Secret sauce

The recipe for the outperformance of Swiss businesses

Common sense and low taxes make the Alpine nation a corporate haven

Big cheeses from the world of politics, business, academia, media and the arts descended on Davos on May 22nd for the first in-person bash of the World Economic Forum in more than two years. For over half a century the great and the good have used the annual get-together to chew over the world’s most pressing problems. They feel at home in Switzerland. Just as the small mountain village punches far above its weight as a talking-shop, Switzerland has prospered as a haven for businesses far beyond what might be expected of a small, landlocked country with few natural resources. It is home to 13 of the top 100 European firms by market capitalisation and 12 of the top 500 worldwide. What is the secret sauce of the Swiss?

Something remarkable must be going on in the nation of mountains and valleys that before playing host to world-beating firms counted the invention of yodelling among its achievements. Relative to its GDP Switzerland has the highest density of Fortune 500 companies in the world (see chart 1). Multinationals contribute around one-third of Switzerland’s economic output, a much higher share than in other countries of comparable size. Foreign firms are drawn to Switzerland: Google set up its largest engineering centre outside America in Zurich. Swiss blue-chip firms outperform European rivals: the Swiss stockmarket index has risen by 29% over the past five years, compared with 3% for the Euro Stoxx 50, an index dominated by French and German behemoths.

Swiss firms’ name recognition has spread far beyond the country’s borders in banking (UBS and Credit Suisse), insurance (Swiss Re and Zurich), pharmaceuticals (Roche and…