Switzerland Innovation Nation

The Global Innovation Index 2015 (GII) was published in September. Switzerland was voted the most innovative country in the world and the UK reaffirmed its position in second place.

The GII measures 141 economies around the world, based on its definition of the 79 criteria which constitute effective innovation policy. The index is calculated based on a nation’s innovation inputs (human capital, regulations, research, business sophistication like landing, etc) and innovation outputs (knowledge and technology outputs, and creative outputs).

Switzerland has been in the number 1 slot for 5 years in a row, but is not leading in all areas.

Most important as a basis for its successful innovation policy is a triangle that links:

1. A generous funding system for fundamental research, which in turn leads to the highest production of scientific papers per capita, most cited behind the US;
2. A scientific community, which is well networked with other leading countries and emerging economies, highly successful in EU research funding programmes (until now) and other international schemes;
3. Strong collaborations between academic research and private sector R&D, which leads to a high volume of patents and derived revenues.

Overall, the Confederations’ framework conditions seek to offer: political stability; continuity in funding for education, research and innovation, thanks to low national debt; a good fiscal system; effective protection for the use and commercialisation of IP; and model sustainability.

However, the GII shows that the country is notably behind on: ease to set up a company (59th position), investor protection (72th), ease of getting credit (48th), and online services (64th).

In addition, the difficulties the Swiss have in accessing venture capital and attracting talented engineers (50th), combined with high salaries, push some of the most innovative young Swiss entrepreneurs to move overseas rather than grow at home. The impact this has on the country’s long term ability to retain its competitive and innovative edge is not negligible. There are a great number of university spin-offs (in 2014 ETHZ and EPFL registered 47), but very few become large companies, yet multinationals currently drive two-thirds of R&D in the country. There are also few organic start-ups, and the country if off the radar of the world’s best start-up ecosystems. (more information on Tech.eu, Swiss Innovation by Joe Scarboro).

The next Google could be Swiss, as one of the National Councillors’ said, but only if some of these issues get addressed.

In Switzerland, government is always careful not to intervene unduly by picking topics for coordinated action (with an exceptional package for energy) or by designating and supporting branches of the economy to drive future growth. But over the past two years, there have been signs that government is taking into account changing circumstances and intervening to help stay ahead of some of the fastest progressing countries, including the UK.

A reform of the Commission for Technology and Innovation (the CTI is Innovate UK’s counterpart) is underway to make it a more reactive, flexible supporting tool for all players in the innovation space, as opposed to being accessible to academic partners or universities spin-offs alone.

When asked about bridging “the Valley of Death” in support of innovative ideas, the official position is still to let the market organically manage the transition between discoveries and commercial success. But lately, government has had to react to the immediate pressures caused by the strong franc and by partial association to the EU Framework Programme, H2020. As Swiss SMEs have seen their benefits slashed, the Confederation is helping them to maintain their capacity to innovate. It is doing so by promoting their access to the federal institutes’ excellent knowledge, technologies and facilities with a number of measures worth some £13.5m. Exceptionally, the CTI is currently offering export-oriented SMEs a cash contribution for their R&D projects with academia. This temporary measure has been designed to support Swiss competitiveness. The Confederation is also paying for Switzerland’s participation in Pillar II of H2020, “Industrial Leadership”, as Swiss SMEs are no longer entitled to direct funding from the EU, including Access to Risk Finance.

Other ideas, which are slowly gaining traction include: using pension funds to create a dedicated mechanism to financially support future enabling technologies developed domestically; or having an equivalent to the UK Ministry of Defence’s Science and Technology Laboratory (Dstl) or the American Defence Advanced Research Projects Agency (DARPA). More could be done to drive innovation through public spending, procurement and early adoption.

In 2014 the Confederation agreed to set up a new Swiss Innovation Park, which rather than being located in one place, will be regionally co-located, in a hub and spoke model around the knowledge and innovation power houses each side of the country: ETH Zurich and EPF Lausanne. The project aims to guarantee further private funding for innovation, and a common goal between the federal state, the cantons, as well as science and industry to safeguard Switzerland’s competitiveness long term.

The GII shows how hard it is to provide such an enabling environment for innovation. Switzerland is able to do that in its own slow and steady way, without complacency and throughout the country, which is probably another reason for its success. Compared to the rest of Europe, Swiss regions are high performing in a wide range of economic sectors, and taken as a whole, the country is homogenous in its capacity to use its local pool of research results to stay on top of the innovation scoreboard.