At the beginning of this new millennium, regional economies are confronting momentous changes. The globalisation of trade and economic activity is increasingly testing their ability to adapt and maintain their competitive edge. There is a tendency for income and performance gaps to widen between and within regions, and the cost of maintaining social cohesion is increasing. Rapid technological change and greater use of knowledge are offering new opportunities for local and regional development but demand further investment from enterprises, reorganisation of labour and production, more advanced skills and environmental improvements.

Regions in Switzerland show high levels of GDP per capita, a variety of strong economic sectors (as measured by their exporting performance) and a highly educated population, particularly in Région Lémanique (36.1% in 2006) and Zurich (37.7%). They have high levels of knowledge-intensive employment, especially in Zurich, and high-tech manufacturing in North-West Switzerland. Swiss regions score very high on patent applications, especially cantons such as Basel City. Moreover, they could be considered leaders in green growth. They are at the forefront of innovation in green technologies, such as energy efficiency and pollution abatement.

Regions form an important part of the Swiss state. This chapter presents an assessment of regional performance in Switzerland. It first describes the economic characteristics and institutional role of Swiss regions. It then assesses their strengths and challenges in an international perspective. Next it turns to the inter-linkages between regions, in order to highlight possible policy needs. The chapter concludes by identifying the main policy implications, which will be analysed in Chapters 2 and 3.

Switzerland has introduced a New Regional Policy (NRP) to support regional value-added creation more effectively. This chapter explores four ways to maximise policy impact: i) extending the NRP’s territorial coverage to reduce economic fragmentation and support polycentric development; ii) designing stronger incentives for intercantonal co-operation to facilitate policy synergies within functional economic areas; iii) enhancing co-ordination with sectoral policies, possibly through a formal co-ordination (or a possible merger) between the NRP and agglomeration policy, and closer collaboration between the NRP and agricultural policy; and iv) building strategic management and evaluation capacity both at federal and cantonal levels, while abiding by the Swiss principle of subsidiarity.

The Swiss New Regional Policy (NRP) places a focus on promoting innovation across the whole country. This chapter presents a critical analysis of the current framework of federal and regional innovation policies. It first discusses the instruments implemented at federal level and their potential role for promoting innovation in the region. It then assesses the state of development of innovation promotion initiatives at regional level, including those supported by the NRP, with a specific focus on the case of Eastern Switzerland. The chapter then concludes by identifying the main challenges for developing innovation policies in, and for regions in Switzerland, and derives policy recommendations for better articulation between policies and instruments developed at the levels of the Confederation and the cantons.