Innovation can be the key to a thriving and sustainable economy, according to innovation driver Anton Duisterwinkel. ‘At least, if you establish strict rules for sustainability on the one hand and provide subsidies for the development of sustainable solutions on the other.’ Together with spatial economist Frank van Oort, he outlines an interesting route. By Rianne Lindhout
What does the high-tech landscape in South Holland look like?
Anton Duisterwinkel: ‘No less than 33 per cent of Dutch tech companies are located in South Holland. The High Tech Systems & Materials sector is particularly important. It employs more than 123,000 people in over 6,000 companies with two or more employees. The sector is very diverse. For example, computer-controlled machines are manufactured, as well as measuring systems for radar detection on ships, for use in space or for the Ministry of Defence. Approximately one third of the Dutch defence industry is located in South Holland.'
That's surprising, doesn't everyone think of Eindhoven when they think of the tech industry?
Duisterwinkel: 'Typical for South Holland is that there are many suppliers at the SME level. A greenhouse contains up to nine systems, from power supply and cooling to robotics. Many suppliers work exclusively for the maritime sector, horticulture or defence, for example. And what's remarkable is that they mainly associate themselves with the sector they supply and not with “high-tech”. As a result, these high-tech companies are not very visible. But companies in South Holland spend (much) more than 6 per cent of their turnover on research and development, which makes them high-tech companies. On average. An average company spends less than 2% on this.
That sounds like extremely fertile ground for innovation and a job engine.
Duisterwinkel: 'It is, given the strong growth in recent years. But as is the case throughout the Netherlands, only a small proportion of the many tech start-ups make it. Ten times fewer than in the US. For example, they don't have a good marketer on their team, only techies. And they lack the financing to grow. Pension funds have enough money, but they don't invest in start-ups. There are opportunities there, and we are working on them.
‘Another problem is the limited exchange of knowledge and personnel between different companies. Suppose a company develops sensors for shipping that would also be valuable in horticulture. That company simply supplies the shipping industry; the horticultural sector has no contact with it. At InnovationQuarter, we are trying to strengthen that exchange with Hi Delta – the high-tech platform in South Holland – and with the Technological Industry Task Force of the Economic Board South Holland. And here's a very concrete example: someone asked me if I knew anyone who could use ultrasonic welding to heat plastics very locally, after which you can join them securely without glue. Through our combined networks, we were able to find a few companies. I also organise projects in which potential partners can meet each other. And in the RoboHouse of Delft University of Technology and TNO, which was partly created on our initiative, SMEs have access to knowledge and technology.
If tech companies help each other more, do they also help society and the economy?
‘In the South Holland Growth Agenda, we want to stimulate green growth and the growth of human capital with high-quality employment. Successful economic growth is determined half by human capital, i.e. whether there is a productive, well-educated workforce that can adapt to changing circumstances. The other half is determined by innovation. If both are in order, the only problem left is the available space.’
Few tech startups make it. Ten times fewer than in the US.'
Duisterwinkel: ‘We must dare to say goodbye to polluting and unproductive sectors. Labour productivity is very important, and that is not going so well in the Netherlands. This is also true in South Holland: we are not going to make progress with lots of people picking vegetables. We need to create a lot of added value with relatively few people, because there are shortages in the labour market and wages are relatively high. Saying goodbye to sectors must be done carefully: in Aberdeen, unemployment rose dramatically after the sudden forced departure of the oil industry. First build up an alternative industry. This requires innovation. On the one hand, to develop new products that can make healthcare and horticulture more efficient, for example, and on the other hand, to develop production technology that increases productivity.'
So what is the right approach? South Holland wants selective growth, but who should do the selecting?
Duisterwinkel: ‘It has to happen in the market, but the Province can put more energy and money into sectors that promote green growth. What you give attention to grows. I think it will only work with the root-and-stick approach. The stick is new legislation. For example, legislating that nitrogen emissions must be halved in five years' time. If you do nothing else, companies will only start asking around after four and a half years to see if anyone can help them with this. If you immediately organise subsidies and field labs, their suppliers will get to work to develop the necessary technology in time, and their customers will be able to apply it in time to meet the target. Unfortunately, this method is rarely seen.’
The rules come from one ministry and the subsidies from another.'
Can you also use this root-and-stick method at the regional level?
Duisterwinkel: 'Within InnovationQuarter, we can at most put it on the agenda. It requires cooperation within the government. But the rules come from one ministry, while another ministry is responsible for subsidies and yet another for education, which really needs to be more appropriate. In parts of Germany, educational programmes do not receive funding for every graduate, as is the case here, but for every graduate who finds a job. Youth unemployment there is zero. Here, we have a perverse incentive to offer the cheapest possible education programmes, as technical programmes are expensive. The labour market would benefit from the German system of kein Abschluss ohne Anschluss (no degree without a job).
Economic success is determined by a good labor market and innovation.'
These seem like problems we should be able to solve, after which everything can be sorted out with rules and subsidies, right?
Van Oort: 'You can stimulate sustainable and productive high-tech, but in the context of broad prosperity, we have to take into account groups of people who are not included in this.' Duisterwinkel: 'That is certainly a point of attention, but in the hospitality and healthcare sectors, for example, there will always be a need for many people. And as for the frequently asked question of whether AI will have a major impact on the labour market, I think it will be less than expected. In the 1970s, people thought that microelectronics would cost a lot of jobs. In practice, such innovations also create new jobs. But we do need to help people make the transition. Lifelong development is vital for the people themselves and for our economy.
Are there certain sectors in South Holland that we should focus on strategically?
Van Oort: 'We are currently betting on too many sectors. Duisterwinkel: 'I agree, but if you bet on just one sector, the risk of failure is high. South Holland can go far by stimulating the development that is already taking place in horticulture, from tomatoes to technology. The province also has a head start in quantum technology, which can be used in satellite communication and space travel, for example. But beware, Japan has just invested seven billion in, among other things, a large quantum complex where companies can make use of all kinds of facilities. If we don't keep up, our companies will lose out. Van Oort: 'That has to be done at European level. There also needs to be an EU fund for AI-related high-tech, otherwise we will miss the boat.
We must dare to say goodbye to polluting or low-productivity sectors'
Dr. Ir. Anton Duisterwinkel worked at TNO for many years and is now committed to strengthening the economy at InnovationQuarter, the Regional Development Agency of South Holland. He brings the right people together to accelerate innovation and help companies move forward, especially in the high-tech manufacturing industry.
Prof. Dr. Frank van Oort is Professor of Urban and Regional Economics at the Erasmus School of Economics. Drawing on his knowledge of the knowledge economy, urban economics and spatial planning, he warns against stagnation and advocates a shared vision of our spatial-economic future.
This article is from the new Leiden-Delft-Erasmus white paper 'The Economy of South Holland: Earning - Distributing - Changing'.