Characteristics of internationally active companies

Authors: Alex Lammertsma, Linda Bruls

This chapter examines the characteristics of companies that are internationally active. To what extent are they exporters, importers or both? What proportion of them are independent SMEs or large enterprises; are they under Dutch or foreign control; and how many of them are multinationals? Another question is how they differ as regards key indicators such as productivity, average wages and the proportion of female entrepreneurs. And to what extent are these characteristics different among companies in the designated top sectors?

3.1Key findings

The internationally active business economy in the Netherlands is a highly diverse group of companies. The share of multinationals is largest in the mining and quarrying sector and smallest in repairs, accommodation and food services, and the construction sector. The largest share of exporters is found in mining and quarrying at 57 percent, while in manufacturing this share is 51 percent. The highest productivity among internationally active companies is achieved in mining and quarrying, followed by the energy sector. These two sectors also have the highest average wages. In wholesale and retail trade – the sector with by far the largest number of entrepreneurs – nearly 30 percent of entrepreneurs are women. Only in the accommodation and food services are there more female entrepreneurs, with 35 percent. Between 2012 and 2017, the share of female entrepreneurs in Dutch businesses actually declined by 1 percentage point.

In 2017, approximately 66 percent of the entire Dutch business economy were not trading internationally; 23 percent were one-way importers, 4 percent were one-way exporters, and 8 percent were two-way traders. Of independent SMEs, 67 percent were not international traders in 2017, while the figure for large enterprises was only 12 percent. Most importers and two-way traders are active in the wholesale and retail sector, and this is true of both independent SMEs and large enterprises.

Of the foreign companies, 63 percent are two-way traders and only 12 percent are not international traders. Among Dutch companies, only 7 percent are two-way-traders and 66 percent do not trade internationally. Most foreign traders are active in the wholesale and retail sector. The picture is similar for Dutch companies, except that most one-way exporters are active in specialised business services. For multinationals, the breakdown into types of traders is similar to that of foreign companies.

In the 2012–2017 period, the share of internationally active companies that had been in existence for ten years or more declined from 45 percent in 2012 to 43 percent in 2017. The share of internationally active companies that have been in existence for ten years or more is largest in manufacturing, transport and storage, construction, and wholesale and retail trade. The change in the age distribution of companies is not only due to the fact that companies that continue to trade become older, but also because a proportion of companies start or stop trading internationally. In 2017, the majority of companies that started or stopped exporting were involved in business services and wholesale and retail trade. These sectors also contain the largest number of born globals, which are companies that start selling to foreign markets very soon after being set up.

In addition to the figures on business sectors, we also looked at developments according to the top sector classification. Top sectors are sectors that are knowledge-intensive; export-oriented; governed by specific legislation and regulations; and make, or could make, an important contribution to solving social problems (Section 4.4). The Chemicals top sector was the most internationally active in 2017, while the top sectors Agriculture & Food and Creative industries were the least active. Most companies are two-way traders in the top sectors of Chemicals, Energy, and Horticulture and starting materials. In the other top sectors, most traders are one-way importers. The majority of top-sector companies that are active in international trade are independent SMEs, under Dutch control, more than ten years old, and are not multinationals. Most multinationals are found in the High Tech sector and these are mostly two-way traders.

3.2Key indicators for internationally active companies

The characteristics of internationally active companies differ greatly between sectors (Table 3.2.1). The wholesale and retail trade sector has by far the highest number of entrepreneurs. Over 32 percent of internationally active entrepreneurs were working in this sector in 2017. Entrepreneurs are people carrying out work on their own account or at their own risk in their own business or practice, or are owners of a company and employed by the company as director. The share of multinationals is largest in the mining and quarrying sector, at 35 percent, and at less than 3 percent, it is smallest in repairs of consumer goods, the accommodation and food services sector, and the construction sector. These last three sectors are almost completely focused on the domestic market. The largest share of exporters is found in mining and quarrying at 57 percent; in manufacturing this share is 51 percent. The highest productivity in internationally active companies is achieved in mining and quarrying, followed by the energy sector. These two sectors also have the highest average wages. In 2017, the average wage in the mining and quarrying sector was 39 euros per hour and in the energy sector the average hourly wage was 33 euros.

