The new Dutch Chamber of Commerce:
10 basic principles
By
Henk-Jan Kruit
The new Dutch Chamber of Commerce: 10 basic principles
A case study
Master thesis on behalf of the MSc BA Small Business and Entrepreneurship
University of Groningen
Faculty of Economics and Business
Master of Science Business Administration - Small Business and Entrepreneurship Program Coordinator & Second Examiner University of Groningen: Clemens Lutz Supervisor & First Examiner University of Groningen: Peter Zwart
Supervisor Ministry of Economic Affairs: Iman Merison
Co-Supervisor Ministry of Economic Affairs: Zuzana Wilms-Stanova
The author: Henk-Jan Kruit
Student number: 1703994
Address: Poortstraat 16A
9716JH Groningen
Email: kruit.hj@gmail.com
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Executive summary
In 2011, the Dutch Rutte-I administration decided for a thorough modernization and streamlining of the informational, educational, and supporting public infrastructure regarding entrepreneurship and innovation, to reduce fragmentation of Dutch public services, focus on the needs and requirements of entrepreneurs, and to grasp the opportunities of digitalization. This ultimately led to the formation of a new Chamber of Commerce. The new Chamber of Commerce is a quasi-autonomous non-governmental organization, and has received authority from the government to execute its statutory tasks, serving the public interest. By law, the new Chamber of Commerce is tasked with the execution of the subsequent five statutory tasks: maintenance and execution of tasks related to the trade register; regional economic development; informational, educational and business support; management of the digital and physical business plazas; and stimulation of innovation. The Chamber of Commerce’s activities are supported by the physical and digital business plazas.
In this thesis the following research question has been addressed:
How should the new Dutch Chamber of Commerce as a public service provider deal with market imperfections, preventing its activities from anti-competitive conduct, in the context of potential
future cooperation with the private sector, while learning from the lessons of similar foreign organizations?
To provide an answer to the main research question, sub questions have been developed, which in combination with the theoretical framework, have led to the development of propositions. By the propositions the sub questions and the main question have been answered.
Proposition 1: If market imperfections affecting SMEs and entrepreneurs are present in the Dutch economy, if not tackled completely by the private sector, these market imperfections provide a solid base for the Chamber of Commerce to develop and implement activities upon, if they fall within the Chamber’s scope and when a positive outcome is expected.
Proposition 2: The Dutch’ holistic entrepreneurship policy approach creates a broad range of policy measures the Chamber of Commerce might implement within the scope of its tasks and responsibilities, as a primary organization providing business support services to entrepreneurs and SMEs, to develop and implement activities upon.
Proposition 3: Public-private cooperation can create surplus value for the target groups of the Chamber of Commerce, as for the Chamber of Commerce and the private organization themselves, by developing better, efficient products and services.
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The research design for answering the propositions and the research questions is the qualitative case study. Data has been collected by desk research and interviews with internal and external stakeholders of the Dutch Chamber of Commerce. For the comparison with similar international organizations, interviews with contacts at the selected international organizations were held.
The results of the data collection stage, and the analysis, have led to all of the propositions to be stated as true. Ten basic principles have been drawn from these propositions which are significantly important in providing an answer to the main question. In answer to the main research question, and as a recommendation, the new Dutch Chamber of Commerce should:
1. Address market imperfections affecting SMEs, starters and entrepreneurs, which fall within the Chamber’s statutory tasks;
2. Address solely market imperfections which aren’t, completely, tackled by the private sector; 3. Address market imperfections where a positive outcome is expected;
4. Exploit current activities and other opportunities within the scope of the Chamber’s statutory tasks to the fullest;
5. If possible, cooperate with public or private organizations providing business support when this will add value for the target groups;
6. Comply with legislation on competition for public organizations; 7. Implement proper evaluations mechanisms, by an impartial actor;
8. Learn from international, similar organizations, on the subjects of policy advisement, public-private cooperation, and the clear view on government versus market activities;
9. Function as a signpost and referrer to other public or private organizations if they can provide the, potentially superb, support that is needed;
10.Strive for a coherent, integrated and qualitative support by the entire public service provision to the target groups.
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Preface
I would like to thank all who have contributed to the realization of my thesis.
A special thank you is for the Enterprise department of the Ministry of Economic Affairs, for providing me with the opportunity of a research internship.
I would like to thank the Dutch Chamber of Commerce for cooperating with my research, and all the external interviewees who I have interviewed during my internship.
I would like to express my gratitude to the foreign Chambers of Commerce and to the contacts at the UK Department for Business, Innovation & Skills, for their contribution to my research.
I would like to thank Iman Merison and Zuzana Wilms-Stanova especially, for their feedback, guidance, and care, supervising my research. Thank you!
A special thank you is for Peter Zwart, my supervisor at the University of Groningen, for his precious feedback during the research process.
