Executive Summary

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

International trade often refers to trade in goods, but the import and export of services – such as transport, logistics, finance, communications and the use of intellectual property – are also vital to the Dutch economy. In 2018, service exports contributed an amount of €105bn to the national economy. Service exports play a pivotal role in global production networks and global value chains. This makes international trade in services an interesting and relevant central topic of this Internationalisation Monitor.

In order to support and encourage companies to enter the international market, it is crucial to know what factors are involved in their decision whether or not to engage in cross-border trade. These factors may be different for service providers as opposed to goods producers. It is essential to gain insight into what affects a company’s likelihood of engaging in international business and to identify the different behavioral patterns of goods and service traders. Decisions to export or to invest in R&D are interdependent. Knowledge activities in the economy and internationalisation often go together; these combined and mutually reinforcing activities are an important part of globalisation.

This edition of the Internationalisation Monitor describes the population of service traders, the patterns in their export behaviour, and how these have developed over time (2015 – 2018). We start off by providing an overview of some key features, such as the sectors of industry, company size, and whether or not they combine trade in services with goods trade. Then we provide a clearer picture of the differences and similarities between occasional and perennial service traders; and we investigate whether GDP of a particular trading partner and distance to a particular trading partner influence the volume of service exports. Finally, we study the complementarity between R&D and exports.

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

Chapter 1: International service traders in more detail

• Within the group of international service traders, the majority engages in business services or wholesale and retail. Most enterprises are one-way importers and relatively small in size. In terms of the value of trade, the top five sectors are business services, information and communication, trade and storage, manufacturing, and wholesale and retail. Almost half of the total export value is on account of business services and transport and storage.
• In 2018, more than 93% of international service traders in the Dutch business economy were independent SMEs, mostly one-way importers. Only 3.6% were foreign multinationals and 2.6% Dutch multinationals. On the other hand, foreign multinationals accounted for 66% of total exports and Dutch multinationals for 24%; in imports these figures were 73% and 19%, respectively. Independent SMEs represented only 10% of the total export value and 8% of the total import value.
• Within the group of international goods traders in the Dutch business economy, most are active in wholesale and retail trade. Just as in service trade, the majority concerns one-way importers. The five largest sectors in terms of trade value are manufacturing, wholesale and retail, transport and storage, energy, and business services. 84% is on account of two sectors: manufacturing and wholesale and retail. In 2018, over 90% of all international goods traders were independent SMEs; only 4.2% were foreign multinationals and 3.3% Dutch multinationals. Foreign multinationals accounted for more than half of the export and import value of international goods traders, whereas independent SMEs contributed around 15%.
• Among international goods and service traders combined, 39% trade only in services, 28% only in goods and 33% in both. At 32%, the largest share of traders is found in wholesale and retail, followed by business services with 26%. Of all traders, 95% are independent SMEs; only 3% are foreign multinationals and 2% are Dutch multinationals.
• Trading goods as well as services results in the highest shares in the value of both exports and imports. In 2018, more than 90% of the total value of both exports and imports was generated by enterprises trading goods as well as services. Manufacturing contributed 33% and wholesale and retail 32% to total exports. As for imports, wholesale and retail contributed 42% and manufacturing 28%.
• Of the total export and import value in 2018, more than half was generated by foreign multinationals. Dutch multinationals contributed one-quarter to exports and more than 23% to imports. The share of independent SMEs in the export and import value was only 12%. Among all types of traders, most of the import and export value is generated by combined goods and service trading.

Chapter 2: Occasional service traders

• Over 6% of the Dutch enterprise population is active as a service exporter.
• In 2018, more than half of the service exporter population were classified as occasional exporter (68 thousand exporters).
• Although perennial exporters made up only 44% of the service exporter population, these 53 thousand companies accounted for 94% of the total value of service exports in 2018.
• We classify a business that has exported services in at least three of the last four years as a perennial service exporter. A business that has exported services in at least one but no more than two of the preceding four years is classified as an occasional service exporter.
• Most occasional (70%) and perennial (47%) service exporters are small companies with no more than 1 employed person. Notably, one out of eight perennial service exporters belongs to a large enterprise, while this is ‘only’ the case for three out of one hundred occasional service exporters.
• Perennial service exporters account for more than half of all service exports in manufacturing, trade and transport, hospitality and IT. In the business services sector, three out of five companies export services occasionally.
• Although the group of extra-EU service exporters is relatively limited in size, exports outside the EU still contribute just over 40% to the value of total service exports by both perennial and occasional exporters.
• For both perennial and occasional goods exporters, more than 30% export services in addition to goods. Perennial goods exporters are also more likely to export services structurally rather than occasionally.
• Approximately 35% of the occasional service exporters are also active as goods exporter. However, more than half of all perennial service exporters also export goods.
• One in three occasional service exporters become a perennial exporter after three years. This is similar to the statistics on goods exporters. Approximately 31% of the occasional service exporters in 2015 did not report any exporting activity in 2018 while 14% discontinued such activity that year. More than one-quarter of the occasional service exporters from 2015 still belonged to the same group three years later.
• Seven out of ten perennial service exporters in 2015 were still exporting continuously three years later. Around 15% only exported occasionally in 2018, while 4% were no longer exporting any services in 2018. The other 10% were no longer active in 2018.
• After grouping traders based on their trade behaviour it becomes clear that 41% of the companies that started exporting services in 2015 were still doing so in 2018. The majority may be considered to be mature exporters who exported services almost each year in the period 2015–2018.
• Around one-tenth of all companies which started exporting services in 2015 no longer existed after three years.
• More than half of the immaturing service exporters in 2015 became a mature exporter in 2018 while 11% had stopped exporting after three years. What is particularly striking about these figures is that around 10% of the immaturing service exporters had ceased to exist after three years.
• Mature service exporters are the most stable group: 70% still belong to this group three years later. For this group, the dynamics over the period 2015–2018 apply to both goods and service exporters.
• A pattern of ‘productivity sorting’ emerges among service traders: the occasional service exporters position themselves between the non-exporters and the perennial service exporters in terms of their productivity. The ‘productivity sorting’ pattern is also observed among goods traders.

