Executive Summary – Patterns in trade behaviour

The Internationalisation Monitor describes trends in internationalisation and the consequences thereof for the Dutch economy and society. It is published quarterly as part of the Globalisation programme at Statistics Netherlands (CBS), which is commissioned by the Dutch Ministry of Foreign Affairs.

The main feature of this edition of the Internationalisation Monitor is the population of businesses involved in international trade. For many of these companies, international trade is a strategic choice and a key source of growth, although there is a significant group of other companies for which international trade does not make up a large share of their business. A significant segment of the population is made up of businesses that experience a cycle of being briefly active in overseas markets and then returning to the Dutch market. In the past, Statistics Netherlands has investigated the scope, dynamism and composition of the population of businesses involved in international trade. This edition of the Internationalisation Monitor refines and improves on this research, producing a clearer picture of the differences – and indeed similarities – between occasional and structural traders. This is key data for policy-makers aiming to stimulate international enterprise, as it offers insights into how much clout occasional traders have and at what point in their growth they become structural traders.

Trade behaviour patterns are not limited to whether or not the company trades internationally. They also relate to the various products traded, the number of export destinations and the number of customers. Many new exporters start small, supplying a single product to a single country and a single customer. The choices they go on to make – intensifying exports by increasing export volume or ‘fanning out’ by exporting multiple products to several different countries and/or customers – are covered extensively in this edition. There is also a separate focus on a special kind of new trader: ‘born globals’, businesses that start directly exporting goods and/or services within a year of being founded.

Listed below are some of the main findings presented in this edition:

Chapter 1: Trade across borders: a choice for all eternity?

• The number of goods exporters in the Netherlands has seen a big rise in the past decade, from approximately 66 000 exporters of goods in 2010 to 115 000 in 2018. The proportion of the total business population made up of goods exporters has also increased.
• Importers of goods share substantial similarities with exporters, although the number of businesses that import goods is significantly higher than the number of goods exporters.
• Only a relatively small proportion of the businesses export goods every year. Around 31 000 businesses have reported continuous goods exports in all of the nine years examined. However, this relatively small group of businesses is responsible for nearly 80 percent of exports in value terms. The same statistic for the importers is even higher, at almost 90 percent.
• Businesses reporting one-off goods exports make up one-quarter of the total group of unique exporters in the period from 2010 to 2018, whilst only representing 0.5 percent of exports in terms of value. The same applies to businesses that repeatedly start and stop exporting. Although jointly this group of intermittent exporters makes up over 20 percent of the exporter population, they are responsible for less than 2.5 percent of total exports.

Chapter 2: Occasional traders: who are they and what are their distinguishing features?

• Every year, roughly one in ten Dutch businesses actively exports goods and around one-quarter import goods. That is not to say that traders in goods are a uniform group: only a small proportion of the businesses experience year-on-year trade.
• The phenomenon of repeatedly starting and stopping trading is particularly difficult to explain using economic theory, which is grounded in the idea that it is only the more productive businesses that are capable of making the leap to foreign markets, because that is a complex endeavor involving substantial fixed costs.
• After grouping traders based on their trade behavior it becomes apparent that roughly one third of the exporters can be considered a mature exporter, jointly generating about 95 percent of the exports in value terms.
• Of the group of businesses that started exporting in 2016, fewer than half were still exporting in 2017. In 2017, 43 percent developed into pre-mature exporters. More than half withdrew from the export market in the first year, and three percent had ceased trading altogether a year later.
• Pre-mature exporters appear to reach an important crossroads after making their first leap into foreign markets. Of this group, 60 percent become mature exporters, and 40 percent stop exporting after two years. What is particularly striking about these statistics is that almost 8 percent of the pre-mature exporters no longer exist a year later.
• We consider a business that has exported goods in at least three of the last four years as a structural exporter. A business that has exported goods in at least one but no more than two of the preceding four years is defined as an occasional exporter.
• Two out of three active exporters are structural exporters and represent the overwhelming majority of the export value. This group of exporters was responsible for 97 percent of the total export value in 2018.
• The largest proportion of structural exporters – approximately 78 percent – are active in manufacturing, followed by businesses that are active in trade. Businesses in service industries are more likely to be occasional exporters.
• When distinguishing between non-exporters, occasional exporters and structural exporters, a pattern of ‘productivity sorting’ emerges: temporary exporters are more productive than non-exporters, but less productive than structural exporters.
• Businesses with greater labour productivity and capital intensity stand a better chance of achieving a structural presence in international markets.
• Structural exporters trade more with European countries than do occasional exporters, possibly as a result of the relatively low variable costs and high expected profits associated with this trade.
• New exporters with higher levels of labour productivity and capital intensity have a greater chance of being active for at least two more years in that foreign market. This chance is also greater for younger businesses, which may be explained by the ‘born globals’ phenomenon.

Chapter 3: Occasional trade in services

• There was a steady increase in the number of service exporters and importers in the Netherlands between 2012 and 2016.
• Almost 90 percent of the export of services between 2012 and 2016 was conducted by firms that export every year. In terms of the number of exporters, this group makes up just 18 percent of all exporters.
• Nearly 45 percent of businesses that exported services between 2012 and 2016 did so only once. Together, these exporters make up just 1 percent of the value of service exports in this period.
• In contrast to goods exporters, there is a relatively low instance of businesses that repeatedly start and stop exporting among exporters of services. One-off exporters, on the other hand, are actually more common among service exporters than among goods exporters.
• More than 40 percent of the service exporters active in 2015 and 2016 were structural exporters. Approximately 90 percent of the structural exporters in 2015 maintained their status in exports a year later. Of the occasional exporters in 2015, around 70 percent were still exporting occasionally in 2016.

