HOW SWITZERLAND AND THE UNITED STATES EXCEL IN INNOVATION

Both countries regularly receive highest rankings in global-innovation indices—whether for business, entrepreneurship, technology, science, or education. Read about what makes these two very different countries global leaders in innovation.

Americans are known for their willingness to take risks and accept uncertainty, while the Swiss are famous for their steady course and risk aversion. Both countries are fertile ground for innovation.

Innovation by companies and individuals around the world overcame the disruptions of the coronavirus pandemic, resulting in a record number of international patents in 2021, with Switzerland in eighth place globally, and the U.S. in second place.

Switzerland. Well into the 19th century, Switzerland was known primarily for its Alps, cows, and sheep. Today, Switzerland is known for its technological, scientific, and financial innovation and strong and stable economy. Lacking major natural resources—except for massive amounts of water, most of which comes from the Alps—Switzerland has had little choice but to innovate. Given the country’s small and highly fragmented internal market, Swiss companies also had to seek out foreign markets for their goods, and they had to be productive enough to compete internationally.

The country was largely spared the ravages of World War II, and it was in an excellent position with intact, export-oriented production facilities, to build on Europe’s post-war reconstruction. Also helpful were Switzerland’s stability-oriented economic policy, its traditional emphasis on hard work and education, high-skilled immigration from France and Germany, and foreign investment. Today, Switzerland and the United States are tightly connected through intensive cross-border investments. The U.S. is Switzerland’s most important destination for foreign direct investment (more than Germany, France, Italy, and the U.K. combined), and Switzerland is the seventh-largest foreign investor in America.

Switzerland remains the global patent leader, with Swiss companies filing almost seven times as many patent applications per million inhabitants as U.S. companies in 2021. Switzerland has world-class research institutions, high levels of investment by multinational companies, high-profile “green” innovation projects (such as the solar-powered plane that circled the globe), and highly skilled employees, thanks in no small part to the country’s renowned apprenticeship system. Switzerland also stands out as an innovation leader in drone technology.

The Swiss have demonstrated that tradition and innovation need not be mutually exclusive. In Switzerland, “slow and steady” leads to exciting developments. Market stability, excellent infrastructure, and a competitive regulation and tax system are also important features that facilitate entrepreneurship. More challenging for entrepreneurship are the relatively small Swiss market (many good inventions work on a small scale, but cannot be expanded to larger regions and markets), limited financing for start-ups.

United States. The United States did not start out as a scientific powerhouse. In the 19th century, it was Britain and Germany who dominated the world of science. British engineers laid the foundation of the Industrial Revolution largely through their invention of the steam engine, while German scientists developed key principles in physics. After its Civil War, the U.S. was able to build on this European framework—and the rest is history. “No other nation has displayed such inventive power and produced such brilliant innovators as the United States during the half-century that began around 1870,” writes historian of technology Thomas Hughes.

Americans did indeed seem to be naturals at applied science, improving upon many existing ideas and bringing them to life with resources that became newly available during the Industrial Revolution—such as Samuel Morse and the telegraph, Thomas Edison and the light bulb, and the Wright brothers and their flying contraption. America has been a country of innovation ever since. It was a combination of science and the American can-do spirit that put the first human being on the moon.

The U.S. files the most international patent applications in the world (Switzerland is in the top ten), has research institutions that attract students and academics from around the world, and is regularly the source of top medical and technological innovation.

Regulatory Environment

Few dispute that some amount of industry and financial regulation is needed. What is in high and constant dispute, however, is the amount of regulation, as well as the source of regulation—international, federal, state, county, municipal, local, private, or self-regulation? Furthermore, many businesspeople—from bankers to small-business owners to entrepreneurs—complain that much existing regulation hinders starting and expanding a business, either through over-regulation or ambiguity.

The regulatory environment sends certain signals, and the particular characteristics of the regulatory context can hinder or contribute to the creation and early-stage growth of new businesses as well as to the innovation process within a market.

Entrepreneurial activity is central for economic growth and job creation, and the regulatory framework is a critical factor in entrepreneurial performance. Entrepreneurs are particularly affected by administrative regulation that creates entry barriers, and disadvantaged members of society may have especially much to gain from deregulation.

For 2023, the Heritage Foundation’s renowned Index of Economic Freedom rated Switzerland as the second-freest economy in the world (up from fourth place in 2017). The United States, which ranked in 2017 as the 18th-freest economy in the world, dropped to 25th place in 2022, and maintained that position in the 2023 Index. As the Index demonstrates, there is a heavy correlation between innovation and economic freedom, along with strong protection of property rights, rule of law, and government spending. Perhaps reflecting the United States’ lower ranking for economic freedom, the U.S. public sector consumes more than 40 percent of GDP, while the Swiss public sector consumes about 33 percent of GDP.

Global Rankings

• Switzerland ranked most innovative country in the world 12th year in a row; United States moves from third to second place: Global Innovation Index 2022
• The World Economic Forum’s Global Competitiveness Report 2019 placed Switzerland in fifth place for global competitiveness, and the U.S. in second place. 
• In IMD’s 2022 Competitiveness Ranking, Switzerland comes in at fifth place, while the U.S. comes in at second place.
• The 2023 Times Higher Education ranks ETH Zurich as best university in continental Europe; it is tied with New York’s Columbia University for 11th best in the world, up from 15th place for 2022: World University Rankings
• The 2020 Universitas21 ranking of national higher education systems once again placed the U.S. in first place, and Switzerland in second place, of 50 countries: Universitas21

Recent Innovative Developments in Switzerland

• Water-activated biodegradable battery made of paper and powered by salt and ink—built by researchers at EMPA—named one of 200 best inventions of 2022 by Time magazine.
• Scientists in Lausanne—at EPFL and the Vaud University Hospital Center—identified neurons that may help paralyzed people to walk again.
• Switzerland built the world’s longest passenger train—stretching for more than a mile.
• Engineering students at ETH Zurich built a four-seat battery-powered airplane.
• Researchers at ETH Zurich are helping to identify landing sites on the moon for NASA’s Artemis program.
• Switzerland is testing world’s first thermal-network prototype that uses CO? as a fluid in pipes. 
• Switzerland unveils renewable-energy innovation—a giant “water battery” (a hydropower storage plant) in the Swiss Alps that can go from storing energy to providing electricity in an instant.
• ETH spinoff Lumisera develops intelligent traffic lights.
• Check out these 10 tech innovations.
• Despite the pandemic, Swiss patent applications reached a new record in 2021, and Switzerland remains global patent leader.

Additional reading:

“How a Small Landlocked Country Can Serve as a Global Model for Innovation,” by Alois Zwinggi (YL 1995), World Economic Forum, 2023

“What Switzerland Can Teach the World About Innovation,” by Alexander Konovalov, Forbes, 2022

“Three Priorities to Keep America’s Innovative Edge,” by Jordan Crenshaw, U.S. Chamber of Commerce, 2022

“Switzerland Still the Most Innovative Economy in the World,” Switzerland Global Enterprise, 2022

“Renewing American Innovation,” by Sujai Shivakumar, Center for Strategic & International Studies, 2021

Innosuisse, the Swiss Innovation Agency

Swiss State Secretariat for Education, Research, and Innovation, “Research and Innovation in Switzerland,”

U.S. Department of State, “Innovation Policy”

Doing Business Switzerland, World Bank

Doing Business United States, World Bank