I hope you will enjoy reading my thesis,
Yours sincerely,
Henk-Jan Kruit
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0.1 Index
Executive summary ... 2 Preface ... 4 0.1 Index ... 5 0.2 Abbreviations ... 80.3 Figures and Tables ... 9
1.0 Introduction ... 10
1.1 A new Chamber of Commerce ... 11
1.2 Problem statement... 12
1.3 Research questions ... 14
1.3.1 Main research questions and sub questions ... 14
1.4 Academic Relevance ... 15
1.5 Methodology ... 17
1.6 Chapter and paragraph layout ... 17
2.0 Background ... 19
2.1 History of the Chamber of Commerce and Syntens ... 19
2.1.1 Chamber of Commerce ... 19
2.1.2 Syntens Innovation Centre ... 20
2.2 Merger and reorganization – The new Chamber of Commerce ... 21
2.3 Tasks and responsibilities ... 22
2.3.1 Trade register ... 23
2.3.2 Regional economic development ... 23
2.3.3 Informational, educational & business support ... 24
2.3.4 Business plazas ... 25
2.3.5 Stimulation of innovation ... 27
2.3.6 Other activities ... 27
2.4 Public profile ... 28
2.4.1 Governance structure... 28
2.5 International Chambers of Commerce ... 29
2.5.1 Sampling of countries ... 30
2.6 Summary ... 31
3.0 Theoretical framework ... 32
3.1 Market failure ... 32
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3.1.2 Market imperfections affecting SMEs, entrepreneurs and start-ups ... 35
3.1.3 Critique on the market failure argument for government intervention ... 37
3.1.4 Conclusion ... 38
3.2 SME and entrepreneurship policy approach ... 39
3.2.1 Policy typologies ... 40
3.2.2 Policy measures ... 42
3.2.3 Conclusion ... 44
3.3 The possibilities of public-private cooperation ... 45
3.3.1 The case for public-private cooperation ... 45
3.3.2 Type of hybridization ... 46
3.3.3 Advantages of public-private cooperation ... 47
3.3.4 Conclusion ... 48
3.4 Anti-competitive conduct ... 49
3.4.1 Competition by the public sector ... 49
3.4.2 Prevention of anti-competitive conduct ... 50
3.4.3 Basic principles for prevention of anti-competitive conduct ... 51
3.4.4 Conclusion ... 52
3.5 Conceptual model ... 53
3.5.1 The new Chamber of Commerce ... 53
3.5.2 Presence of market imperfections ... 54
3.5.3 SME and entrepreneurship policy approach ... 54
3.5.4 The possibilities of public-private cooperation ... 54
3.5.5 Anti-competitive conduct ... 55
4.0 Method ... 56
4.1 Methodological foundation ... 56
4.2 Research Design - Case study ... 56
4.3 Data collection ... 57
4.3.1 Information need per concept ... 59
4.3.2 Sampling interviewees ... 62
4.4 Data analysis ... 62
4.5 Quality of the case study design ... 63
5.0 Results ... 64
5.1 The Dutch Chamber of Commerce ... 64
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5.1.3 The new Chamber of Commerce and market imperfections ... 74
5.1.4 The new Chamber of Commerce and cooperation with the private sector ... 77
5.1.5 The new Chamber of Commerce and anti-competitive conduct ... 79
6.0 Discussion ... 81
6.1 The propositions ... 81
6.1.1 The Chamber of Commerce and market imperfections... 81
6.1.2 The Chamber of Commerce and the Dutch policy focus on entrepreneurs and SMEs ... 83
6.1.3 The Chamber of Commerce and public-private cooperation ... 86
6.1.4 The Chamber of Commerce and anti-competitive conduct ... 87
6.2 Practical highlights regarding the new Chamber of Commerce ... 89
6.3 Going abroad ... 91
6.3.1 United Kingdom – Gov.uk... 91
6.3.2 The Austrian Chamber of Commerce ... 92
6.3.3 The French Chamber of Commerce ... 92
6.3.4 The German Chamber of Commerce ... 93
6.3.5 The Luxembourg Chamber of Commerce ... 94
6.4 Limitations ... 94
7.0 Conclusion ... 96
7.1 Propositions, sub questions and main research question ... 96
7.2 Recommendations ... 100
7.3 Research opportunities ... 102
References ... 103
Appendix A – The activities of the Dutch Chamber of Commerce ... 109
Appendix B – Definition of SMEs ... 110
Appendix C – Policy typologies ... 111
Appendix D – Interview Guide Internal and External stakeholders Dutch Chamber of Commerce ... 112
Appendix E – Information regarding research into the Dutch Chamber of Commerce for international Chambers of Commerce ... 120
Appendix F – Interview Guide International Chambers of Commerce ... 123
Appendix G – Information regarding research into the Dutch Chamber of Commerce for Gov.uk ... 126
Appendix H – Interview Guide Gov.uk ... 129
Appendix I – List of interviewees and international partners ... 131
Appendix J – Assessment framework ... 132
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0.2 Abbreviations
BIS Business, Innovations & Skills (British government department)
CC Chamber of Commerce
CCI Chamber of Commerce and Industry (France)
Chamber Chamber of Commerce (Dutch)
EC European Commission
EU European Union
EIM Economisch Instituut voor het Midden- en Kleinbedrijf
FDI Foreign Direct Investment
GDS Government Digital Services (British government department)
MEA Ministry of Economic Affairs
NEA Netherlands Enterprise Agency (former Agency NL)
NL Netherlands/Dutch
PPP Public-private partnership
Quango Quasi-autonomous non-governmental organization
RIDA Regional investment and development agency
SME(s) Small and medium enterprise(s)
Syntens Syntens Innovation Centre
UK United Kingdom
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0.3 Figures and Tables
Chapter 2.4 Figure 1: Governance structure of the Chamber of Commerce
Chapter 3.1 Table 1: General market failures related to market imperfections affecting starters and small firms
Chapter 3.2 Figure 2: Entrepreneurship policy typologies
Chapter 3.2 Table 2: Objectives and measures for selected policy areas of entrepreneurship policy Chapter 3.3 Table 3: Strengths and weaknesses of delivery of public services in public and private
sector agencies
Chapter 3.3 Table 4: Overview of hybrid types, arrangement of tasks, and possible relationships between public and private sector agencies
Chapter 3.5 Figure 3: The conceptual model
Chapter 6.1 Table 5: Policy measures for selected policy areas of entrepreneurship policy and related activities of the Dutch Chamber of Commerce
Appendix A Table A1: The activities of the Chamber of Commerce per statutory task Appendix B Table B1: The EU definition of SMEs
Appendix C Table C1: The policy typologies’ objectives, policy rational, areas of policy, policy measures, policy structure, and limitations
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1.0 Introduction
‘The more people who own little businesses of their own, the safer our country will be, for the people who have a stake in their country and their community are its best citizens.’
John Hancock, US statesman and American Founding Father
In the late 18th century, in the United States small businesses were valued from a political and societal point of view, rather than their economic contributions. Although small businesses have been valued by economists ever since, the start and mid of the 19th century were mainly dominated by large firms. It was in the late 1970s, when western governments started paying more attention to small businesses. The recognition of small businesses as an engine for economic growth, and their contribution to social wealth in terms of job creation and start-ups led to specific policy measures for small businesses (Acs & Audretsch, 1993; Honjo & Harada, 2006; Loveman & Sengenberger, 1991). Furthermore, the attention small and medium enterprises and entrepreneurship increasingly received from policy makers, analysts, researchers and economists, regarding their contribution in terms of wealth creation, job creation, economic growth, innovational activity and export capacity, led to the development of policies in support of these contributions (Audretsch, Grilo & Thurik, 2007; Blackburn & Schaper, 2012).
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compared to normal growing firms (Panteia, 2012). Although Mason and Brown (2013) agree to focus public support on firms with growth potential, they disagree with the implication that start up policy should cease in favor of high growth firm policies as suggested by Shane (2009) and others. Instead of ceasing start-up support, Mason and Brown (2013: 217) suggest to: ‘…cut generic start-up business support on the grounds of questionable effectiveness and high displacement and instead focus on the types of support likely to be needed by potential high growth firms’. Without support for new businesses, there would be no pipeline for potential high growth firms. In addition, the importance of small businesses for job creation is supported by research of De Wit and De Kok (2014), who confirm small businesses overall create more jobs than larger firms in the EU. Thus, start-up support, as a pipeline for high growth firms and indirect support of job creation by small businesses, and support for firms with growth potential, as catalyst of economic growth and job creation, are both considered as valid public support mechanisms policy makers should focus upon.
