Navigating Global Transitions in European Arctic Regions

4. Competitiveness, connectivity, and regional development in the NSPA

Abstract

The NSPA regions hold great potential for sustainable development, requiring targeted policies and regional collaboration to address shared challenges. Key priorities include advancing renewable energy, fostering the green transition through incentives and infrastructure, supporting SMEs and start-ups, and improving digital, transport, and education systems. Financial tools like venture capital funds and loan guarantees are essential to drive innovation and economic growth. Tailored strategies addressing each country’s specific needs, combined with co‑ordinated efforts, aim to achieve sustainable and inclusive economic progress across the region.

Introduction

In a rapidly evolving global economy, competitiveness and connectivity are essential for economic prosperity, innovation, market adaptation, and environmental sustainability. Within the European Union (EU), competitiveness involves building a dynamic, innovative economy capable of meeting technological and market demands, while connectivity—especially in digital and transport infrastructure—ensures inclusive growth, integrating even remote areas into the European and global economy (European Commission, 2024[1]).

Regions enhancing competitiveness attract investment, drive innovation, and generate high-quality jobs (Storper, 1997[2]). Effective policies must address macroeconomic factors, such as fiscal and monetary policies, as well as microeconomic concerns, including R&D, workforce development, infrastructure, and trade (Greenwald and Stiglitz, 2013[3]). Europe’s strategy emphasises adapting to global market changes through productivity, advanced technologies, research capabilities, and fostering high-tech industries (Fuest et al., 2024[4]). Additionally, environmental sustainability now plays a key role in competitiveness, as green policies and technologies not only mitigate climate change but also unlock economic opportunities (Lubin and Esty, 2010[5]) (Constantini and Mazzanti, 2012[6]).

The growing importance of digitalisation places connectivity at the centre of economic prosperity, requiring its integration into policy frameworks to support sustainable growth (Dabbous et al., 2023). Place-based policies must balance the unique needs of regions and their broader geographical contexts, as their effectiveness depends on local, national, and global economic conditions (Ketels, 2013[7]).

The EU’s innovation strategies, including the Regional Innovation Valleys, Partnerships for Regional Innovation, and the European Startup Village Forum, aim to address disparities and foster interregional collaboration. These initiatives build on the Smart Specialisation Strategy (S3) framework but seek to overcome challenges like regional concentration of R&D and weak interregional co‑operation (Uyarra, Marzocchi and Sorvik, 2018[8]). The new mission-oriented approach emphasises inclusivity, green and digital transitions, and cohesive regional innovation ecosystems (Kattel et al., 2024[9]). However, administrative capacity and alignment with existing frameworks remain critical challenges.

The NSPA faces significant barriers to competitiveness due to geographical isolation, harsh environmental conditions, and limited infrastructure. Despite rich natural resources and potential for sustainable energy, these areas struggle with connectivity, skilled labour recruitment, and access to finance and advisory networks (Phillipson et al., 2019[10]). Improved digital and transport infrastructure can unlock their economic potential and support competitiveness objectives.

Moreover, the economic development of the NSPA holds strategic geopolitical and environmental importance due to their Arctic location, contributing to socioeconomic goals while preserving traditional lifestyles, heritage, and mitigating climate change (Galloway, 2007[11]) (Tate, 2010[12]) (Fieldsend, 2013[13]). Policies targeting connectivity, talent retention, and sustainable energy are crucial for addressing these unique challenges, aligning with broader European objectives to build a cohesive and innovative economic landscape.

The analysis in chapter one highlights that the NSPA outperforms other rural OECD regions in GDP and productivity growth, though it faces sectoral shifts and structural disparities. The economy is dominated by SMEs, with small firms (1–9 employees) making up 85% of businesses but accounting for only 28% of employment, indicating limited job creation capacity. Firm density is lower than in non-NSPA regions, with 21 small firms per 1 000 individuals compared to 24 per 1 000 elsewhere.

Innovation remains a concern, with 106 patent applications per 1 million people in 2020, lower than non-NSPA regions (159) but significantly higher than other OECD rural areas. Despite moderate innovation growth, its diffusion between urban and rural areas remains a challenge.

Trade performance presents a mixed picture. While exports reached USD 2 billion in 2020—lower than non-NSPA (USD 5.5 billion)—the region’s export growth (21% from 2015 to 2020) outpaced all comparison groups. Its 3.3% annual growth rate nearly doubled that of non-NSPA (1.7%). However, accessibility remains a major constraint, as gaps in physical and digital infrastructure limit economic opportunities and overall quality of life.

This chapter examines competitiveness as a key factor shaping the NSPA’s future, emphasising innovation, SME support, and high-value industry transitions. Subsequent chapters will explore the Green Transition (sustainability policies, renewable energy, and emission reduction) and Multi-Level Governance (policy co‑ordination, cross-border collaboration, and local engagement) as additional dimensions crucial to fostering a cohesive and innovative economic landscape.

Trends and policies for competitiveness and connectivity in the NSPA

The NSPA face unique challenges due to remoteness, high transport costs, shrinking and ageing populations, and a reliance on natural resources. Despite these constraints, the regions benefit from substantial renewable energy generation and high life satisfaction among residents, particularly in environmental and housing aspects, though income and service accessibility lag behind national averages. Addressing these structural issues while leveraging geographic advantages is crucial for competitiveness and connectivity (OECD, 2019[14]).

Competitiveness in the NSPA

The NSPA regions are experiencing significant demographic shifts, with an ageing population and youth outmigration. These trends result in a shrinking labour force and challenge the possibility of sustaining local economies. Often, the youth, in spite of their high educational attainment, tend to migrate to other geographic areas, mostly in the Nordic region, reducing the local talent pool. As a result, the NSPA is being very active in the definition of (immigration) policies that help revert the previous demographic trends, attract talent that could contribute to the growth of local SMEs and or create new ventures in the region.1 At the same time, better integration of Indigenous Sámi communities into regional development strategies is required, as their rights are affirmed by law.2 Their traditional knowledge and involvement in sustainable land use, agriculture, and tourism can significantly contribute to regional competitiveness (OECD, 2019[14]).

