Investments Dutch private sector in knowledge and know-how down in 2009

Due to the economic crisis, investments in knowledge and know-how by the Dutch private sector were more than 7 percent down in 2009 from 2008. Such a substantial decrease has not occurred in the period 1987-2008. Total private sector investments in knowledge and know-how amounted to about 43 billion euro in 2009, 52 percent of total private sector investments.

Private sector investments in knowledge and know-how, 2009 (bn euro)

Private sector investments in knowledge and know-how down

The decline in recent years contrasts sharply with the effort made by the Netherlands to improve its competitive position as a knowledge-based economy. Over the period 1992-2001, the average growth of investments in knowledge and know-how was 4.6 percent on an annual basis. Substantial investments were made in computer software, partly as a result of new Internet applications and new brand names and improvement of organisation structures.

The growth in knowledge and know-how investments was structurally higher than the overall economic growth in the Netherlands. After 2001, the situation was reversed. Relative to the period 1992-2001, knowledge appears to be a less important factor for economic growth in recent years. Due to their cyclical sensitivity, investments in other fixed assets dropped much more rapidly in 2009 than investments in knowledge and know-how.

Investments and GDP

Knowledge investments crucial to economic growth

In the period 1996-2001, the average annual production growth was 4.3 percent. The increase (0.5 percentage points) in knowledge and know-how, as one of the means of production, played an important role.

In the years that followed, production growth decelerated and in 2009 production growth was negative. The contribution of knowledge capital to production growth was practically zero. Remarkably, productivity growth – the part of production growth that cannot be attributed to increased use of means of production –  was considerable over the period 2001-2007.

Contribution means of production to production growth

Improved efficiency in the period 2001-2007, was partly the result of considerable investments in knowledge and know-how in the prior period. The fact that knowledge capital has barely grown in recent years might have negative consequences for efficiency improvement and growth potential in the years to come.

Murat Tanriseven

Source: The Dutch growth accounts 2009