DUTCH ENTERPRISE IN THE TWENTIETH CENTURY: BUSINESS STRATEGIES IN (Routledge International Studies in Business History)

Dutch Enterprise in the Twentieth Century

In the business history literature, broad international comparisons often limit themselves to large countries, because information about them is abundant. But small countries deserve attention too, because their entrepreneurs have to be more flexible and to adjust rather than lead. This book offers the first overview of Dutch enterprise in the twentieth century, with particular emphasis on business strategies. The author addresses relevant and topical themes such as the rise of the managerial company, the survival of family firms, the success and failure of mergers, tensions in labour relations, business–government relations, and the globalisation of industry, looking at them from the Dutch perspective and through the looking glass of business strategies. The international outlook of Dutch business is one of its fascinating characteristics and as such this study will interest both business and economics historians across the globe. Keetie E. Sluyterman is Professor of Business History at Utrecht University, the Netherlands.

Routledge international studies in business history Series editors: Geoffrey Jones and Mary Rose

1 Management, Education and Competitiveness Europe, Japan and the United States Edited by Rolv Petter Amdam 2 The Development of Accounting in an International Context A Festschrift in honour of R.H. Parker T.E. Cooke and C.W. Nobes 3 The Dynamics of the Modern Brewing Industry Edited by R.G. Wilson and T.R. Gourvish 4 Religion, Business and Wealth in Modern Britain Edited by David Jeremy 5 The Multinational Traders Geoffrey Jones 6 The Americanisation of European Business Edited by Matthias Kipping and Ove Bjarnar 7 Region and Strategy Business in Lancashire and Kansai 1890–1990 Douglas A. Farnie, David J. Jeremy, John F. Wilson, Nakaoka Tetsuro and Abe Takeshi 8 Foreign Multinationals in the United States Management and performance Edited by Geoffrey Jones and Lina Galvez-Munoz 9 Co-operative Structures in Global Business A new approach to networks, technology transfer agreements, strategic alliances and agency relationships Gordon H. Boyce

10 German and Japanese Business in the Boom Years Transforming American management and technology models Edited by Akira Kudo, Matthias Kipping and Harm G. Schröter 11 Dutch Enterprise in the Twentieth Century Business strategies in a small open economy Keetie E. Sluyterman

Dutch Enterprise in the Twentieth Century Business strategies in a small open economy Keetie E. Sluyterman

First published 2005 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Ave, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2005. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” © 2005 Keetie E. Sluyterman All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalog record for this book has been requested ISBN 0-203-02316-1 Master e-book ISBN

ISBN 0–415–35027–1 (Print Edition)

Contents

List of illustrations Acknowledgements Introduction Business strategy The Netherlands as a small country with an open economy Debates in business history National business systems Long-term perspective

xi xii 1 2 4 8 13 15

CHAPTER 1: FAMILY-BASED MANAGEMENT IN AN INTERNATIONAL CONTEXT, 1895–1914

18

Introduction Interlude 1: The Philips family and the incandescent lamp

18 20

1.1 Small scale and family run Cotton industry Engineering and shipbuilding Chemical industry Food sector Family management

23 26 29 31 34 37

1.2 The stimulating influence of the Dutch East Indies A profusion of companies, many of them free-standing The colonial network Managing from a distance The spectacular rise of the petroleum industry Multinationals

39 40 41 45 47 49

viii

Contents 1.3 Businessmen and the spirit of free enterprise Trade, restrictive trade practices, trusts and cartels Discussion on a national patent law Labour relations Conclusion

CHAPTER 2: A SMALL COUNTRY IN AN ERA OF WAR AND PROTECTIONISM, 1914–1945

52 52 56 60 67

68

Introduction Interlude 2: The Philips family firm becomes a multinational company

68 72

2.1 The First World War and its aftermath Close alliance between business and government Vertical and horizontal integration Collaboration between capital and labour A short but fierce crisis

75 78 81 84 88

2.2 From roaring twenties to gloomy depression Internationalisation of Dutch enterprise Fluctuating business in the Dutch East Indies Management, organisation and rationalisation Huddling together during the depression

91 92 100 105 111

2.3 The Second World War Adapting to new circumstances A cog in the German war machine Dutch business outside the Netherlands Conclusion

113 114 117 122 124

CHAPTER 3: FOLLOWING THE AMERICAN LEAD, 1945–1975

126

Introduction Interlude 3: Philips achieves rapid expansion in consumer mass markets

126 129

3.1 The managed economy: between socialism and capitalism Industrial relations and the centrally directed wage policy Government and the promotion of the manufacturing industry To whom does the company owe its responsibility? The welfare state and consumer capitalism

133 134 138 144 146

Contents

ix

3.2 The spread of the managerial enterprise The productivity drive The family firm under pressure Cartels, mergers and diversification

148 149 152 157

3.3 Internationalisation, losses and gains Loss of the Dutch East Indies: political and economic decolonisation Dutch multinational companies in fragmented markets The Netherlands as host for multinational companies Conclusion

165

CHAPTER 4: COMPETING IN THE GLOBAL ECONOMY, 1975–2000

167 173 179 181

183

Introduction Interlude 4: Philips under pressure in global markets

183 188

4.1 The glide into economic recession Downward spiral in an unfriendly business climate Spectacular failures A new appreciation of entrepreneurship and the small firm

191 192 196 200

4.2 Flexibility in post-industrial society Flexible organisation of the enterprise Changing views on the best strategies Mergers and acquisitions Revolt of the capital market Wage moderation and flexibility in labour relations A more modest role for government

201 202 205 207 211 214 219

4.3 International business and national boundaries Global strategies of manufacturing companies The rise of the service multinationals Foreign masters Cross-border mergers and national cultures Conclusion

222 226 230 235 239 241

Conclusion

243

Internal organisation of the firms External organisation of firms

244 246

x

Contents International orientation Management and labour relations Attitudes towards the state Dutch business system

248 250 252 254

Notes Bibliography Index

258 291 312

Illustrations

Figures I.1 I.2 3.1 4.1 4.2

Dutch import and export as percentage of GDP, 1815–1995 Dutch inward and outward direct foreign investment, 1948–2002 Dutch inward and outward direct foreign investment, 1948–1975 Dutch merger movement, 1970–2000 Dutch inward and outward direct foreign investment, 1975–2002

7 9 173 208 223

Tables I.1 I.2 I.3 2.1 3.1 4.1

Breakdown of employment by major economic sectors, the Netherlands compared with Britain and Germany The Netherlands within North-West Europe and the US Growth of population, GDP and GDP per capita and GDP per hour worked, the Netherlands Company size in manufacturing in the Netherlands Ranking of Dutch companies in the list of largest 50 industrial corporations outside the US (ranked by sales) Dutch (or mixed Dutch) companies in Fortune’s list of world’s largest corporations

6 6 17 106 177 225

Acknowledgements

This study is the result of my work in the field of Dutch business history during the past twenty years, which included the writing of a number of company histories. First of all I want to thank the company executives who entrusted the writing of the history of their company to me (and my colleagues). By opening their archives and by telling me about their business experiences they helped me gain important insights into the problems and challenges of entrepreneurship. Without their co-operation I could never have written this study. During the course of writing I have accumulated an unusually large number of happy obligations. First among them is the debt I owe to the Research Institute for History and Culture of Utrecht University, which enabled me to spend two years full time on this book. I want to thank in particular Joost Dankers and Jan Luiten van Zanden for helping arrange this generous research time. In addition I am very grateful for their tireless efforts in advancing the study of business history at Utrecht University. My Utrecht colleagues Bram Bouwens, Joost Jonker, Hein Klemann and Jan Luiten van Zanden have read the completed manuscript and given me numerous valuable suggestions for improvements, most of which I had the good sense to take. My book greatly benefited from discussions in the research project ‘Bint’ about the evolution of the Dutch business system in the twentieth century. Active members of this research group include Erik Bloemen, Mila Davids, Jacques van Gerwen, Ferry de Goey, Jan Peet, Maurits van Os and Gerarda Westerhuis, apart from those mentioned above. I would also like to mention Ben Gales with whom I first explored the world of Dutch multinationals and free-standing companies. My colleagues in the European Business History Association have been an important source of inspiration for the last fifteen years. To two of them I want to give my special thanks. Geoffrey Jones stimulated me to widen my horizon by studying the internationalisation of business and by taking an active role in the establishment of a European Business History Association. Mary Rose read the completed manuscript and gave me many useful comments. She encouraged me to submit my manuscript to Routledge to be included in its International Studies in Business History series

Acknowledgements

xiii

and gave my book her full support. Every historian writing on the subject of foreign direct investment owes a great debt to Mira Wilkins, who researches this subject already for so many years in such great detail, always eager to teach and to learn. As a ‘native speaker’ Tony Breckell kindly read the final draft and suggested many small but vital improvements to the English text. Seyno van Es assisted in collecting and assembling statistical information. From manuscript to printed book is a long and complicated process. I would like to thank Alice Sparks for her careful copy-editing, Gerard van Es for his help with correcting the proofs, and Gail Welsh for her aid in the final production stage. I feel blessed having received support and encouragement from so many people.

Introduction

In 1990 the largest Dutch company, Royal Dutch, one of the two parent companies of the Anglo-Dutch Royal Dutch/Shell Group, celebrated its centenary. The chairman of the Committee of Managing Directors, Lo van Wachem, was asked to explain how you reach a centenary, to reveal the secret of the Group’s vitality. He replied: On the one hand, you must try to be flexible enough to react to changing circumstances, whether they’re political, commercial or technical. At the same time, you must have enough self-confidence to do things your own way, so that you’re not drawn off course by every whim of fashion. It’s a balancing act. The same goes for your organisational form: we’ve opted for a high degree of decentralization, but you still have to keep it cohesive, because otherwise the various parts would just cling loosely to one another. And if things take a downturn, it’s no use moping. Keep the proverbial stiff upper lip. While if things go well, perhaps even very well, you mustn’t think that they automatically always will, or that it’s due solely to your own wise decisions. A certain degree of modesty is then called for.1 In a nutshell Lo van Wachem paints basic choices in business strategies: keeping the balance between flexibility and a steadfast course, finding the right balance between centralisation and decentralisation, placing events in their proper perspective by not getting too discouraged by bad results, nor too arrogant when things go well. These are some of the important and recurrent themes in this book on Dutch business enterprise in the twentieth century. Business history has been a thriving field of research in the Netherlands during the past two decades.2 This book intends to bring together some of these results by offering the first synthesis of the major developments in Dutch enterprise in the twentieth century, with particular emphasis on business strategies. It aims to highlight the developments in Dutch business history from the perspective of the individual firm and its leaders. It covers industry as well as the service sector. This study is based on the wide

2

Introduction

range of published material written in recent decades, including company and industry histories, journal articles both contemporary and modern, investment directories, published company reports and governmental reports. Now that the twentieth century lies behind us, the moment seems right to look backward. In the words of Eric Hobsbawm, this was the ‘Age of Extremes’, with two World Wars, a deep depression, economic miracles in many European countries, and a struggle between communism and capitalism.3 In this volatile business environment, entrepreneurs had to find their way. This book deals with business strategy in the Netherlands during the twentieth century. On the one hand, this is a general story about change and adaptation in the twentieth century and much of it may sound familiar to readers from other countries. On the other, it is a story about business people acting in a small country with an open economy, though situated in the rich part of the world.4 This setting makes the story of change and adaptation more specific: because a small country lacks the political and economic power to significantly influence the world around it, and because it is unable to close the door to the outside world, this story is – even more than in the case of large countries – about company strategies to adapt to outside developments or to anticipate them.

