Financing Entrepreneurship in the Netherlands

Big news in De Volkskrant this weekend. The most leftist newspaper reported that in 2014 some 500 million worth of international investments was channeled to Dutch startups. Although much of that was in a small number of high-valued individual firms, still we are witnessing a financing revolution. And startups are politically becoming an important issue too. Recently, former European Competition Commissioner Neelie Kroes was appointed to lead Startup Delta, an initiative to map the entrepreneurial ecosystem in the Netherlands and promote it globally as the next place to be. In a bit of conspiracy theory, the lead article in De Volkskrant (traditionally the Labor Party’s newspaper) is there to show that Iron Neelie (right wing liberals VVD) has nothing to gain and even more to lose in het mission of startup ambassador.

Why the Netherlands is suddenly successful as a startup country may have some deeper roots. For the last ten years, entrepreneurship has been promoted in universities and in science parks. This more and more seems to be paying off for society. In addition, there is a boom in public and private incubators and accelerators that play the intermediary role in channeling (bank) finance to startups. In a land where venture capital has for long been quite absent, this is a very useful function. And last, there is an increasing interest from the big corporates to stimulate innovation through entrepreneurship, see for example high profile initiatives like StartupBootcamp.

Read more

Quantitative Easing: Will it Work?

“I will do whatever it takes”, these words resonate in the financial markets and, with the return of deflation, makes Quantitative Easing (QE) unavoidable. Will it work? That is the question that dominated the press and commentators on the Friday following the historic ECB press conference. Reading these comments, I miss two arguments that to my opinion will play an increasingly important role in the coming months.

There are four traditional mechanisms through which QE may work. It can take effect by reducing interest rates, especially long term interest rates that are important for investors. That will not work because they are already low. It may reduce the interest rates for distressed governments a bit, but this has only limited power to stimulate the economy as a whole. Another mechanism is (according to the credit view) by improving the balance sheet of banks – direct or indirect by reducing company losses –  and thus improving the conditions for lending. Do not know, but I guess this will also not work, because balance sheet conditions are not the crucial thing at the moment why banks in the Euro area are not making loans. The third mechanism is by avoiding deflation itself. If prices fall then this increases real wages and real private debt, which both are likely to reduce economic activity. As a defensive strategy, my guess is that this will work, given the size of the package and by credibly shifting inflationary expectations and putting a floor on asset prices. But it will not raise the price level, so we cannot expect a return to growth through this mechanism.

Read more

Entrepreneurship at the AEA

Entrepreneurship at the AEA

AEA

Last week, I was lucky. Although much of my time at the American Economic Association (AEA) meeting in Boston was devoted to finding new professors for the many vacancies at the Utrecht School of Economics, careful planning made it possible to visit the central AEA session on entrepreneurship research. Clearly, entrepreneurship as a field is on the rise, however, this so far has passed the economics profession. But now the dismal science is back with a vengeance. In a session packed with top talent, the main aim was not so much to derive new hypotheses (left to business studies) but to use the tools of economics to verify some points made elsewhere.

Read more

1 4 5 6