On the face of it, the prerequisites of industrialisation were lacking: Switzerland is almost entirely devoid of the basic raw materials of coal and iron, and the mountainous terrain makes agriculture above the subsistence level largely impossible. But it is precisely for these reasons that a variety of export-oriented craft workshops emerged in the 18th century. Additionally, Switzerland enjoyed a surplus of labour as a result of Europe-wide population growth. Thus, industrialisation in this tiny Alpine country got off to a surprisingly good start.

At the beginning of the 19th century, the rattle of imported English spinning machines became increasingly commonplace in St. Gallen, a traditional centre of linen production. As Napoleon' Continental System prevented the import of cheaper and better English cotton, ever more spinning and weaving works opened their doors, particularly around Zurich. Unlike in the mother country of industrialisation, these were driven by water power instead of coal-fired steam engines. As many homeworkers were unable to compete with the new factories, they turned to printing textiles with colourful patterns, silk production and embroidery. Thanks to such niche products, along with watch-making and the mechanised production of chocolate, the Swiss economy flourished.

Although even more textile factories were established and watch housings were soon mass-produced, industry as a whole expanded only slowly. Many high-value goods were still made by hand, as there was no shortage of labour; entrepreneurs could pay low wages, particularly as many people also worked in agriculture on the side. The severe famines of the 19th century revealed dramatically how important the agricultural sector was for the country.

From around 1850, industry began to diversify: the machine tool industry emerged as Swiss engineers were designing their own spinning and weaving machines in place of British models, and the bleaching and dyeing of cloth gave rise to chemical plants. This development was most pronounced in the urbanised crescent extending from Geneva to Basel and Zürich and on to St. Gallen on Lake Constance. For example, Escher Wyss, for many years a leader in producing machinery, was founded in Zurich;  the Sulzer foundry in Winterthur was established virtually next door; and the Saurer company produced embroidery machines and later trucks in Arbon on Lake Constance. By contrast, the Mittelland and the Alpine cantons in the south long remained primarily agricultural.

The political unification of the country, commencing in 1848 and ultimately leading to the founding of the federal state in 1874, imparted a significant impetus to development. Domestic customs duties were gradually eliminated, and currency and units of measurement standardised. Education flourished as new universities in Bern, Geneva, Freibourg and Lausanne along with the Eidgenössische Polytechnikum, which went on to become today's ETH Zürich (Swiss Federal Institute of Technology in Zurich) joined the traditional universities of Basel and Zürich. Railway construction only began in 1869: a challenging and correspondingly expensive undertaking in this mountainous country which produced such technical masterpieces as the Gotthard route, the Simplon Tunnel and the Bernina Railway.

Toward the end of the 19th century, progress in energy production formed the basis of the “second industrialisation”. Water power was now used to produce electricity instead of mechanical energy: in 1881-82 the cities of Lausanne and St. Moritz built the first power plants to illuminate their streets. The city of Schaffhausen constructed a large power plant at the Moser Dam above the Rhine Falls; other dams, power plants and high-voltage transmission lines followed. Switzerland soon bacame a leader in the production of electrical equipment, one of the key technologies of this phase of industrialisation. One prominent example of this development is the company Brown, Boveri und Compagnie, founded in Baden in 1891.

At the same time, the large chemical factories around Basel developed into pharmaceutical manufacturers. The founding of Sandoz, the “Gesellschaft für Chemische Industrie in Basel, or CIBA, and Hoffmann-La Roche in the last two decades of the 19th century marked the rise of the well-known chemicals centre on the Upper Rhine. As the cities were also expanding and the construction industry booming, the labour market situation changed to one of a shortage of workers, leading to a rise in  wages.Starting in the 1880s, Switzerland, traditionally a nation of emigration on account of the precarious agricultural conditions, became dependent on immigration.