Business strategy Business leaders draw up plans, seize opportunities and seek to overcome obstacles. In this way they shape their business and contribute to economic development. But changing economic or political circumstances invariably forces them to react and reconsider their strategies. This pattern of action and reaction is central to the development of businesses. It is of particular interest when we consider developments from a longterm perspective. In business life there is never stability for a prolonged period. How business enterprises and their leaders cope with changing circumstances makes up the main theme of this study. Companies make plans for the future that are sometimes well defined by a committee and sometimes only vaguely present in the mind of the leader, but they are never entirely absent. [Strategy is understood as the major choices made in the running of the company.] Individual entrepreneurs, owners and managers take decisions concerning the organisation of their firms, their products, their use of technology, their purchasing and marketing, their recruitment and training of personnel and their attitude towards the state. Together these choices determine the direction of the company and, indirectly, the economy in which these companies function. This book will address the formulation of strategies as such, that is the conscious thought about the best way forward for the company. But much of the story will be taken up by what companies in fact did, what we may term the ‘revealed strategies’. For the first half of the twentieth century,

Introduction

3

much more is known about the revealed strategies than about the conscious strategies, because companies were not used to discussing their strategies openly, and certainly not in the financial press as they do nowadays. Even then, what they discuss may not be the same as what they actually do. The term strategy originates from the military, but it became an accepted terminology for business in the 1960s. One of the first to apply the concept of strategy to business history writing was A.D. Chandler jr. In Strategy and structure, published in 1962, he described the rise of large, diversified companies and argued that their organisational structure had to follow the chosen strategy, or more particularly that a diversification strategy demanded a multidivisional organisation. In his further works he elaborated on the rise of the managerial company, first in a number of suppositions about the most likely developments, then in a model to explain the success and failure of national economies.5 The rise of the managerial companies is one of the themes I will explore in this book. Interest in the strategy of the company became widespread in business circles after the publication of H. Igor Ansoff’s book Corporate strategy in 1965.6 For Ansoff strategy was synonymous with policies directed toward growth and expansion. His book was concerned with long-term planning and diversification. Though not denying the importance of long-term goals and action plans, Henry Mintzberg underlined the learning process involved in strategy making. Some intended strategies are never realised, while in other instances the realised strategies are not the result of deliberate choices but emerge out of responses to the external environment.7 This approach to strategy is particularly relevant for historical research. As J.G. van Oord, from the family dredging firm the Van Oord Groep, remarked about their internationalisation strategy during the 1970s: Our strategy reports and discussions thereof determined the course of events less than one might have expected. Their importance lay more in the discussion itself than in the outcome, because the outcome was very much determined by market opportunities.8 Over the years management consultants developed the strategy concept further to include internationalisation, turn-around management, human resource policies, the development of capabilities, core competencies, competitive strategies and re-engineering.9 The interplay between management ideas and actual business policies will be highlighted in this study. The use of the word strategy, however, is not limited to the world of management consultants. In microeconomics and, more particularly, in game theory, firm strategies have become vital in explaining economic developments. Rational behaviour, supply and demand, marginal costs and benefits are no longer considered enough to explain company behaviour. Insights are often limited, knowledge incomplete and the various alternatives ambiguous, which creates room for individual interpretations and choices. But even if choices are individually made, it doesn’t mean the outcome is different for all firms. In fact, in different

4

Introduction

periods entrepreneurs display similar behaviour, which, for instance, is particularly evident in merger strategies.10 Business strategies have to be explored in particular situations. In this book five fields for exploration have been chosen: 1

2

3

4

5

The internal organisation of firms: how, when and to what extent did the family firm give way to the managerial company? To what extent was the specialised firm transformed into integrated big business and further into a diversified conglomerate? Or did the reverse happen: the streamlining of diversified companies into specialised ones? The external organisation of firms: how did business leaders shape their relationship with their external business environment: financiers, clients, competitors? Did they use ‘networks’ as alternative contractual arrangements? The international orientation: how important were foreign contacts in buying, selling and investing? The rise of the multinational company raises discussions about why and how firms go abroad and how success or failure can be explained. Is it possible to point out a ‘competitive advantage’ of the Netherlands? Management and labour relations: which plans and policies were used by management to direct work tasks, to discipline and reward workers, and to deal with trade unions and works councils? Attitudes towards the state: were business and state opponents or collaborators? The relationship with the state is twofold: governments create boundaries for firms by regulating their relationships with each other, by protecting interests of workers and consumers, by safeguarding the environment. But governments can also promote entrepreneurial opportunities, invest in infrastructure and directly support certain business activities. In particular they can be supportive or not towards new technological developments.

The Netherlands as a small country with an open economy Business strategies take place in the context of place and time. The ways in which firms and their leaders act are closely related to the country from which they operate. They are influenced by the position of their home country in the world and by its national business system. The Netherlands had its moment of glory, its Golden Century, in the seventeenth century, when it reached its summit in economic power, political influence and rich cultural life after a revolt against the Spanish empire. The Dutch Republic took over the leading role from older trade centres such as Venice, Genoa, Augsburg and Antwerp and would in turn be superseded and surpassed by Britain. The mid-seventeenth century formed the heyday of the Dutch commercial and financial superiority. Its ships sailed the world, combining dominance over bulk trades with a strong position in

Introduction

5

the more specialised colonial trade. The VOC (Dutch East India Company), established in 1602, was among the first multinational companies, though with some justification it could also be called the first ‘national champion’, because it thrived on a state-supported monopoly position. It exercised a military presence around the centres of foreign trade, which in due time would lead to the establishment of a colonial empire. In four Anglo-Dutch trading wars, the Dutch position as commercial and financial leader was gradually superseded and surpassed by Britain.11 The final blow came when the French troops of Napoleon ‘liberated’ or occupied the country in 1795, shutting the country off from the sea and introducing French laws and the metric system. The Netherlands did not begin to industrialise in the late eighteenth century as did Britain. Historians have agonised over why the Netherlands was so slow to follow Britain’s example and when at last the ‘industrial revolution’ took off. Some favoured the 1860s as the period of breakthrough, others took 1895 as the moment of ‘take off’. Explanations for the lateness alternated between economic factors, such as high wages or a lack of iron-ore and coal, and psychological factors such as lack of entrepreneurship. Another way of looking at the debate was arguing that the Netherlands did show considerable economic growth, but simply followed a different path.12 The most recent contribution, based on reconstruction of the national accounts, underlines the importance of institutional factors in retarding growth during the first part of the nineteenth century, until the political and economic liberalisations between 1840 and 1870 paved the way for a rise in productivity and economic growth after 1860. In this agriculture, trade and transport, helped by the colonies overseas, played a leading role and manufacturing followed.13 How balanced developments in the Netherlands were, can be seen from the equal division of labour over the most important economic sectors. In Table I.1 Dutch developments are compared with those of two of its most important trading partners and neighbouring countries, Britain and Germany. Being a late-comer in industrialisation the Netherlands was behind Britain in employment in manufacturing throughout the whole period, but in particular until 1913. It was, however, ahead of Germany in 1870, but no longer in 1913. The share of manufacturing in employment in the Netherlands rose from 29 per cent in 1870 to 40 per cent in 1950, but remained somewhat behind Britain and Germany. Though not visible in this table, employment in manufacturing reached a level of 41 per cent in 1960 and diminished thereafter.14 The ‘rise and fall of manufacturing’ therefore gives the twentieth century a distinctive character, which justifies a separate treatment of this period. The Netherlands was very similar to Britain in its importance of the service sector, including the non-market services, as a source of employment. Its share was already 34 per cent in 1870 and gradually increased to 72 per cent in 1992. In contrast, employment in agriculture steadily declined, though it remained higher than in

6

Introduction

Table I.1 Breakdown of employment by major economic sectors, the Netherlands compared with Britain and Germany, 1870–1992, in percentage of total employment 1870

1913

1950

12 26 35

5 14 22

2 4 3

Manufacturing, mining, construction and utilities Britain 42 44 Netherlands 29 34 Germany 29 41

45 40 43

26 24 38

Market and non-market services Britain 35 Netherlands 34 Germany 22

50 46 35

72 72 59

Agriculture, forestry, fisheries Britain 23 Netherlands 37 Germany 49

44 40 24

1992

Source: A. Maddison, Monitoring the world economy, 1920–1992 (OECD, 1995), p. 39.

Britain and somewhat lower than in Germany. By 1992 agriculture was less than 4 per cent of employment in all three countries. With its own mix of activities in agriculture, manufacture and services, the Netherlands succeeded in realising a respectable economic growth during the twentieth century. In Table I.2 the Dutch performance in economic growth and labour productivity in the period 1913–1994 is compared with an average of eleven North-West European countries and the US. The average annual growth in Gross Domestic Product (GDP) was higher than in North-West Europe, but the Dutch rise in population was much higher as well, and as a consequence the GDP per capita was lower than in North-West Europe, though slightly higher than in the US. The rise in labour productivity, measured as GDP per hour worked, was someTable I.2 The Netherlands within North-West Europe and the US, 1913–1994 (unweighted averages of annual compound growth rates)

Population GDP GDP per capita GDP per hour worked

Netherlands

North-West Europe*

US

1.14 2.99 1.83 2.55

0.59 2.80 2.00 2.67

1.22 3.05 1.80 2.19

Source: B. van Ark and H.J. de Jong, Accounting for economic growth in the Netherlands since 1913. Research Memorandum GD-26, Groningen Growth and Development Centre, Groningen: Universiteit Groningen, 1996, p. 20. Note * Includes Austria, Belgium, Denmark, Finland, France, Germany, Netherlands, Norway, Sweden, Switzerland and the UK.

