Switzerland must channel more effort into preserving its status as an international centre for innovation in the face of increasing competition, a study has warned.
Many Asian and Middle Eastern countries are stealing a march in attracting global research and development (R&D) investment by reacting better to the changing demands of multinational companies.
The report, issued by the Swiss branch of the Boston Consultancy Group (BCG), warns of dire penalties to the Swiss economy if such heavyweight firms relocate to other areas.
Innovative industries account for 35 per cent of gross domestic product (GDP) in Switzerland, with multinationals making up three quarters of this total. However, these firms are highly mobile and review their location every five years on average.
"In the past, Switzerland has not leveraged its creative environment to its full potential. As
a result, it has had very low real GDP growth over the past 25 years. And with the robust progress of competitors in the global economy, even this low GDP growth is now threatened," the report states.
The rise of countries such as Singapore and the United Arab Emirates as competing global innovation centres threatens to reduce Swiss economic output by two per cent a year unless reforms are put into place, the report says.
Forward planning needed
Furthermore, those Swiss companies surveyed are moving R&D resources outside of their home country at an increasing rate.
Martin Naville, chief executive of the Swiss-American chamber of commerce which collaborated in the report, said innovation should move from the background to the forefront of economic planning.
"Switzerland is fine on indicators that look backwards, but there are some serious weaknesses looking forwards," he told swissinfo. "People need to recognise that innovation is a key driver of the economy and not just the froth on the top of the coffee."
"We need to take a much stricter look at where we get the brains from, how we plan our curriculums, how we market the location and how we view entrepreneurs."
The BCG report recommends five areas of improvement: increasing the number of graduates with technology degrees, opening borders to skilled workers from outside the European Union, providing better support for start-ups, cutting down on red tape and forming a coordinated national strategy to attract talent and firms.
Think tank Avenir Suisse believes that maintaining a flow of highly skilled workers into the country is critical. Voters will decide next month on whether to persevere with open borders for European Union workers.
"Switzerland cannot rely on home grown talent alone. Highly skilled immigrants add to the number of people with the capacity to innovate, attract more companies to Switzerland and help us build critical mass in our creative ecosystems," spokesman Daniel Müller-Jentsch told swissinfo.
"Immigration from outside the EU is more bureaucratic, particularly in regard to visas, but the barriers are not prohibitive."
The Swiss government did increase spending on research and education by six per cent for the period 2008-2011. But an alliance of science organisations had called for a ten per cent hike to make up for cuts in previous years.
swissinfo, Matthew Allen in Zurich
Economic innovation can be measured in a number of ways: products and services, production and delivery methods, business models and marketing – to name some.
Switzerland has a long history of producing great innovators. These include: Alfred Escher (Credit Suisse bank, Swiss national railways, Swiss Life and the federal Institute of Technology), Henri Nestlé (Nestlé) and Charles E L Brown (ABB).
Switzerland is at the top of most charts that measure international competiveness in innovation (World Economic Forum, Economist Intelligence Unit). However, there are signs that this status is coming under threat.
There is currently a deficit of around 3,000 engineers and scientists needed to fill jobs in Switzerland. BCG estimates this shortfall could double by 2016.
Two thirds of Swiss companies surveyed planned to increase R&D expenditure outside of their home country. In comparison, 40% said they would increase capacity inside Switzerland. In the past decade, R&D spending abroad rose 1.4 times faster than at home.
Switzerland churns out more patents to protect intellectual property rights per head of capita than any other European country. But the country saw just 3.5% new businesses in 2004 compared to 18.3% in New Zealand, 17.4% in Germany and 10.3% in Hungary. This represents a low conversion rate of ideas into enterprises.
The World Bank estimates that it takes 20 days on average to set up a business in Switzerland – five days in Singapore and two days in Australia.