3.2.1Key indicators for internationally active business by sector, 2017

	Number of enterprises	Share of multi­nationals (%)	Share of exporters (%)	Productivity1)	Average wage2)	International entrepreneurs	Share of female entrepreneurs (%)
Sector
Agriculture, forestry and fisheries	.	.	.	79	18	14,205	29.5
Mining and quarrying	270	35.2	57.4	466	39	55	23.6
Manufacturing	32,105	10.6	51.3	103	24	17,290	21.4
Energy	395	24.1	32.9	256	33	85	11.8
Water and waste management	760	17.1	54.6	113	24	315	16.1
Construction	31,745	2.3	19.5	76	24	13,115	16.4
Wholesale and retail trade	130,320	5.9	38.1	59	20	72,625	29.5
Transport and storage	15,750	9.3	43.2	81	22	9,915	20.9
Food and accommodation	16,210	1.5	4.4	31	14	16,215	35.2
Information and communication	42,050	4.9	35.5	109	29	10,465	11.6
Real estate	5,905	6.9	12.3	136	27	3,530	24.2
Consultancy and research	101,710	3.2	33.1	71	30	30,430	21.5
Rental of movable property	20,190	5.6	29.8	31	17	8,765	25
Repairs	3,575	0.7	16.1	43	18	1,100	25.2
Total Dutch business economy	400,985	5.2	34	68	23	183,920	25.1

¹⁾in 1,000 euros per year

²⁾in euros per hour

Share of female entrepreneurs fell between 2012 and 2017

In the wholesale and retail trade sector, which has the largest number of internationally active entrepreneurs, nearly 30 percent of entrepreneurs are women (Table 3.2.1). Only in the accommodation and food services sector are there more female entrepreneurs, as 35 percent of internationally active entrepreneurs are women. The share of female entrepreneurs is lowest in the information and communication sector, at 12 percent. Between 2012 and 2017, the share of female entrepreneurs in internationally active companies declined in most sectors, with the exception of mining and quarrying, and agriculture, forestry and fisheries (Figure 3.2.2). In internationally active business as a whole, the share of female entrepreneurs declined by 1 percentage point on average.

3.3International traders by type

The group of nearly 1.2 million companies in the Dutch business economynoot1 in 2017 can be divided into one-way importers, one-way exporters, two-way traders (companies that both import and export) and companies that do not trade internationally.noot2 By far the largest group is that of companies that are not active in international trade. In 2017, 66 percent of companies were not international traders. The remaining 34 percent of companies were spread over various types of traders (Figure 3.3.1). Of that group, 23 percent were importers, 8 percent were two-way traders and 4 percent were exporters.

Most companies in the wholesale and retail trade sector and the mining and quarrying sector are international traders, with 52 percent of the former and 51 percent of the latter sector active as importers and/or exporters (Figure 3.3.2). Most companies in mining and quarrying, and water and waste management that trade internationally are two-way traders. In the other sectors, most companies are only importers.

The Dutch business economy consists of independent SMEs and large enterprises. Of the 1.2 million companies, there were 1.1 million SMEs and 17 thousand large enterprises in 2017. Around 99 percent were therefore independent SMEs. These two groups differ in the extent to which they do not trade internationally or are two-way traders (Figure 3.3.3). In 2017, whereas 67 percent of independent SMEs did not trade internationally, this was only the case for 12 percent of large enterprises. The opposite is true with regard to two-way-traders. Only 7 percent of independent SMEs were two-way traders, against 64 percent of large enterprises. In contrast, the percentages of companies that only export or import are similar for independent SMEs and large enterprises. In 2017, 23 percent of independent SMEs were active in imports, as were 20 percent of large enterprises. For both independent SMEs and large enterprises, around 4 percent were active in exports.