Chapter 3: Gravity model and trade in services; different from trade in goods?

• From the trade in services statistic, we know that in 2019 service exports amounted to €238bn.
• During the 2014 – 2019 period, service exports grew by 9% annually.
• ‘Other business services’ and ‘Use of intellectual property’ are the two largest service categories by export value. In 2019 these two service categories generated an export value of €71bn and almost €60bn, respectively.
• In 2019 Ireland was the most important destination for service exports with a value of €32bn, followed by Germany and the UK.
• 65% of total service exports went to EU countries in 2019. The share held by EU countries increased during the period 2014–2019 as it stood at 58% in 2014.
• Our visual analysis shows that there is a clear negative relation between the value of service exports and the distance between the capital of the destination country and Amsterdam.
• There is also a clear positive relation between the value of service exports and the GDP of the destination country.
• Our gravity analysis confirms that there is a significant negative relation between the export of services to a country and the distance to the destination country. This relation is less pronounced for trade in services than for trade in goods.
• Our gravity analysis also confirms that there is a significant positive relation between the GDP of a country and service exports to the destination country. There is no significant difference in this relation between trade in services and trade in goods.
• The same significant effects are also being observed for the number of enterprises exporting to a country and the GDP and distance of the destination country.
• Our micro analysis shows the same effects as the macro analysis and additionally shows that there is a positive relation between the language similarity between the destination country and the Netherlands on the one hand and the value of service exports to that country on the other.
• Transport service exports are more affected by the distance to the destination country than other service exports.
• The use of intellectual property is less affected by the distance to the destination country than other services.

Chapter 4: Characteristics of enterprises with R&D and export activities

• We have constructed a dataset on enterprises in the manufactoring sector and in services, based on the R&D survey response over the period 2013–2017. Of the 7,254 enterprises in the manufacturing sector, 54% conducted both R&D expenditures and exports of goods during this period. Over 90% only conducted exports of goods, while 56% only had R&D expenditures.
• The average labour productivity (value added per person employed) of enterprises in the manufacturing sector was €51 thousand for enterprises not conducting any R&D or goods exports, €78 thousand for those only conducting goods exports, €59 thousand for those only conducting R&D and €93 thousand for enterprises conducting both R&D and goods exports.
• The average export value and average intramural R&D expenditure are higher for manufacturing enterprises engaging in both activities.
• Of the 11,498 enterprises in our data for the services sector, 16% had conducted both R&D and exports of services. Almost 48% had conducted exports and almost 25% had conducted R&D activities.
• The average labour productivity in the services sector is €69 thousand for enterprises not conducting any R&D or exports; €84 thousand for enterprises only conducting exports; €80 thousand for those only conducting R&D and €92 thousand for enterprises conducting both R&D and exports.
• In general, enterprises in the services sector have a higher labour productivity than those in manufacturing, but tend to be larger in terms of the number of persons they employ. Manufacturing enterprises display a slightly higher labour productivity than enterprises providing services and conducting both goods exports and R&D.
• The average value of service exports and the intramural R&D expenses are higher among enterprises in the services sector engaging in both types of activities.
• The average value of goods exports per person employed in the manufacturing sector is higher than that of service exports per person employed in the services sector.

Chapter 5: Complementarity between R&D and export

• We have empirically determined the probabilities of enterprises changing their exporting and R&D behaviour between two consecutive years, based on data for manufacturing and services.
• Manufacturers exporting goods in a given year have a 69 percentage point higher probability of conducting goods exports in the following year than non-exporters.
• Manufacturers conducting R&D in a given year have a 83 point higher probability of conducting R&D in the next year than non-R&D manufacturers.
• Manufacturers exporting their goods in a given year have a 6 point higher probability of conducting R&D in the following year.
• Manufacturers conducting R&D in a given year have 11 point more probability of exporting goods in the next year.
• Enterprises exporting services in a given year have 86 point more probability of exporting services the next year than non-exporters.
• Enterprises providing services that conduct R&D in a given year have an 83 point higher probability of conducting R&D the next year than non-R&D service enterprises.
• Service enterprises engaged in exporting their services in a given year have a 4 point higher probability of conducting R&D the next year than non-exporters.
• Service enterprises conducting R&D in a given year also have a 4 point higher probability of exporting services in the next year than non-R&D service enterprises.
• Foreign control, foreign direct investment, size class, labour productivity and investment in tangible assets are all positively and significantly associated with the probability of manufacturers taking up both R&D and exports of goods as compared to manufacturers that conduct neither activity.
• Foreign control, foreign direct investment, size class, labour productivity and investment in tangible assets are all positively and significantly associated with the probability of service enterprises taking up both R&D and service exports as compared to service enterprises that conduct neither.
• Overall, in manufacturing, more expenditures on intramural R&D lead to more exports of goods and more exports of goods lead to more expenditures on intramural R&D. These indicators have been found to be positively and significantly associated with each other, while controlling for other characteristics.
• Overall, among service enterprises, more expenditures on intramural R&D lead to more service exports and more service exports lead to more expenditures on intramural R&D. These indicators have been found to be positively and significantly associated with each other, while controlling for other characteristics.