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The Netherlands is one of the world’s most advanced economies, its long-term development underpinned by entrepreneurship and innovation. The economy has not fully recovered from the crisis, however. Dutch exporters have benefited less than others from an expansion into emerging markets. While levels of productivity are high, productivity growth has been rather weak. Strengthening investment in knowledge and innovation is a key to future growth and competitiveness and is necessary to address social challenges. The top sectors approach, a new form of industrial policy announced in 2011, focuses public resources on specific sectors and fosters co-ordination of activities in these areas by businesses, knowledge institutions and government.
Hot Issues are major national STI policy priorities, as self-reported by countries in their responses to the OECD STIO 2014 policy questionnaire.
Improving the framework conditions for innovation (including competitiveness)
The Netherlands scores high on indicators of overall framework conditions (Panel 1j, n) and skills for innovation (Panel 1s, u, v). Some indicators of private investment in R&D and innovation, however, are closer to the OECD median than to leading innovators (Panel 1d, h, k). The government has set targets to reduce administrative burdens and compliance costs for enterprises and improve transparency and provision of public services. It is concerned about sector-specific regulatory obstacles in the top sectors. The Netherlands Enterprise Agency (RVO), established in 2014 following a merger of agencies, offers help with EU and national grants, finding international business partners and know-how and facilitates compliance with laws and regulations.
Strengthening public R&D capacity and infrastructures
Public R&D expenditure has a high share of GDP (Panel 1a). Dutch universities are well placed in global rankings, and science has a strong global impact (Panel 1b, c). Universities and PRIs attract a high share of industry funding for their R&D (Panel 1o). While project-based funding has increased in importance, most public R&D funding is disbursed as institutional block funding (Panel 4), of which general university funds (GUF) represent approximately two-thirds. The government’s vision for applied research foresees improved efficiency and effectiveness through greater national coherence and a tighter link between funding and quality and impact, particularly in the context of the top sectors.
Encouraging innovation in firms and supporting entrepreneurship and SMEs
Business R&D expenditure is at the OECD median (Panel 1d), owing in part to structural features of the Dutch economy. Yet, the Netherlands performs above the OECD median in patenting (Panel 1f), owing in part to large corporate R&D spenders (Panel 1e). Support for business innovation is part of enterprise policy, with instruments for public-private partnerships in the top sectors and generic support for all businesses. Tax incentives are the primary means of financial support for business R&D (Panel 4). The largest innovation policy instrument is the R&D payroll tax allowance (WBSO), which is very beneficial for SMEs; it was complemented in 2012 by a tax allowance for investment in R&D. Together, they amounted in 2013 to over USD 1.2 billion (EUR 1 billion). Based on experience so far and to better reflect social challenges, efforts are made to simplify and harmonise top-sector instruments: the Top Consortia for Knowledge and Innovation (TKI) and the SME Innovation Support Top Sectors (MIT) scheme. The MIT scheme, introduced in 2013 with a budget of USD 24.1 million (EUR 20 million), promotes SMEs’ participation in top-sector exploitation initiatives, through collaborative R&D projects, feasibility studies, innovation vouchers, hiring of experts, networking and coaching. The TKI allowance, with USD 100 million (EUR 83 million) in 2013, promotes public-private R&D consortia in top sectors. Efforts are under way to strengthen the representation of SMEs in the top sectors.
Nine top sectors have been chosen for preferential support: agri&food, horticulture and propagating stock, high-technology systems and materials, energy, logistics, creative industry, life sciences, chemicals and water. Knowledge institutions, companies and the government co-operate to strengthen the competitiveness of top sectors and address social challenges. While research and innovation dominate top-sector programming, there is also concerted action concerning STEM-educated human resources. Dedicated funding for top-sector instruments is only some USD 128 million (EUR 106 million) a year, but considerable amounts of public research (of which about 30% is privately financed) in universities and PRIs are being aligned with the approach, equal to about USD 1.2 billion (EUR 1 billion), excluding regional and EU funding.
Innovation to contribute to addressing social challenges (including inclusiveness)
The social challenges facing the Netherlands, including demographic change, energy supply and climate change, are an important factor in shaping top-sector agendas. Innovative responses to these challenges are strengthened by participation in the EU’s Horizon 2020 programme, attention by the top sectors, and funding by the Netherlands Organisation for Scientific Research (NWO), which distributes a major share of competitive research funding to Dutch universities and other knowledge institutes.
The Netherlands ranks among the top countries on the OECD Ease of Entrepreneurship Index (Panel 1j). While early-stage entrepreneurial activity is strong, recent empirical OECD work finds barriers to subsequent growth. In recent years the scarcity of bank lending, combined with the limited role of venture capital in risk financing (Panel 1h), have been a limiting factor. In response, a number of policy instruments have special provisions for SMEs, including credit guarantees through the Qredits, MKB and GO facilities. The Seed Facility supports private equity firms investing in early stage start-up companies and the R&D credit goes to R&D projects.
The government emphasises strengthening the commercialisation of public research (Valorisation Agenda of 2009). Dutch universities and knowledge institutes have strong links with the business sector, with a high share of industry funding for public research (Panel 1o). To foster commercialisation and technology transfer, the Valorisation Programme was introduced in 2011 with a budget of USD 76 million (EUR 63 million) to support 12 consortia over six years.Valorisation is now part of performance agreements with universities Collaboration to exploit scientific research is a key objective of the top sectors.
There is relatively little income inequality among Dutch regions owing in part to the poly-centricity of the Dutch economy. The aim of the Strong Regions initiative is to make the Randstad conurbation a leading sustainable, internationally competitive region, with an accessible and dynamic economy, high quality of life in an attractive living and working environment, and a climate-proof delta. To facilitate planning for the EU Structural Funds, Smart Specialisation Strategies have been drawn up for the North, East,West and South of the Netherlands, according to each region’s comparative advantage.
The Netherlands is very open to international trade and investment. The science system, too, is highly internationalised, as reflected in international co-authorship (Panel 1q), although international co-invention is below the OECD median. Dutch participation in European Framework Programmes is above the European average. The Ministry of Education, Culture and Science and the Ministry of Economic Affairs have developed national strategies to promote the international dimension of STI policies and programmes.
The Dutch workforce is well educated and has strong innovation skills overall, and education is of high quality (Panel 1u, v), although adult tertiary education attainment and the rate of doctoral graduates in science and engineering could be improved (Panel 1t, w). Current policy efforts focus on maintaining quality in tertiary education and responding to emerging labour market needs. The top sectors’ human capital agendas encourage co-ordination to identify and prepare for emerging skill needs. In 2013, the government launched the 2020 National Technology Pact, involving major stakeholders. Co-operation between HEIs, vocational secondary education and the business sector is a main aspect of the Pact, which aims to increase the number of technically trained people.