1.1 A new Chamber of Commerce
In 2011, the Dutch Rutte-I administration decided for a thorough modernization and streamlining of the informational, educational, and supporting public infrastructure regarding entrepreneurship and innovation, to reduce fragmentation of Dutch public services, focus on the needs and requirements of entrepreneurs, and to grasp the opportunities of digitalization. The foundation for the modernization is embedded in the merger of Syntens Innovation Centre, the twelve independent Chambers of Commerce, the Dutch Chamber of Commerce association, and several parts of the services provided by the Netherlands Enterprise Agency, the former NL Agency. The new organization, the ‘new’ Chamber of Commerce, emphasizes on ‘...digital unless...’ for the years to come, with a key role to play for the physical and digital business plazas. A consequence of the emphasis on digitalization is the reduction of the number of physical front offices from 50 to 19 (Chamber of Commerce & Syntens Innovation Centre, 2013).
The new Chamber of Commerce is regarded as one of the key organizations in the Dutch public sector providing support to starters and firms with growth ambition, with the Ministry of Economic Affairs as its supervisory authority. The Chamber of Commerce is a public service provider responsible for maintenance and execution of tasks related to the trade register, support of entrepreneurs by providing informational, educational and business support, and regional economic development. As from January 1, 2014, two new tasks have been added to the Chamber’s task portfolio: the development and management of the regional, physical business plazas and the digital business plaza; and the stimulation of innovation and innovative activities.
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statement: ‘…enable entrepreneurs to do business in a safe manner and to grasp their start and growth ambitions…’ (Chamber of Commerce, 2013: 3). This statement is in accordance with the emphasis scholars put on public policy for SMEs, entrepreneurs and start-ups, which is stimulating and helping firms with growth opportunities to grasp their growth potential, especially high growth firms (Mason & Brown, 2013; Lee, 2013). In the Chamber’s vision, the need for proper government support, without disturbing private sector markets, is addressed: ‘…it is the Chamber’s vision entrepreneurs benefit from government support in information and advice services on subjects which aren’t (already) provided by the private sector and where qualities like ‘reliability and independence’ are important…’ (Chamber of Commerce, 2013: 3).
The merger and reorganization required a new law on the Chamber of Commerce. During the development process of the new law, questions have been raised in Dutch parliament. Several politicians emphasized the importance and the need for a clear task portfolio of the Chamber of Commerce in relation to other, public and private, organizations providing support to starters and SMEs; the presence and effectiveness of anti-competitive safeguards; a thorough analysis if government intervention is necessary; a safe, efficient and effective digital business plaza; and a clear definition of public-private cooperation on the business plazas (Dutch House of Representatives, 2013b). These questions of Dutch parliament regarding the new Chamber of Commerce have contributed to the focus of this research, as is dealt with in the remaining course of this introductory chapter.
Overall, the new Chamber of Commerce is the result of a merger between different organizations in the public domain into a single quasi-autonomous non-governmental organization, or quango. A ‘quango’, or non-departmental public body, is an organization which has been given some sort of authority by the government to act in a nation’s public interest, by performing governmental functions as a non-governmental organization. The new Chamber of Commerce will have a broad range of responsibilities, with two tasks added to its previous portfolio, though cut in its operating budget. From the first of January 2014, the new Chamber of Commerce is operational. With the creation of a digital business plaza, the migration of multiple front offices, and the integration of multiple organizations into a single organization, the merger has been in full progress during 2013.
1.2 Problem statement
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which aren’t (already) sufficiently provided by the private sector with a focus on the Chamber’s independence and reliability in providing these services. Although boundaries have been set for and by the new Chamber of Commerce regarding its activities, research is needed to put these boundaries in perspective. To recall the questions of parliament about the new Chamber of Commerce, first of all, there is a need for a clear task portfolio of the Chamber of Commerce as a public service provider in relation to other public and private support to entrepreneurs. Second, to prevent anti-competitive conduct of the new Chamber of Commerce, there is need for proper and effective anti-competitive safeguards to avoid the Chamber of Commerce from competing with the private sector. Third, the Chamber of Commerce needs to analyze whether there is ground for government intervention when markets fail and the private sector can’t or won’t respond accordingly to present market imperfections. Fourth, there is a need for a clear distinction between public products on the business plazas especially, and private products solely in compliance with strict terms and conditions. Thus, the possibilities and challenges of cooperation with and between public and private organizations, especially on the business plazas, are of interest to this research.
The Dutch Chamber of Commerce might learn from similar international organizations, receiving public funding, how to deal with market imperfections, anti-competition, and cooperation between public and private organizations. These organizations have to comply with the legislation set by the European Union as well, and issues of wrongful regulation and intervention may have been dealt with in the past. Furthermore, the Chamber of Commerce has shifted its focus from physical to digital business plazas. International organizations similar to the Dutch Chamber of Commerce, which facilitate and supply digital business plazas, may teach valuable lessons for the Dutch digital business plaza. Therefore, an exploratory comparison and analysis of similar foreign organizations can contribute in providing practical lessons for the Dutch Chamber of Commerce.
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1.3 Research questions
This paragraph will introduce the main research question and the sub questions necessary for answering the main research question. These questions have been developed in line with the problem statement, which has been introduced in the former paragraph.
1.3.1 Main research questions and sub questions
The issues discussed in the problem statement have led to the formation of the main research question:
How should the new Dutch Chamber of Commerce as a public service provider deal with market imperfections, preventing its activities from anti-competitive conduct, in the context of potential
future cooperation with the private sector, while learning from the lessons of similar foreign organizations?
In order of developing a comprehensive and detailed answer to the main research question, sub questions have been designed to answer each aspect of the main research question.
A. What are the (statutory) tasks and responsibilities of the new Chamber of Commerce in the context of the Dutch public policy approach regarding support to SMEs and entrepreneurs? The history of the Chamber of Commerce and Syntens is of interest, as these organizations have merged into one, and subsequently, the merger and reorganization have been analyzed as well. Furthermore, the tasks and responsibilities of the new Chamber of Commerce are of interest and have been examined, as will the public profile of the Chamber of Commerce. As became clear from the introduction, the Dutch government has had a major influence in the process of developing a new law on the Chamber of Commerce. Therefore, literature on a country’s approach to SME and entrepreneurship policy might shine a light on the influence it might have on a public service provider as the Chamber of Commerce, in order to gain insight in the task portfolio of the Chamber of Commerce within public policy.
B. How should the new Chamber of Commerce deal with market imperfections for SMEs and entrepreneurs?
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imperfections as a base for government intervention, in order to identify when and how the Chamber of Commerce can intervene to address a market imperfection.
