The framework conditions are one of the historical strengths of the Swiss economy, with a strategic geographical location in the heart of Europe, in a time zone that allows for talks with the USA and parts of Asia, political stability and legal security in the same day. The quality of life here is good, which makes it possible to attract or retain qualified employees with advanced skills. In addition, its attractive tax system and its labour and company law make the country generally favourable for business. For innovation as a business process, these framework conditions are essential, and it is important to preserve them. But where exactly does Switzerland stand?
Among the sub-indicators of the Global Innovation Index, framework conditions are the theme where Switzerland ranks lowest, with a 17th place in 2019. However, on closer inspection, the scores of countries with a strong innovation ecosystem have one thing in common: regardless of their ranking, they are all high - more than 75 out of 100 points - and close to each other. Seven of the eight countries in the selected comparison panel score between 80 and 90 out of 100 points - Switzerland's score is 80 points.
Within the framework conditions, the sub-indicator in which Switzerland ranks lowest (62nd place) concerns the ease of setting up a company. However, in this area, all the economies in the comparison panel stand in a pocket handkerchief and with high scores (88 out of 100 points for Switzerland). The elements that penalize the country are related to the number of procedures (six according to the World Bank census), the total cost (2.3% of per capita income) and the overall time to incorporate a company (10 days on average). At first glance, however, for entrepreneurial projects that are generally long and fraught with pitfalls, this initial obstacle seems rather marginal. In most of the other dimensions, Switzerland is either among the leaders (quality and security of law) or scores high despite a modest ranking (e-government). The relatively low score and ranking in terms of education expenditure relative to GDP is not atypical for a developed economy, nor is it a focus of attention as such, although this dimension is obviously key for a knowledge-based economy. The situation is somewhat different when it comes to the ease of resolving bankruptcies and creditor protection. In this dimension, Switzerland is both ranked (43rd) and scored (63 out of 100 points) quite far from the comparison group. Specifically, the resolution time, the recovery rate and the protection of assets during the procedure are lagging behind the other countries. A specific provision in Swiss law is the possibility of postponing bankruptcy proceedings. However, during this phase, the company has the possibility of using its assets to continue its activity or even to honour newly contracted claims. This is in line with the desire to enable the company to restructure, but in practice, this possibility, when authorised by a judge, extends the duration of the procedure by an equal amount and often has a direct impact on the chances of recovering the claims. Furthermore, the misuse of bankruptcy proceedings by an entrepreneur is not well defined and those who frequently resort to this practice are difficult to identify due to a highly decentralised system. These elements are not specific to innovation, but potentially affect a key asset of an entrepreneurial ecosystem: trust. Some of these elements have been identified by the authorities and a draft amendment to the Federal Debt Enforcement and Bankruptcy Act (and other relevant texts) to better prevent the misuse of bankruptcy proceedings was put out for consultation in 2015 and transmitted to Parliament in June 2019.
Somewhat surprisingly, the topic of taxation is not covered by the Global Innovation Index ranking. In this area too, the competitiveness of the place is rather good overall. The main point of attention concerns the treatment of participations when taxing the assets of founders and employee shareholders, which can be problematic in some cases, especially for fast-growing start-ups. This point, which is detailed in the next section of this chapter, may be important from an economic policy perspective, as it affects persons who have the power to decide where the company (and its jobs) are located.In the end, the framework conditions, despite some areas of improvement, remain a strength of the Vaud innovation centre. This is the case even if the canton has little room for manoeuvre to change them. However, our country remains attractive in international comparison, even in the absence of tax privileges for angel investors, particularly because of the capital gains exemption.
"In the area of taxation, the main point of attention is the taxation of founders' and employee-shareholders' holdings."
Stockholm, a digital ecosystem
Legal definition of a start-up