To respond to these challenges, the NSPA regions are diversifying beyond traditional sectors such as fishing, forestry, and mining to include ICT, tourism, green energy and niche high-tech manufacturing. SMEs are seen as vital for local employment and innovation, and hence, the NSPA region shows a strong focus on fostering SMEs and creating new (technology-based) start-ups. Targeted venture capital funds, the promotion of business incubators and innovation hubs, and the co‑operation with universities and research organisations is thus fundamental to consolidate these ambitions.3 This collaboration is also essential to identify and invest in (potentially new) areas of relative comparative advantage to the region (Commission, 2006[15]), due to its unique strengths, in areas such as renewable energy, cold climate technologies4, and the blue economy (i.e. aquaculture, maritime tourism).

Public service delivery is also a major concern in the NSPA region. The use of new technologies is being promoted to enhance the effectiveness and efficiency of public services, and to mitigate the challenges posed by vast distances and low population density. Here too, cross-border co‑operation between the public sector, private companies, and community organisations is encouraged to improve service delivery and infrastructure maintenance.

As a result of the missions undertaken by the OECD in the NSPA regions between 2023 and 2024 and the information gathered in them, Table 4.1 identifies the main trends and policies for competitiveness in the NSPA region as a whole, and in each of the three countries constituting it, respectively. The NSPA region faces a series of demographic and economic challenges, prompting tailored policy responses to enhance its competitiveness. To counter demographic issues, particularly the challenges of an ageing workforce, policies are focused on retaining and attracting youth, improving educational attainment, and addressing regional disparities in workforce participation, particularly among underrepresented groups in specific sectors, such as STEM (i.e. Science, Technology, Engineering, and mathematics). Tailored immigration initiatives also aim to incentivise younger workers to settle in the region.

Economic diversification is at the core of the region's growth strategy, with policies designed to foster innovation in high-value sectors like ICT, tourism, bioeconomy, green energy, and niche high-tech manufacturing. Support for SMEs and start-ups is being enhanced through funding initiatives, incubators, and the promotion of entrepreneurship, aiming to build resilient industries with potential for high returns. In addition, there is a strong focus on promoting industries with existing absolute advantages—such as minerals, renewable energy, fisheries, aquaculture, and tourism—to boost export-oriented growth. By capitalising on these natural strengths, the region seeks to position itself as a key player in international markets.

To improve public service delivery, particularly in healthcare and education, policies emphasise the adoption of new technologies and the development of partnerships among the private, public, and community sectors. This collaborative approach aims to enhance public value and efficiency across the region. Lastly, efforts are being made to link Indigenous communities, especially the Sámi, with regional development plans. Policies are promoting educational and vocational training tailored to the needs of local industries, thereby reducing skill mismatches and fostering greater capacity within regional and local institutions. This inclusive approach not only enhances economic resilience but also ensures that regional development benefits are shared broadly across all communities.

Table 4.1. Main trends and policies for competitiveness in the NSPA

Trend	Policy initiatives
NSPA region as a whole
Demographic challenges	Policies aiming to retain and attract youth, improve educational attainment, address the challenges associated to an ageing workforce, particularly targeting underrepresented groups such as young females, and through tailored immigration policies and incentives for younger workers.
Economic diversification and innovation in high-value industries	Policies supporting innovation and entrepreneurship through (venture) funding, incubators, and the promotion of SMEs and start-ups in sectors like ICT, tourism, bioeconomy, green energy and niche high-tech manufacturing industries, which have potential for higher returns.
Growth in export-oriented sectors	Policies and strategies focusing on industries with absolute advantages such as minerals, renewable energy, fisheries and aquaculture, and tourism to drive export growth.
Public value and effectiveness	Policies promoting new technologies and aiming to develop partnerships between private, public, and community sectors to improve service delivery efficiency, especially in healthcare and education.
Building capacity and linking Indigenous communities with regional development	Policies enhancing educational and vocational training to meet the specific needs of local industries and reduce skill mismatches. Strengthening the capacities of regional and local institutions for effective policy implementation. Integrating Sámi communities into regional development plans.
Finland
Labor market	Policies aiming to attract young talent and encourage immigration to counteract demographic challenges.
Skill development	Policies enhancing education and vocational training tailored to regional economic needs, especially in remote areas.
Innovation in key sectors	Policies emphasising investment in innovation and research, particularly in areas with strong potential like renewable energy and ICT.
Export-driven growth	Policies focusing on sectors like paper, pulp, technology, and services that are integral to Finland's export economy.
Norway
Energy and maritime sectors	Policies utilising natural resources effectively and promoting innovation in the maritime, fisheries and offshore energy sectors.
Rural and regional development	Policies focusing on enhancing the viability of rural economies through targeted support and investments.
Human capital investment	Policies strengthening educational institutions and training programs to meet the needs of emerging industries.
Tourism as an economic driver	Policies developing tourism, particularly eco-tourism and adventure tourism, as a major economic activity.
Sweden
Economic diversification	Policies encouraging diversification away from traditional industries to more knowledge-intensive activities.
High-tech and green technologies	Policies promoting growth in sectors like advanced manufacturing and sustainable technologies where Sweden has a competitive edge.
Cluster development	Policies supporting the development of business clusters in biotechnology, ICT, and other innovative sectors, building “networked clusters” that include a physical location and a cluster management organisation acting as a central hub, as well as a digital platform for collaboration.
Workforce upskilling	Policies prioritising lifelong learning and skills development to keep pace with technological advancements.
Regional economic integration	Policies strengthening economic ties within and between regions to foster economic stability and growth.

Source: Author’s elaboration

The main trends impacting competitiveness in Finland's NSPA include demographic challenges such as an ageing population and youth outmigration. As a response, policies are being implemented to attract young talent, encourage immigration, and enhance higher education and vocational training. Additionally, there is a strong focus on fostering innovation and entrepreneurship to diversify the economy, particularly in areas with strong potential to strengthen the export economy of the Finnish NSPA. The Finnish government is addressing these issues through regional reforms that grant more autonomy to NSPA regions, allowing for tailored policy adaptations. Funding from the European Regional Development Fund (ERDF) and European Social Fund (ESF) is also crucial for supporting SMEs and enhancing innovation in the Finnish NSPA.