Most importers and two-way traders are active in the wholesale and retail sector. This is true of both independent SMEs and large enterprises. Most exporters are active in specialised business servicesnoot3 and this also applies to both independent SMEs and large enterprises. In 2017, in the case of independent SMEs, 32 percent of importers were active in wholesale and retail trade, as were 45 percent of two-way traders; for large enterprises, 31 percent of importers and 40 percent of two-way traders were active in that sector. For the same year, as regards independent SMEs, 42 percent of exporters were active in specialised business services, while among large enterprises, this was the case for 25 percent of exporters.

As well as the distinction between independent SMEs and large enterprises, the business economy may also be divided into foreign and Dutch companies (Figure 3.3.4). Of the 1.2 million companies in the Netherlands in 2017, some 14 thousand were under foreign control and the rest were Dutch, so that around 1 percent of the companies were in foreign hands. Of those foreign companies, 63 percent were two-way traders and 12 percent were not international traders in 2017. Among Dutch companies, only 7 percent were two-way-traders and 66 percent were not internationally active.

Most foreign companies are active in the wholesale and retail trade sector. In 2017, 36 percent of importers under foreign control and 45 percent of two-way traders were active in wholesale and retail trade, while for exporters the share was 30 percent. Among Dutch-controlled companies, most of the importers and two-way traders were active in wholesale and retail trade in that year: 31 percent of Dutch importers and 45 percent of two-way traders were active in the sector. Most Dutch exporters were active in specialised business services in 2017, with 33 percent of exporters in the Dutch business economy involved in that sector. For multinationals, the breakdown into types of traders is comparable to that of the foreign companies (Figure 3.3.5).

3.4Internationally active companies by age

In the 2012–2017 period, the share of internationally active companies that had been in existence for more than 10 years declined from 45 percent in 2012 to 43 percent in 2017 (Figure 3.4.1). In contrast, the share of companies in existence for less than 5 years increased by 1 percentage point. In 2017, within the group of internationally active companies, most of the companies founded less than 5 years ago were active in mining and quarrying; energy; information and communication; and consultancy and research (Figure 3.4.2). Most of the companies in this group which were more than 10 years old were active in manufacturing; water and waste; construction; the trade sector; transport and storage; accommodation and food services; real estate; and rental of movable tangible property.

The shifts in the age distribution of companies are not only due to the fact that companies which continue trading internationally become older, but also because a proportion of companies start or stop trading. The share of the importers and exporters that feature every year in the total group of international goods traders does appear to be on a downward trend (CBS, 2019). This can be explained by the fact that the total group of international traders has grown significantly. Moreover, there is a large group of companies that traded in a particular period, but changed their trading status over time, either from exporter (importer) to non-exporter (non-importer) or vice versa. In addition, there is a significant group of companies that, after taking this step, will stop trading internationally again within a few years. The majority of this group do continue to exist as companies, however. Also, there is a large group of companies that repeatedly start and stop exporting: the so-called intermittent exporters (CBS, 2019). An explanation for this phenomenon is that it is a process of failing and then trying again, as companies learn to export by experimenting in different markets before possibly developing into stable exporters. Companies that report having exported goods once make up no less than a quarter of the total number of unique exporters, but they only represent 0.5 percent of exports in terms of value. The same applies to companies that repeatedly start and stop exporting. Although together this group of intermittent exporters make up over 20 percent of the exporter population, they are responsible for less than 2.5 percent of total exports.

A special group of starters are the ‘born globals’ – companies that immediately begin to import or export goods or services in the year that they are founded (CBS, 2019). As with the starters and stoppers, in 2017 most born globals were involved in business services and wholesale and retail trade (Figure 3.4.3). However, there are also born globals in the information and communication, manufacturing, and construction sectors. This is in line with the findings from a European Union study (Eurofound, 2012), which states that in Europe, there are born globals in wholesale and retail trade, business services, manufacturing, and the information and communication sector. Around 24 percent of companies that started trading internationally in 2017 were born globals.

