Location factors

The aim of measuring innovative strength is to differentiate and depict the innovative efforts of regions in the greatest detail possible. In established regions with high levels of prosperity, innovative strength is often the key to sustainability and consequently to the ability of regions to shape their futures, to act and to spread wealth. In particular against the backdrop of demographic change, considerable productivity gains in the sense of technological progress are needed to safeguard prosperity and the ability to act. The creation of an innovation-friendly environment across sectors is important, because innovations derive increasingly not from new technologies, but instead from the intelligent connection of existing technologies. The quality of the universities and research institutes as well as research spending are decisive for the innovation environment of a region. When it comes to economic momentum, another key factor is how the research activities correspond to the economic structure, i.e. to the economic specialisation of the region. In the case of industrial sectors, patent activities are a particularly important criterion for future innovative strength. These three indicators (quality of the universities, research spending, patents), linked to the research landscape and the economic structure represent the performance benchmark for the innovative strength of a region.
Research spending data are sourced from the OECD, Eurostat, BfS (CH), National Science Foundation (USA). Patents are drawn from international patent databases.

The tax burden is a very important factor when it comes to global competition between business locations. The BAK Taxation Index shows which locations have the best cards when it comes to international tax competition. Account is taken of the effective tax rates for companies and highly-qualified employees, and consequently the tax burdens for the target groups of global locational competition The BAK Taxation Index provides a number of different analyses. A central criterion for the decision of a company to relocate is the effective tax burden as a percentage of the earnings on a highly-profitable investment. In addition, factors such as the threshold tax burden (of relevance for the expansion of the location) is also included. For employees, the effective tax burden as a percentage of employment costs for three (medium to high) income classes and two different family units is shown. In addition to income taxes, incidental wage costs of a fiscal nature on the employer and employee side are also taken into consideration. The BAK Taxation Index has been regularly compiled together with the Centre for European Economic Research (ZEW) in Mannheim) since 2001.

For companies, access to procurement and sales markets plays a central role. The stronger the regional and international links between research, production, logistics and sales processes, the more important quick and direct access becomes. BAK has a database containing 60,000 global and 120,000 European links (city to city). The calculations include the journey to the railway station or airport, the transfer time, check-in time (depending upon the particular destination and airport), flight and travel time incl. changes, as well as the time it takes to travel from the destination airport to the railway station at the destination, calculated separately for all seven days of the week. The data have been regularly collected by BAK since 2003. Accessibility profiles for competing regions can be drawn up, with absolute journey times shown according to particular destinations, as well as basic statements («what percentage of global GDP can be reached in how many hours»), differentiated according to relevant sales markets and production sites. The overall concept was created in conjunction with the Institute for Transport Planning and Systems at ETH Zurich as well as the Faculty of Business and Economics at the University of Basel.

Quality of life is a key factor when it comes to attracting (highly-qualified) employees. And the latter are crucial for the innovative capacity and growth momentum of regional economies. The basis is classifying the quality of life on an international comparison, drawing upon quantitative indicators. These can be grouped into three categories: Economic environment (income, taxes, rents, job availability and growth, unemployment, accessibility); social environment (sense of security, criminality, life expectancy, employment level, health system, international schools, quality of the universities, quantity and quality of cultural institutions, restaurants, hotel nights, openness..) and environmental conditions (climate and location, pollution, modal split, ..) The data sources used are internationally valid statistics, for example OECD, European Social Survey, World Value Survey, International Baccalaureate, etc.). In addition, if required, the analysis can be extended to include subjective qualitative views of the quality of life provided by qualified employees in the region, for example by means of surveys or interviews.

Regulations correct primarily market failures, and serve to protect consumers and investors. However, regulation can also cause costs in the form of administration and controlling, as well as incompatible incentives. Competitive regulation establishes the necessary leeway for successful business activities. Indicator sets on product market regulation and labour market regulation are used to measure the level of regulation. Good product market regulation promotes competition, prevents market control/monopolies, and secures a level competitive playing field as well as corporate investment. Good labour market regulation facilitates business-friendly employment of permanent and temporary staff, low recruitment and termination costs. Comparison of regulatory environments includes general economic regulation (administrative costs, market access and investment hurdles), as well as sectoral provisions, for example liberal professions, retail or infrastructure sectors such as telecommunications or electricity networks.
The data sources used are OECD regulatory indicators and «economic freedom» indicators («Business Regulations» and «Labour Market Regulation») drawn up by the Fraser Institute.

All regions face the challenge that employees are subject to limits in terms of numbers as well as qualifications. The further increase in the knowledge intensity of economic processes, coupled with increasing bottlenecks affecting individual groups of professions, means the availability of specialist workers as well as competition for top talent are becoming ongoing strategic tasks. It is important to consider, in this conjunction, that in addition to current availability, the medium term migration of specialist workers and the long-term availability of corresponding educational and training establishments also need to be taken into account. BAK analyses the availability of specialist workers in the regions, as well as between various regions, on the basis of four modules: The “availability of workers” is measured using the following indicators: The employment ratio and employment potential as well as the proportion of non-domestic workers. The «labour market efficiency» is recorded on the basis of unemployment rates (according to age, gender, etc.). The «worker quality» is illustrated using indicators for education and training levels of domestic and non-domestic workers, for further training opportunities, as well as for university graduates. The «regional attractiveness for workers» reflects the ability of the region to attract and to retain workers. In this conjunction, the prevailing quality of the jobs (international corporations, highly-productive and sustainable companies) as well as income opportunities and the quality of life are also decisive.