Yellow flags billow from lamp-posts along Gothenburg’s main streets and canals, declaring: “What A Wonderful World.” They are there to advertise Gothenburg’s 2009 biennial, a 10-week-long celebration of contemporary art, but the banners feel like they’d be appropriate permanent fixtures: Gothenburg has that knack, shared by many Scandinavian cities, of making this planet seem like a singularly comfortable and agreeable place.

It might be small, but it is one of the 10 most popular European cities for ­entrepreneurs, according to a 2009 ECER-Banque Populaire survey. It comes in ninth behind the likes of Helsinki, Stockholm, Hamburg and Frankfurt. And it is attracting a particular kind of start-up – people looking for a cosy community, a comfortable, practical environment to work in that’s not hyper-competitive but clever and creative. Gothenburg’s biennial posters are the work of an ad agency called Sturm & Drang, established three years ago. The men who wrote the slogan clearly believe they are not exercising their creative licence untowardly.

“There’s less competition here between agencies than you would find in Stockholm,” says Björn Eklind, 40, art director at Sturm & Drang. “People co-operate more. Stockholm agencies tend to bloom and then disappear but businesses here last.” Åke Brattberg, 31, Sturm & Drang’s digital creative, agrees: “People here are very practical. There’s a focus on ideas, and getting things done.”

“There is a saying,” adds Olof Gustafsson, 42, the agency’s ­copywriter, “that in Stockholm they write poetry, and in Gothenburg we write invoices.”

It’s appropriate, then, that the one brand on Earth most synonymous with stolid practicality is that of a Gothenburg company: the first Volvo rolled out of a local factory in 1927. Though the car company’s HQ is still just outside of Gothenburg, it is no longer a locally owned ­enterprise, having been bought by Ford in 1999 (and, at time of writing, possibly set to be sold to a Chinese consortium).

Nudie jeans was able to utilise the municipal image of cheerful, rugged, level-­headedness that is associated with Gothenburg, recently establishing a globally recognised brand. Yet it also makes sense that another Gothenburg company – Hasselblad – built the cameras that chronicled mankind’s most giant leap.

Gothenburg has always faced outward: it was built largely by Dutchmen (in the 17th century), made rich by Scots (when it was the headquarters of Sweden’s East India Company in the 18th century) and has since brought people, goods and ideas from all over the world as the home of Scandinavia’s biggest port and Sweden’s largest ­university. And while most of its small businesses are run by locals, outsiders have begun to discover the place. The number of foreign-owned firms operating in the Gothenburg region has more than doubled in the past decade: as of 2008, 2,055 foreign-owned businesses were employing 77,033 people in the area.

Joakim Levin, 36, co-founded Nudie in 2001. He requires no persuasion that Gothenburg can serve as a bridgehead from which to conquer the planet. “Our idea,” he laughs, like a man who can afford to, “was to make something out of values that we had. The goal we had was to sell 10,000 units a year, to raise SEK10m (€990,000), which was what we needed to keep the company going. We sell about a million units a year now.”

Nudie’s success is unusual. Its attitude, in the context of Gothenburg, is not. Levin’s belief that “there’s a different mentality here that makes it easier to do your own thing”, is widely echoed. ­Whatever their field of endeavour – creative, political, scientific, journalistic – Gothenburgers protest, with convincing consistency, that what matters most to them is doing good work in the right way, with profit a secondary consideration.

Stockholm, runs the refrain, is competitive. Gothenburg, everyone insists, is collaborative. Anna Lena Mayor Ekeblad, 35, a former project manager for Nudie, left the company last year to establish a studio-cum-shop from which she sells her own artworks. She bought the space, on Nordenskiöldsgatan, when it was all but derelict, for SEK100,000 (€8,000) – she also pays the building’s freeholders a monthly rent of SEK6,000 (€600) – and has transformed it into a high-ceilinged haven for her colourful graphics, jewellery, clothes and eccentric cement cakes.

She also thanks Gothenburg’s community spirit for the swiftness with which she was able to set up shop, and turn a profit. News spread fast by word of mouth. A new bar opened and asked to hang her works on their walls. “And people,” she smiles, “get drunk and buy the paintings, so I go down there the next day with a new one.”

Gothenburg is a small city, with a population of 500,000, which manages to feel even smaller. Everywhere and everybody in downtown can be reached on foot, in minutes. The peak of its rush hour feels like a Sunday. One does not have to spend much time here before it becomes impossible to walk 100m without bumping into a familiar face, who will invariably use this intimacy as an advantage.

