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Erasmus Competition and Innovation Monitor 2013-2014: Innovation among Dutch businesses has dropped considerably

Research institute INSCOPE – Research for Innovation runs the Erasmus Competition and Innovation Monitor each year, led by Professor Henk Volberda of Rotterdam School of Management, Erasmus University (RSM).



This year’s research report shows that businesses in the Netherlands are innovating much less compared to previous years. The full report can be downloaded here. Its main findings are:

Capacity for innovation among Dutch companies has decreased substantially

The number of completely new products and services (‘radical innovation’) that Dutch businesses have introduced dropped by 6% between 2013 and 2014. The number of improved products and services (‘incremental innovation’) fell by 4% and is now at its lowest level since the Erasmus Competition and Innovation Monitor was first run in 2006. Volberda explains: ‘Recent information about the faltering German economy (an important engine for the Dutch economy), adjusted forecasts from the International Monetary Fund (IMF), conflicts in the Middle East, and fluctuating share prices have made businesses more hesitant when it comes to innovation. A decline in the number of product and service innovations from companies in the Netherlands is not benefiting their competitive edge and as such constitutes a threat to the development of the Dutch economy.’

After years of decline in investment, businesses in the Netherlands have been investing slightly more in technological innovation, but less in social innovation

After several years of decline, investment in technological innovation (investments in R&D and in ICT) increased by around 1% of turnover in the period from 2013 to 2014. After an increase between 2006 – 2013, companies in the Netherlands saw a decline of 8% in activity in social innovation (new ways to organise, manage, work, and collaborate). Volberda calls these developments ‘a possible threat to the competitiveness of Dutch businesses, given that smarter ways to operate, facilitating leadership, flatter organisations and co-creation with partners are all essential to successful innovation. Companies with these attributes are in a much better position to turn technological innovation into successful product and service innovations.’

The regions of Achterhoek/Twente, Central and East Brabant, and North Holland get an above average score for the number of product and service innovations

The region of Central and East Brabant scores above the national average on technological innovation (+1.5%), social innovation (+2.5%), radical product and service innovation (+2.8%) and incremental product and service innovation (+3.5%). Various other regions also had above average scores for social innovation, including North Holland (+1.2% above the national average), the northern part of the province of South Holland (+0.9%) and Achterhoek/Twente (+0.8%). North Holland and Achterhoek/Twente, in particular, score more than the national average for the amount of radical innovation with, respectively, 4% and 4.9%. According to Volberda, the companies in the Central and East Brabant region, including the businesses in the High-Tech Campus, are an example of how technological innovation and social innovation can go hand in hand when it comes to enhancing successful innovation.

④ An increase in the number of jobs demands a high degree of technological innovation and social innovation

Businesses that work intensively on both technological innovation and social innovation saw an increase in workforce of 8.3% on average. Volberda explains: ‘Businesses that invest in new technologies (robotisation, internet or Things, Big Data and 3D printing) as well as in human capital, new kinds of organisation and collaboration with partners perform better in terms of profitability and job satisfaction. With regard to priority sector policy there needs to be much more attention for Social Innovation and the Human Capital Agenda if the new economic growth that the cabinet is aiming at is to be achieved in the Netherlands. One-sided investments in technological innovation actually result in a drop in economic growth (-5.8% drop in jobs).’ Minister Asscher of Social Affairs and Employment has rightly expressed his concern about the one-sided attention being paid to new technologies and the potentially drastic impact this will have on employment. For this reason, Volberda points out that ‘Priority sector policy to boost innovation must not only be directed at fiscal stimulus for technological innovation (the Promotion of Research and Development Act, tax breaks for R&D, the Innovation Box), it must also focus on social innovation. This can be done, for instance, through fiscal stimulus for corporate investments in human capital, fiscal stimulus for collaboration between businesses and knowledge institutes, increasing the distribution of flat and flexible organisational forms by making online diagnostic tools available to entrepreneurs, or creating online learning modules for innovative leadership.’

⑤ Dutch companies are transferring more activities abroad than they are returning to the Netherlands

 

On average, Dutch companies are shifting 4.4% more activities abroad than they are returning to the Netherlands. This outflow is particularly noticeable among ICT activities (+17%), provision of services and production (+12%) and procurement activities (+8%) ‘Transferring ICT activities, manufacturing/provision of services and procurement activities across the border is not only driven by costs; it is also prompted by the desire to access certain new markets or a lack of technical people in certain sectors,’ according to Henk Volberda.

⑥ Particularly in the regions of South Limburg, Arnhem/Nijmegen and Haaglanden/Leiden, the outflow of business activities abroad is greater than the inflow of these activities; in North-Eastern Netherlands, Zeeland and West Brabant the opposite is the case

 

The extent to which activities flow from the Netherlands to foreign countries and then back again varies per region. In the regions of South Limburg/Arnhem/Nijmegen and Haaglanden/Leiden, around 21% more activities go abroad than return to the regions in question. According to Henk Volberda, the regions of South Limburg, Arnhem/Nijmegen and Haaglanden/Leiden must guard against an exodus of high-quality jobs. In contrast, there has actually been a net gain of activities in the regions of North-East Netherlands and Zeeland/West Brabant. In these two regions, 9% and 10% fewer activities, respectively, have been transferred abroad than have been moved back to the regions in question.

Professor Henk Volberda will announce these and other findings from the Erasmus Competition and Innovation Monitor 2013 – 2014 during the National Day of Social Innovation on 18 November 2014 in The Hague.

About the research: the Erasmus Competition and Innovation Monitor 2013 – 2014.

INSCOPE – Research for Innovation, under the leadership of Professor Henk Volberda, has for several years been running the Erasmus Competition and Innovation Monitor to chart and promote innovation in the Netherlands. As professor of Strategic Management & Corporate Policy, Volberda is attached to the faculty of Strategic Management & Entrepreneurship at RSM. In addition to this, he is academic director of INSCOPE – Research for Innovation. INSCOPE is a top institute that conducts research into social innovation. Professor Henk Volberda works in conjunction with a research team comprising Kevin Heij, Emre Karali, Jacomijn Klitsie, Diana Perra, and Aybars Tuncdogan. www.inscope.nl

Existing scales used in academic literature were used in the drafting of this questionnaire. Invitations to participate in this survey were sent in print to the senior management of around 10,000 organisations. In total, 692 respondents answered the questionnaire. The respondents came from a wide range of sectors, such as business services (27%), the manufacturing industry (17%), trade (10%), construction (8%), and other sectors.

Rotterdam School of Management, Erasmus University (RSM) is ranked amongst Europe’s top 10 business schools for education and amongst the top three for research. RSM provides ground-breaking research and education furthering excellence in all aspects of management and is based in the international port city of Rotterdam - a vital nexus of business, logistics and trade. RSM’s primary focus is on developing business leaders with international careers who carry their innovative mindset into a sustainable future thanks to a first-class range of bachelor, master, MBA, PhD and executive programmes. RSM also has offices in the Amsterdam Zuidas business district and in Taipei, Taiwan. www.rsm.nl

For more information on RSM, please contact Marianne Schouten, Media & Public Relations Manager for RSM, on +31 10 408 2877 or by email at mschouten@rsm.nl.

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