Norway's NSPA deal with the dual challenges of remote locations and severe climatic conditions, which have a direct impact on physical connectivity. On the one hand, policies focus on enhancing transport infrastructure to ensure reliable connections and support economic activities in these remote areas. On the other, digital connectivity initiatives, as well as investments in broadband and new digital technologies are also a significant part of the strategy to improve access to services and economic opportunities. Policy initiatives are also being implemented to support innovation and to achieve a sustainable management of natural resources in key industries, where Norwegian NSPA regions show competitive advantages, such as offshore energy, maritime and fisheries, eco-tourism and adventure tourism. To meet the demands of these emerging industries, policies are also aiming to strengthen education institutions through the development of new training programs oriented to respond to the previous demands.

Sweden's NSPA face trends of economic diversification and show significant regional variations in development strategies. In particular, there is a strong focus on promoting smart specialisation to enhance regional competitiveness in rural areas.5 As a result, policies promoting growth in high-tech manufacturing industries, ICT, biotechnology and green technologies, where Swedish NSPA regions have a competitive edge, are being implemented.6 Policies are also focusing on the development of lifelong learning and skills development, so as to keep pace with technological advancements in these industries, as well as on promoting STEM education at the university level.7 The integration with other national policies, particularly in transport and innovation, is also critical to addressing competitiveness issues of the Swedish NSPA. The European Structural and Investment Funds (ESIF) also play a key role in supporting these initiatives.

Connectivity in the NSPA

The geographical and climatic challenges in the NSPA region pose significant obstacles to connectivity, with long distances between urban settlements and tough weather conditions. Improved physical and digital infrastructure is thus essential for enhancing accessibility, economic integration, and overall quality of life. The NSPA suffers from weak transport connections, long distances between settlements, and challenging geographic settings. Significant investment is thus needed to enhance physical infrastructure, improving road, rail, and air transport to reduce travel times, making it easier for people and goods to move across the region, and integrate the NSPA region with national and international markets.

As regards digital connectivity, high-speed broadband is essential, particularly in remote and sparsely populated areas, to support economic activities and the access to public services, such as telemedicine and online education, which can mitigate the disadvantages of physical remoteness. Policies are therefore crucial for ensuring that residents and businesses in the NSPA can access digital services and participate in the digital economy.

Cross-border collaboration is vital to address these shared challenges. Harmonising regulatory frameworks and improving cross-border infrastructure planning can enhance connectivity and regional integration. Joint initiatives between NSPA regions and neighbouring countries can facilitate better infrastructure development and economic integration.

Sustainable and smart infrastructure development is also a key focus. Investment in renewable energy infrastructure, such as wind and hydroelectric power, supports sustainable development and reduces environmental impact. Developing smart transport systems that use innovative technologies are also essential to improve efficiency and reduce costs, making these infrastructure investments sustainable and supporting long-term regional growth.

Table 4.2. Main trends and policies for connectivity in the NSPA

Trend	Policy initiatives
NSPA region as a whole
Improving physical infrastructure	Policies supporting investment in infrastructure to improve transport connectivity, particularly as regards East-West connectivity through road, railway and air, to better integrate the NSPA with national and international markets and reduce travel times, also addressing the unique geographic and climatic challenges.
Digital connectivity	Policies expanding digital infrastructure, high-speed broadband and the inclusion of digital technologies to enhance accessibility, and support e-government and service delivery (e.g. telehealth services).
Cross-border collaboration and integration	Policies enhancing cross-border collaboration to leverage shared opportunities and address common challenges effectively. This includes policies improving infrastructure planning and investment, but also harmonising policies and regulations, and facilitating the movement of goods and people.
Sustainable and smart infrastructure	Policies promoting sustainable infrastructure development, including renewable energy projects, infrastructure to connect regional energy production with national grids, smart transport systems that improve access to national and international markets, including ports and rail networks, to improve overall connectivity and reduce environmental impact.
Finland
Transport infrastructure	Upgrading transport links, particularly road and rail networks.
Digital infrastructure	Extensive investment in broadband to enhance digital connectivity across remote areas.
Cross-border initiatives	Strengthening ties with neighbouring countries through infrastructure projects and digital collaborations.
Energy independence	Developing renewable energy sources to reduce dependence on imports and improve energy security.
Regional transport planning	Integrating regional transport needs into national planning to improve accessibility and connectivity.
Norway
Arctic route development	Exploiting geographic advantages to develop the Arctic shipping routes for better global connectivity.
Rural broadband expansion	Extending high-speed internet to rural and remote communities to reduce the digital divide.
Transport and logistics hubs	Developing regional hubs to improve logistics and transport efficiencies across northern Norway.
Cross-border co‑operation	Enhancing infrastructure links with the EU to support economic and social interactions.
Renewable energy networks	Expanding the infrastructure for hydroelectric and wind power to bolster energy connectivity and sustainability.
Sweden
Digital infrastructure	Extensive investment in broadband to enhance digital connectivity across remote areas.
Advanced digital networks	Leading in the deployment of 5G networks and services to enhance digital connectivity and innovation.
Sustainable transport systems	Investing in green transport solutions, including electric and hybrid vehicles for public transportation systems.
Northern transport corridor	Enhancing East-West and North-South transport corridors linking northern regions with major urban centres in Sweden and beyond, also ensuring sea-to-sea connectivity, which is highlighted as high priority by the national armed services in Sweden, Norway and Finland given the new security situation.
Smart city initiatives	Implementing smart city technologies in urban areas to improve efficiency and connectivity.
Energy grid modernisation	Upgrading the energy infrastructure to support the integration of renewable energy sources.

Source: Author’s elaboration

The main trends impacting connectivity in the Finnish NSPA focus on upgrading transport and digital infrastructure, cross-border initiatives, energy independence, integrating regional transport into national planning and enhancing digital connectivity. The Finnish government is working on long-term infrastructure plans that align with regional development strategies to address these issues. Strengthening cross-border co‑operation with neighbouring countries is also crucial for improving overall connectivity in the Finnish NSPA.