“We’ve never advertised,” says Jesper Larsson, 29, of design company Next Century Modern (NCM). “It’s quite easy to just grow a network.” NCM started life in 2002 as a manufacturer of conceptual T-shirts, and has since grown into a multimedia marketing operation. The offices, Larsson notes with satisfaction, are just metres from the spot which Google Maps pinpoints as Gothenburg’s centre. He notes with even more satisfaction that the rent is just SEK40,000 (€4,000) a quarter (the relative cheapness of property is another recurring explanation for Gothenburgers’ good cheer).

“We could move to Stockholm and double our hourly rate,” says Larsson, “but we base our business on loyal clients, and the people here are nice.” The word “nice” is, of course, often used to patronise or damn with faint praise, but it suits Gothenburg. The cobbled shopping district of Haga is cute without being twee. The food – Gothenburg has four Michelin-starred restaurants – is ­terrific without being ostentatious (Sjöbaren, on Haga Nygata, does wonderful, unfussy seafood at startlingly unfussworthy prices). The parks are green, the streets clean, and if one subscribes to the wisdom that creativity is born of struggle, Gothenburg seems about the least likely entrepreneurial hotbed imaginable. “Gothenburg’s weaknesses are its strengths,” explains Mattias Göransson, 37, publisher of music magazine Filter and football title Offside.

“The limited opportunities mean you can focus,” he says. It’s a view echoed by Erik Hemmendorff, 36, of Plattform ­Produktion. Hemmendorff moved to Gothenburg in the mid-90s, and became entranced by the semi-legal underground club and music scene that was flourishing at the time, and the availability of almost free housing – he recalls paying his meagre rent by recycling beer cans from the previous month’s parties.

Though the signifiers of this period have now dried up or gone legit, Hemmendorf believes the spirit still flourishes. At the very least, being located in Gothenburg has done no harm to the production house he established in 2002 with director Ruben Östlund. Their latest feature, De Ofrivilliga (“Involuntary”), has won several international festival awards and has just been submitted as Sweden’s contender for the foreign-­language Oscar. Hemmendorf insists, however, that the location has been key to their success. “If you work here in our field,” he says, “nobody cares. There’s no career opportunity unless you invent it.”

In a city of such determined self-starters, it’s easy to wonder what role government can play, beyond leaving everybody to get on with it. Andreas Göthberg, 33, is the head of the Centre of Visualisation at Business Region Göteborg, a non-profit firm, owned by the city government, whose brief is to develop local trade and industry.

Unsurprisingly, he describes Business Region Göteborg’s role as one of ­facilitation rather than encouragement – introducing the right people to the right people and accelerating the city’s culture of cooperation. “It’s what makes this place,” he says, “that people collaborate a lot. Being the second city, we need to do that – being successful here means fighting for it, but not against each other.”

There are, he explains, grand ambitions for what many of Gothenburg’s citizens describe as “a little big town, or a big little town” – he wants to see 50,000 more people living here by 2020, and thinks there’s every reason for them to come. “In Stockholm,” he says, “people seem to need to have a certain amount of stress, and be seen to be rushing about with a latte in their hand. People here don’t do that. It’s much more easygoing, but no less effective.”

Gothenburg is serviced by two international airports. Landvetter, the larger of the two, boasts 40 or so direct routes. Most of these are within Europe, aside from connections to Tehran, Beirut, Erbil and Sulaymaniyah. Gothenburg City Airport, the smaller one, is closer to the centre, and is favoured by budget airlines including Ryanair and Wizz. Sweden’s national rail service, SJ, connects Gothenburg to destinations all over Sweden and Scandinavia – Stockholm, Copenhagen and Oslo are all about three hours away. Gothenburg can also be reached by sea. Stena Line connects to Frederikshavn in Denmark in three and a quarter hours with its car ferry, or two hours with its high-speed ferry in the summer. Kiel, in Germany, is 14 hours away.

1. More direct air links. One of the world’s great ports should have equally commanding global air reach.
2. A fast train link from the city to the airports would make a big difference. The buses to Landvetter aren’t bad, but taxis are expensive.
3. A coherent vision for making more of the waterfront. The Göta river could be made a glorious spectacle without compromising the working port.
4. A sense of adventure about architecture. Too much of the city’s fondness for utility is expressed in its newer buildings.
5. Have more confidence. Locals spend too long defining themselves in relation to Stockholm typical second-city syndrome.