Introduction

7

what lower than in North-West Europe, but significantly higher than in the US. These general figures conceal different periods of alternating fast growth and stagnation, which will be highlighted further on in this introduction. Overall they show that the Netherlands succeeded in providing a growing population with rising incomes and that its labour productivity has been relatively high. One important characteristic of the Netherlands, shared with many other small and medium-sized countries, was the ‘small country dilemma’: the country is strongly dependent on international developments, while at the same time being unable to influence these developments. In 1985 Peter Katzenstein in his study about Small States in World Markets suggested that large states were gradually relinquishing their traditional prerogative of imposing political solutions on others and were adjusting like small states to changes imposed from abroad: ‘For America and the large states, “rule taking” rather than “rule making” is becoming increasingly important.’ With regard to the production of goods for international markets he added: ‘They too must learn how to tap-dance rather than trample.’15 However, this was a development he expected to happen in the future, not the reality for much of the twentieth century. While large countries like the US could export the cost of economic change to other countries through ad hoc protectionist policies, small European states had to be flexible and adjust their industrial policies to adapt to changes in the world economy.16 International trade was hugely important for the Netherlands, because of its attractive geographical position along major rivers and the sea, surrounded by prosperous nations. Figure I.1 highlights the imports and exports of the Netherlands during the past two centuries. 90

80

70

percentage

60

50

40

30 import export

20

10

1995

1989

1983

1977

1971

1965

1959

1953

1947

1941

1935

1929

1923

1917

1911

1905

1899

1893

1887

1881

1875

1869

1863

1857

1851

1845

1839

1833

1827

1821

1815

0

Figure I.1 Dutch import and export as percentage of GDP, 1815–1995 (source: CBS, Tweehonderd jaar statistiek in tijdreeksen, 1800–1999 (Voorburg: CBS, 2001)).

8

Introduction

After 1860 international trade rose to a substantially higher level, roughly amounting to between 50 and 80 per cent of GDP until 1914. This illustrates how much Dutch business relied on international trade. It was often involved in just a small part of the supply chain, buying raw materials or intermediate products abroad, upgrading them to the next level, and exporting them again as intermediate or final products. To put this figure in perspective: the US level of imports and exports varied roughly between 4 and 8 per cent of GDP between 1870 and 1914. US exports peaked at slightly over 20 per cent in 1920,17 while Dutch exports were seldom below that level. Dutch figures for the two war periods are lacking, but both wars seriously interrupted the flow of goods. The very high level of international trade did not return to its pre-war level after the First World War, not even in the 1990s, though with 40 to 50 per cent it remained substantial. It is not possible to give a similar impression of developments in Dutch foreign direct investment over two centuries, but figures for the last fifty years are available, and are presented in Figure I.2. Figure I.2 underlines the international interconnectedness of the Dutch economy, which reached a high point in the 1990s. As we will discuss in this book, the international outlook of Dutch business is one of its fascinating characteristics.

Debates in business history In the business history literature, broad comparisons between national countries often limit themselves to large countries. Looking at the literature from the 1990s onwards, the first book that comes into mind is Alfred D. Chandler’s Scale and scope, which compares the rise of the managerial business enterprise in the US, Great Britain and Germany. Highlighting the rise of modern business, Mansel G. Blackford compared experiences in Great Britain, US and Japan. In his synthesis of the British business history from 1720 till 1994, John F. Wilson contrasted the British developments with those in the US and Japan. Youssef Cassis wrote about the rise of big business in Europe, but in this case Europe meant mostly Britain, France and Germany.18 Small countries like the Netherlands are most of the time excluded from these broad comparisons. One reason for this is that, being small, these countries are understandably considered less important. For another, their history is less accessible to the international body of academics because much of the literature is written in a non-English language. The first problem is a fact of life and can’t be changed, but this book hopes to remedy the second problem by highlighting the history of Dutch business in the English language and opening up the Dutch business history literature to the extra attention which an English language publication attracts. Not only that, this study also addresses the most important debates among business historians of the last two decades, looking at them from the Dutch perspective and through the looking glass of Dutch business strategies.

0

5

10

15

20

25

outward

1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

inward

Figure I.2 Dutch inward and outward direct foreign investment, 1948–2002 (source: M. van Nieuwkerk and R.P. Sparling, De betalingsbalans van Nederland: methoden, begrippen en gegevens (1946–1985), Monetaire monografieën, nr. 7 (Deventer: Kluwer, 1987); Annual Reports De Nederlandsche Bank, 1985–2002; CBS, Tweehonderd jaar statistiek in tijdreeksen, 1800–1999 (Voorburg: CBS, 2001)).

as percentage of GDP

10

Introduction

In the limited space of this introduction it is impossible to do the debates in business history full justice, but a short discussion should give the reader an impression of the themes this book will touch upon. Business history has always been fascinated by the rise of big business. A.D. Chandler jr. brought a vital contribution to this debate by addressing this phenomenon from the perspective of organisational capabilities. He argued that building a managerial hierarchy was essential to the success of big business, and the companies which succeeded in building this hierarchy were hard to beat, and as a consequence dominated their economies for decades. According to Chandler, the US was the first country in the last decade of the nineteenth century to exploit the new possibilities of modern transport and technological progress to create large vertically integrated companies managed by a hierarchy of professional managers. Germany followed close on America’s heels by organising production in large companies supported by cartels and protection of the home market. In his book Scale and scope he contrasted the American ‘Competitive Managerial Capitalism’ with the ‘Cooperative Managerial Capitalism’ in Germany and the ‘Personal Capitalism’ in Britain.19 In his view, Britain failed to grasp the opportunities of the new technological developments in oil, chemicals and electro-technical engineering, because it clung to family firms and personal ways of doing business. Chandler did not discuss the Netherlands, but in a study Big business and the wealth of nations, from 1997, edited by Chandler, Amatori and Hikino, the Netherlands was included among the ‘world’s leading industrial economies’, because it was ‘one of Germany’s smaller neighbors whose contours of growth paralleled that of Germany’.20 Though the Netherlands undeniably profited from the economic growth of Germany, it would be wrong to see the country as a mere satellite of Germany. For one thing, it did not protect its economy but followed Britain in its free-trade policy. For another, it was far less cartelised and the rise of big business came later than in Germany. Also, in the Dutch case, large companies were at the same time multinational companies. Not only that, three of the four truly large multinational enterprises which developed in the Netherlands before the Second World War were the result of cross-border mergers, underpinning the international outlook of the Dutch business community. Placed between the two large economies of Britain and Germany, it learned from both countries, but developed in its own unique way. Discussion among business historians about new forms of organising business automatically led to debates about the old forms, i.e. about the family firm. Initially the family firm was seen as a first step in the progression of business, useful in the industrial revolution, but no longer competitive in modern times. Economies were expected to move from a business organisation based on family firms to one based on managerial enterprises, as the latter form was considered far more efficient, certainly in industries such as cars, chemicals, oil and electrical engineering.21

Introduction

11

Countries where the family firm still dominated had apparently failed to move forward. For instance, Chandler explained Britain’s backwardness, compared with the competitive managerial capitalism of the US or the co-operative managerial capitalism of Germany, by its adherence to the family firm and personal capitalism.22 This claim was hotly contested. One line of argument was that the performance of British business wasn’t bad at all. Comparing the economic performance of Britain, France and Germany in the twentieth century, Cassis found Britain the undisputable leader until the 1950s, after which the performance of all three began to converge.23 Another line of argument was that national and corporate cultural differences were more important influences on business behaviour than contrasting organisational structures.24 A third approach argued that family firms as institutions could function very effectively, so that there was no convincing argument to blame the family firm for Britain’s perceived underperformance.25 Family firms tended to organise their activities through networks rather than hierarchies. Colli and Rose concluded that family firms in different countries displayed large variations depending on national cultures, including inheritance laws, the role of minorities and the political system.26 Colli, Perez and Rose, comparing the family firm in Italy, Spain and Britain, showed that there was no simple North–South divide in Europe. In their view, the key issue in discussions about the family firm is the succession strategy, but this too is culturally dependent.27 Anglo-Saxon countries tend to have strong business leaders, while in other countries, as for instance the Netherlands, leadership is much more a collective responsibility. The latter makes succession easier. Internal succession has the danger of fostering an inward- rather than outward-looking business culture. However, many family firms are known for using their networks, including their business relations abroad, for training the next generation. In this way family firms were able to keep themselves informed about new technological and organisational developments. Colli noticed this tradition in Italy and the same happened in the Netherlands. Dutch family firms were also successful in sectors of the Second Industrial Revolution, but often in niche markets. As was the case in Britain, they came under pressure in the 1950s, but experienced a renewed appreciation in the 1980s, together with the small firms. Within business history, the history of multinational companies has been one of the key interests, resulting in a regular stream of publications. When and why companies went abroad, and how they shaped their expansion organisationally, have been important subjects for study. In the 1960s the term multinational became a household name to describe the large US manufacturing firms, which spread their production units around the world on the basis of their superior technology and managerial skills. They became the object of public scrutiny as well as historical research. For the last three decades historians have worked to enrich our knowledge and in so doing have revealed a more complex picture, showing how

12

Introduction

multifaceted the world of international business is. The detailed archivalbased research of Mira Wilkins about US foreign investment showed that the phenomenon had old roots, dating back to the nineteenth century.28 Nor was it limited to the US. In fact European countries, in particular Great Britain, played a leading role in foreign direct investment in the period before the Second World War, as calculations by John Dunning revealed.29 By studying European multinationals the roots could be placed even further back, because the chartered trading companies such as the Dutch and British East Indian companies could very well be analysed as early modern multinationals.30 A flurry of research activity resulted in a number of essay collections published in the short period of time between the late 1980s and early 1990s.31 It became clear that international business was not limited to manufacturing companies, but could include exploitation of natural resources, trading, banking and other services. In his Evolution of international business, Geoffrey Jones identified a movement from a dominance of foreign direct investment in trading and natural resources, especially oil, at the end of the nineteenth and start of the twentieth century, to a focus on manufacturing from 1914 till the 1970s and a new dynamism in multinational services in the last two decades of the twentieth century.32 In order to chart the wide variety of historical experiences, historians tended to use a broad definition of the multinational enterprise, as for instance Jones, who defined the multinational enterprise as a firm that controls operations or income-generating assets in more than one country.33 Though the multinational company was initially seen as a large enterprise with an extensive managerial hierarchy, historical research made clear that other forms of organisation had been used successfully in the past. Multinationals from European countries were normally smaller than their American counterparts and their organisational structure was often more informal and decentralised so as to be able to work effectively in the fragmented European markets. It was not unusual for family firms to be multinationals.34 Still, Europe had a number of multinational companies that could match themselves in size with American companies, including the Anglo-Dutch companies Royal Dutch/Shell and Unilever. Other small countries such as Sweden and Switzerland were also homes for important multinationals. A company with investments abroad but no activities at home apart from its headquarters was a popular vehicle for foreign investment at the beginning of the twentieth century in Britain as well as other European countries, including the Netherlands. Mira Wilkins coined the term the ‘free-standing company’ for it. With its lack of a formal managerial structure the free-standing company looked fragile, but it was stronger than it appeared on the surface because it was embedded in informal networks of people who shared knowledge and information.35 In the Dutch case, freestanding companies were an important form of direct foreign investment.