Norway's NSPA focuses on developing Arctic shipping routes, extending rural broadband, creating transport and logistics hubs, enhancing cross-border co‑operation, and expanding renewable energy networks. There is still substantial potential in improving digital connectivity through investments in broadband and other digital technologies to reduce the digital divide, to enhance the digitalisation of local SMEs, to promote the creation of new start-ups, to improve access to services and to stimulate the creation of new economic opportunities.

The Swedish NSPA struggles with fragmented transport infrastructure, requiring better integration with other northern regions and national transport planning. The focus is on developing sustainable transport solutions that are environmentally friendly and cost-effective. Policies aim to integrate regional transport networks implementing smart city technologies in urban areas and green transport systems. Sustainable infrastructure development includes renewable energy and its associated grid modernisation, and the development of advanced digital networks to enhance digital connectivity and innovation. However, this requires the basic digital infrastructure as broadband needs to be out in place first.

Competitiveness and connectivity in Finland’s NSPA

As regards the competitiveness of Finnish NSPA regions, their current needs consist of improving collaboration between businesses and educational institutions to foster innovation and technology transfer, access to finance and venture capital for the growth of innovation-driven ventures, particularly in technology sectors, strengthening regional clusters and innovation hubs and enhancing digitalisation and innovation among SMEs. Support policies being currently considered and implemented include regional development programs, innovation alliances and EU funding to foster green and digital transitions, develop renewable energy projects and sustainable land use practices, and facilitate the export orientation of Finnish SMEs. Financial support is currently being provided through ERDF, ESF+, and other EU funds.

Future gaps and opportunities highlight the need for better integration of SMEs into innovation ecosystems as a key lever to drive economic growth, and the development of high-value-added sectors and export-oriented activities in key industries in which Finnish regions count with absolute comparative advantages. To reach this potential economic transition expanding digital and green skills among the workforce is regarded as a crucial lever. New policy areas requiring further support emphasise the need for targeted policies to promote entrepreneurship, venture capital access for SMEs, particularly in technology-driven sectors, education and training programs to retain youth and attract skilled workers, and incentives for R&D investments and sustainable practices in key sectors like forestry, mining, and bioeconomy. Policies are also needed to promote innovation linkages and better integrate SMEs into regional economic strategies. Potential is sought for the implementation of public procurement for innovation initiatives.

Table 4.3. Competitiveness and connectivity in Finnish NSPA regions

Current needs	Current support policies	Future gaps and opportunities	New policy areas requiring further support
Competitiveness
Improved collaboration between businesses and educational institutions	Regional development programs, innovation alliances, and EU funding for green and digital transitions	Enhanced integration of SMEs into innovation ecosystems	Support for entrepreneurship and venture capital access for SMEs, particularly in technology-driven sectors
Access to finance and venture capital for innovation-driven ventures	Programs supporting SMEs in green transition and export facilitation	Need for comprehensive policy co‑ordination and better execution of digital connectivity strategies	Policies promoting innovation linkages and better integration of SMEs into regional economic strategies Potential role for public procurement for innovation
Strengthening of regional clusters and innovation hubs	Financial support from ERDF, ESF+, and other EU funds	Development of high-value-added sectors and export-oriented activities	Enhancement of education and training programs to meet local industrial demands and retain youth
Enhanced digitalisation and adoption of advanced technologies by SMEs	Support for renewable energy projects and sustainable land use practices	Expanding digital and green skills among the workforce to meet economic transition needs	Incentives for R&D investments and sustainable practices in key sectors like forestry, mining, and bioeconomy
Connectivity
Improved transport infrastructure, particularly road conditions and cross-border links	Ongoing projects to improve road, rail, and broadband infrastructure	Enhanced broadband coverage and smart grid infrastructure	More cohesive and targeted policy implementation for digital and transport connectivity
Increased broadband penetration and digital capabilities in rural and remote areas	Initiatives supporting the digitalisation of SMEs and extending broadband access	Better co‑ordination of policies to fully utilise EU funds for digital and transport infrastructure	Development of necessary infrastructure for smart grids to integrate renewable energy sources efficiently
Development of necessary infrastructure for smart grids to support renewable energy integration	EU initiatives like the Just Transition Fund supporting green energy and digital connectivity projects	Addressing challenges in achieving widespread digital transformation among SMEs	Policies focusing on extending high-speed internet access to rural and remote areas
Enhancements in cross-border transport links to support export industries and economic activities	Regional and national policies promoting sustainable transport and energy practices	Aligning local infrastructure developments with broader EU priorities to enhance economic resilience and competitiveness	Support for transport infrastructure projects to improve connectivity within regions and with neighbouring countries

Source: Author’s elaboration

As regards the connectivity of Finnish NSPA regions, the current needs are related to improvements in transport infrastructure, especially in rural and remote areas, increased broadband penetration and digital capabilities to support the digital transformation of SMEs, and the development of infrastructure for smart to support the integration of renewable energy sources. Support policies being currently considered and implemented include ongoing initiatives to improve road, rail, and broadband infrastructure, initiatives to support the digitalisation of SMEs and extend broadband access, and EU initiatives like the Just Transition Fund to support green energy and digital connectivity projects.

Future gaps and opportunities call for the need to enhance broadband coverage and smart grid infrastructure, achieving widespread digital transformation among SMEs and aligning local infrastructure developments with EU priorities. These future demands request more cohesive and targeted policies for digital and transport connectivity, extending high-speed internet access to rural and remote areas to bridge the digital divide, the development of smart grids to integrate renewable energy sources, and a better co‑ordination of policies to fully utilise EU funds for digital and transport infrastructure.

These aspects are critical for driving regional competitiveness and connectivity, ensuring sustainable economic growth, and enhancing resilience against external shocks. Addressing these needs and gaps through targeted policies will foster innovation, improve digital and transport infrastructure, and support the green transition in Finnish NSPA regions.