In the literature, various reasons are put forward to explain why born globals are able to internationalise so quickly. For example, companies in sectors where trade barriers, the necessary investments and transport costs are low can internationalise more rapidly. It is also suggested that born globals are expected to be most strongly represented in knowledge-intensive sectors, such as the production of software and technology products (Lopez et al., 2009). Because such products can be replicated at low marginal costs, a company can enter foreign markets at the same time as the domestic market. In addition, the international experience of the founders and employees is important for rapid internationalisation (Bengtsson, 2004; Madsen & Servais, 1997). The importance of the social networks in the country of origin for the speed of internationalisation is also mentioned (Zhou et al., 2007). Such networks help companies to spot opportunities in foreign markets, influence when and how they start exporting, help in identifying foreign partners, and help them to interpret implicit practices in international business.

3.5International traders by top sector

In the 2012–2017 period, the number of international traders belonging to a top sector increased from 84 thousand in 2012 to 148 thousand in 2017 (Table 3.5.1).noot4 Top sectors are those that are (1) knowledge-intensive, (2) export-oriented, and (3) in many cases governed by specific legislation and regulations that (4) make or can make an important contribution to solving social issues (Section 4.4). The overwhelming majority of these companies – nearly 60 thousand – were active in the Creative sector in 2017 (Table 3.5.1). In second place was High Tech with nearly 42 thousand companies.

3.5.1Number of international traders by top sector, 2012 and 2015–2017 (in thousands)

	2012	2015	2016	2017
Top sector	x 1,000
Agriculture & Food	9.3	14.7	16	16.6
Chemicals	1.6	1.8	1.8	1.8
Creative industries	25.4	47.6	55.7	59.8
Energy	1.2	1.2	1.2	1.3
High Tech	26.5	37.4	40.2	41.6
Life Sciences & Health	0.9	1.3	1.4	1.5
Logistics	10.7	12.6	13.2	13.7
Horticulture and starting materials	7.3	9.3	9.8	9.7
Water	1.1	1.4	1.5	1.5
Total	84	127.3	140.8	147.5

In addition to the top-sector companies that trade internationally, there are also companies that do not. This varies from one top sector to another (Figure 3.5.2). In 2017, the top sector Chemicals was most active in international trade: 78 percent of the companies in this sector imported and/or exported goods in 2017. At the other end of the scale, the Creative industries and Agri-Food top sectors traded least: 23 percent of creative industry companies and 32 percent of those in Agri-Food exported and/or imported in that year. These sectors also differed as to the type of trader. In the top sectors Chemicals, Energy, and Horticulture and starting materials, most traders were two-way traders, while most traders were exclusively importers in the other top sectors.

Of the top-sector companies that trade internationally, the majority are independent SMEs (Figure 3.5.3). However, the majority of international traders in the top sectors of Energy and Chemicals are large enterprises. In 2017, 31 percent of companies in the Energy top sector and 23 percent of companies in the top sector Chemicals were large enterprises. The shares were lower for the other top sectors. The majority of top-sector companies that are internationally active are under Dutch control. Also, for all top sectors, most of the companies active in international trade are more than 10 years old. However, in the top sectors that trade internationally, the majority of companies are not multinationals. Most multinationals in the top sectors are in the HighTech sector and these are mostly two-way traders.

There are major differences between the shares of companies in the top sectors that trade internationally. In 2017, the vast majority of entrepreneurs were active in the High Tech sector. The Life Sciences & Health top sector had the largest share of female entrepreneurs with 23 percent, while the smallest shares were found in the top sectors of Energy and High Tech, where only 14 percent of entrepreneurs were women. The highest productivity was achieved in the top sector Chemicals (177 thousand euros per employed person), followed by the top sector Energy (149 thousand euros per employed person). Productivity was lowest in Logistics (82 thousand euros per employed person). Average wages in 2017 were highest in the Energy sector (31 euros per hour) and lowest in the Logistics sector (24 euros per hour).

3.6References

Open references