C. How should the new Chamber of Commerce cooperate with the private sector?
Since it is of interest how the Chamber of Commerce should deal with private actors, and when cooperation between public and private service providers is possible, it is of interest which cooperation possibilities are present for both sectors. Furthermore, the advantages, risks and added value of such cooperation need exploration, in order to define how public-private cooperation should be dealt with, with regard to the Dutch Chamber of Commerce. D. How should the new Chamber of Commerce prevent anti-competitive conduct of its activities?
As there is need for proper safeguards to prevent the Chamber of Commerce from competing with the private sector, this question will examine how prevention of anti-competitive conduct can be designed and implemented. Theory on anti-anti-competitive conduct by public organizations might be of use here. Furthermore, measures to prevent anti-competitive conduct need exploration, and ultimately a rough guideline for the prevention of anti-competitive conduct should be elaborated upon.
E. How do similar public funded organizations, in other EU-member countries, deal with the opportunities of physical and digital business plazas, public-private cooperation, market imperfections and anti-competition?
This research aims to gain practical lessons from the topics under study and the overall operation of international, similar organizations, by a comparison. Selection criteria for comparison need to be developed and will lead to the selection of international organizations for comparison with the Dutch Chamber of Commerce.
1.4 Academic Relevance
Government action in a free market economy has been topic of discussion by economists, policy makers and politicians for decades (Audretsch et al., 2007). Interventions to address market failure or specific actions – any form of governmental interference with the free market economy has been advocated and criticized simultaneously (Wallis & Dollery, 1999).
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policy to fail (Bennett, 2012). Therefore, this research aims to contribute to the literature on government intervention and market imperfections, by analyzing how a public service provider, like the new Chamber of Commerce, should deal with market imperfections in analyzing them, when to develop and implement policies to address these market imperfections, and how to monitor and evaluate impact.
The economy has changed from a managed to an entrepreneurial economy (Audretsch & Thurik, 2001), creating several challenges for policy makers on topics as to design appropriate and effective policy in the entrepreneurial economy (Audretsch et al., 2007). Furthermore, digitalization and information technology have made their way to the public sector, directing public organizations to holistic and needs-oriented structures, and the digitalization of administrative procedures (Dunleavy, Margetts, Bastow & Tinkler, 2005). Therefore, the role of government changes, as does its public policies. As the new Chamber of Commerce is a modernized, digitally focused, demand-driven organization, it serves as a practical example of a modernizing public organization with regard to the economic, social and digital change of the last decade.
There is a lack of research into antitrust law and regulatory policy applied to public enterprises, as these organizations often conduct anti-competitive behavior as well (Sappington & Sidak, 2003). It is even argued that public enterprises can have more incentives to pursue anti-competitive activities than their counterpart, the private sector, does (Geddes, 2008; Sappington & Sidak, 2003). This research investigates how the new Chamber of Commerce can prevent anti-competitive behavior, and the findings of this research contribute to this research field.
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1.5 Methodology
This master thesis and its associated research are conducted during an internship at the Dutch Ministry of Economic Affairs. The Ministry of Economic Affairs’ network is used to gain access to information and data sources throughout the internship and the research process. The duration of the internship was set from October 1st, 2013, till the 14th of February, 2014. Within these months, data has been collected interviewing stakeholders and conducting desk research using the resources of the Ministry of Economic Affairs. After this date, correspondence with international organizations for further data collection has been continued.
This research is designed as a case study, since the conditions of this thesis apply for a case study design, as will be discussed thoroughly in chapter 4. The research has been split up in different phases. The preparatory phase consisted of exploratory conversations with internal stakeholders, reading material about the issues at hand, and starting the literature review. Subsequently, the research methods and techniques for data collection, analysis and interpretation, have been determined. This research depends on qualitative data for resolving its research questions, mainly through interviews and desk research. The gathered data, analysis of the data and results of the data have been used to resolve the several research sub questions, in order to answer the main research question. The final results of this research will be presented to the Ministry of Economic Affairs, the University of Groningen, and will be added to the researcher’s curriculum as well.
1.6 Chapter and paragraph layout
The layout of the remaining chapters and paragraphs of this research are explained in this paragraph. Chapter 2 Background
The background chapter describes the Chamber of Commerce in detail, and starts by providing the Chamber’s history and the history of Syntens in paragraph 2.1. Subsequently, in paragraph 2.2, the internal reorganization and merger is illustrated. The tasks and responsibilities of the new Chamber are introduced in paragraph 2.3. Paragraph 2.4 discusses the Chamber’s public profile and governance structure. In paragraph 2.5, the characteristics of Chambers of Commerce in general are discussed, and the foreign, similar organizations which are compared with the Dutch Chamber of Commerce are introduced. Paragraph 2.6 presents a summary of the chapter’s key points.
Chapter 3 Theoretical framework
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3.2. Paragraph 3.3 explores the possibilities of, and variety in public-private cooperation. The anti-competitive conduct of public enterprises is discussed in paragraph 3.4. Next, in paragraph 3.5, the conceptual model and the propositions are presented.
Chapter 4 Method
Chapter 4 introduces the research design of this thesis. In paragraph 4.1, the methodological foundation of the research design is presented. Paragraph 4.2 discusses the research design of choice, the case study. Paragraph 4.3 discusses the data collection methods used in this research and describes the information need per concept. Paragraph 4.4 provides the data analysis methods used in this research. Lastly, paragraph 4.5 elaborates on measures taken to improve the quality of the case study.
Chapter 5 Results
Chapter 5 presents the results of the interviews held with internal and external stakeholders of the Dutch Chamber of Commerce and the results of the desk research on some of the concepts of this research. The results of data collection on foreign, similar organizations are presented in Appendix K. Chapter 6 Discussion
Section 6.1 discusses the results and how they do or don’t support the propositions established in paragraph 3.5. Section 6.2 highlights the most interesting results of the interviews regarding the Chamber of Commerce from a practical point of view, which aren’t already mentioned in section 6.1. Section 6.3 discusses the results from data collected on international organizations. Lastly, section 6.4 discusses the limitations of this research.
Chapter 7 Conclusion
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2.0 Background
This chapter provides the background information regarding the Chamber of Commerce, developing the context of this research for the subsequent chapters. Paragraph 2.1 describes the history of the Chamber of Commerce, and gives a small overview of the history of Syntens. Paragraph 2.2, discusses the merger and reorganization which have preceded the inauguration of the new Chamber of Commerce. Paragraph 2.3 elaborates on the tasks and responsibilities of the new Chamber of Commerce. Paragraph 2.4 describes the public profile of the new Chamber of Commerce. In paragraph 2.5, the main differences between Chambers of Commerce in other countries are provided. The chapter’s summary, paragraph 2.6, specifies the various activities of the Chamber of Commerce and provides an overview of this chapter. Paragraph 2.2, 2.3 and 2.4 have been developed from desk research by reviewing the new law on the Chamber of Commerce of 2013, the Detailed Design on the Chamber of Commerce (Chamber of Commerce & Syntens Innovation Centre, 2013) and the ‘Explanatory Memorandum’ of the new law on the Chamber of Commerce (Dutch House of Representatives, 2013a). Other sources for the development of this chapter are mentioned in the text.