Competitiveness and connectivity in Norway’s’ NSPA

The current needs dealing with the competitiveness of Norwegian NSPA regions focus on improving collaboration between businesses and educational institutions, integrating SMEs into local and global value chains, access to finance and venture capital to support the growth of high-tech and innovative industries, strengthening regional clusters and innovation hubs and enhancing digitalisation and innovation among SMEs. Current support policies include regional development programs and EU funding to foster green and digital transitions, the development of innovation hubs, business networks, and regional funds to support local SMEs and the creation of new start-ups while facilitating technology transfer and commercialisation of research, and the implementation of programs supporting green energy projects, sustainable land use practices, and digital transformation.

Future gaps and opportunities related to competitiveness highlight the need for better integration of SMEs into innovation ecosystems and the development of high-value-added sectors related to the green transition. This diversification also presents significant opportunities for regional growth. To reach these goals it would be necessary to expand digital and green skills among the workforce. New policy areas requiring further support emphasise the need for targeted policies to promote entrepreneurship, innovation linkages, and better integrate SMEs into regional economic strategies. Support for high-tech industries and the commercialisation of research, particularly in technology-driven sectors like biotech and aquaculture, should be enhanced, what also requires venture capital access, education and training programs, and incentives for R&D investments and sustainable practices. Potential is sought for the implementation of public procurement for innovation initiatives.

Table 4.4. Competitiveness and connectivity in Norwegian NSPA regions

Current needs	Current support policies	Future gaps and opportunities	New policy areas requiring further support
Competitiveness
Improved integration of SMEs into local and global value chains	Regional development programs and EU funding (Horizon Europe, European Arctic Strategy)	Enhanced integration of SMEs into innovation ecosystems and green transition strategies	Support for high-tech industries and commercialisation of research, particularly in technology-driven sectors like biotech and aquaculture
Access to finance and venture capital for high-tech and innovative industries	Innovation hubs, business networks, and regional funds supporting SMEs and entrepreneurship	Development of high-value-added sectors and diversification of the economy (e.g. green energy, sustainable tourism)	Policies promoting innovation linkages and better integration of SMEs into regional economic strategies, particularly in remote areas Potential role for public procurement for innovation
Strengthening of regional clusters and innovation hubs	Financial support from Innovation Norway, Siva, and EU programs	Need for comprehensive policy co‑ordination and better execution of green and digital connectivity strategies	Enhancement of education and training programs to meet local industrial demands and retain youth
Enhanced digitalisation and adoption of advanced technologies by SMEs	Programs supporting green energy projects, sustainable land use, and digital transformation	Expanding digital and green skills among the workforce to meet economic transition needs	Incentives for R&D investments and sustainable practices in key sectors like forestry, mining, and bioeconomy
Connectivity
Improved transport infrastructure, particularly road conditions and cross-border links	Ongoing projects to improve road, rail, and broadband infrastructure	Enhanced broadband coverage and smart grid infrastructure	More cohesive and targeted policy implementation for digital and transport connectivity
Increased broadband penetration and digital capabilities in rural and remote areas	Initiatives supporting the digitalisation of SMEs and extending broadband access	Better co‑ordination of policies to fully utilise EU funds for digital and transport infrastructure	Development of necessary infrastructure for smart grids to integrate renewable energy sources efficiently
Development of necessary infrastructure for smart grids to support renewable energy integration	EU initiatives like the Just Transition Fund supporting green energy and digital connectivity projects	Addressing challenges in achieving widespread digital transformation among SMEs	Policies focusing on extending high-speed internet access to rural and remote areas
Enhancements in cross-border transport links to support export industries and economic activities	Regional and national policies promoting sustainable transport and energy practices	Aligning local infrastructure developments with broader EU priorities to enhance economic resilience and competitiveness	Support for transport infrastructure projects to improve connectivity within regions and with neighbouring countries

Source: Author’s elaboration

Regarding connectivity, the current situation in the Norwegian NSPA calls for improved transport infrastructure, especially in rural and remote areas, increased broadband penetration and the development of digital capabilities to support the digital transformation of SMEs and enhance overall regional connectivity, and the development of smart grids to support the integration of renewable energy sources and improve energy efficiency. To respond to these needs, there are a number of ongoing projects aiming at improving road, rail, and broadband infrastructure, the digitalisation of SMEs and enhancing regional connectivity. In turn, future gaps exist as regards the alignment of local infrastructure developments with broader EU priorities, what requires better policy co‑ordination to improve the execution of green and digital connectivity strategies and maximise their impact, and to fully utilise EU funds for digital and transport infrastructure, ensuring cohesive and strategic development.

Competitiveness and connectivity in Sweden’s NSPA

The current competitiveness needs are related to improving collaboration between businesses and educational institutions, improving the integration of SMEs into local and global value chains, access to finance and venture capital for the growth of high-tech and innovative industries, strengthening regional clusters and innovation hubs and enhancing digitalisation and innovation among SMEs. Current support policies include regional development programs and EU funding to foster green and digital transitions, sustainable land use practices, and digital transformation.8 Policies are also targeting the development of innovation hubs, business networks, and regional funds to support SMEs and new start-ups, facilitating technology transfer and commercialisation of research.

Future gaps and opportunities highlight the need for better integration of SMEs into innovation ecosystems and the development of high-value-added sectors to diversify the economy, particularly in those cases in which the SMEs are located away from the urban areas of the region. This diversification also requires the introduction of new skills among the workforce to meet the future potential demands of the Swedish NSPA regions.9 New policy areas requiring further support for competitiveness emphasise the need for targeted policies to promote entrepreneurship and innovation, such as public procurement for innovation, promote innovation linkages and better integrate SMEs into regional economic strategies. Support for high-tech industries (e.g. biotech, bioeconomy, advanced manufacturing and renewable energy) requires venture capital access, education and training programs to retain youth and attract skilled workers, and incentives for R&D investments and sustainable practices.

