Strategic Fragmentation and Its Consequences: Capital Flows and Innovation Capacity in the Baltic Sea Region’s AI Transition
Purpose: The Baltic Sea Region (BSR) possesses the critical innovation assets—capital, industrial base, and digital talent—required for global Artificial Intelligence (AI) leadership. However, this potential remains unrealized. The purpose of this paper is to diagnose this "Superpower Paradox" by identifying the systemic barriers to regional integration. It argues that the primary obstacle is not a lack of strategy, but a "Battle of the Blueprints"—a conflict between competing, non-interoperable national models for AI development that fragment the ecosystem. Design/Methodology/Approach: This study employs a multi-phase, mixed-methods desk research design to triangulate data sources. Phase 1 consists of a Systematic Literature Review (SLR) examining the theoretical underpinnings of Transnational Innovation Systems (T-RIS) and institutional lag. Phase 2 involves a Comparative Document Analysis (CDA) of over 20 official national AI strategies, legal acts, and policy programmes (2018–2025) from nine BSR countries (Denmark, Estonia, Finland, Germany, Latvia, Lithuania, Norway, Poland, Sweden). Phase 3 validates these findings through a qualitative expert elicitation (N=49) involving high-level policymakers and industry leaders from the region. Findings: The research reveals five distinct, divergent national AI blueprints: 1) Germany’s "Standardization & Sovereignty" model; 2) Poland’s "Security & Scale" model; 3) Denmark’s "Commercialization & Branding" model; 4) Sweden/Finland’s "Consensus & Human-Centricity" model; and 5) the Baltic States’ "Regulatory Agility & GovTech" model. The analysis confirms that these strategies operate in silos, creating significant regulatory friction and inhibiting the cross-border scaling of "Trustworthy AI" solutions. Practical Implications: The study suggests that enforcing top-down uniformity is ineffective. Instead, policymakers should adopt a "meta-governance" approach focused on interoperability. The proposed "Baltic AI Resilience Accelerator" framework outlines how to connect existing assets—such as linking German industrial standards with Baltic regulatory sandboxes—to transform ethical compliance from a burden into a competitive regional advantage. Originality/value: This paper provides the first systematic, comparative synthesis of conflicting national AI strategies within the BSR. It contributes a novel conceptual framework for a "Digital Baltic Way," demonstrating how mission-oriented policy can overcome institutional fragmentation in multi-speed innovation ecosystems.