2.1 History of the Chamber of Commerce and Syntens
2.1.1 Chamber of Commerce
The history of the Chamber of Commerce is derived from a publication of, and about, the Chamber of Commerce (Association of Chambers of Commerce and Factories in the Netherlands, 1985). The first Chamber of Commerce worldwide is considered to be the Chamber of Commerce in Marseille, France, which was founded in 1599. In the 18th century, a nationwide partnership of regional Chambers of Commerce, Conseil de Commerce, emerged in France. This network of regional Chambers advised the French government in matters of industry and trade.
In the Netherlands, the first institution which is considered to be the precursor of the Chambers of Commerce is the College of Merchants in Zeeland, which operated from 1720. These type of institutions originated from the medieval guilds, though there lifetime was particularly short. In 1795, Comities of Trade, Shipping, Factories and Traffic were founded in Amsterdam and Rotterdam, and endured with more success than their predecessors. These precursors of later Chambers of Commerce, advised local governments, representing local business interests specifically.
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I, secured the existence of the Chambers with a royal decree. In the 19th century, the number of Chambers grew rapidly. Their main sources of income were funds from the towns they resided; hence their main activity was advising the local government. However, eventually the system failed. The financial dependence on the local authorities resulted in the closure of many of the 97 small Chambers of Commerce.
In 1921, the Chambers of Commerce were embedded in Dutch legislation, by the ‘law on the Chambers of Commerce’. The number of Chambers of Commerce was limited to 36, their regional character was invigorated, and the establishment of the ‘Trade register’, by the ‘Trade register law’ enhanced the importance of the Chambers of Commerce. Furthermore, they were no longer depending on finance from regional governments, since the Chambers got their own source of income from the Trade register.
The ‘law on the Chambers of Commerce’ changed in 1963 into the new ‘law on the Chamber of Commerce and Factories’, which transferred the right of appointment from the government to representative employer and employee associations. Moreover, it was the start of the modernization of the Chambers of Commerce. Hereon, the Chambers were the regional advocates of business and industry in their region, in a network of other institutions with the mutual goal of promoting economic life.
In 1997, a new ‘Trade register law’ was established, with major changes for the Chamber of Commerce. Henceforward, all the separate trade registers would be united into one national trade register. Furthermore, options for the digitalization of the paper archive were introduced and the Chamber of Commerce started with the digital provision of trade register information.
Ten years later, a new ‘Trade register law’ replaced the 1997 law in 2007. The major changes in this law required the legal business formats ‘sole proprietor’, ‘the partnership’ and ‘the homeowner association’ to be registered in the trade register from hereon as well.
2.1.2 Syntens Innovation Centre
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Syntens has developed a large network of innovation partners across the most important sectors and branches of the Dutch economy. Just like the Chambers of Commerce, Syntens has been embedded in the region, fostering accessibility for all (potential) businesses. Once a (potential) business partnered with Syntens, Syntens used its large network to establish connections between the (potential) business and its network participants. These partnerships could ultimately lead to innovations; hence Syntens has been an indirect contributor to the innovational activity of the Dutch economy. The annual report of Syntens for 2012 highlights the accomplishments of Syntens Innovation Centre, in stimulating innovation, employment, turnover and the linkage of partners for Dutch business (Syntens, 2012).
The 1st of January 2014, Syntens has been officially merged with the Dutch Chamber of Commerce. From here on, its activities and tasks have become subject to the Chamber’s responsibility. This new responsibility is embedded in the new law on the Chamber of Commerce, as is described in paragraph 2.3.
2.2 Merger and reorganization – The new Chamber of Commerce
In 2011, the merger of the twelve independent Chambers of Commerce, the Dutch Chamber of Commerce association, Syntens and several activities of NL Agency, nowadays the NEA, was announced and the process of preparing the merger was initiated. First of all, the merger would require a heavy revision of the law on the Chambers of Commerce and Factories, since the Chamber’s governance and task portfolio would be changed significantly. At the 25th of June 2013, the House of Representatives passed the bill on the new Chamber of Commerce. After a review of the bill, the Senate of Dutch Parliament passed the bill as a mere formality the 12th of November 2013. The new Chamber of Commerce is a national organization with regional anchorage in each of the, reorganized, five regions: North (Groningen, Friesland and Drenthe); East (Gelderland and Overijssel); South (Limburg and Brabant); South-West (South-Holland and Sealand); and North-West (North-Holland, Utrecht and Flevoland).
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the Chambers of Commerce and Syntens is mainly the result of the urge for reducing the fragmentation of public business support. However, the merger isn’t just to provide greater congruence and lesser fragmentation of government services, but is aimed at reducing costs and the result of budgetary cutbacks as well. The public contribution to the Chambers of Commerce’ budget has been reduced from 183 million in 2012, to 178 million in 2013, and will be reduced even further for the new Chamber of Commerce to a 135 million in 2014, and a vast, yearly amount of 114 million for 2015 and the years thereafter. Syntens used to receive a financial contribution of almost 31 million in 2012 and 29 million in 2013, with no separate budget left for Syntens’ activities from 2014 on. As an integrated part of the new Chamber of Commerce, Syntens’ activities are continued under the Chamber’s budget. Concluding, the new Chamber of Commerce is tasked with a financial budget cutback for its own activities, and no extra funds for the activities it is imposed with from the merger with Syntens. The reorganization, digitalization and the back to basics approach should enable the Chamber of Commerce to deal with these financial cutbacks.
2.3 Tasks and responsibilities
The public tasks and responsibilities of the new Chamber of Commerce are specified in the law on the Chamber of Commerce. The law on the Chamber of Commerce and Factories from 1997, and the Trade register law from 2007, specify the three statutory tasks the old Chamber of Commerce has been obligated to perform. In the revised bill on the Chamber of Commerce from 2013, two statutory tasks are added (4 and 5), retaining the three former tasks of the Chamber (1 to 3):
1. The Chamber is tasked with the maintenance and execution of tasks related to the central trade register (Trade register law, 2007) – paragraph 2.3.1.
2. The Chamber is tasked with the stimulation of regional economic development (article 28, law on the Chamber of Commerce) – paragraph 2.3.2.
3. The Chamber is tasked to inform, educate1, and provide business support to (potential) businesses on starting and running a business (article 25/26, law on the Chamber of Commerce) – paragraph 2.3.3.
4. The Chamber is tasked with the development and management of the regional business plazas (article 24, law on the Chamber of Commerce) and the digital business plaza (article 5, law on the Chamber of Commerce) – paragraph 2.3.4.