Introduction

13

They were also nearly synonymous with investment in colonial Indonesia. Though outward direct investments have traditionally received most attention, there is a growing interest in inward investments. The US and UK are still the most researched countries, but continental European countries have been drawn into the picture.36 The Netherlands was among the few small countries with both substantial inward and outward investment. In many of the publications on the history of international business since the 1980s, the authors have sought to combine history with theory.37 This historical research has been enhanced by the application of theories and concepts from international business economics, in particular John Dunning’s eclectic paradigm to explain foreign direct investment patterns.38 He seeks to explain why companies go abroad and why they choose certain countries as their destination. For explaining the level and patterns of direct inward and outward investment Dunning’s eclectic paradigm has proven to be of considerable use. This theory analyses three kinds of possible advantages, the ownership-specific advantages of the firm of one nationality over those of another, location-specific advantages of home or host countries and the internalisation incentive advantage resulting from internalising markets. This flexible and comprehensive theory turned out to be well suited for historical research. Not surprisingly, this framework has been used frequently in studies of multinational companies in both manufacturing and services. Nonetheless, in his Evolution of international business, Geoffrey Jones concluded in 1996 that: ‘The complex history of international business does not prove any single theory of the multinational enterprise. There was no inherent and single logic behind the growth of MNEs’. (. . .) ‘These “lessons” of history do not mean that the growth of international business was a random process, but it is evident that systematic factors behind its growth must not be oversimplified.’39 In 2000 Mark Casson set out a new research agenda for the economics of international business.40 One of his ambitions is to embed the theories of international business within a broader social and political context. He argues that the theory of multinational companies can and should be integrated with the national business system approach. This is more generally true for the study of businesses and their strategies.

National business systems Business strategies reflect the national business system. The study of business strategies, therefore, increases our knowledge about national business systems. The end of the Cold War and the collapse of the communist production system in the Soviet Union stimulated research into the differences between capitalist systems. The French banker Albert created a contrast between the Anglo-American and the Rhineland system, arguing that the Rhineland system was losing ground while it was actually the best

14

Introduction

system.41 This contrast became popular and gave rise to further and far more detailed studies into business systems. In fact, in academic circles (sociology and political economy) there already existed a long tradition of comparing business systems. Notable in this context is the work of Richard Whitley on national business systems, in which he argued that there is no one best system, but that different systems have their own merits in their own context. A business system is characterised by the nature of the firm, the market organisation and the co-ordination and control systems. Essential elements in the nature of the firm are ownership structures, managerial hierarchies, capabilities, and employment and reward systems. The market organisation deals with matters such as co-operative relations between firms, the significance of intermediaries, and the functioning of business groups. The systems of co-ordination and control within and between the companies can be personal or impersonal, authoritarian or democratic, close or at arm’s length, company based or market based. Business systems develop within a particular institutional context. Important elements of this context are intangibles such as trust, loyalty, co-operation and attitudes towards authority, risk and innovation. But the context becomes concrete in political and legal systems, the capital market, the role of the state, the structure of the labour market and education.42 In 2001, Hall and Soskice published a study, Varieties of capitalism, in which they bring firms back into the centre of the analysis of comparative capitalism, in this way building bridges between business studies and comparative political economy. They too use the contrast between two extremes, the liberal market economies portrayed by the US, and the coordinated market economies, of which Germany is the ideal type. Central to the comparison between the two systems is the way in which firms resolve problems of co-ordination in the spheres of industrial relations, corporate governance and inter-firm relations. Each system offers companies a particular set of opportunities and companies can be expected to gravitate towards strategies that take advantage of these opportunities. Therefore the authors reverse the famous adage of Chandler: ‘structure follows strategy’, and argue that ‘strategy follows (institutional) structure’. A clear example of the interplay between the institutional framework and corporate strategies can be found in the reaction of British and German companies to an appreciation of the exchange rate that makes exports more expensive. British companies in the liberal market economy tend to pass the price increase along to customers in order to maintain their profitability, because they have to justify their behaviour first of all to shareholders. German firms in the co-ordinated market economy, however, maintain their prices and accept lower returns in order to preserve market share, because they have to justify their behaviour to labour institutions which tend to favour long-term employment and hold back redundancies.

Introduction

15

Classifying the large OECD countries, Hall and Soskice included the US, Britain, Australia, Canada, New Zealand and Ireland under the liberal market economies, and Germany, Japan, Switzerland, the Netherlands, Belgium, Sweden, Norway, Denmark, Finland and Austria under the coordinated market economies. They found six countries, France, Italy, Spain, Portugal, Greece and Turkey, difficult to place, and suggested that there might be a Mediterranean economy, marked by a large agrarian sector and recent histories of extensive state intervention. The authors also keep an open mind on the question of whether national systems change over time, though they expect business communities to support the prevailing institutional structures.43 In the conclusion of my book, I will ponder over the question of whether the Dutch business system is rightly placed under the co-ordinated market economies, and whether or not it has been stable over the whole twentieth century.

Long-term perspective This book takes the long-term perspective because in this way it is possible to evaluate business strategies. Making long-term plans and following them up are two quite different matters. Often, unexpected events require an extensive reconsideration of the course just set out. Also, the results may not match the expectations of the chosen strategy. Looking back over a century makes it possible to evaluate on a long-term basis this interplay between the strategy, the action, the changes in the environment, the reformulation of the strategy, its results, the influence of the environment, and once again the determining of a new strategy. There is no end-game. After each round there are winners and losers, but winners have to play again, make choices, invest their money. Victors can never rest on their laurels, because each time new challenges await.44 The element of time underlines the fact that there is no one best strategy. Under certain market conditions or in certain international state configurations, one strategy may temporarily outperform the others, and if these conditions remain stable for several decades, one strategy may even obtain a dominant position. However, each strategy incorporates a number of control dilemmas or contradictions that can’t be avoided forever. Also, economic, political and social circumstances inevitably change. Eventually, once dominant strategies will lose their appeal and will fall into decay. To demonstrate how changes over time are reflected in the strategies and results of individual companies, I have followed one company, Koninklijke Philips Electronics NV (Royal Philips Electronics), in greater depth over the whole period. This example is chosen because Philips is well known abroad as one of the major international companies of Dutch origin. Its history illustrates the transformation from family firm to managerial company. The firm also embodies two important technologies of the twentieth century, the electron tube and the micro-chip.

16

Introduction

To underline the relationship between business strategies and the reigning economic, political and social circumstances, I have organised this book chronologically. The four chapters deal with historical periods that reflected important changes in the economic and political landscape of the country. Each of the four periods had different characteristics and therefore demanded different strategies. During the first period, the years 1895–1914, the world economy expanded greatly, supported by a rapid growth in world trade and a profusion of new technologies. This period is often called the Second Industrial Revolution. In some countries, including the US and Germany, the large integrated managerial firm made its entrance. Dutch entrepreneurs made extensive use of these favourable economic circumstances, but they did it in their own way with network structures, family firms and international activities. The country still considered itself a middle range political power because it possessed overseas colonies. The main characteristic of the second period, covering the years 1914–1945, was its volatility. A world war ending in a sharp recession, a short upswing period, a major economic depression and another world war posed great demands on Dutch companies and their generation of leaders. They had to find answers to the fragmentation of the international economy as a consequence of nationalism and protectionism, as well as a slow down in economic growth. Their reaction was to seek protection against uncertainty through vertical integration and closer collaboration with government, workers and colleagues. The years 1945–1975 brought economic expansion under strong US influence. The world was divided in two political systems, communism and capitalism, with Western Europe, including the Netherlands, in the American capitalist camp. The Americans were victorious, powerful, technologically highly advanced, very prosperous and willing to lead the world. The Netherlands was pleased to follow their lead, to enter the stage of mass production and mass consumption, to become an affluent society. These were the heydays of the manufacturing industry and the managed economy. Dutch entrepreneurs continued their close and constructive relationship with the government, carried on their cartel agreements as far as possible, avoided conflict in labour relations and used protective corporate governance structures. As was true for many North-West European countries, this period was the Golden Age of economic growth for the Netherlands, as becomes clear from Table I.3. The fourth period, 1975–2000, started with the kind of economic downswing that governments had hoped to avoid through Keynesian policies. The managed economy lost its attraction. Instead the spirit of free enterprise returned in full force and markets became increasingly global, in particular financial markets, helped by the new possibilities of information technology. Parts of the service sector also developed into large integrated and internationally operating companies. In manufacturing the trend was

Introduction

17

Table I.3 Growth of population, GDP and GDP per capita and GDP per hour worked, the Netherlands, 1913–1990 (unweighted averages of annual compound growth rates)

Population GDP GDP per capita GDP per hour worked

1913–1938

1947–1973

1973–1990

1.38 2.44 1.04 1.79

1.29 5.07 3.73 4.80*

0.63 2.19 1.55 2.50

Source: Van Ark and De Jong, Accounting for economic growth, 1996, p. 20. Note * From 1950.

the reverse, with less integration, more alliances and outsourcing. In the Netherlands the service sector became more important as a source of employment than manufacturing. Flexibility became the new catchword. A new era of prosperity spread during the 1990s, but the turn of the twenty-first century brought another economic recession. This underlines the constantly changing fortunes for businesses and their leaders.

