simplifying with a team competences unemployed people, departments within the (Eskilstuna competency services) however this is not the municipality and the of recruitment agencies and the main source. More employment agency. employment agency etc.Working important to understand Can give fast response actively to map competence what competencies to companies on what is needs together with existing exist in other existing available companies. Need to ensure that companies. Data bank right competencies are in place at on people that want to the right time, resulting in move into the initiatives around vocational municipality that could training are in place. However be available for new timing is of essence to ensure companies. that trained workforce are in place before the need arises.

Awareness of Yes, understand there Yes, understand there Yes, understand there is an reshoring is an ongoing trend. is an ongoing trend. ongoing trend.

Reshoring No, however work with Yes, however striving to No strategy in place. However strategy in place Business Sweden to improve. Can offer a gave an example of the company understand green environment yet Stiga who moved back production opportunities. However closeness to facilities. early. work proactively to Synsam would have understand and been a great reference. develop opportunities Ensure sustainable together with existing approach. companies

Need for Yes N/A Yes, however not so many head reshoring offices in Eskilstuna resulting in strategy if no limited info when opportunities strategy in place arise. Believe there will be a continued reshoring trend, especially due to Covid 19 with companies experiencing disruptions in their production chain.

Commonality of Yes, fairly common. 5- Yes, fairly common in Yes, fairly common. Awareness companies 10 case / year, general. But for our that there are multiple playing the sometimes initiated small municipality it is municipalities chasing the same municipalities through Business less common. opportunity. However, in most of against each Sweden the cases they are not aware of other when who is competing regarding the choosing site Availability to cheap company establishment. electricity, how fast can you get necessary permits, availability of planned land, building permits etc. Make sure detail plans are prepared in advance

Demands on subsidies not so common.

Not serious, no focus if the first question is on grants, however not so common with requests.

Working with aero fuel based on hydrogen,

Looking at paper pulp production, to avoid transport of timber to sundsvall

Important areas It differs a lot! Depends on the policy for companies Critical volume of of the companies, so when choosing available competence, very different. We municipality sometimes availability provide what we can, of “investeringsstöd”, good entrepreneurship customers available in spirit and closeness to the vicinity. Local facilities and service. connections are important.

Importance of Factor x, try to The local existing Yes, it is important to build an personal understand who makes companies have a lot of extensive network of personal relationships for the decision. contacts and when they relations. The relations remain if establishment of can not respond they an individual changes jobs. Not new companies introduce opportunities always in contact with the in municipality to the municipality. company itself, sometimes it is Cooperation is key the real estate company that when it comes to initiates an establishment who in contacts and developing turn got the contact with the new personal relationships. company.

Are you aware Yes, fully aware. Tries Yes, we want to have Yes, we use the survey as an and working to understand the the best business indicative target. However not the towards reasons for the result. climate in Sweden, not main driver for what we do. improvements in However, no proactive there yet but actively “Svenskt work on trying to get a working towards it. Näringslivs” better score. ranking system

on “entrepreneur- friendly municipality”

Characteristics of Early meeting where Well established Established contact early in the a optimal the company relationship with short process. Ensure there is no cooperation establishing a good communication lines. prestige in the project and a regarding a new relationship with a good Not too big and formal, common understanding. Also company level of trust on a easy to have a ensure to be responsive and not establishment personal level, discussion. overpromise on commitments. understand decision Ensure to treat small companies process and be a in an equally professional way as problem solver with the large ones. Ensure information is easily accessible to the companies.

Swedish Retailer, Synsam (SR) specific questions Questions Östersund Ockelbo Eskilstuna Municipality Municipality Municipality

Initiator of process No comment No comment No comment

How did you find out Contacted by SR SR through a third SR through a third there was an interest party, keeping party. from SR anonymity initially. Worked for a good while without knowing who it was.

Use of formal request Yes We had a dialogue, but for information process no comment on actual by SR content

Municipality strategy to Yes, however no No, the municipality has No, same as for other be chosen by SR comment on specific what it has. We can companies.. strategy - too early offer a green and sustainable image.

Characteristics of work Presented alternatives Each party has its own No comment to get to Letter of Intent for premises, did not process. Aimed to get a put a lot of work, max LOI in place, however 10 hours then the real work starts, i.e. to find premises to offer etc.

Possibility to affect SRs Low, limited interaction Definitely the green No, we have the decision until final decision. profile with sustainable conditions that we can energy and good offer and it is up to the communications. company to see how it fits them

Major reasons for SR No comment Our goal lined up well No comment choosing Ockelbo with SRs goals. municipality Otherwise as per above.