Entrepreneurial Economies: Switzerland
You are required to write an essay which critically evaluates entrepreneurship in an economy of your choice. You can choose your own country or any developing economy, emerging economy, or an advanced economy. Your essay will enhance our understanding of the entrepreneurship process in the economy of your choice. Your essay must demonstrate your knowledge of “how entrepreneurship is fostered and/or hindered in the economy of your choice?”. You are strongly encouraged to include a discussion of how the Covid 19 pandemic affected entrepreneurship including how both entrepreneurs and policy makers responded to this exogenous shock that affected almost all businesses globally. In addition, you should succinctly examine entrepreneurial processes, innovation, the institutional environment and how it promotes or inhibits entrepreneurship in that country. For instance, some institutional realities (such as regulation, corruption, export promotion strategies, import substitution strategies…etc) and other relevant variables might hinder or promote entrepreneurship. On the other hand, innovation and technology are enablers. Based on entrepreneurship theories and relevant concepts of economic development, you are expected to provide empirical evidence in support of your arguments and reasons for your thinking. A critical evaluation means providing a critique of the various relevant debates including the evaluation of policies, the R & D or technology landscape designed to promote entrepreneurship. You should make use of existing published literature in international peer-reviewed journals (e.g. Entrepreneurship: Theory & Practice), book chapters, policy reports and evidence from the business press (e.g. the Economist magazine, Financial times) to substantiate your understanding of the key drivers of the entrepreneurship process in the economy of your choice. You can include both qualitative and quantitative literature.
You are NOT expected to collect your own primary data for this assignment. However, you can use secondary data to support your ideas, as well as empirical evidence from published literature or reports. A careful use of qualitative data, and evidence from studies based on a specific company or a group of companies in a given economic sector is also welcome.
ENTREPRENEURIAL ECONOMIES: SWITZERLAND
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Entrepreneurial Economies: Switzerland
Entrepreneurship has become an important aspect of economic development and progress within different economies. According to Catalin et al. (2017, p.14), entrepreneurship creates job opportunities and wealth, promotes social inclusion, and enhances technological development and innovation. Given these benefits, entrepreneurship has become prevalent in different parts of the world. However, some economies are more entrepreneurial than others. This difference is created by various factors such as the institutional environment, technology, and innovation, among others. The purpose of this paper is to explore entrepreneurship in Switzerland. Specifically, this paper will explore the factors that hinder/promote entrepreneurship, the effects of Covid-19 on entrepreneurship, and how entrepreneurs and policymakers in Switzerland responded to the pandemic.
Switzerland's Economy: An Overview
Switzerland is a developed economy in Europe. The Swiss economy is one of the world's most competitive economies (Federal Department of Foreign Affairs (FDFA), 2019). It is export-oriented and has one of the highest gross domestic products (GDP) per capita. According to a report released by the Global Entrepreneurship Monitor (GEM) (2019), Switzerland has $80 643 GDP per Capita based on the most recent data. The Organisation for Economic Co-operation and Development (OECD) (2019, p.6), based on recent data, ranks Switzerland's GDP per capita third globally (Figure 1). The Swiss government's competitive tax rates have made Switzerland an attractive economy for multinational companies, and as a result, Switzerland is home to many multinational companies (FDFA, 2019). Also, small and medium (SME) enterprises are major economic players in the Swiss economy. They create about two-thirds of all employment opportunities in the country, and most of them are still managed by the families that started the SMEs (FDFA, 2019). Switzerland is a member of the European Union (EU), and since it is an export-oriented economy, about 43% of its exports go to countries in the EU (FDFA, 2019). Also, approximately 78% of its imports come from the EU.
Figure 1: Switzerland's GDP per Capita
Source: (OECD, 2019)
Entrepreneurship in Switzerland
As an advanced economy, Switzerland has the ability and the opportunity to be highly entrepreneurial. It has a competitive economy that fosters the success of SMEs and attracts multinational businesses (FDFA, 2019). However, entrepreneurship cannot exist in the absence of a positive entrepreneurial attitude. According to Zahra (p.4, 2020), an entrepreneurial attitude entails being innovative, proactive in taking advantage of the existing opportunities and taking risks. Individuals in any given economy need to have the motivation to take advantage of opportunities without fear. Otherwise, these opportunities become under-utilized. In Switzerland, the entrepreneurial attitude has not always been positive. A report by the OECD (2017, p.34) indicates that entrepreneurship is not considered a good career choice in Switzerland. This attitude affects the ability of the Swiss to utilize the available entrepreneurial opportunities.