1

Family-based management in an international context, 1895–1914

Introduction During the last decade of the nineteenth century and the first of the twentieth century the world economy greatly expanded. National income growth accelerated in many regions and most countries. Improved communications stimulated international trade, large-scale international migration and massive flows of foreign capital. Colonialism reached its highest point with Western countries scrambling for the last regions in Africa and Asia. Though there was some increase in tariff levels, the flow of trade benefited from fixed exchanged rates as most of the world adopted the gold standard.1 International business was not a new phenomenon in the nineteenth century, but it’s fair to say that its size and significance greatly expanded after 1880. Multinational trading companies and multinational banking increased their activities, international oil companies arose and multinational manufacturing developed in a wide range of products.2 These were years when people believed in progress, especially in technological progress. The whole world would be revolutionised through technical inventions. Some of those inventions, such as electricity with its new possibilities for light, power, telephone and film, greatly appealed to the general public. Others, such as those in the chemical industry with its chemical fertilisers and dyes, were hidden within industry. The same goes for the opportunities created by the availability of cheap steel in the production of ships and later on in armaments, bicycles and cars. While inventors, producers and users shaped the new technologies, their own lives were in turn changed by them in an intricate process of reciprocity. All these technological innovations, coming together at the end of the nineteenth century, have been understood as the Second Industrial Revolution. Other economic historians see this period as the upswing period of the Third Kondratieff wave, boosted by electrical and heavy engineering with cheap steel as the key-factor. Kondratieff waves are considered to last about fifty years. The first wave might have appeared from 1785 till 1845, the second from 1845 till 1895, though views differ on the

Family-based management, 1895–1914 3

19

exact timing. In fact, the remarkable upswing of the 1895–1914 period formed the inspiration for formulating the first tentative long wave theory.4 Contemporaries related the upswing in the economy to the invention of electricity with its many ramifications and the globalisation of the economy. The last decades of the nineteenth century saw the rise of big business in manufacturing in the US, and to a lesser extent in Britain, Germany and France. As mentioned in the Introduction, the fascinating phenomenon of the rise of big business has been extensively analysed by the American business historian Alfred Chandler.5 In his view, the modern industrial enterprise played the most fundamental role in the transformation of Western economies. They had been rural, agrarian and commercial and subsequently became industrial and urban. That transformation brought the most rapid economic growth in the history of mankind. The revolution in transport and communications made possible larger, faster and more regular movements of goods and raw materials. A new group of entrepreneurs moved quickly to exploit these market opportunities, using the new technologies of the Second Industrial Revolution to achieve economies of scale and scope. The first country where this transformation took place was the US. To benefit fully from the cost advantages of high-volume technologies they also had to invest in marketing and distribution networks and to ensure the regular supply of raw materials. This led to a process of horizontal and vertical integration, either by internal growth or mergers. The real challenge for these companies came when faced with the problem of their internal organisation. Here the experiences in administrating national railway systems helped entrepreneurs to develop their own model. They set up layered managerial hierarchies to process and control flows of information crucial to profitable production and marketing. At the same time, ownership and control became more and more separated. Essential in creating the large manufacturing company in the new sectors of the Second Industrial Revolution were therefore, according to Chandler, the three-pronged investments in production, distribution and management. The result was the rise of mass production and mass consumption. The entrepreneurs who first moved forward in this direction, the so-called first movers, acquired powerful competitive advantages, which made it hard for followers to challenge them successfully. Therefore, many of the big companies that arose after the 1880s were still at the core of their national economies at the end of the twentieth century.6 Chandler’s generalisations have found much acclaim but have also met with reservation and criticism. This was particularly true for his suggestion that the continuation of other forms of doing business, such as the family firms and small businesses working together in an intricate web of relationships in preference to vertical integration, were a sign of failure to meet the modern requirements. The discussion on failure concentrated

20

Family-based management, 1895–1914

on the performance of Britain compared with the US and Germany. In particular, developments in the UK were compared negatively with those with the US. In his study of European big business, Youssef Cassis therefore broadened the analysis of Chandler by including big business outside the manufacturing industry in banking, insurance, transport and trading, in which sectors British companies did relatively well.7 Sabel, Zeitlin and Scranton have stressed the equal value of alternatives to mass production, such as speciality products for niche markets. Even in the US itself, a large sector of the economy was based on speciality manufacturing. By using multi-purpose machinery these firms kept a great deal of flexibility in their production process, which enabled them to adjust successfully to changing demands. This sector, they argue, deployed a dynamic that paralleled, complemented and at times conflicted with the achievements of the mass-production sector.8 Small businesses, serving local markets or working as flexible specialist producers for niche markets, remained an important part of business life. This was particularly true for Europe, but even in the US itself a third of the workforce was still employed by firms with 100 or fewer workers by 1914.9 In this chapter I will explore the strategies of Dutch business people during the upswing period till 1914 with its profusion of new technologies and its growing international interconnectedness. In these favourable surroundings, the Dutch economy experienced a period of sustained growth. All sectors in the Dutch economy, agriculture, services and manufacturing, contributed equally. The Dutch felt as though they were at long last reconnecting with the major economic developments in Europe, taking their rightful place amongst their peers. Within Europe, the Netherlands belonged to the group of smaller countries, but because of its colonial empire it still considered itself one of the middle-ranking political powers. Around 1900 the Dutch were very much aware of their status as colonial power and their tradition in trading, dating back to their Golden Age of the seventeenth century. Their art and architecture demonstrated clear references to this period of glory.10 Also, there was a distinct feeling especially amongst businessmen that a new Golden Age was now dawning.

Interlude 1: The Philips family and the incandescent lamp International orientation, collaboration and family capital, three themes central in our first chapter, lay at the basis of the formation of one of the most wellknown Dutch companies in the twentieth century, the Koninklijke Philips Electronics NV. A short history of the firm therefore forms an ideal introduction to the main arguments of this chapter. Gerard Philips and his father Frederik founded the Philips company as a family partnership in 1891. Gerard had studied mechanical engineering at Delft University before taking up a job at a shipyard in Glasgow. There he developed an interest in electrical engineering

Family-based management, 1895–1914

21

and studied at Glasgow University. Subsequently he worked for the AngloAmerican Brush Electric Light Corporation in London and Berlin and for the Allgemeine Electrizitäts Gesellschaft (AEG) in Amsterdam, thus learning the trade and getting acquainted with many of the players in this new field. He came to the conclusion that there was room for specialist lamp-bulb producers alongside the big electrical-equipment manufacturers and started to experiment with the production of incandescent lamps, in particular the carbon filament. His father, a banker, tobacco trader and landowner in the Dutch town Zaltbommel, agreed to provide the financial means. Together they chose a convenient production site in the south of the Netherlands, in the small town of Eindhoven, with good communications and cheap labour. Gerard was a relatively late starter as he was the fifth to take up the production of incandescent lamps in the Netherlands. In order to fully master the intricate production process, he started on a small scale before introducing the mass production which was essential to manufacture the lamps cheaply enough to leave sufficient profit margin. In a small country like the Netherlands, with a modest home market, mass production also implied producing for foreign markets.11 The family character of the firm was reinforced when Gerard’s younger brother Anton Philips joined the firm in 1894. Anton was learning the business at a stockbroker in London. His father called him back from the financial centre of the world to the backwaters of Eindhoven to deal with the commercial aspects of the family firm. Anton delighted in international travel, including a successful trip to Russia. Soon the exports surpassed the home sales. In 1900 the firm boasted 28 foreign agencies, ranging from London to Berlin, St. Petersburg, Yokohama, Surabaya and Buenos Aires, and employed about 600 people, of which two-thirds were young women.12 The employees worked sixty hours per week, though the working days could be shorter if demand for lamps was sluggish. In 1911 Philips introduced the 57.5 hours working week. The Philips brothers were in contact with a group of forward-looking employers in the Netherlands, who studied best practices in organising social funds such as sick funds and pension funds. The rising number of workers in the small town of Eindhoven demanded from the employers an active policy in housing and recreation.13 Dutch producers profited from the fact that patents were not protected in the Netherlands between 1869 and 1912. Philips and others could start up their business and experiment without having to pay huge licence fees or be involved with patent litigation. But, as mentioned, for a mass product such as light bulbs the Dutch home market was not large enough. It was fortunate for the company that by this time the claims of the Edison patents had been sufficiently challenged in Germany and France to make them ineffective. In England and the US the patents would soon expire. Philips could therefore enter the foreign markets without the threat of litigation. Expansion, however, became hampered by fierce international competition resulting in pressure on prices. In particular, the German company AEG tried to squeeze competitors out of the market through low prices. The Dutch producers, therefore, started

22

Family-based management, 1895–1914

negotiations with the German light bulb manufacturers in 1901 to reach a European-wide cartel agreement. It took two years to work out an agreement between the major European bulb manufacturers. In fact, it became predominantly a German cartel because the French and English producers backed off, afraid as they were of German domination. The Dutch producers, including Philips, however, joined the cartel agreement that covered a joint sales organisation in Berlin and fixed production quotas against stable prices. The benefits for Philips were considerable. The participation in the cartel made the name of Philips known to customers and colleagues far outside its home market. The secure level of production enabled Philips to rationalise its production units and thus lower production costs.14 In the meantime the real competition between the bulb manufacturers took place elsewhere. Many new types of bulbs were being developed of which the metal filament lamp turned out to give the best performance. While the family firm Philips & Co participated in the carbon filament cartel, a new limited liability company, NV Philips’ Metaalgloeilampenfabriek, was founded to develop the new metal filament bulb. The cartel arrangement became increasingly irrelevant as outsiders acquired market share and the new metal filament lamp conquered the market.15 As a specialist bulb producer, Philips was able to move fast. When Gerard learned that General Electric had developed better production techniques, Anton took the first steamer to the US to study the process and buy the necessary machinery to take them back home. Because of the lack of patent protection in the Netherlands, Philips could once again experiment freely at home, but by exporting its products the company ran the risk of infringing existing patents and indeed became deeply involved in patent wrangles in Germany, England and the US. As is often the case, the legal position was far from clear as many different patents covered the field. Though Philips disputed the various claims, in most cases it preferred to reach agreements in order to avoid long-lasting legal battles. The three important Berlin producers combined in a Patentgemeinschaft which forced Philips into a licence agreement, curtailing its expansion in the metal filament bulb. Philips had to withdraw from the British market, but could continue to sell in the British colonies. In the US, General Electric and Philips agreed to wait for the outcome of the legal process, while in the meantime imports of Philips lamps into the US could go ahead. Here Philips’ joint venture, Laco Philips, created a large though not very profitable outlet. While these negotiations were going on, the development of yet another improved variety, the ‘half-watt’ bulb, upset the earlier arrangements.16 In the development of the ‘half-watt bulb’ Philips once again moved quickly to introduce its own half-watt bulbs before the market opportunity would be lost. It also realised the importance of basic scientific research to move from follower to initiator of new developments. The company already had a chemical laboratory, but in 1914 a physics laboratory was added with the double task of doing practical as well as fundamental research.17 In 1912 the family firm was turned into a limited company, the NV Philips’ Gloeilampenfabrieken, which also encompassed the Philips’ Metaalgloeilampen-

