# 1 / 2023

How Switzerland remains successful - the seven pillars of innovation capacity

Pillar 6: International networks and cooperation

Multinational companies are particularly important for innovation and progress. Although they account for only four percent of all companies in Switzerland, they are responsible for more than a quarter of local jobs. They also generate around one-third of Switzerland's GDP and pay around half of all corporate taxes (chart 3). One in six Swiss francs and nearly one in four people in R&D in Switzerland are attributed to foreign-controlled companies. These companies are often exposed to huge global competition and therefore rely on the best employees. With their top talent, they have above-average productivity.

One of the key drivers of the innovative capacity of large companies is their international network and the international teams that provide knowledge exchange across borders. The importance of the latter has already been shown in chapter 5. Open labor markets are an important part of being international. In principle, this advantage of international networking can also be transferred to an economy as a whole, for example in the form of open access to the world market. In this way, small Switzerland in particular can compensate to a certain extent for its size disadvantages. Knowledge and ideas do not stop at national borders, and innovative procedures are not limited to individual sectors. Consequently, an open, internationally oriented economy is attractive as a business location for foreign corporations.

Chart 3: The Importance of Multinationals for Employment, Value Creation and Taxes in Switzerland

Source: Deloitte and Swiss-American Chamber of Commerce 2020

The importance of internationality and thus foreign trade for Swiss prosperity can be illustrated with a simple figure: Switzerland earns two out of every five francs abroad. However, Swiss companies not only export and import services and goods, but also invest heavily abroad. The prosperity of our country is therefore essentially based on the export and import performance of the economy. Swiss companies are present on the world markets and can successfully hold their own against international competition. Particularly in economically difficult times, it proves to be a great advantage that the Swiss export industry is broadly diversified and that exports are made by different sectors.

However, internationality is not only reflected in open labor, goods and services markets. Other areas, such as international research cooperation, are also central to Switzerland's ability to innovate. Cross-border cooperation and networking must be promoted in all areas. Private-sector networking cannot be prescribed politically. But politics can remove intergovernmental obstacles and create incentives. For example, it would be possible to increasingly tie government research funds to collaborations. In addition, it is essential to strengthen Switzerland's access to the international research community by means of bilateral research agreements or by joining research networks. Particularly large scientific projects, for example CERN in Geneva, are now based on the participation of researchers from all over the world.

Takeaway 6: International networking and cooperation promote cross-border research and business. This increases the attractiveness for researchers from all over the world and multinational companies. A high level of internationality strengthens innovative power.