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5. The Chamber is tasked with stimulation of innovation and innovative activities (article 27, law on the Chamber of Commerce) – paragraph 2.3.5.
It is important to mention that the service provision of the Chamber to SMEs, starters and entrepreneurs is twofold. The first is registration and informational service provision to individual entrepreneurs, including starters and SBOs. The second is support and stimulation of entrepreneurial groups or communities. An overview of the various activities, and products and services in general terms, of the Chamber of Commerce, categorized by statutory task, is presented in Appendix A. The following paragraphs, 2.3.1 to 2.3.5 give a description of each statutory task.
2.3.1 Trade register
The trade register is the base register of enterprises and legal entities, for the benefit of government and business, providing legal certainty for consumers and business owners. Goal of the trade register is to enable safe and secure trade between businesses, nationally and internationally. It registers and processes information about started, modified and discontinued businesses. Hence, the trade register is also an important source of knowledge and data. It functions as a national knowledge database and provides relevant information about trends and developments regarding Dutch businesses. This database offers Dutch entrepreneurs relevant information about their market, market developments and trade partners.
The services offered by the trade register are standardized for as much as possible. Registration and modification businesses in the trade register, the deposit of annual reports, the deposit of general terms and conditions, and the provision of export documents are physical processes, which will be digitalized almost entirely. Physical front offices and business plazas still handle all necessary face-to-face contact, mostly for identification purposes, as a digital identification standard for businesses is not yet completely available. Just like the physical front offices offer products of the trade register, these products are online available at the digital business plaza and the website of the Chamber of Commerce. The trade register offers a variety of products, derived from the database of registered businesses in the trade register. The most important products offered per business by the trade register are: business extracts; annual financial statements; overview of corporate relationships; the various deposits a legal entity has filed; summary of a company’s main details; the history of changes made to a company’s main details; address database listing (potential) business partners; services providing trade register data; and sole products about a company’s: statutes, contact information, general terms and conditions, intended merger or division. 2.3.2 Regional economic development
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built, during their lifetime, has connected them with many and various regional partners. Hence, the new Chamber of Commerce is firmly embedded in the region and is an experienced connecter of businesses, government and research institutions. By hosting special events with themes as starting a business, an introduction to social media or how to internationalize, the Chamber provides information and education to business owners in the region. Furthermore, these special events fulfill a networking function as well, since the Chamber of Commerce cooperates with public and private partners at these events to support the visitors of these special events.
Previously, the Chamber had the possibility of providing individual customized guidance to entrepreneurs. With the new Chamber, this task is heavily reduced in terms of finance and employees, as the Chamber’s role transits from provider to facilitator. This transfer is implemented as well in the Chamber’s ability to conduct region-specific economic stimulation activities, which budget has been cut back severe. However, the new Chamber of Commerce still has some room to provide small subsidies for economic development purposes, in order for regional bottlenecks to be tackled. Regional stimulation is coordinated in regional programs and the regional, physical business plazas as well. An overview of specific activities for regional development is provided in Appendix A. 2.3.3 Informational, educational & business support
Not only does the Chamber of Commerce provide businesses with relevant market information, the Chamber supports businesses with relevant information about subjects connected to tasks and themes of the Chamber, like starting and running a business, rules and information about exports, how to transfer ownership of a business; etc. This information is provided primarily online at the digital business plaza, supported by the front offices, the telephone helpdesk and informative events. This information and related products and services aim to help (potential) entrepreneurs and small business owners with the development of their business skills.
The task of providing informational, educational and business support can be divided in two elements. First, it provides general business information, redirects and connects (potential) entrepreneurs. Second, it provides first-line business advice and support services. The latter is a limited service provision, to prevent anti-competitive practices by the Chamber, in order to enable entrepreneurs to move forward and is offered on a demand-driven basis.
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planning; Business desk; and Agricultural knowledge. On the regional level, specific programs for local development are developed and implemented within each of the five regions, like for example: Industry; Healthy Growth; Chemical; or Logistics. This depends on the industries present in each of the regions, their needs, and potential growth sectors, which need extra support.
Each of the national or regional programs can provide business support to entrepreneurs about finance, organizational development, networking and cooperation, strategy and market development, and knowledge exploitation. For the direct advice and support services of the Chamber, an hourly limit is set per entrepreneur per year. In total, national and regional, the Chamber offers informational support to SMEs and start-ups, by specific activities as: seminars on relevant subjects (online and offline); special convention days with topics as starters, or import; Business 2 Business meetings; digital information portals, like the digital business plaza or the website of the Chamber of Commerce; telephone and face-to-face support; and lastly, personal advice and coaching. An overview of specific activities for informational, educational & business support is provided in Appendix A.
2.3.4 Business plazas
The importance of business plazas, physical and digital, is embedded in the systematic failure of cooperation between public and private organizations, which have led to the fragmentation of support services. These business plazas provide platforms for public and private cooperation in the provision of their services. The Chamber of Commerce is obligated by law to facilitate these business plazas and to keep them neutral and independent. At first, all the relevant public service providers for businesses will be connected to the business plazas. In a second stage, relevant private partners might be connected to the businesses plazas as well. The Chamber highlights diversity of private organizations, like for example: employer associations, branch organizations and commercial service providers. Partnering with private organizations will be directed at organizations with collective business interests at first. Partnering with commercial service providers is less likely, since this brings forward several challenges, like anti-competitive practices or negative monopoly opportunities. The Chamber of Commerce therefore will develop criteria for these commercial private organizations to enter the business plazas. In this case as well, the business plazas are ought to operate with a demand-driven character, therefore offering solely what is required by their clientele, without detraction of the objective character of the business plazas.
2.3.4.1 Physical business plazas
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public partners. For each of the business plazas, public service providers are approached for participation on the physical business plazas. The Chamber of Commerce strives to approach local governments in the regions; national public partners as the Netherlands Enterprise Agency, the former NL Agency, and the Dutch Tax and Customs administration (in Dutch = Belastingdienst); nationwide semi-public service providers as Qredits (micro financing), and ‘ondernemers klankbord’ (business council for entrepreneurs); regional partners like the regional develop agencies, knowledge institutions and triple helix organizations. In addition to the potential public partners, interest of private partners for participation on the business plaza is assessed as well, like employer- and employee organizations, branch organizations, banks or other financial service providers, which might offer their services on the physical business plaza in the future.
The physical business plazas are housed in a front office location of the Chamber of Commerce. These plazas function as a meeting point for small and large events of the Chamber of Commerce, or its public partners. Furthermore, they function as a location for appointments of the Chamber and other partners; as a reception for entrepreneurs; and lastly, as workspace for partners. In the near future, more physical business plazas might be developed by cooperating with partners regarding the content and financing of these business plazas. An overview of specific activities for the physical business plazas is provided in Appendix A.
