Sweden takes two tracks, Korea remains polarized

Shim Jae-hoon

The author is a foreign attorney at Hyemyung Law Firm and adjunct professor at KAIST's Moon Soul Graduate School of Future Strategy.

Sweden, a country of 10.6 million people, has emerged as one of the world’s leading producers of unicorns per capita, rivaling Silicon Valley. The small country has not only created large companies but also built an ecosystem in which successful companies help spawn new ones.

At the center are Spotify, which helped usher in the music-streaming era, and Legora, a legal-tech company at the forefront of generative and agentic AI. Around them, capital and talent accumulated by a first generation of tech companies are flowing into a second generation of deep-tech and AI startups. The world is paying attention to this virtuous cycle, often described as a “flywheel ecosystem.”

A flywheel ecosystem is a structure in which capital, talent and technology reinforce one another, accelerating growth. Sweden’s IT and AI industries are expanding from consumer platforms such as Spotify into high-value enterprise AI businesses such as Legora.

The way Sweden supplies talent is particularly noteworthy. Silicon Valley draws top talent from around the world, then turns out unicorns through grueling workweeks that can exceed 80 hours and generous stock options. Sweden follows a different model. Its foundation is an engineering talent pool centered on the KTH Royal Institute of Technology and Chalmers University of Technology, a cycle in which former Spotify employees launch startups and close cooperation between universities and technology companies.

Korea’s talent-development system, by contrast, has long been polarized along two axes: medical, dental, pharmaceutical and veterinary schools versus other fields, and universities in the Seoul area versus those outside it. As a result, science and engineering talent has fewer opportunities to move into the center of entrepreneurship and technological innovation. Korea needs to consider how to draw such talent back to that center, and Sweden may offer clues.

Another feature worth examining is Sweden’s distinctive “dual-track economy.” Traditional manufacturing and retail, represented by IKEA, Volvo and Ericsson, operate alongside emerging technology and AI industries represented by Spotify and Legora, with both contributing to economic growth.

Traditional manufacturing serves as a downside buffer for the economy, supporting large-scale employment, substantial cash flow, steady growth in tangible assets and robust global supply chains. Emerging tech and AI industries, meanwhile, provide the upside growth engine through high capital productivity, high-value intellectual property, access to global venture capital and the expansion of borderless, cloud-based enterprise software-as-a-service, or SaaS, and agentic platforms.

Korea also needs a dual-track economy that builds new engines of growth in technology and AI on top of its traditional manufacturing strengths in semiconductors, shipbuilding and rechargeable batteries. The choice should not be between manufacturing and AI. Korea should build AI on top of manufacturing.

That approach also has implications for how Korea thinks about industrial policy. Mature industries need not be treated as remnants of an old economy destined to give way to software companies. They can provide capital, production expertise, customers and global networks that emerging technology businesses can use. At the same time, startups can add software, automation and new intellectual property to industries that already possess world-class manufacturing capabilities.

The lesson from Sweden, then, is not the replacement of one industry by another. It is the recycling of success: allowing the capital, people and expertise created by established businesses to feed the next generation of companies while preserving the productive base that made those successes possible in the first place.

The Swedish model is also notable because growth does not depend on a single type of company. Established manufacturers and retailers continue to provide jobs, cash flow, assets and global supply chains, while newer technology companies pursue scalable services and intellectual property. That balance matters for Korea, where manufacturing already provides a foundation. Rather than treating AI as a substitute for factories, the country can use its industrial strengths as the base on which technology businesses grow.