Table 4.5. Competitiveness and connectivity in Swedish NSPA regions

Current needs	Current support policies	Future gaps and opportunities	New policy areas requiring further support
Competitiveness
Improved integration of SMEs into local and global value chains	Regional development programs and EU funding (European Regional Development Fund, Just Transition Fund)	Enhanced integration of SMEs into innovation ecosystems and green transition strategies	Support for high-tech industries and commercialisation of research, particularly in technology-driven sectors like biotech, bioeconomy, advanced manufacturing and renewable energy
Access to finance and venture capital for high-tech and innovative industries	Innovation hubs, business networks, and regional funds supporting SMEs and entrepreneurship	Development of high-value-added sectors and diversification of the economy (e.g. green energy, sustainable tourism)	Policies promoting innovation linkages and better integration of SMEs into regional economic strategies, particularly in remote areas Potential role for public procurement for innovation
Strengthening of regional clusters through the establishment of cluster management organisations that act as innovation hubs	Financial support from regional programs, public-private partnerships, and EU programs	Need for comprehensive policy co‑ordination and better execution of green and digital connectivity strategies	Enhancement of education and training programs to meet the industrial demands of local firms (new and traditional firms) and retain youth
Enhanced digitalisation and adoption of advanced technologies by SMEs	Programs supporting green energy projects, sustainable land use, and digital transformation	Expanding digital and green skills among the workforce to meet economic transition needs	Incentives for R&D investments and sustainable practices in key sectors like forestry, mining, and bioeconomy
Connectivity
Improved transport infrastructure, particularly road conditions and cross-border links	Ongoing projects to improve road, rail, and broadband infrastructure	Enhanced broadband coverage and smart grid infrastructure, and North-South and East-West connectivity harmonisation	More cohesive and targeted policy implementation for digital and transport connectivity, and targeted investments to modernise North-South rail connections
Challenges associated to regional air connectivity	Significant financial burden on small municipalities to maintain and develop air connections, with only minor state-supported air links	Promote partnerships for innovation in sustainable aviation technologies, investing in ongoing projects in electric and biofueled flights	Advocate for a national strategy to support small airports and regional air routes, with cross-border air connections with Finland and Norway
Increased broadband penetration and digital capabilities in rural and remote areas	Initiatives supporting the digitalisation of SMEs and extending broadband access	Better co‑ordination of policies to fully utilise EU funds for digital and transport infrastructure	Development of necessary infrastructure for smart grids to integrate renewable energy sources efficiently
Development of necessary infrastructure for smart grids to support renewable energy integration	EU initiatives like the European Green Deal and Horizon Europe supporting green energy and digital connectivity projects	Addressing challenges in achieving widespread digital transformation among SMEs	Policies focusing on extending high-speed internet access to rural and remote areas
Enhancements in cross-border transport links to support export industries and economic activities	Regional and national policies promoting sustainable transport and energy practices	Aligning local infrastructure developments with broader EU priorities to enhance economic resilience and competitiveness	Support for transport infrastructure projects to improve connectivity within regions and with neighbouring countries

Source: Author’s elaboration

As regards connectivity, the identified current needs are related to transport infrastructure, especially in rural and remote areas, the need for an air transport strategy, increased broadband penetration and digital capabilities, and the development of infrastructure for smart grids to support the integration of renewable energy sources and improve energy efficiency. Ongoing projects are currently targeting road, rail, and broadband infrastructure, supporting the digitalisation of SMEs and fostering sustainable regional development. Future gaps still remain as regards the alignment of local infrastructure developments with broader EU priorities. The current state of North-South rail infrastructure is inadequate to support the growing demands of freight and passenger transport. This deficiency hinders economic integration, restricts mobility, and limits the region’s ability to fully leverage its resources and industries for national and international markets. In addition, there is a need for a national strategy for northern Sweden, ensuring strategic investment in small regional airports and air routes critical to business and economic growth, while also establishing direct flights to northern Finland and Norway, supporting the economic development and international integration of northern Sweden. This requires better cross-border policy co‑ordination to fully utilise EU funds for digital and transport infrastructure.

Conclusions

The NSPA regions have significant potential for sustainable development. They share many challenges, which can be addressed through targeted policies and enhanced multi-level governance that aim to establish a smart growth strategy for a new rural economy based on education, knowledge, research and innovation (Fieldsend, 2013[13]). In particular, strong collaboration could be implemented across the three countries in a number of needs (current or future) and policy areas that are common to all NSPA regions.

First, sustainable development is a priority to combat climate change and ensure long-term economic growth. While the willingness to invest in renewable energy projects is high, public opposition remains a significant barrier, particularly among municipalities, landowners, and residents living near power production sites. To address this challenge, policies should focus on creating incentives that directly benefit local stakeholders and foster public acceptance. Additional policy interventions could consider the implementation of circular public procurement and public-private partnerships for large-scale green infrastructure projects, so as to accelerate the transition to green energy production and distribution in the NSPA regions. Second, and to provide support for SMEs and innovative start-ups, grants could be provided for existing SMEs or for entrepreneurs to access accelerator programs, public procurement for innovation projects could be launched, and innovation clusters could be created or enhanced to help SMEs and new ventures to scale and compete globally. Third, digital infrastructure is crucial for modern economies and opens infinite possibilities for diversification and the creation of new business models. Hence, investing in broadband and providing digital literacy programs could help bridge the digital divide and support business transformation. Fourth, efficient transport infrastructure is necessary to support economic activities and regional integration. Here, infrastructure development funds and cross-border projects could ensure smooth movement of goods and people across the NSPA regions. As regards the needs concerning education and workforce development, NSPA regions could align and co‑ordinate their education systems with industry needs, for example, using partnerships between industries and educational institutions to help meet labour market demands. Fifth, financial support is essential for innovation. Creating inter-regional venture capital funds and offering loan guarantees could provide necessary capital for start-ups and SMEs to grow and to extend their goods and services to the whole of the NSPA region.

