Figures about knowledge transfer from fundamental research towards private companies strengthen this
observation.
To summarize, the overall picture is that private companies relatively have low R&D investments and
that R&D particularly takes place in public organisations. Total R&D intensity therefore remains on
average in international perspective. On this aspect, the economy is thus not characterized by great
innovative strength, but based on other indicators a more positive view emerges. A study of the
independent bureau of economic analysis of the government (CPB) confirms this. Despite the low R&D
expenditure the overall innovative Dutch position is considered as moderately positive.
5. Design and impact of Dutch innovation policy
In this paragraph we describe the design and impact of Dutch innovation policy. We distinguish four
objectives and look at the theoretical market failures, the instruments that are used and their potential
economic impact.
5.1.Design of innovation policy
The objectives of Dutch innovation policy can roughly be divided into four categories:
a) More development and use of technological knowledge by individual companies
b) Strengthening the knowledge base through cooperation between companies and public knowledge
centres
c) More diffusion and application of knowledge within small- and medium-sized businesses.
d) Increasing the number of starting companies that focus on knowledge development.These categories are directly linked with the perceived problems mentioned in paragraph 2. An
interesting observation is that low private investment and little innovative investments are input-related
problems, but a substantial part of the existing shortcomings, such as limited practical use and diffusion
of knowledge as well as insufficient corporation between companies are clearly output-related.
Improvements in R&D policy can thus not only be found in increasing the available budget directed for
R&D, but also in making better use of existing knowledge.
a) More development and use of technological knowledge by individual companies
Stimulating R&D investment in private companies is an important element in Dutch innovation policy.
The rationale for government action is based upon the possible existence of information problems and
external effects. The difference between the private and social return of R&D and the fact that a company
is unable to internalize all benefits of its investment leads to underinvestment in R&D on an aggregate
level. The fiscal subsidy tries to remove this distortion, although the actual extent of the wedge between
private and social return is unknown.
The most important instrument within this category is a general fiscal stimulus for companies (WBSO)
by means of a tax credit on the wage cost of knowledge workers that are involved in innovative research
projects. The effectiveness of a fiscal stimulus can only be ascertained within a full economic analysis,
including effects on relative prices and wage costs, but such figures are difficult to obtain, especially with
regard to the net effect of the fiscal stimulus, the alternative use of R&D workers and the magnitude of
the social return. Given these restrictions, an evaluation of the effectiveness of this instrument has been
carried out which concludes that companies that receive the fiscal subsidy spend more on R&D. The
direction of the relation however is uncertain but there are indications that stimulus leads to more R&D
investment and not vice versa.