The proportion of R&D-active companies in Switzerland has risen for the first time in 20 years

At present we can only speculate about the reasons for this increase in R&D activities. Further analysis shows that it is mainly non-exporting firms, foreign-owned companies and businesses belonging to a group of companies that have expanded their R&D. The introduction of the patent box in Switzerland in 2020 and the greater tax deductibility of R&D expenditures in some cantons may have played an important role. Whether the increase in R&D will prove to be sustainable – and what the exact reasons are – will only become clear in the next surveys.

Differences in R&D activities between sub-sectors and company size categories

The rise in the proportion of firms that conduct R&D is also reflected in the various sub-sectors (chart G 9). Companies in low-tech industries and traditional services show increases of 2 and 4 percentage points respectively. This growth is particularly strong in modern services such as telecommunications, media, information technology, and banking & insurance, where the relevant proportion has risen from 15 per cent to over 20 per cent. Only in high-tech industries has the share of R&D-active companies fallen – from 48 per cent to 45 per cent. However, high-tech industries still have by far the highest proportion of firms engaged in R&D of all sub-sectors.

Why the share of R&D among high-tech companies has declined further is not entirely clear. Descriptive evaluations show that market conditions in high-tech industries have not changed significantly in the last two years. The only notable difference here is the drop in the export ratio, which was caused by more intense competition and, possibly, also by the turmoil in international markets in the wake of the COVID-19 pandemic. This may have led some companies in high-tech industries to use their knowledge base more for incremental innovation and to invest less heavily in the expensive creation of new knowledge in the form of R&D, which would explain some firms’ exit from R&D.

If we look at the share of R&D-active companies by size category, small firms with fewer than 50 employees in particular experienced a sharp increase during the most recent period (chart 10). This rise from 10 per cent to 15 per cent is even more pronounced than that across the economy as a whole. The two categories of medium-sized firms reveal stronger fluctuations over the entire period and do not show a clear increase during the latest period. The proportion of R&D-active large companies with more than 250 employees has remained more or less stable since the period from 2003 to 2005. It has always varied between 40 per cent and 50 per cent. The share of 39 per cent during the most recent period is at the lower end of this historical range. However, the proportion of R&D-active firms is still almost three times higher among large companies with more than 250 employees than it is among small businesses with fewer than 50 employees.

R&D activities have increased resilience to the COVID-19 pandemic

The COVID-19 pandemic has had a significant impact on almost all parts of the economy. Charts 11 and 12 show how the existence of R&D activities is related to the impact of coronavirus. The advantages and disadvantages that R&D brings in connection with COVID-19 are not clear. Innovative companies, for example, can generally react more quickly to problems but are more dependent on events in international markets owing to their stronger export focus. Chart 11 shows that firms engaged in R&D have had more frequent problems with international customers and suppliers. Only in services have companies that conduct R&D reported fewer problems.

In chart 12 we can see that the situation is reversed when we look at problems with domestic customers and suppliers. R&D-active firms have been less likely to report coronavirus-related problems. The two charts suggest that R&D tends to make companies more resilient. Firms engaged in R&D have had fewer COVID-19-related problems in their domestic markets. Because R&D-active firms export more often, however, they are more exposed to COVID-19-related difficulties in international markets.

However, being affected by COVID-19 is only one aspect of resilience. The speed of recovery is equally important in such considerations. Future research will reveal whether innovative and R&D-active companies were able to recover more quickly from the COVID-19 pandemic. There are already initial indications of this. For example, a study of innovative firms (see KOF Bulletin No. 164, 2022 entitled ‘The innovation activities of Swiss companies during the COVID-19 crisis’) showed that their amount of digital technology increased as a result of COVID. In addition, innovative firms have frequently realigned their business models. Both of these are signs of structural measures that should boost companies’ productivity in the future.