Table 4.6. Common policy areas to all NSPA regions

Policy area	Description	Policy interventions
Sustainable development and green energy	All regions emphasise the importance of sustainable development, focusing on green energy production, renewable energy projects, and reducing carbon footprints.	- Create incentives and support mechanisms that address public opposition and engage local stakeholders, such as municipalities, landowners, and nearby inhabitants in renewable energy production. - Potential role for circular public procurement. - Develop public-private partnerships for large-scale green infrastructure projects.
Support for SMEs and innovation	There is a common emphasis on supporting SMEs, enhancing innovation capabilities, and fostering entrepreneurship through regional development programs and innovation hubs.	- Establish SME/entrepreneur innovation grants and accelerator programs. - Potential role for public procurement for innovation. - Create regional innovation clusters, digital platforms promoting collaboration and networking events.
Digital infrastructure and connectivity	Enhancing digital infrastructure, improving broadband access, and supporting the digital transformation of SMEs are key priorities across all regions.	- Invest in high-speed broadband for rural and remote areas. - Provide digital literacy programs for SMEs.
Transport infrastructure	Improving transport infrastructure, including roads, railways, and cross-border connectivity, is critical for economic development and regional integration.	- Launch infrastructure development funds for road and rail improvements. - Develop cross-border transport agreements and projects.
Education and workforce development	All regions highlight the need for targeted education and training programs to align with industry demands, particularly in green and digital skills.	- Develop industry-specific training programs and apprenticeships. - Partner with educational institutions for tailored curriculum development.
Access to finance and venture capital	Access to finance and venture capital for high-tech and innovative industries is a common challenge, with various regions seeking better financial services and support mechanisms.	- Create regional venture capital funds and angel investor networks. - Offer loan guarantees and microfinance options for startups and SMEs.

Source: Author’s elaboration

However, naturally, there are also some country-specific needs, which would require specific policy interventions, either by regional authorities or by the NSPA region as a whole.10 In the case of Finland, enhancing SME integration into value chains could boost innovation and competitiveness. Innovation vouchers could be used to reach this goal, and participation in trade expos could be promoted to provide exposure and opportunities for growth. Existing clusters could be instrumental in both cases. Second, strengthening collaboration between research and educational institutions and industry would facilitate meeting industry needs, fostering innovation, practical skill development and talent retention. Finland could implement joint research centres between industry and academia, and co‑operative education programs that place students in local businesses (e.g. dual education) to facilitate this collaboration. As regards the green transition and the development of sustainable practices, Finnish NSPA regions could develop new regulatory frameworks for sustainable forestry and mining (among other industries) as well as and inject funding for sustainable technologies to support this transition.

Table 4.7. Policy areas specific to Finland

Policy area	Description	Policy interventions
Integration of SMEs into innovation ecosystems	Focus on enhancing the integration of SMEs into regional and global value chains, particularly in high-value-added sectors like bioeconomy, forestry, and digital technologies.	- Establish innovation vouchers and subsidies for SMEs. - Facilitate SME participation in international trade fairs and expos.
Education-industry collaboration	Emphasis on strengthening collaboration between businesses and educational institutions to foster innovation and meet local industrial demands.	- Create joint research and development centres. - Implement co‑operative education programs that place students in local businesses.
Green transition and sustainable practices	Policies promoting sustainable practices and innovation in key sectors like forestry, mining, and renewable energy, aligning with the green transition goals.	- Develop regulatory frameworks for sustainable forestry and mining. - Fund research into new sustainable technologies and practices.

Source: Author’s elaboration

In Norwegian NSPA regions and considering the scale and scope of Norway's natural resources, sustainable aquaculture, and marine biotechnology could promote economic growth. Grants for sustainable aquaculture projects and R&D support in marine biotechnology and sustainable fisheries could drive innovation in these sectors. Second, increasing energy autonomy through renewable projects could ensure energy security. Here a national strategy could be developed for alternative energy production (e.g. hydrogen) and subsidies could be awarded to support the development of green energy sources such as wind and hydropower. Third, and to respond to existing workforce shortages, retraining and lifelong education programs could be offered, and incentives could be implemented for migrant workers to help meet labour demands in high-demand industries.

Table 4.8. Policy areas specific to Norway

Policy area	Description	Policy interventions
Marine and aquaculture industries	Focus on enhancing the innovation and value-adding in fisheries and aquaculture, with significant emphasis on sustainable practices and biotechnology.	- Introduce grants for sustainable aquaculture projects. - Support R&D in marine biotechnology and sustainable fisheries.
Energy autonomy and green Energy production	Emphasis on increasing energy autonomy through investments in renewable energy projects like wind and hydropower, and exploring hydrogen production.	- Develop a national strategy for hydrogen production. - Increase subsidies for wind and hydropower projects.
Addressing workforce shortages	Specific focus on reducing dropout rates, integrating migrants, and addressing workforce shortages in healthcare, transport, and tourism sectors.	- Offer retraining programs for adults in key sectors. - Implement incentives for migrant workers in high-demand industries.

Source: Author’s elaboration

Finally, as regards Swedish-specific needs, a strong focus on renewable energy production could be adopted, through the establishment of regional competence centres and the introduction of incentives to support green energy and sustainable forestry. Developing sustainable tourism and supporting cultural heritage could also lead to the promotion of economic diversification and cultural preservation in Swedish NSPA regions. Here, community-based initiatives could be implemented, and heritage projects could be financed to enhance tourism offerings. Finally, digital and physical infrastructure could be integrated, for example, in the field of transport and logistics.

Table 4.9. Policy areas specific to Sweden

Policy area	Description	Policy interventions
Renewable energy and sustainable practices	Strong focus on renewable energy production, particularly through hydropower and wind energy, and integrating sustainable practices in forestry and manufacturing.	- Establish regional centres for renewable energy research and innovation.
Tourism and cultural heritage	Emphasis on developing sustainable tourism relying on natural landscapes and cultural heritage, with efforts to involve local communities like the Sámi.	- Create community-based tourism initiatives. - Fund cultural heritage preservation projects linked to tourism.
Integration of digital and physical infrastructure	Need for more co‑ordinated efforts to develop both digital and physical infrastructures in tandem to support economic and social activities.	- Launch integrated infrastructure development plans. - Fund joint digital and transport infrastructure projects.

Source: Author’s elaboration

References

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[6] Constantini, V. and M. Mazzanti (2012), The dynamics of environmental and economic systems: innovation, environmental policy and competitveness, Dordrecht: Springer.

