Switzerland has been a poor nation as late as the nineteenth century. Its major exports were mercenaries and emigrating citizens (Porter 1998, 307). In the early decades of the 20th century, Switzerland has emerged as an industrial nation of importance. Because Switzerland avoided destruction during World War II the country was an early winner. The circumstances made them well positioned to prosper in early post war periods. By the 1960′s, using some measures, Swiss per capita income was the highest in the world (Porter 1998, 307). Industrial success was enough to more than employ all available Swiss citizens at high wages. Total unemployment was in the 60ies 0.0% (Porter 1998, 281) Swiss companies like Nestlé, Novartis, UBS, Roche, Schindler, Swatch Group or Lindt and Sprüngli, are global operating. The leading Swiss multinationals employ far more people outside the country than in Switzerland (Porter 1998, 307). Switzerland is an example how a small nation without a large home market can be a successful global competitor.
At the moment Switzerland is still a prosperous country but it lost economic wealth. During the 1990ies Switzerland had the lowest growth rates compared to all OECD member states. This working paper tries to answer the question if Switzerland lost competitive advantage, and if the low growth rates are a result out of this. In the first part of the text Porters theory of national advantage is explained the second part reflects the state of the Swiss economy in the late 1980ies and the third part analyzes what has happened in Switzerland from 1990 to 2000.
Table of Contents
Introduction
Determinants of National Advantage
Factor Conditions:
Demand Conditions:
Related and Supporting Industries:
Firm Strategy, Structure and Rivalry:
Patterns of Swiss Competitive Advantage in 1985:
Clusters of Internationally competitive industries in 1985:
Factor Conditions:
Demand Conditions:
Related and supporting industries:
Firm Strategy, Structure and Rivalry:
Conclusion:
Switzerland during the 1990ies:
Factor Conditions:
Location:
Low Taxes:
The R&D spending:
High saving rate/strong currency/low interest rates:
Demand conditions:
Strong home demand:
Related and supporting industries:
Firm Strategy Structure and Rivalry:
Two or more competitors in a successful industry:
Enhancement of Porters Model:
Government:
Change:
Switzerland a Wealth driven economy?
Conclusion:
Outlook - is Switzerland becoming more competitive again?
Research Objectives and Themes
This paper investigates the economic performance of Switzerland during the 1990s to determine whether the country lost its competitive advantage compared to other OECD nations. It evaluates the nation's economic state by applying Porter’s theory of national advantage to identify if low growth rates are linked to a shift in the economic structure.
- Analysis of Porter's "Diamond" framework for national competitive advantage.
- Comparative assessment of Swiss economic patterns between the 1980s and 1990s.
- Evaluation of macroeconomic indicators including R&D spending, taxation, and currency trends.
- Impact of Switzerland's non-membership in the EU on international trade competitiveness.
- Examination of the transition toward a "wealth-driven" economy and its implications for future growth.
Excerpt from the Book
Switzerland a Wealth driven economy?
After Porter Switzerland was at the end of the 1980ies an innovation driven economy, at the border to a wealth driven economy (Porter 1998, 566). Now the question can be asked did Switzerland enter the wealth driven state. After Porter (1998, 556) an economy driven by wealth is not able to maintain its wealth. In the wealth driven stage firms begin to lose competitive advantage in international industries.
Porter says: "the motivations of investors, managers, and individuals shift in ways that undermine sustained investment and innovation, and hence upgrading. New goals are set, often including some socially laudable ones, that supplant those that have sustained progress in the economy."
After Porter (1998, 557) are widespread mergers and acquisitions a symptom of an industry moving to the wealth driven stage. Foreign firms that more and more possess the true competitive advantage begin to acquire the nation's firms and integrate them into a global strategy with home base elsewhere.
Summary of Chapters
Introduction: This chapter provides historical context on Switzerland's development into an industrial nation and introduces the research question regarding the loss of competitive advantage in the 1990s.
Determinants of National Advantage: This section explains Porter’s diamond framework, defining the four core pillars that shape a nation's ability to compete globally.
Patterns of Swiss Competitive Advantage in 1985: The author details the specific industrial clusters in which Switzerland held a dominant position during the mid-1980s.
Switzerland during the 1990ies: This chapter analyzes the changes in factor conditions, demand, and firm strategy throughout the 1990s, highlighting the impact of external and internal pressures.
Enhancement of Porters Model: This section integrates "Government" and "Chance" as two additional determinants that influence the national competitive landscape.
Switzerland a Wealth driven economy?: The chapter explores the theoretical implications of an economy transitioning from innovation-driven to wealth-driven status and evaluates if Switzerland underwent this shift.
Conclusion: This section synthesizes the findings, presenting a final assessment of the decline in competitive advantage and the requirement for a return to innovation-led growth.
Outlook - is Switzerland becoming more competitive again?: The final chapter examines recent data and global competitiveness rankings to assess potential signs of economic recovery.
Keywords
Switzerland, Competitive Advantage, Porter's Diamond, Innovation-driven Economy, Wealth-driven Economy, OECD, GDP Growth, Industrial Clusters, Economic Policy, Foreign Direct Investment, Mergers and Acquisitions, Global Competitiveness Report.
Frequently Asked Questions
What is the primary focus of this paper?
The paper examines the decline in Switzerland's economic growth during the 1990s and analyzes whether this trend indicates a fundamental loss of national competitive advantage compared to other OECD states.
What theoretical framework is used to evaluate Switzerland?
The analysis is based on Michael E. Porter’s "Diamond" model, which evaluates national advantage through factor conditions, demand conditions, firm strategy, and supporting industries.
What is the core objective of the research?
The research aims to determine if the low growth rates observed in Switzerland during the 1990s are a result of the country transitioning from an innovation-driven economy to a wealth-driven one.
Which methodology is applied to the study?
The study utilizes a comparative analytical approach, mapping the competitive landscape of the 1980s against the performance metrics of the 1990s and 2000s, while incorporating macroeconomic indicators and Porter’s model.
What does the main body of the paper cover?
It covers the determinants of national advantage, historical snapshots of Swiss industrial success, the impact of the 1990s recessionary environment, and an evaluation of government influence on the economy.
Which keywords best describe this work?
The work is characterized by terms such as national competitive advantage, Porter's Diamond, wealth-driven economy, innovation, and macroeconomic performance.
How did Switzerland's stance on the EU affect its competitiveness in the 1990s?
The author argues that Switzerland's non-membership in the EU caused it to lose its status as a major trade hub, as primary European trade routes bypassed the country.
Why is the transition to a "wealth-driven" economy considered negative in this paper?
According to Porter’s model, a wealth-driven economy struggles to maintain innovation and investment, leading to a eventual decline in competitive strength and potential loss of overall wealth.
- Quote paper
- Beat Flury (Author), 2002, National Competitive advantage of Switzerland, Munich, GRIN Verlag, https://www.grin.com/document/9603