Family-based management, 1895–1914

23

fabriek established in 1907. Philips considered following the example of the margarine producer Henry van den Bergh, who had turned to the London capital market, but in the end decided to remain a Dutch company. The family kept a considerable influence in the new company through its large shareholding, while the two Philips brothers acted as managing directors and two of their brothers became members of the board of supervisory directors. With a nominal share capital of six million guilders and about 2,500 employees Philips was small compared with its main foreign competitors, such as General Electric, Siemens and AEG. In the Dutch context it belonged to the top twenty largest manufacturing companies. It also represented the successful entrance of a Dutch company into one of the industries of the Second Industrial Revolution as a second mover.18

1.1 Small scale and family run The Netherlands had been late in catching up with the opportunities shaped by the First Industrial Revolution: the use of steam power and mechanisation in the textile and machinery industry. According to Van Zanden and Van Riel, the rise of the modern manufacturing industry took place from the mid-1860s onwards with a short interruption around 1890. Investment in machinery showed a marked growth after 1895. The manufacturers were stimulated to mechanise their production, because of the relatively high wages in comparison to the costs of coal and machinery. High real wages at the same time provided a growing market for consumer goods and stimulated the manufacturers to further increase production.19 While the Netherlands had been slow to adapt to the First Industrial Revolution, they were quick to take up the benefits of the Second Industrial Revolution. One of these benefits was that electricity fitted well in the tradition of small-scale production. The spread of the electric motor was remarkably fast in the Netherlands.20 Important elements in the dynamics of the 1895–1914 period were the growth of the agricultural sector with its agribusiness, the expanding transit-trade which benefited from the economic growth in two neighbouring countries, Germany and Britain, and the economic exploitation of the Dutch East Indies creating rising opportunities for investment and supply of goods. In this dynamic context the manufacturing industry began to thrive. Between 1889 and 1909 the number of people employed in manufacturing rose 44 per cent. How balanced the economic growth in the Netherlands was during that period becomes clear when we compare the structure of employment. The division of the labour force over the three main sectors, agriculture, industry and services, remained by and large the same with roughly a third for each sector, though the general trend was already visible: the share of agriculture went down from 36.6 per cent in 1889 to 30.4 per cent in 1909, while that of industry increased from 31.6 to 34.3 per cent and services from 31.9 per cent to 35.4 per cent.21 The

24

Family-based management, 1895–1914

size of industry as measured in workforce was growing as well, though not spectacularly. Factories with a few hundred employees were no longer an exception. The number of people working in firms with more than 50 employees increased from 15 per cent of the total workforce in the manufacturing sector in 1889 to 29 per cent, nearly a third, in 1909. Unfortunately, this source gives no information on the number of firms with 1,000, let alone 10,000 employees.22 Mass production of textiles, shoes, furniture and ready-made clothes had made its entrance, though it certainly had not yet ousted all craft production. Dutch entrepreneurs took on new products such as bicycles and light bulbs. The joint stock company became more frequently used, even by manufacturing companies. Between 1895 and 1914 Dutch manufacturing clearly displayed growth and modernisation. Yet, all this was a far cry from the rise of the large managerial companies that took place elsewhere, particularly in the US.23 How does the development of Dutch business in the period before 1914 match the generalisations of Chandler mentioned in the Introduction? Chandler gives no indication of size measured in workforce for his selection of big companies. His focus is more on the way the business enterprise is organised: being a modern managerial company implies having a number of distinct operating units and being managed by a hierarchy of full-time salaried managers. Naturally these characteristics suggest a certain size, otherwise they would make no sense. Youssef Cassis, writing on Big Business in Europe, is more explicit. He gives two criteria for size: the first is a workforce of 10,000, though he admits that 5,000 would be more realistic for the period before 1914. His second criterion is paid up capital of £2 million before 1914, which is the equivalent of 24 million Dutch guilders.24 We have some information on the size of Dutch companies in 1902. By far the largest companies both in terms of workforce and capital were in fact not manufacturing companies but the two major railway companies, Maatschappij tot Exploitatie van Staatsspoorwegen and the Hollandsche IJzeren Spoorweg Maatschappij, with respectively 18,000 and 11,000 employees. This fact demonstrates that the transport revolution had taken place in the Netherlands. Equally large in workforce (18,000) was the government-owned postal and telegraph service PTT: the revolution in communications had left its mark too. All the other Dutch companies in 1902 employed less than 2,000 people, most of them far less than 1,000. As we saw, Philips had about 600 employees in 1900. (In this survey, the companies working in the Dutch colonies are not included.) Public service companies, such as the municipal tramways and gasworks in Amsterdam, and a combination of municipal works in Rotterdam employed between 1,000 and 2,000 people. About twelve manufacturing companies had a similar size. These companies were to be found in the textile industry, the metal industry, especially shipbuilding, and glass and pottery

Family-based management, 1895–1914

25

industry. All other firms employed less than 1,000 people. The dominant manufacturing industries at the turn of the century were textiles and metals (shipbuilding), that is to say representatives of the First Industrial Revolution. Ten years later, at the outbreak of the First World War, the picture of company size was somewhat different. The number of companies with a workforce of more than 1,000 people had risen from twenty to nearly fifty. This points to a growth in company size. It is also a clear sign of the general growth of industry in the early twentieth century. Utilities, textiles and metals still dominated the list, but representatives of new industries such as electrical engineering and the petroleum trade had made their entrance. By 1913 Philips employed about 2,500 people. Several companies in the food sector had also grown sufficiently to become part of this select list of big companies measured in workforce.25 Nevertheless, even in the European context, let alone the US, company size was still modest. Between 1907 and 1912 Britain had 17 companies with a workforce of over 10,000 people, France 10 and Germany 23, of which three employed more than 30,000 people.26 A few years ago, a Dutch list of the top-100 manufacturing companies in 1913 measured in total assets was drawn up. Information was collected from the directories for the Amsterdam Stock Exchange, but additional information was gathered from company archives to include the family firms.27 Sometimes company archives provided the required information, sometimes outright estimates had to be made. Nearly half the number of companies (46) was included on the basis of estimates, which gives a clear indication of how many companies were still family based. Even among the remaining 54 companies many were family firms, and even of those which were listed on the stock exchange many were still basically family firms, that is managed by the family and with the family holding a substantial part of the shares, as was for instance the case with the N.V. Philips Gloeilampenfabrieken. The Dutch list of top-100 manufacturing firms is based on total assets, but if we were to judge the top companies against Youssef Cassis’ measure for big business before 1914, that is ‘more than £2 million nominal paid up capital’, then only one company, the Royal Dutch Petroleum Company, could compete in this league.28 In comparison, Cassis counted 41 British, 13 French and 20 German manufacturing companies with a capital of more than £2 million between 1907 and 1912.29 Small scale and family run are therefore the best words to typify the Dutch manufacturing industry before 1914. As Chandler argued that the big companies, the first movers, possessed a great competitive advantage, one might wonder how the Dutch firms survived against such odds. They did not survive by closing the borders and relying on serving the national market; quite the contrary, by and large the Dutch government followed a policy of free trade and ‘laissez faire’. In fact, the Dutch economy was very

26

Family-based management, 1895–1914

open. Dutch exports rose continuously from 1895 till 1913 in line with growth of the Dutch National Product. The contribution of Dutch exports to the GNP was already high in 1870, nearly 70 per cent, and remained between 55 and 70 per cent throughout this period. The same goes for the imports, though they rose to a new level of 80 per cent in 1913.30 It is clear that the Dutch economy was very open and that Dutch firms relied heavily on export and import. Apparently other ways of organising business successfully were possible alongside the big managerial firms. By looking into the history of individual companies, I will try to discover what strategies these firms employed to hold their own against the big companies abroad. This won’t be a complete overview of Dutch manufacturing industry. The strategies of Dutch entrepreneurs in manufacturing with regard to size, vertical integration, financing and leadership are explored in more detail in four sectors, two sectors of the First Industrial Revolution (cotton and engineering/shipbuilding), one sector of the Second Industrial Revolution (chemicals) and the most important sector in Dutch manufacturing: the food sector. The service sector and the oil industry will be discussed in the second section of this chapter about the relationship with the Dutch colony in Asia. Cotton industry The manufacturing sector with the largest firms measured in workforce at the start of the twentieth century was the textile industry, particularly the cotton industry in the region of Twente in the eastern part of the Netherlands. Yet, this was also the typical stronghold of the family firm. The diffusion of steam power took place in the 1860s, relatively late compared with the English cotton industry. For expertise the industry relied heavily on England. Engineers from England were invited to come to the Netherlands and Dutch manufacturers or their sons went to England to learn the ropes. Not surprisingly, the business strategies in the Dutch cotton industry showed distinct similarities with the Lancashire cotton industry. During the nineteenth century Lancashire developed into a sophisticated industrial district, characterised by a dominance of family firms collaborating in a loose network of interlocking partnerships. The ambition to serve the colonial markets as well as the diverse markets at home led to specialisation, particularly in cloth.31 The Twente cotton manufacturers also produced for the colonial markets, predominantly cotton fabrics (calicoes) for the Dutch East Indies. After 1895, the cotton industry profited from the general economic prosperity that also influenced their important markets in Asia positively. It succeeded in increasing sales by varying and upgrading products, making them more suitable for different markets at home and abroad.32 The large exports, not only to the Dutch East Indies but also to other markets in Asia and elsewhere, are a clear indication of the competitiveness of the Dutch cotton industry. In this context it is

