Innovation position of the Netherlands hinders prospects for economic growth

Today TNO presents De Staat van Nederland Innovatieland 2012 (The State of the Netherlands, the Innovator 2012), an HCSS (The Hague Centre for Strategic Studies) publication that shows fastest growth and above-average contribution to economic growth coming from sectors with the most intensive investment in R&D (Research & Development). At the same time, R&D -investments by SMEs is declining structurally, Dutch companies are increasingly investing in R&D abroad and all face the threat that the lack of home-grown workers in the Netherlands means a risk of losing out to foreign competition.

Jan Mengelers, CEO of TNO: “The fact that the Netherlands is slipping behind economically makes the need for more R&D and innovation investment and effort unequivocally urgent. We use the introduction of this report to nourish the discussion on policy and implementation of innovation in the Netherlands. To this end key speakers have been invited to draw up a plan of action in Innovation 2020 that the Netherlands needs in both the shorter and longer terms to boost its innovation and competitive position.”

The Staat van Nederland Innovatieland 2012 report reveals that the Netherlands can be characterised as an innovation follower, an average R&D performer. The R&D intensity (R&D spending as a percentage of gross domestic product) is 1.84% in the Netherlands, below the EU average and well below the Lisbon target of 3%, and the trend is downwards. In contrast, R&D intensive sectors in the Netherlands are the fastest growers and contribute above average to economic growth. These sectors include the machine, chemical, electrical-engineering, food and drinks industries along with IT services.

A look at the trend in R&D spending by the ten largest R&D investors in the Netherlands over the past ten years reveals that most have maintained the same level of spending. But the fall in the total level of R&D spending in the first decade of this century points to less SME spending on R&D. The growth of new original equipment manufacturers (OEMs) is modest and that poses a great risk for the future. The cause does not seem attributable to a lack of entrepreneurship but risk aversion by other players.
Foreign stake in Dutch companies rising

Foreign stakeholders in Dutch industry have grown strongly over the last decade, with around 1% of our industry in foreign hands, good for 31% of total market sales and 33% of all R&D spending. At the same time, R&D spending by Dutch companies abroad appears to be on the rise. Jan Mengelers: “It is crucial for the Netherlands to open its doors to the world and to go itself beyond its own borders. Performing research generates income and employment directly. So we have to foster the interests of and facilitate Dutch companies abroad as well as foreign companies in our own country. To attract new foreign companies (headquarters), therefore, it is advisable to have a well-defined context and vision of R&D and innovation. Innovation is a ‘global game’ and so the Netherlands must have a strong ‘R&D climate’ to be attractive internationally.” Also the lagging growth of new home-grown talent in science and engineering, especially among young secondary school-leavers and higher education graduates, is a concern. “A lack of a home-grown workforce threatens to see the Netherlands lose out to foreign competitors in the long run. With the rapid tempo of ageing our country is encountering, we urgently need to modify policy,” Jan Mengelers adds.
Innovating rather than cutting back

Jan Mengelers: “Every euro spent on innovation generates much more in terms of economic growth , prosperity and employment. The Netherlands has embarked on the right course with the Top Sectors policy and now has to build on this towards a national and widely supported Knowledge and Innovation pact for the Netherlands. Just holding on to what we have won’t get us there; cutbacks threaten to put us far behind our nearest competitors.”

“It really pleases me to see a number of leading representatives from the ‘golden triangle’, including VNO-NCW, ASML, Philips, VSNU, NWO, SME Netherlands and KNAW, having indicated their commitment to collaborate on the development of Innovation 2020. This group will be drawing up action and recommendations needed to boost the innovation and competitive position of the Netherlands. In an era of administrative refuge, this initiative is vital to bring continuity to the innovation impulses already set in motion and the new impulses that are so essential to our future prosperity. I am convinced that by uniting our forces, we can innovate ourselves out of the recession.”

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