2.3.4.2 Digital business plaza
In 2012, the beta concept of the digital business plaza has been launched. The months thereafter, improvements to the digital business plaza have been made and public partners have been connected to the plaza. In November 2013, the connected public partners, offering products, to the digital business plaza were the Chamber of Commerce, Syntens (from the 1st of 2014 continued under the Chamber of Commerce), NL Agency (since, the 6th of January 2014 merged into the Netherlands Enterprise Agency, or NEA) and Answers for Business – Antwoord voor Bedrijven in Dutch. Thereafter, the Dutch Tax and Customs administration – Belastingdienst in Dutch –, RDW – Rijksdienst voor Weggebruikers in Dutch –, and Statistics Netherlands – Centraal Bureau voor de Statistiek in Dutch – were connected to the digital business plaza as well.
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The digital plaza offers several product and service categories. First, the Chamber of Commerce provides its services via the digital business plaza. Businesses are able to register and modify their business entries in the trade register. The trade register’s products are offered at the digital business plaza as well, which have been offered digitally at the website of the Chamber of Commerce for years. Other public partners, such as local governments, Syntens (from the 1st of 2014 continued under the Chamber of Commerce), the NEA, the Dutch Tax and Customs administration, Answers for Business, and RDW provide, or will provide, part of their services at the digital business plaza as well. In addition to public organizations, private organizations might be assessed and approached for cooperation on the business plaza in the future. The digital business plaza facilitates as a portal for these partners to provide their services and information cheaper, easier and integrated to entrepreneurs, thereby creating an extra channel to reach entrepreneurs. In 2014, the digital business plaza will be developed to a fully integrated portal for government affairs. An overview of specific activities for the digital business plaza is provided in Appendix A.
2.3.5 Stimulation of innovation
The Chamber of Commerce is statutory obligated by the 2013 bill on the new Chamber of Commerce to stimulate innovation, specifically amongst starters and SMEs, by informing them with the various opportunities regarding innovation; connecting research institutions, education partners and other relevant organizations to businesses in need of innovative support; and guiding entrepreneurs with the start of a company to develop and commercialize their innovative product or service. These activities, formerly executed by Syntens, are integrated within the new organization. The innovation task of the Chamber is devised to create awareness amongst enterprises regarding the importance of innovation and to increase their innovational capabilities. By providing information and educative advice about innovation, and the innovation process, the Chamber supports enterprises with development and commercialization of their innovations. The task of innovation stimulation is twofold. First, it consists of the informative and educative element, which is present at the digital business plaza. Second, face-to-face coaching and support is provided on individual level by the Chamber to support enterprises in moving forward with their innovations. A maximum number of approximately 16 coaching hours a year per client, with a maximum of 48 coaching hours in three years, is instituted to prevent the Chamber of Commerce from anti-competition activities. An overview of specific activities for the stimulation of innovation is provided in Appendix A.
2.3.6 Other activities
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task has a legal and justified foundation, and assess the potential of anti-competitive behavior. These safeguards are being developed and are ought to be implemented with the start of the new Chamber of Commerce. All present and new activities will have to pass this assessment framework.
2.4 Public profile
The new Chamber of Commerce will continue as a single quasi-autonomous non-governmental organization. An important aspect of the Chamber as a quango is the involvement of representatives of employee and employer associations in the governance structure of the Chamber of Commerce. Thus, representative of the target group of the Chamber of Commerce indirectly influence the Chamber’s activities.
In 2013, the financial system of the Chamber of Commerce changed radically. The yearly fee paid by organizations registered in the trade register was abolished, and instead, the government would replace this revenue stream with a yearly government contribution to the Chamber, from the budget of the Ministry of Economic Affairs. Primary reasons for the elimination of the yearly fee were the administrative cost and time reduction for businesses, and it saves the Chamber of Commerce the costs of billing and collecting fees as well.
The Chamber’s responsibilities and tasks are statutory anchored in Dutch law. The law on the Chamber of Commerce; the Trade register law; and the law Government and Markets all specify the scope of the Chamber’s activities. Furthermore, the Dutch Chamber of Commerce is obliged to comply with EU legislation for the execution of public tasks, regarding the nature of their public character in order to receive a government contribution.
2.4.1 Governance structure
The Chamber’s governance is simplified and professionalized under the new law on the Chamber of Commerce, and is visualized in figure 1. The Minister of the Ministry of Economic Affairs is responsible for supervision of the Chamber’s functioning and well-being. Management of the organization is executed by a board of directors, appointed by the Minister of the Ministry of Economic Affairs, responsible for the daily operations, strategy and service provision of the Chamber. Moreover, the board is responsible for the execution of the multiannual plan, dividing the budget over the task portfolio and regions, and for the development and execution of the yearly activity plan.
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Each of the five regional areas is represented by a regional council and consists of appointed members of regional employer and employee associations. The regional council advices the board in matters of regional issues and regional specific activities, and designs a regional annual plan in consultation with other regional stakeholders.
A partner council represents all partners of the digital business plaza and advices the Chamber of Commerce about the digital business plaza.
Lastly, a user council representing the main users of the trade register, advices the board about improvements in the register’s content, infrastructure and organization, and the security of the trade register.
Figure 1: Governance structure of the Chamber of Commerce Source: Chamber of Commerce & Syntens Innovation Centre (2013)
2.5 International Chambers of Commerce
Chambers of Commerce have been around since 1599 and come in many shapes and structures. In 2001, the private research institute EIM conducted a multiple-case analysis of the Chambers of Commerce in foreign countries with a comparative approach, on behalf of the Ministry of Economic Affairs. The EIM (2001) research concluded that Chambers of Commerce differ widely.
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internationally, due to compulsory or voluntary memberships. In several countries, there is an overarching organization in place governing the Chambers of Commerce, on regional or national basis, while other countries accommodate a single national Chamber of Commerce.
Second, there are differences between the tasks of the Chambers, and it varies by country if these tasks are regulated by law. Some counties have specific statutory obligations for Chambers of Commerce embedded in law. Furthermore, the task portfolio of Chambers of Commerce differs widely by country, ranging from a limited and narrow number of tasks to a broad task variety. Some Chambers are allowed to compete with private sectors, while in other countries competition of Chambers of Commerce with the private market is prohibited entirely.
Third, the financing of Chambers of Commerce varies by country. In several countries, the Chambers of Commerce are financed entirely or partially by a government contribution. In other countries, Chambers of Commerce don’t receive public funds and need to create their own revenue streams to finance their operations. Furthermore, there is a difference between Chambers of Commerce regarding the presence of mandatory, yearly membership fees.
