C.C.A. Smits, R.G. Bertelsen, & J.C.S. Justinussen

Like many Arctic states, Iceland and the Faroe Islands used to be the resource-based economies which Greenland is today. Remotely located in relation to the World economy, Iceland and the Faroe Islands have succeeded in developing a knowledge-based economy, also related to their energy sector. To create a knowledge-based economy a sufficient mass of human capital is of crucial importance. In forming this critical mass, higher education and knowledge institutes play a central role. The cases of the Faroe Islands and Iceland show that it is possible to create a critical mass of human capital by developing strong knowledge institutes and stimulating the exchange of knowledge. Iceland has successfully developed a knowledge-based energy sector based on hydropower over the last century. Icelanders bringing home knowledge gained via graduate education at top institutes abroad, appeared of major importance. More recently the Faroe Islands have developed human capital based on oil and gas exploration activities, while no economically viable resources have been found yet. Greenland on the other side has made some important steps in creating and strengthening strong knowledge institutes, but is still far from a full-fledged knowledge-based economy such as the one in Iceland. Are there lessons to be learned from Iceland and the Faroe Islands, and how much do historic path-dependencies matter in this context? These are questions that this article will explore.

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