Chapter 4: Development of the export portfolio of new goods exporters

• New goods exporters tend to be relatively small: in 2014, approximately 94 percent were independent small and medium-sized enterprises (SMEs).
• New goods exporters represented 1.6 percent of the total value of goods exports in that year.
• On average, new exporters export to fewer countries and trade in fewer products than other exporters. Most new goods exporters begin by supplying a single product to a single country. In 2014, this was true for seven out of ten businesses in this group.
• On average, larger businesses which begin exporting goods export more product varieties to more countries from the outset than do independent SMEs, particularly in the manufacturing sector.
• Of the new goods exporters, approximately 7 out of 10 initially export exclusively to countries within the European Union, with Belgium being the most popular destination. Just over 10 percent of new goods exporters began their overseas adventure exclusively outside the EU; for these businesses, the US was the most popular destination.
• Approximately half of the goods exporters who started exporting in 2014 continued structurally exporting goods until 2018.
• The largest increase in both the number of export destinations and the number of products in the years following the decision to start exporting can be found among large enterprises. The number of products grew faster than the number of destinations. SMEs experienced exactly the opposite trend. In general the number of destinations is a decisive factor in the growth of the export portfolio.
• The growth in the value of the exports carried out by new goods exporters is largest in businesses that deliver more products to more countries. Between 2014 and 2018, this group’s export value increased almost sixfold. This is also true for the group that increased both the number of countries and the number of customers: those businesses succeeded in increasing their export value by almost 450 percent.
• New goods exporters with an unchanged export portfolio increased their export value over time. The group that saw no change in the number of countries and products experienced a 65 percent growth in their export value between 2014 and 2018. The group with the same number of countries and customers tripled the value of their exports.
• The median new exporter among independent SMEs within the EU in 2014 began exporting to a single customer. For the group that continued exporting, the customer portfolio increased to three or more by 2018, regardless of the customers being distributed across multiple countries. The median number of European trade relationships maintained by large new exporters increased from four to ten.
• Businesses active in manufacturing, wholesale and retail trade were especially likely to have a relatively large number of trade relations when they begin exporting. There was a particular increase in the number of trade relations among large enterprises active in wholesale trade.
• New exporters grow their customer base over time, and this growth appears to correlate with an increase in the number of export destinations.
• Foreign businesses and large enterprises were more likely to expand their portfolio in terms of countries increasing both the number of countries and products. The same was true for increasing both the number of countries and the number of customers. Large domestic enterprises and independent SMEs are particularly well represented in the group of enterprises with a stable export portfolio.
• On average, for each year between 2014 and 2018, more than half of the exporters added a new destination in comparison with the previous year (55 percent). This was substantially more likely to be the case for large enterprises and businesses under foreign ownership than for independent SMEs.
• Firms starting to export to a new country also actually expanded the number of countries in their portfolio in less than a quarter of the cases on average in the period 2014–2018 (23 percent). The chance of this being the case was substantially lower among new exporters and independent SMEs. Foreign controlled companies also score slightly higher in this area.

Chapter 5: Dynamics in the export portfolio of service traders

• Among new service exporters, large enterprises had significantly more service destinations than independent SMEs.
• The period from 2014 to 2018 saw a gradual increase in the average number of export destinations for both large businesses and independent SMEs.
• 34 percent of businesses starting service exports in 2014 still do so in 2018.
• New service exporters were most likely to stop exporting after the first year if they exported to Belgium or Germany in that year.
• The higher the number of export destinations, the smaller the chance that an enterprise would stop exporting.
• Among the service exporters that continued exporting from 2014, the greatest relative increase in destinations came for businesses that had only one export destination in 2014.
• Whereas the number of new service exporters that continued exporting from 2014 declined, the average number of customers per service exporter increased.
• The fewer the number of customers to which services were exported in 2014, the greater the chance that the enterprise had entirely stopped exporting services by 2018.
• In addition to the increase in the average number of customers in the period from 2014 to 2018, the average service export per customer also increased.
• The lower the export value of services in 2014, the greater the probability that a business had entirely ceased exporting services by 2018.

Chapter 6: Born globals

• In the period from 2014 to 2018, the total export value of the group of born globals active in goods trading grew from 1.8 to 2.3 billion, while the total export value of other new exporters in goods trading increased from 3.3 to 8.7 billion.
• In the period from 2014 to 2016, the total export value of the group of born globals trading in services grew from 457 to 810 million. For other new exporters trading in services, the total export value increased from 4.3 to 5.1 billion.
• Born globals have a better chance of survival in the years following their entry onto the export market than do other new exporters.
• 55 percent of the born globals that started exporting goods in 2014, still did so in 2018. For the group exporters as a whole this percentage is 50 percent.
• 54 percent of born globals that started exporting services in 2014 still did so in 2018. For the group exporters of services as a whole this percentage is 45 percent.

Chapter 7: Are occasional exporters more likely to fail than structural exporters?

• Exporters’ probability of survival is generally higher than that of companies that do not export. This is true for exporters of both goods and services.
• Structural exporters have a higher probability of survival than companies that only export occasionally. Again, this is true for exporters of both goods and services.
• Structural exporters are less likely to survive after they stop exporting than former occasional exporters.