2.5.1 Sampling of countries
Due to time limitations of this research five organizations have been selected for comparison with the Dutch Chamber of Commerce, including four public Chambers of Commerce and the digital portal for business support of the UK, Gov.uk. These organizations are selected in accordance with policy makers at the Ministry of Economic Affairs, responsible for the Chamber of Commerce, and with contacts at the Dutch Chamber of Commerce. Furthermore, these five organizations all reside in EU-member states, thus EU legislation is of influence on all these organizations.
Regarding international Chambers of Commerce, a choice was made for the public Chambers of Commerce in Austria, France, Germany and Luxembourg. The choice for Luxembourg is explainable by their publicly organized Chambers of Commerce and Craft (two chambers), which fulfill a facilitating function for the Luxembourgian digital business plaza, or point of single contact. The choice of Austria is justifiable by their public Chambers of Commerce on federal and regional level. Furthermore, the Chamber of Commerce in Austria functions partially as an employer association and branch organization for SMEs and entrepreneurs (EIM, 2001), and is therefore of interest to this research as this heavily contrasts with the Dutch Chamber of Commerce.
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government for government affairs, including business issues. It is managed by the Government Digital Services, and for business issues, the department for Business, Innovation & Skills contributes in developing content.
2.6 Summary
The Dutch Chamber of Commerce has a rich history in the Netherlands. The role of the Chamber has changed over time into a public organization, tasked with the support of SMEs and start-ups. The Dutch Chamber of Commerce is a quasi-autonomous non-governmental organization, and received authority from the government to execute its statutory tasks, serving the public interest. The Dutch Chamber of Commerce is to a large extent publicly funded. National and regional governance provides everyday management and development of plans for future activities.
By law, the Chamber is obliged to maintain and execute statutory tasks. The new Chamber of Commerce has five statutory tasks to execute: maintenance and execution of tasks related to the trade register; regional economic development; informational, educational and business support; management of the digital and physical business plazas; and stimulation of innovation. The Chamber’s activities are being transferred from broad, supply driven activities to focused, demand driven activities, contributing to economic growth. The Chamber of Commerce offers (digital) information products and public advisement services which can empower entrepreneurs to successfully start a business, innovate, and do business, domestic and foreign. National and regional programs on relevant topics for Dutch business have an educative and supportive function, and support the task of regional development. The Chamber has a network function as well, by connecting entrepreneurs with one another, and with knowledge institutions, to realize their growth ambitions.
The Chamber’s activities are supported by the business plazas at physical and digital platforms. Physical business plazas are set up in each of the five regions, and cooperation with partners is essential. The digital business plaza provides a central portal for the Chamber of Commerce and other public partners to supply entrepreneurs with information, and to facilitate transactions with these public partners or the Dutch government.
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3.0 Theoretical framework
The theoretical framework is developed and elaborated in this chapter. An introductory overview of the various paragraphs, the concepts and the research questions these paragraphs address, is presented in this overview.
Section 3.1 explains the presence of market imperfections through the lens of the market failure paradigm. It explains when markets fail and what the sources of market failure are in general, in paragraph 3.1.1. The next paragraph, 3.1.2, addresses market imperfections for SMEs, starters and entrepreneurs more specifically. Lastly, paragraph 3.1.3 discusses the critique on the market failure argument for government intervention. Paragraph 3.1.4 is the section’s conclusion.
Section 3.2 starts with describing the characteristics of SME and entrepreneurship policy. In paragraph 3.2.1, the policy typologies governments can adopt are presented next. Paragraph 3.2.2 deals with the policy measures for six different areas of entrepreneurship policy. Paragraph 3.2.3 is the section’s conclusion.
Section 3.3 introduces the concept of public-private cooperation. In paragraph 3.3.1, the case for public-private cooperation is discussed and the strengths and weaknesses of the public and private sector are presented. Paragraph 3.3.2 describes the different types of public-private cooperation, or hybridization. The advantages of public-private cooperation are presented in paragraph 3.3.3. With paragraph 3.3.4, the section is concluded.
Section 3.4 discusses the concept of anti-competitive conduct. In paragraph 3.4.1, the case of unfair competition by the public sector is addressed thoroughly. Paragraph 3.4.2 addresses the need for prevention of competitive conduct. This results in basic principles for the prevention of anti-competitive conduct in paragraph 3.4.3. The last paragraph, 3.4.4, concludes the section.
Ultimately, section 3.5 presents the conceptual model resulting from the discussed concepts in this theoretical framework, the relations between the concepts in the framework and is concluded with the propositions derived from the theoretical framework.
3.1 Market failure
The concept of perfect competitive markets is part of economic theory. The general idea is that in perfect competitive markets, information is available across all markets incumbents; therefore, price levels are at marginal cost. When these markets achieve equilibrium, i.e. are perfectly competitive, there is no need for government intervention. When the conditions for perfect competition disappear, the market fails and government intervention might improve the outcomes of these markets (Congdon, Kling & Mullainathan, 2011; Wallis & Dollery, 1999).
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avoided, while so called anti-trust schools promoted the addressing of market failure through government intervention (Audretsch et al., 2007). Audretsch and Thurik (2001) suggest the current policy debate shouldn’t be about the ‘more or less’ question regarding government intervention, but rather how governments should intervene and their specific role in today’s economy. The market failure paradigm of policymaking assumes that government intervenes in the public interest to restore economic efficiency. In his Anatomy of Market Failure (1958), Francis Bator has set the foundation for the market failure paradigm.
Two classes of policy action are considered to be welfare improving. The first, corrective policies, address market failures, and the second, redistributive policies, which try to balance the social welfare distribution (Congdon et al, 2011). Of importance to this research are efficiency enhancing, corrective, or enabling, policies. Corrective policies address market imperfections which can occur due to asymmetric information, externalities and other sources of market failure. These policies can increase the efficiency in markets, where the assumed outcomes are no longer efficient (Wallis & Dollery, 1999).
For SME and entrepreneurship policy, Audretsch and Thurik (2004) argue that the focus should be on enabling and fostering entrepreneurship, knowledge commercialization, providing education, and supporting entrepreneurs in starting a business, instead of constraining regulation. In the entrepreneurial economy, firm development and performance should be stimulated through enabling policies, focusing on the creation of a business climate which fosters success and viability. Furthermore public policy should target inputs instead of outputs. Production in the entrepreneurial economy is based on knowledge input, and therefore the creation and commercialization of knowledge should be targeted. Another aspect that should be considered in public policy is a local locus instead of a national locus. In the entrepreneurial economy, knowledge is a competitive source which is often localized in regional, sector specific clusters. These clusters are argued to function as catalyst for economic growth and job creation. Lastly, the financing structure in the entrepreneurial economy is should be focused on entrepreneurs and innovative starters instead of existing companies (Audretsch & Thurik, 2004).
