STOCKHOLM, AN ECOSYSTEM FOCUSED ON DIGITAL TECHNOLOGY

Switzerland can claim to be an innovation hub in Europe. However, it is outspaced by Sweden in this area, a country that is comparable to ours in many respects. Zoom in on some tracks explaining this delay.

Some parts of the world catalyze a particular innovation activity, such as the famous Silicon Valley. These "innovation hubs" show a particularly intense activity in the creation of high-tech start-ups linked to academic centres. This activity can be measured through venture capital investment volumes.

Switzerland is one of the European regions that can claim to be such "innovation hubs". The Lake Geneva region (Lausanne-Geneva-Bern) was even highlighted as the first European hub for life sciences in the Startup Genome study.

La Suisse est toutefois devancée par plusieurs autres régions. Nous nous intéressons ici à celle de Stockholm (Suède), qui offre beaucoup de paramètres comparables avec la Suisse. Elle a aussi montré une activité d'investissement capital-risque supérieure (double, grosso modo) en 2018, tout en étant partie du même niveau en 2010-2012.

Switzerland and Sweden share certain characteristics

 

«Switzerland is one of the European regions that can claim to be such innovation hubs»

Switzerland is off to a great start

Depending on how different indexes are read, Switzerland has more strengths in innovation. In terms of GDP, it has many Fortune 500 companies, and is well positioned in terms of competitiveness, as well as in terms of freedom to do business. Its three best universities, whose scientific publications are more frequently cited, are much better placed in international rankings. Collaboration between industry and academia is more intense and developed. In addition, our country regularly ranks first in the field of patent filing. The Swiss financial centre is also incomparably more developed than elsewhere. Finally, Switzerland is welcoming more foreign students into its higher education programmes.

Switzerland and Sweden each have their strengths

However, Sweden is leading the race

How can these many competitive advantages for Switzerland be reconciled with the more sustained development of disruptive innovative companies that are reaching the unicorn stage, being bought out or going public? Where does this apparent contradiction come from?

Starting at the same level in 2012, Stockholm has largely overtaken  the canton of Vaud

 

We believe that there are four possible explanations for this discrepancy.

1. A very digital innovation

As a first element, it can be observed that the proportion of graduates in engineering and ICT at doctoral level is significantly higher in Sweden than in Switzerland (source: OECD).

Sweden produces almost twice as many doctorates annually in the fields of engineering, computer science and communication.

 

The presence of multinationals, large groups, banks and major insurance companies is one of Switzerland's strengths. However, not all these actors are traditional catalysts for innovation: one hypothesis is that these strengths are also a weak point when it comes to finding the first "corporate" customers or partners willing to take risks off the beaten track, and in disruptive areas of digital transformation that are not familiar to them.

On the other hand, it can be seen that Switzerland is traditionally much stronger and present in products and engineering, and that it has an intense export activity in these fields.

Sweden, for its part, has been positioning itself for at least two decades in the field of ICT and services. It is probably no coincidence that unicorns and exit successes are all digital and B2C.

2. A favourable cultural environment

Swedish society is very multilingual and open to other cultures. English is taught from an early age. It is an egalitarian society where women are much more represented in the economic, academic and innovation fabric. The country has excellent social security coverage that reduces the risk for entrepreneurs. It should be noted that, unlike Switzerland, unemployment coverage is also provided for entrepreneurs.

Sweden's vast territory provides a favourable framework for a policy that is rather welcoming to immigrants, especially academics (see for example the @movetostockholm campaign).

The density of new company start-ups is much higher than in Switzerland. It's mathematical: if you create more start-ups in the beginning, you have a better chance of achieving great success once they find their market and grow (scaling-up phase).

«Swedish society is very multilingual and open to other cultures»

3. Direct access to the European market

As a member of the European Union, Sweden naturally has access to this large market and is also positioned as an economic gateway for the Nordic countries, or even for part of Russia. Swedish start-ups and scale-ups are making full use of these export channels.

4. First emblematic successes

Unicorns are unlisted companies whose last investment round valued them at more than $1 billion. They have become one of the measures of a country's innovation dynamism.

There are no more Swedish unicorns than in Switzerland. On the other hand, it is the resounding acquisition, or initial public offering, of three of them that gives Sweden its reputation as a favourable country: Spotify (initial public offering, $30 billion), Skype (acquired by Microsoft for $2.6 billion) and IZettle (acquired for $2.2 billion).

Such exits produce a draught and create dozens of millionaires, who in many cases become founders of new start-ups or experienced business angels. Such a community does not yet exist in Switzerland, even if we see early signs and that some scale-ups in the canton of Vaud are preparing for a potential IPO (Nexthink, Sophia Genetics, Green Motion).

Some more adjustments to be made

One could therefore assume that Sweden benefits mainly from a few years' advance and that Switzerland, as well as the canton of Vaud, can perfectly claim this level of success. Several points could encourage this evolution: simplify the creation of companies and also their disappearance in the event of failure (to free entrepreneurs), promote female entrepreneurship, focus more on training in digital channels and, finally, encourage scale-ups to help them achieve their success (exit) and thus create a community of successful entrepreneurs.

«One could therefore assume that Sweden benefits maily from a few years' advance and that Switzerland, as well as the canton of Vaud, can perfectly claim this level of success»

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