[1] European Commission (2024), A new plan for Europe’s sustainable prosperity and competitiveness, https://commission.europa.eu/priorities-2024-2029/competitiveness_en.

[13] Fieldsend, A. (2013), Rural Renaissance: an integral component of regional economic resilience, Studies in Agricultural Economics.

[4] Fuest, C. et al. (2024), EU Innovation Policy. How to escape the middle techonology trap. A report by the European Policy Analysis Group, https://www.ifo.de/sites/default/files/docbase/docs/EconPol-PolicyReport_50-Innovation-Policy.pdf.

[11] Galloway, L. (2007), Can broadband access rescue the rural economy?, Journal of Small Business and Enterprise Development.

[3] Greenwald, B. and J. Stiglitz (2013), Industrial policies, the creation of a learning society, and economic development., Palgrave Macmillan UK, https://cgt.columbia.edu/wp-content/uploads/2014/01/Industrial-Policies-the-Creation-of-a-Learning-Society-and-Economic.pdf.

[9] Kattel, R. et al. (2024), Towards inclusive innovation systems: developing a mission-oriented framework for No limits, UCL Institute for Innovation and Public Purpose, Policy Report.

[7] Ketels, C. (2013), Recent research on competitiveness and clusters: what are the implications for regional policy?, Cambridge Journal of Regions, Economy and Society.

[5] Lubin, D. and D. Esty (2010), The sustainablity imperative, Harvard Business Review.

[10] Phillipson, J. et al. (2019), Shining a spotlights on small rural businesses: How does their performance compare with urban?, Journal of Rural Studies.

[14] Reviews, O. (ed.) (2019), Linking the Indigneous Sami People and Regional Development in Sweden, OECD Publishing.

[2] Storper, M. (1997), The Regional World Territorial Development in a Global Economy, University of California, https://books.google.fr/books?hl=fr&lr=&id=ROaCVd6RRN8C&oi=fnd&pg=PR5&dq=storper+1997+competitiveness&ots=IqOlyBq1IS&sig=_eALp_1pgTWIvSGJY4riZvLQhZ4&redir_esc=y#v=onepage&q=storper%201997%20competitiveness&f=false.

[12] Tate, G. (2010), Entrepreneurship and the environment for rural SMEs in the Shropshire Hills, The Journal of Entrepreneurship.

[8] Uyarra, E., C. Marzocchi and J. Sorvik (2018), How outward looking is smart specialisation? Rationales, drivers and barriers, European Planning Studies.

Notes

← 1.  See for example the new rules for labour immigration that have been discussed in the Swedish context to promote the immigration of highly qualified labour. Available (in Swedish): https://www.regeringen.se/rattsliga-dokument/statens-offentliga-utredningar/2024/02/sou-202415/. See also the Sweden assignment to national agencies to attract and retain international competence. Available (in Swedish): https://www.regeringen.se/pressmeddelanden/2024/03/myndighetsovergripande-satsning-for-att-attrahera-och-behalla-internationell-kompetens/

← 2.  It is stipulated by law that the government, state administrative authorities, regions, and municipalities must consult Sami representatives before making decisions in matters that may have particular significance for the Sami population. Available (in Swedish): https://www.riksdagen.se/sv/dokument-och-lagar/dokument/svensk-forfattningssamling/lag-202266-om-konsultation-i-fragor-som-ror-det_sfs-2022-66/

← 3.  The fourteen regions that comprise the NSPA include the following universities: (a) Finland: Kainuu (Kajaani University of Applied Sciences), , Central Ostrobothnia (Centria University of Applied Sciences), North Ostrobothnia (University of Oulu), Lapland (University of Lapland, Lapland University of Applied Sciences), North Karelia (Karelia University of Applied Sciences, University of Eastern Finland), South Savo (South-Eastern Finland University of Applied Sciences, Mikkeli University Consortium), North Savo (Savonia University of Applied Sciences, University of Eastern Finland); (b) Norway: Finnmark (The Arctic University of Norway), Nordland (Nord University),Troms (The Arctic University of Norway); (c) Sweden: Jämtland Härjedalen (Mid Sweden University, Swedish University of Agricultural Sciences), Västernorrland (Mid Sweden University), Norrbotten (Luleå University of Technology), Västerbotten (Skellefteå Universities Alliance, Umeå University, Swedish University of Agricultural Sciences).

← 4.  Cold Climate Technologies refer to a range of scientific and engineering solutions specifically designed to function effectively in cold environments. These include, among others, thermal insulation, heating systems, durable materials, energy efficiency, and cold-resistant transportation.

← 5.  See the bill proposed by the Swedish government for a rural policy that leads to long-term sustainable development, and which considers the promotion of entrepreneurship, work, housing and welfare. Available (in Swedish): https://www.regeringen.se/rattsliga-dokument/proposition/2018/03/en-sammanhallen-politik-for-sveriges-landsbygder--for-ett-sverige-som-haller-ihop/

← 6.  See for example the national strategy for sustainable regional development for the period 2021-2030. Available (in Swedish): https://www.regeringen.se/rattsliga-dokument/skrivelse/2021/03/skr.-202021133

← 7.  For more details on the Swedish STEM strategy, see (in Swedish): https://www.skolverket.se/download/18.582d622c190768c7a0820/1720018140659/MSV%20skrivelse%20till%20STEM%20240626.pdf

← 8.  See the green acceleration office created by the Swedish government to increase the pace of the industry's transition. Available (in Swedish): https://www.regeringen.se/pressmeddelanden/2024/06/gront-accelerationskontor-ska-oka-takten-i-industrins-omstallning/

← 9.  The policies dealing with skills supply and lifelong learning are defined in a collaborative manner, including: the Swedish Public Employment Service, the Swedish Agency for Higher Vocational Education, the National Agency for Education, the Swedish ESF Council, the Swedish Agency for Economic and Regional Growth, the Swedish Higher Education Authority and the Swedish Council for Higher Education. The annual report for year 2023 is available (in Swedish): https://assets.myh.se/docs/publikationer/rapporter/arsrapport-msv-2023.pdf

← 10.  In turn, many of these policy areas require a strong coordination and alignment with national policy priorities in the three countries.