However, in recent years, the Swiss have been working towards cultivating a positive attitude towards entrepreneurship. According to a GEM report (2019, p.13), part of the Swiss' policy plan is to increase entrepreneurial awareness and encourage entrepreneurship. The same report indicates that Switzerland is below average when compared to other high-income countries in terms of perceived capabilities, perceived opportunities, entrepreneurial intentions, media attention to entrepreneurship, and consideration of entrepreneurship as a good career choice. It also ranks above average in terms of fear of failure and assigning successful entrepreneurs a high status. Detailed information on this comparison is provided in Figure 2. It is interesting that even though most Swiss individuals do not consider entrepreneurship a good career choice, most of them agree that it is quite easy to establish a business in the country. Approximately 57.9% of Swiss adults believe that starting a Switzerland business is easy (GEM 2019, p.31).
The survival rates of start-ups in Switzerland are above average, especially compared to other advanced economies (Swiss Start-up Monitor (SSM), 2016, p.5). Approximately 50% of start-ups survive for more than five years, and only about 20% fail to survive through the first year of their inception. Also, compared to other high-income economies, Switzerland has a high-rate of established business ownership (the average rate of ownership is 7.3%, and Switzerland's rate is 11.5%) (GEM 2019, p.19). Also, the rate of business discontinuation is low (2%) in comparison to the average rate of high-income countries (4.2%).
Among high-income countries, Switzerland has one of the lowest rates of entrepreneurs who start a business independently without the assistance of employees or co-founders GEM (, 2019, p.32). This could be attributed to the fact that most successful SMEs in Switzerland are family-owned. More than a quarter of new firms in Switzerland are run or owned by families GEM (, 2019, p.33). It is also worth noting that compared to other high-income countries, most start-ups in Switzerland are not based on technology. GEM (2019, p.35) ranks it at 11 out of 14 high-income countries in terms of technology-based start-ups. Figure 2: Perception of Entrepreneurship in High-Income Economies (by percentage)
Source: (GEM 2019, p.14)
Factors that Promote Entrepreneurship in Switzerland
Attractive Market
One of the key factors that promote entrepreneurship in Switzerland is the stable nature of the Swiss market and economy (SSM 2016, p.10). The country has one of the highest GDP per capita and a modern market characterized by international trade. It has low inflation rates than most European countries, and its currency has been appreciating in recent years. As a result, it is a favorable destination for start-ups. Also, the fact that Switzerland is one of the most expensive countries forces businesses to be innovative and creative in their production processes (SSM 2016, p.11).
Geographical Location
Switzerland is favorably located at the center of Europe and acts as a transportation and communication intersection between Southern and Northern Europe (SSM 2016, p.14). This location makes it an attractive economy for entrepreneurship because new businesses have access to a larger European market. Its central location makes it a culturally diverse economy where new start-ups can test their products and services before they can roll them out to the large European market, which is similarly diverse.
Infrastructure
Infrastructure plays a major role in entrepreneurship. According to SSM (2016, p.11), Switzerland has a well-developed infrastructure characterized by airports in major business regions, well-maintained roads, water and energy systems, an effective public transportation system, a telecommunication network, and an effective healthcare system. This infrastructure is attractive to entrepreneurs because it allows them to navigate the market with ease and save costs. The infrastructure provides entrepreneurs with access to local and international trade, especially with neighboring economies. Compared to other economies, Switzerland has been ranked as having the best infrastructure (SSM 2016, p.12).
Innovation
Globally, Switzerland is one of the most innovative countries. Figure 3 shows the ranking based on the Global Innovation Index (SSM 2016, p.13). Innovation is particularly high in the engineering, pharmaceuticals, and chemical industries. Switzerland also knows how to protect its innovation and inventions. SSM (2016, p.14) indicates that Switzerland registers many patents and has been ranked second among countries with high patents per capita and Japan. The high innovation coupled with the ability to protect inventions makes Switzerland an attractive economy for entrepreneurship.
Figure 3: Most innovative Countries
Source: (SSM, 2016)
Entrepreneurial Financing
Entrepreneurship relies heavily on funding. Funding ranges from seed-stage to late-stage financing of businesses (Alemany & Andreoli, 2018). In Switzerland, multinational companies' high presence has worked in favor of the country in many ways. One of the advantages of having multinational companies in the country is that they are a source of funding for high-tech start-ups in their late...