What makes Denmark stand out?
Denmark is popular for quite a few things. The world’s most livable city (Copenhagen), number one in the world in sustainable development, home to some of the happiest people, the country that gave us Lego and yes, its Viking heritage.
But Denmark and capital Copenhagen are also emerging as technology and startup hubs. While places such as the US, the UK or Canada are well-established tech scenes, Denmark is a contender that deserves just as much attention.
From having the most IoT sensors per capita in the world, the most digitized public sector to some of the most exciting tech startups, the country seems to have a few aces up its sleeve. What are the factors that are turning Denmark in a tech powerhouse and what are some of the threats hindering the tech sector’s development?
Growing technology and startup hub
The country is one of the top three EU countries when it comes to digital competitiveness, according to EU Digital Economy and Society Index, following closely Finland and Sweden.
Image description: snapshot from The Digital Economy and Society Index (DESI) 2020
Furthermore, Denmark placed 6th in the Global Entrepreneurship Index in 2018, an index measuring the health of the entrepreneurship ecosystems across 137 countries.
Danish software companies will drive in a revenue of 3,000 million USD by the end of 2020, as estimated by Statista.
Image description: snapshot from Statista
Within the technology / ICT sector, there are a few specific areas in which Denmark stands out:
- audio and sound technology: Denmark is a global leader in the audio and sound technology industries, with many internationally recognized brands such as Bang&Olufsen, Brüel & Kjær and Oticon
- robotics: the country prides itself with the prime robots and drones testing centers, hosting full-scale test facilities for drone and robot applications in healthcare, agriculture or production
- wireless and mobile technology: a wireless cluster with competencies in mobile technology: LTE/LTE Advanced, Bluetooth, Internet of Things (IoT), location-based services, antennas and sound, MIMO, machine-learning, blockchain, and ultra-reliable connectivity for mission-critical systems according to The Danish Minister of Foreign Affairs
- software development: tech giants such as Microsoft, Nokia, and Google have chosen Denmark to set up international research and development centers
- security and encryption
- business solution development: some successful Danish tech companies: Zendesk, Unity Technologies, Tradeshift, Podio, Siteimprove, Trustpilot. Seven percent of global tech exits with a unicorn valuation originate in the Nordic countries
- eGovernment solutions: Denmark has pursued an ambitious agenda for digitizing its public sector and in 2018 reached the top of the United Nations’ e-Government rankings.
But why is Denmark such a thriving place for tech & entrepreneurship?
Government investment and support
Becoming a digital nation
Back in 2018, the Danish government launched the ‘Digital Growth Strategy’, a program aimed at establishing Denmark as a digital hub. The government recognized that if Denmark can create the right conditions for Danish companies to utilise the newest technologies, every Dane and the nation as a whole can gain from the digital transformation.
The strategy consists of 38 initiatives, which are allocated a total of 134 million EUR from 2018 to 2025 and 10 million EUR onwards per year.
Digital Growth Strategy is grouped into seven key initiatives:
- Digital Hub Denmark – a partnership between the public and private sectors to facilitate businesses’ access to expertise for a stronger digital growth
- Digital enhancement of SMEs – supporting small and medium-sized enterprises towards digitalization
- The Technology Pact – initiatives aimed at strengthening the technical and digital skills of Danish people
- Strengthened computational thinking in elementary school – make technological understanding a mandatory subject in primary and lower secondary education
- Data as a driver of growth – facilitate businesses’ access to useful public data to provide a catalyst for growth
- Agile regulation for new business models – more agile regulation will allow businesses to experiment with new business models
- Strengthened cybersecurity in companies – improve cyber and information security in small and medium-sized enterprises.
Making AI a priority
In March 2019, the Danish government launched the National Strategy for Artificial Intelligence (NSAI). The vision is to make Denmark a leader in the use and development of AI technologies and to empower companies to use AI to gain competitive advantage.
To support the NSAI implementation, the government is set out to invest 200 mil EURO in digital and artificial intelligence (AI) research and pilot projects.
Number 1 in Europe for ease of doing business
In the World Bank Doing Business Report, Denmark placed 1st for the ease of doing business in Europe and 4th worldwide.
The report looks at dimensions of the regulatory environment such as legislation for starting a business, getting credit, paying taxes, resolving insolvency, and labor market regulation among others.
Image description: snapshot from World Bank Doing Business Report 2020
Image description: snapshot from World Bank Doing Business Report 2020
Additionally, Denmark ranks 1st in Transparency International’s study of perceived corruption (CPI) in public sectors worldwide since 2016. The public sector is recognized for its low level of bureaucracy and for commitment to limiting administrative burdens on businesses.
Image description: snapshot from Transparency International’s study of public sector perceived corruption
A favorable tax climate
The corporate tax in Denmark is 22% which is close to the average OECD and European levels.
R&D is encouraged through tax incentives: the government offers a full deduction of patents and know-how in the year of acquisition and the possibility to deduct R&D expenses.
Companies with R&D costs resulting in losses are entitled to a cash reimbursement of 22% of the losses relating to R&D costs, capped to DKK 25 million (approx 3.3 million EUR).
Track record of innovation
The development of the tech and software sector in Denmark is not arbitrary, as the Danes have a proven track record of innovation within the technology and digital field.
Some popular programming languages were developed by Danish engineers.
Bjarne Stroustrup developed C++, Anders Hejlsberg was the original author of Turbo Pascal and the chief architect of Delphi, Rasmus Lerdorf co-authored the PHP scripting language, Peter Naur contributed to creating the language ALGOL 60 and David Heinemeier Hansson created the popular Ruby on Rails web development framework.
Other technology achievements include advances in quantum computing, nanoscale engineering, and linear optics.
What can hinder Danish technology companies development?
With such an ambitious public digital agenda and push for adoption of newest technologies, there is one challenge that Danish technology companies need to figure out: the current shortage of IT and digital skills and specialists.
According to a survey by Statistics Denmark, as much as 60% of Danish companies reported that they faced difficulties to hire IT specialists in 2017. In 2018, IT specialists constituted just over 4% of Denmark’s labor force.
In Q3 2019 and Q1 2020, the Information and Communication sector in Denmark registered the highest job vacancy rate.
Image description: snapshot from Statistics Denmark Job vacancies report
Denmark faces future scarcity of an estimated 19,000 ICT specialists by 2030 (Højbjerre Brauer Schultz, 2016). Another projection estimates a need for 6,500 engineers and 3,500 science graduates by as early as 2025 (Engineer the Future, 2018).
At the same time, the number of STEM (science, technology, engineering, and math) graduates remains low, 20.98% according to IDM’s World talent Ranking 2019.
The technology sector is an important engine for growth and development in Denmark. Benefiting from government support, long term strategic plans, and a thriving business environment, tech companies in Denmark seem to have all the needed ingredients to turn into success stories.
But finding the right talent at the right timing is a challenge that can hurt the Information & Communication Technology sector as a whole and affect the small and medium-sized companies in particular.