ENTREPRENEURSHIP IN THE NETHERLANDS 4.2.1 State of Entrepreneurship
4.2.2 Developments in Entrepreneurship
The present state of entrepreneurship in the Netherlands did not develop overnight. A study of the historical development of entrepreneurship in the Netherlands can lead to a better understanding of its present level. Figure 4.1 pictures the development of entrepreneurship in the Netherlands in the period between 1972 and 1998. Although not represented in the figure, there is evidence of a decreasing rate of business ownership in the period preceding 1972, not only throughout the 1960s (Bosma et al., 2000), but also in the decades since 1899.4
From Figure 4.1 it appears that the recent history of entrepreneurship in the Netherlands from 1972 through 1998 can be divided into three periods.
The first period, 1972-1982, is characterized by a continuing decrease in the number of entrepreneurs relative to the labor force from 10.0 percent to 8.1 percent. The second period, 1982-1988, is characterized by stabilization and modest growth. The final period is a period of increasing entrepreneurial activity, reflected by an increasing share of entrepreneurs in the labor force from 8.2 percent in 1988 to 10.4 percent in 1998. Thus, the development of entrepreneurship in the Netherlands is characterized by a U-shaped trend.
The overall growth of the number of entrepreneurs in the Netherlands in the period 1972-1998 is 38 percent. This is low when compared to the growth of the number of entrepreneurs in some other countries, such as the United Kingdom (61 percent) and the United States (102 percent). On the other hand, countries, such as France (-11 percent), Denmark (-9 percent), Japan (5 percent), and Belgium (30 percent) exhibit lower growth rates, or even a decline of the number of business owners in this period.
The level of entrepreneurship is the result of the number of established firms in the previous year and the number of start-ups and closures. Firm start-ups are an indicator of the willingness to engage in risk-taking activity and the capacity to innovate. Closures can be viewed as an indicator of competition and selection, but may also reflect the lack of seriousness of new start-up ventures. The number of start-ups between 1987 and 1996 was approximately 415,000, whereas the number of closures, within the same period, amounted to approximately 200,000. Hence, in this period the number of start-ups was twice as high as the number of closures, indicating an increase of entrepreneurship in the Netherlands in recent years.
Since 1996 there have been over 50,000 business start-ups in the Netherlands each year. In 1997 this number represents ten percent of the total number of businesses in the Netherlands (Verhoeven and Becht, 1999).
Table 4.1 demonstrates the increase in entrepreneurship by setting out the number of firms, start-ups and closures for the major industries in 1987 to these numbers in 1999. The number of start-ups has increased especially in construction, transport, business services and other commercial services. In services, construction and transport, this growth can be attributed in part to the increase in the number of self-employed without personnel (see Box 4.1).
The increase in wholesale trade can be explained for a large part by outsourcing and an increase in the number of new subsidiaries. The increase in services also reflects the modern economy characterized by a more differentiated demand for services and creativity. This creates room for smaller and specialized organizations.
Although start-up rates in the Netherlands increased significantly, from an international perspective they are only at a medium level. Table 4.2 shows that start-up rates in Germany, the United Kingdom and the United States are higher, while Belgium and Japan have lower start-up rates.
Moreover, the number of start-ups introducing new products and services is merely a fraction of the total number of start-ups; only 6 percent of the total number of start-ups is a so-called ‘techno-start-up’ (EZ, 1999).
Internationally, the number of fast growing businesses in the Netherlands also stays behind; only six percent of the SMEs are ‘fast growers’, as compared to 25 percent in the United States (EZ, 1999). However, the closure rate in the Netherlands is relatively low as compared to that in other countries. In 1997 only 5.4 percent of the total number of businesses closed down, whereas in Germany, the United States and the United Kingdom
closure rates are 8.9 percent, 8.9 percent, and 10 percent, respectively (Verhoeven and Becht, 1999, p. 29).
Figure 4.1 and Table 4.1 provide a picture of a booming demography of enterprises in the Netherlands in recent years.5 However, it should be born in mind that the share of business owners in the labor force in the Netherlands is still relatively low as compared to some other countries. Moreover, the level of entrepreneurship in 1998 is only slightly higher than that in 1972.
For a better understanding of developments in entrepreneurship in the Netherlands, in subsequent sections underlying mechanisms of entrepreneurship are discussed.
Box 4.1: Self-employed without personnel in the Netherlands
As in the case in many other countries, an important part of the Dutch increase in self-employment is accounted for by self-employed without personnel. There is a high degree of heterogeneity in the backgrounds of these self-employed people. Some have contract with a single employer, having no intention to alter this relationship. The reason for them to switch from wage employment may lie in the difference in social security, e.g., differences regarding tax liabilities or benefits. OECD (2000b) uses the term ‘false self-employment’. On the other hand, there are self- employed without personnel who use the initial contract with their employer as a first step towards entrepreneurship as they want to gain experience and become ‘independent’ in a later stage.
In the Netherlands, the phenomenon of self-employment without personnel is apparent especially in the service industry and to a lesser extent in manufacturing, construction, transport and wholesale trade (Vroonhof et al., 1999). A problem is that different Dutch institutions have different definitions of self-employed without personnel. 1 This problem is currently dealt with through an attempt at clearing a harmonized definition of this particular group of self-employed people. Especially for the calculation of employment insurance premiums it is important to have a clear and general definition. A joint study by EIM, ING and RZO (1999) proposes a classification of individuals into self-employed and employees on the basis of objective criteria.
1This problem is not unique for the Netherlands. See Evers et al. (1998).