The Financing of Innovation in Switzerland
In a worldwide comparison Switzerland is one of the leading countries regarding research, innovation and the number of patent application per capita. Nevertheless, the promotion and support of innovation is a crucial topic for the country to keep its competitiveness in the long run. Therefore, an analysis of the innovation financing and support programs is undertaken in order to detect possible gaps and challenges.
Stähli Flavia, 2019
Bachelor Thesis, School of Business FHNW
Betreuende Dozierende: Carsten Peuckert
Keywords: Innovation, Financing of Innovation, Challenges in the Financing of Innovation, Gaps in the Innovation Financing System in Switzerland, Innovation Financing Programs in Switzerland, Valley of Death, Stages of the Innovation Process, Swiss Governmental Policy regarding Innovation Financing, Innovation in different Industries
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Innovation is a crucial factor for the maintenance of a strong, growing and competitive economy. Especially in today’s increasingly globalised and fast-moving economic environment. However, it is a long and often difficult way from a new idea and its basic research to the commercialization of the finished product, service or technology. Even though Switzerland is among the leading countries when it comes to research, innovation and the number of patent application per capita, it is of importance to have an efficient support system for innovation projects and start-ups in place in order for the country to maintain its competitiveness in the long run. Therefore, it is interesting to analyse what support programs for innovation are available in Switzerland and what challenges exist in the financing of innovation in general, and especially in regard of the support of projects in different stages of the innovation process.
The paper is based on four main methodological means. Firstly, existing literature in form of secondary data such as existing reports, papers, articles, books and web pages. This data will be gathered by using the method of desk research. Secondly, a list that includes the most important financing programs for innovation in Switzerland including key characteristics in different areas for all programs, which the author generated previously. The listing was also generated by using the method of desk research, using the web pages of the different funding programs as sources to specify the different characteristics of each program. Thirdly, primary data will be gathered through interviews. A total of six interviews will be conducted, including two employees working for start-ups, three interviewees that are on the financing side of the innovation funding process working for governmentally founded programs as well as private funding programs, and a general expert on the topic of innovation and innovation management. The interviews were conducted in the form of qualitative interviews, precisely semi-structured interviews. Fourthly, a ranking model will be developed in order to analyse possible gaps in the innovation funding landscape in Switzerland in regard of the different stages of the innovation process. Therefor a model of the individual stages and activities of the innovation process will be developed beforehand. The secondary data will be used mostly for the first part of the paper, giving an overview of the topics of innovation in general, the financing of innovation as well as the reasons why innovation fail. The data gather during the various interviews will be a fundamental aspect for the question on the main challenges in the financing of innovation in Switzerland but will also be helpful for the creation of the ranking model. The ranking model will then be used for the identification of possible gaps in the financing programs for innovation in Switzerland with regard of certain stages of the innovation process. In order to answer the question on the overview of existing innovation financing programs in Switzerland the list which summarises the most important financing programs for innovation in Switzerland will be used. This list will also be the basis for the evaluation of the ranking model.
It was found that from the five stages of the innovation process that were considered in the analysis for the detection of possible gaps in the innovation financing system in Switzerland – the basic research stage; the applied research and development stage; the testing stage; the commercialization stage; and the diffusion and implementation stage – the last one is having the most difficulties finding financial support from programs aiming at the financing of innovation. This however might be based on the fact that at that stage the product is already very advanced and might not anymore count as innovation, meaning traditional innovation support programs might not be the most suitable support mechanisms but rather private equity firms might be covering the support of the diffusion and implementation stage. Apart from this last stage, it is the early stage of basic research that has the least support programs available. This result is supported by the opinions of the various interviewees and might be due to the fact that at that stage of the innovation process the feasibility, marketability and potential success of the innovation project is not yet apparent which increases the riskiness of an investment at that stage. Other challenges in the financing of innovation that were detected include different barriers for innovation which can be categorized in process barriers; management barriers; and resource barriers. Also certain characteristics that innovation share is making it hard to find investors, especially their high level of uncertainty and their long-run nature. Another well-known problem in regard of innovation is the valley of death which explains an innovation’s struggle to reach the commercialization stage due to the fact that the product or technology is perceived as too advanced to receive financial support from the government but not yet advanced enough for the private sector to step in with funding. Other challenges mentioned during the interviews that are particular to Switzerland, include an unequal distribution of support programs throughout all the cantons and areas of Switzerland; an un-favouring tax-system in regard of innovation projects; the prioritization of innovation projects from certain industries; and a wrong mind-set towards entrepreneurship, start-ups, failure and risk taking. All these challenges and hurdles can lead to promising start ups being prevented from realization or the migration of promising start-ups abroad. The client is able to benefit from the research results insofar that with the detection of the aforementioned challenges a base has been found to start further and more detailed research from. This is seen as valuable considering the client's regular publishing duty.
Studiengang: Business Administration International Management (Bachelor)
Fachbereich der Arbeit: Andere