# 1 / 2023

How Switzerland remains successful - the seven pillars of innovation capacity

Pillar 4: Prioritise funding for research and development

Government investment in education, research and development is central to the capacity to innovate. In recent years, many countries have increased their commitment to research and development in terms of strategic orientation towards innovation. The European Union, China and many emerging economies have launched programmes to increase the innovation and competitiveness of their countries. Large sums are being invested in research programmes and much is being done to attract top researchers from around the world. This development is also reflected in the statistics. They give rise to fears that Switzerland's strong position in innovation and research is in danger of eroding in the long term.


Graphic 2:

Source: ECD - MSTI database, STI / EAS department, Paris, March 2022; FSO - Research and Development (R&D) Synthesis Switzerland (FE Switzerland)

With an R&D share of (gross domestic product) GDP of 3.1 percent, Switzerland is in a good position overall. It ranks ninth in an international comparison and is clearly above the OECD average of 2.5 percent. The list is headed by Israel, followed by South Korea and Taiwan. Despite the good starting position, it can be seen in chart 2 that the growth of this expenditure has recently remained low in comparison. From 2015 to 2019, the share of R&D expenditure in GDP in Switzerland grew by 3.4 percent. This is below average in international comparison. In the same period, OECD countries increased the share by 8 percent. Not only those countries that spend significantly less than Switzerland have increased their spending. Countries such as Israel, South Korea, Sweden, Belgium and the USA have increased their spending in relation to their GDP significantly more than Switzerland. These are all countries that already had a higher R&D share of GDP than Switzerland in 2015.

And even Swiss companies are increasingly investing outside the country and taking advantage of the growing attractiveness of foreign locations. Expenditure on research and development made by Swiss companies at home (intramuros) has indeed increased by 20 percent from 2012 to 2019. However, investments made abroad (extramuros) have almost tripled in the same period.

It is imperative to take countermeasures here. The state must prioritise spending on education and research over other expenditures. However, this should not be accompanied by a fundamental shift in emphasis from the private sector to the state. On the contrary, it is one of Switzerland's great strengths compared to other economies that the largest share of investments in research and development comes from the private sector. The state's contribution (especially in basic research) forms the basis on which the private sector can build. Due to the long incubation period between government spending in education and research and the creation of innovation, a "policy of perseverance" is necessary. However, since research is always open-ended, there is never a guarantee that successful innovations will eventually emerge from government spending. Higher government spending on education and research, however, increases the likelihood that the private sector will be able to continue its high innovation performance in the future.

In addition to prioritising R&D spending, it is important that funders make as few demands as possible regarding the thematic design of research questions. For basically, the bottom-up principle must apply in research and development. So far, Switzerland has granted a great deal of autonomy to universities in particular, which has been reflected in good research and innovation performance. This must be maintained at all costs.

Takeaway 4: In order to increase innovative capacity, government spending on education, research and development must be prioritised. Since they only lead to innovations with a delay, a long-term policy is needed.