Family-based management, 1895–1914

27

important to note that Dutch manufacturers did not enjoy preferential treatment on the colonial market after 1874.33 In the Twente cotton industry, the opportunities for expanding production were mainly used to increase weaving capacity, while spinning capacity lagged behind. In fact, in 1910 only 7 of the 27 weaving firms possessed their own spinning mills, and even these mills only produced part of the total yarn they needed. Apart from these seven integrated spinning mills, there were also five independent spinning mills in 1910.34 Manufacturers preferred weaving to spinning for several reasons. The weaving was closer to the sales, the field where these merchant-manufacturers traditionally felt more at home. Spinning was also technically more advanced and required a higher investment per unit of output. Lastly, yarn could be imported easily and without any tariffs from Britain, Germany and other European countries. But perhaps most important was the fact that the Twente manufacturers were used to concentrate on one or two stages in the production process. For spinning, bleaching and even dyeing separate firms were set up, often by the same entrepreneurs or by members of their family. Through financial participation or personal relationships the firms co-ordinated operations with each other, thus creating informal co-operation rather than vertical integration. For instance, the Twente textile manufacturers set up several joint bleaching companies. They also founded the trading company Internatio together with Rotterdam traders and bankers in 1863, which developed into one of the major colonial traders. Cotton printing was not integrated at all. This was a very specialised business, made even more specialised because of the continued use of block printing in the Netherlands alongside machine printing. The reason was not technological backwardness, but the wish to serve certain specific markets where large patterns and special effects in the printing were required.35 Some cotton companies had a different strategy and were more inclined to integrate various stages of the production process. The firm Gelderman, for instance, had its own steam-powered weaving mill by 1862 and it did not rest until it was the sole owner of the steam-powered spinning mill, which was jointly set up with the firm Stork & Co in the same year. Nonetheless, the firm also bought large amounts of yarn abroad. It had its own sackcloth-weaving mill for a number of years and took over an indigo-dye works in 1879. With a member of the family and an outside partner it set up a small trading house in the Dutch East Indies. This house concentrated exclusively on consignments from Gelderman as far as textiles were concerned.36 If the Twente manufacturers decided to integrate another production stage, they were by and large more inclined to integrate forward by setting up their own bleaching or dyeing than backwards into spinning.37 As we shall see in the next chapter, their strategy changed after the First World War. The family Van Heek provides a perfect example of the kind of family

28

Family-based management, 1895–1914

strategy, in which network relationships are more important than vertical and horizontal integration. The firm Gebr. Van Heek & Co, set up in 1859 though with older roots, belonged to the leading textile firms in the Netherlands. With 2,639 employees in 1910 it was the largest manufacturing employer in the country at that time, and it ranked third on the list of top 100 companies measured in assets in 1913. The firm had both spinning and weaving mills, but also participated financially in a large number of related activities, including separate spinning mills. All this was financed through retained earnings. To name a few of those enterprises the firm became partner in the sackcloth weaving and spinning mill Ter Horst & Co in 1873 and participated in the calico printing firm Ledeboer Brothers in England, founded by two members of the family in 1872. Another activity abroad was the foundation of the Westfälische Jute Spinnerei und Weberei in Ahaus, Germany, together with Ter Horst & Co and others in 1883. The firm was shareholder in two bleacheries and built another one, the Boekelosche Stoombleekerij in 1888. For members of the family who could not participate in the family firm Van Heek & Co, rival companies were established, such as the weaving mill Richtersbleek in 1897, which became joint owner of the Boekelosche Stoombleekerij. The foundation of the spinning mill Spinnerij Oosterveld was likewise motivated to help create jobs for family members. The firm Van Heek & Co was one of the shareholders in the above-mentioned trading company Internatio and in the Twentsche Bankvereeniging.38 In many of these enterprises other textile manufacturers joined Van Heek. Thus the respective textile families met frequently in different capacities. Not surprisingly, there was much intermarriage within these textile families and these unions inspired and sustained the informal network in which trust was such an important ingredient. Invariably men were the business leaders, but women played a crucial role in sustaining the social network and their family’s place in it. A study of the textile city of Enschede showed how women arranged and maintained the various social circuits and how courting took place within the various social layers of the elite. The network was mostly regionally based, though there were links with the larger Dutch community as well.39 The textile manufacturers would play an important, and not necessarily a progressive, role in the foundation of employers’ organisations. The textile firms might have been large by Dutch standards at that time, but they were modest compared with the top companies abroad. One of the reasons to keep firm size modest was indeed to keep it within the financial limits and managerial capacity of the family owners. The Twente manufacturers clearly formed a close-knit community, tucked away in the eastern part of the country, but at the same time they were reaching out for foreign markets and foreign business contacts. And they succeeded in building up a profitable business, of which their country houses, though not as spectacular as the English ones, formed a lasting testimony.

Family-based management, 1895–1914

29

Engineering and shipbuilding In the nineteenth century, foreign engineering companies were far ahead of the Dutch. Most of the machinery needed in the Netherlands was imported. However, repairs had to be made locally and machines had to be adapted to local production conditions, including local raw materials. Thus the Dutch engineering industry developed from small repair shops that undertook a great variety of activities. The process of adapting foreign machinery to local conditions involved a certain measure of ingenuity that in due time could lead to innovations. In dredging equipment, for instance, the Dutch became specialists. In most cases, however, the machine builders relied on foreign knowledge and expertise. There was no mass production, but manufacturing according to the product specifications of the individual client. During the period 1890–1910, in engineering almost all steam power was replaced by electricity, allowing for more flexibility in operations. The firms were predominantly small and medium sized. The forty or so leading machine-building companies had an average of 247 employees in 1897 and 336 in 1910.40 Most firms were partnerships or family firms. Very large companies that covered the entire range from blast furnaces to finished products did not exist before 1914.41 Dutch engineering lacked the stimulating influence of a primary metal industry. In comparison with Germany, and to a lesser extent Britain, the Dutch position in primary metals was very weak. This is easily explained by the lack of mineral ores and the late exploitation of coal. Furthermore, steel could easily be imported from Germany, often at prices lower than in Germany itself because their home market was protected by tariffs and surpluses were dumped on the world market. The one sector that really contributed to the development of machine building in the Netherlands was shipbuilding. The expansion of the transit trade to Germany and the trade with the Dutch colony in Asia after 1895 stimulated both transport and shipbuilding companies. Shipbuilding was also one of the few industries that profited from direct government orders or orders encouraged by the government, particularly in the sector of large seagoing vessels. The sector also benefited from the availability of cheap steel from Germany. Of the large firms engaged in machinery, the majority were closely connected to shipbuilding, and often the same company carried out both activities. The Nederlandsche Fabriek van Werktuigen en Spoorwegmateriaal, the later Werkspoor, started in 1825 by repairing steamships, and broadened its range to building machinery for the sugar industry as well as several locomotives, steam engines and steamships. In the early 1870s the firm experienced financial problems for the first time and during the 1880s the company ran into such high losses that it had to be liquidated in 1890. However, it was resurrected a year later with capital from the Dutch railway companies and the machine manufacturer D.W. Stork. The shipbuilding department was closed down,

30

Family-based management, 1895–1914

but the other activities were continued. Furthermore, in 1902 the manufacturing of diesel engines was taken in hand, when a licence was acquired from the German MAN company (Maschinenfabrik Augsburg-Nürnberg). A whole range of diesel engines followed. Some machines for palm oil production as well as machinery for the sugar industry were developed, but no other capital goods. (The German and American position in the production of capital goods was so dominant that the Dutch could not penetrate this market, whereas in the field of engines the Dutch did have some success.) The firm of P. Smit jr. was a combination of ship and machine building, set up by the shipbuilder Fop Smit for his cousin P. Smit in 1871. The family Smit was a well-known name in shipbuilding. They set up a number of companies in shipbuilding, repairs and machinery. P. Smit himself was financially interested in at least thirteen other companies, including one wholesaler in coal, six towing services, two banks and one insurance company.42 Burgerhout’s Machinefabriek en Scheepswerf, also a family firm, was a shipbuilding company that diversified into machinery. Among the shipbuilding companies in the transport equipment branch, De Schelde manufactured steam engines and turbines and Wilton diesel engines. Kromhout Motorenfabriek was the creation of a family of longestablished shipbuilders. The production of motors for small ships was initially a sideline with modest results, but in 1908 a separate company was set up and a new factory building arose. In 1911 the original shipyard was divested.43 It might have been expected that the Dutch textile industry would have encouraged machine building. That is what in fact happened, though it did not lead to the actual production of machinery for the textile industry until 1900, because British competition was so strong. The textile manufacturer C.T. Stork set up a machine factory in 1859 to deal with repair work. From this humble beginning the company turned to the manufacture of steam engines, boilers and polder pumping engines. When the sugar cane plantations in the Dutch Indies expanded in the 1880s, Stork recognised the potential of this new market. Over the years, the company specialised in machinery for sugar factories and could deliver complete production units. For these products a foreign outlet could be found. Most other products were destined for the home market and the Dutch Indies. Stork often made use of foreign technology by way of licence agreements.44 Within the Dutch machinery industry, Stork had a central position. Members of the Stork family turned up everywhere to encourage and finance new ventures. The group of companies founded or supported by the Stork family illustrates how business was transacted at the end of the nineteenth and first decade of the twentieth century. Personal relationships and informal contacts were more important than formal integration of business activities or legal contract. C.T. Stork began with a simple busi-

Family-based management, 1895–1914

31

ness of his own. With his brother J.E. Stork and his brother-in-law he founded a textile factory in 1854. Five years later he set up a repair shop with a blacksmith and another brother, who had studied engineering, as partners. When the brother died a few years later, C.T. Stork took over the management of the machine factory. The machine factory became entirely a family affair under the name Gebr. Stork & Co after the blacksmith left the firm in 1865. With the textile manufacturer Gelderman and the local mayor as partners, Stork set up a spinning mill in 1860. As mentioned above, this venture was taken over by Gelderman after a number of years. In the meantime, the brothers Stork had supported the foundation of yet another spinning mill in Twente by a brother-in-law. All these ventures were separate partnerships, though if possible they supported each other with their orders. It seems that C.T. Stork had expanded his various businesses more than he could afford financially. In the early 1870s, his machine factory was in urgent need of additional funding. He turned to his friend Hendrik Muller, who advised him to contact his friend, the Rotterdam banker M. Mees, who in turn looked around in his own circle of well-to-do friends and succeeded in arranging additional funding, together with sound business advice.45 A lasting friendship between the Stork and the Mees family was the result. Business life in the Netherlands benefited. For instance, in 1889 C.T. Stork, his son D.W. Stork and M. Mees supported the Werf Conrad in Haarlem, specialising in dredgers. Another request for help came from the above-mentioned Amsterdam machine factory and shipyard Koninklijke Fabriek van Stoom- en andere Werktuigen in 1890. In this particular case, the employees turned to the mayor of Amsterdam to save the factory, because their jobs were at risk. The mayor then called in the help of C.T. Stork.46 It is interesting to note that in both cases, Stork & Co did not take over the failing companies, but helped them back into business, thus creating new rivals for its own company. (In later years, D.W. Stork was also involved in the creation of the steel works Hoogovens.) In their time, C.T. and D.W. Stork were very influential businessmen, but their main company, Stork & Co, employed less than 2,000 people before 1914. Chemical industry The chemical industry could be expected to foster big enterprises. This certainly happened in Germany. Before the First World War, however, the Dutch chemical industry was relatively small. The three biggest German chemical companies, BASF, Hoechst and Bayer, had together a workforce of 25,000 people in 1913, more than the total number of workers in the whole Dutch chemical industry. And those three German companies employed about 300 chemical engineers each, more than all the Dutch firms together.47 The family influence in this sector was less marked than in the textile industry, though certainly not entirely absent. The chemical

32

Family-based management, 1895–1914

industry in the Netherlands was varied. The products ranged from yeast, candles, soap, paint and pharmaceuticals to natural dyes, superphosphates and sulphuric acid. For new processes and chemical knowledge, Dutch entrepreneurs looked to what was happening abroad, particularly in Germany. Through both imports and exports this sector was closely connected with what was going on in world markets. The biggest chemical company measured in assets in 1913 was the Nederlandsche Gist- & Spiritusfabriek (NG&SF) in Delft, though it might be argued that it was more a food company because it produced yeast and natural alcohol. The initiative to found this factory came from the owner of a bread factory in The Hague, F.W. van der Putten. The idea was to apply a modern distilling technology developed in Vienna in the new factory. The recently graduated engineer from Delft, J.C. van Marken, went to Vienna to learn the new technique before he was nominated as managing director. The NG&SF was one of the first incorporated manufacturing companies, but the money was raised traditionally in a circle of good friends, among them the Rotterdam banker Mr W.C. Mees and the textile and machine manufacturer from Twente, D.W. Stork. J.C. van Marken himself, his father, a well-known Amsterdam minister of religion, and several other family members also took a share in the new venture. In later years, a cousin of J.C. van Marken, F.G. Waller, became his right-hand man and later general manager. Even in companies where management and ownership were largely separated, the family connection continued to play a role. Van Marken became famous for the way he put his socially progressive ideas, including profit sharing for all his employees, into practice. But he also took new initiatives in the running of his enterprise. He was the first in the Dutch (chemical) industry to establish a modest research laboratory and engage a bacteriologist. His company became one of the early multinationals by taking over an existing yeast factory in Belgium when the export of yeast was threatened by tariffs. Measured in workforce, the firm was medium sized, employing 600 workers in 1900 and 1,100 in 1910.48 Van Marken became involved with the founding of two more companies in Delft, one producing vegetable oil and the other glue and gelatine. In both cases, he was asked to become managing director. Neither of these incorporated companies was in any way integrated in the NG&SF. This was a personal union, resulting from the quest for charismatic leadership by the other companies, but it had nothing to do with opportunities for integrating production facilities. Indeed, none of this happened.49 Van Marken’s view on entrepreneurship is illuminated by his initiative to set up an exporting association: in 1898 he invited about thirty leaders of the most important firms in the Netherlands to his home to discuss the establishment of a club of entrepreneurs involved with the export of Dutch products. The members should be practical men, leaders in their branch, willing to co-operate to achieve a better export performance for

Family-based management, 1895–1914

33

all. To avoid conflicts of interest no two close competitors could become members. The club should be informal, based on friendship, to ensure its confidential character. The people invited reflect the top of Dutch business around 1900: the manufacturer of potato starch and sago Scholten from Groningen, the textile manufacturer Salomonson from Twente, the machine manufacturer Stork, also from Twente, the paper manufacturer Van Gelder from Velsen, the chocolate manufacturer Van Houten from Weesp, Nieuwenhuizen from the glass works in Leerdam, the bankers G.M. Boissevain and M. Mees, the earthenware and glass works of Regout from Maastricht, and the light bulb producer Philips from Eindhoven, to name a few of the most well known. The association was indeed set up, but it did not last for more than four years, probably because there were not enough common interests. The interesting fact, however, is that many of the businessmen responded positively to this initiative. It shows a general feeling that business, even at the top level, could be done in the congenial atmosphere of a club of friends, at least as long as one didn’t compete with one another.50 Van Marken’s companies were closely related to the food industry. Another group of companies in the chemical industry was related to the agrarian sector. This group of relatively large companies with a few hundred employees were the manufacturers of nitrogenous phosphate, an important component in fertiliser. This line of business was attractive because of the large demand for fertilisers at home and the geographically favourable trade position of the Netherlands. At the same time, nitrogenous phosphate was a bulk product with small profit margins. Therefore producers tended to increase their scale of production continuously. By 1913, the three leading companies in this field were all listed at the stock exchange. The money for the new ventures was raised in different ways. Traders and importers of fertilisers were an obvious source of finance. M.H. Salomonson, the founder of Centrale Guano Fabrieken, came from a wealthy family of textile mill owners, another example how these families set up new and even quite different ventures. Originally he produced natural dyes (garancine), but in 1876 he changed over into the processing of guano and production of superphosphate.51 In 1895 the firm was transformed into a listed company because more capital was needed. Superphosphate was an important export product. The relation between transport and the production of a bulk product such as superphosphate was evident in the creation of the Internationaale Guano and Superphosphaat Werken in 1895. The board of directors included three members of Rotterdam trading partnerships and one banker. The Amsterdam business elite found financial backing for the Amsterdam Superfosfaat Fabriek (ASF), established in 1906. In fact the whole Dutch business elite seemed eager to buy a few shares in this new enterprise. A. Waller became its first managing director. Together with three smaller

34

Family-based management, 1895–1914

companies, these Dutch producers controlled 27 per cent of world trade in superphosphates in 1913. Dutch firms also produced a whole range of fine chemicals. Here we come to the group of firms where the family element was strongest and the scale of operation smallest. Typical of these kinds of firms was the pharmaceutical company Brocades-Stheeman. Started as one of the many chemists’ shops, it went into the production and sale of packaged medicines at the end of the nineteenth century. The company had a considerable export through an extensive network of agents in Europe as well as in South America and Asia. Another pharmaceutical firm was the Amsterdamsche Chininefabriek, which owed its success to the Dutch Indies monopoly position in cinchona bark. This firm too was export based. While the sector as a whole did well, the Dutch chemical industry by and large lacked what was most important in Germany: innovative synthetic-chemical research based on coal tar. Coal tar resulted from gas production and as such was available in the Netherlands. But it did not lead to the kind of industry Germany had built up. There were a few simple distilleries making asphalt from coal tar, but most of the coal tar was exported to Germany. The Netherlands lacked the firms producing the intermediate products from coal tar, such as nitrobenzene, aniline and beta-naftol, which could be used to make a broad range of specialities. The key to the success of the German chemical industry was that they had integrated the whole chain, from coal tar to final products such as dyes and pharmaceuticals. For the intermediate products large works were built up, which gave the German industry the scale and the scope to monopolise a large number of intermediate and final products. These gave them their first mover’s advantage. Maybe surprisingly, while the Dutch chemical industry had no production of these intermediate chemicals, it had a few manufacturers making specialities like dyes and pharmaceuticals. This was done on the basis of imported German intermediate products. Here we see an interesting similarity with the textile industry which also relied heavily on imports. Neither group of manufacturers counted on the kind of disruption the outbreak of the First World War would cause.52 Food sector Measured by workforce and added value, the food sector was easily the most important sector in manufacturing in the Netherlands before 1914.53 This was partially the result of a strong agrarian sector. The food sector was also very diverse, with an overlap with the chemical sector and, in the case of salt, with the mining industry. Large and small-scale companies existed side-by-side. Relatively large scale were the sugar refineries and beet-sugar factories, the breweries and the flour and bread factories. These were also among the early incorporated manufacturing firms. On

Family-based management, 1895–1914

35

the other hand, family firms, many of them small scale, continued to thrive. As was the case in the machine and textile industry, the food sector was characterised by many clusters of family firms, bound by personal relationships but set up as separate ventures. The Zaan region, in the north of Holland, is a fine example of these clusters of entrepreneurial families. Well-known family names were Duyvis, Honig, Laan and Kaars Sijpesteijn. These families were the traditional owners of windmills and they gradually turned towards steam power in the second half of the nineteenth century. Together they covered a broad range of activities such as rice husking, the production of vegetable oil, flour, chocolate, starch and paper manufacturing.54 Another interesting cluster of entrepreneurial families could be found among the Jewish families in Oss. Three names have become widely known, the butter traders and margarine manufacturer Van den Bergh, the meat trader and processor Zwanenberg, and the meat processor Hartog. The three families were interconnected and showed remarkable similarities in their family strategies. In their marketing strategy, for instance, all three relied heavily on exports to Great Britain, and all three sent their sons to Great Britain to set up sales agencies.55 It is remarkable that so many firms were exporting even though they were relatively small. In large countries with extensive home markets, companies usually start by working for the home market before they try their hand at export. In a small country like the Netherlands things happened differently. Some companies entirely concentrated on the export market. An example of this kind of behaviour is the family firm De Kuyper, manufacturer of gin and liqueurs. In the nineteenth century a large outlet was found in Canada and England, while the Dutch market was not served until the 1930s.56 The chocolate manufacturer Van Houten opened sales offices in London, Paris, New York and Chicago as early as the 1890s. Between 90 and 95 per cent of their outlet was abroad in 1914.57 Many more companies served both home and export markets. An interesting early example of empire building in the food sector was the cluster of ventures of W.A. Scholten in Groningen. Between 1841 and his death in 1892 Scholten founded 24 factories, many of them in the province of Groningen. This location was chosen because of the expanding cultivation of potatoes. Scholten started with the production of potato starch, sago and syrup. His six or so factories in this field in the Netherlands were the core of his business. In later years he added sugar refining, potato distilling and the manufacture of strawboard. From 1866 onwards he opened no less than ten potato-starch factories abroad, in Germany, Poland and Austria-Hungary. Not all factories were a success and he sold four of them before 1889, but they were a testimony to his entrepreneurial spirit. The foreign factories made him less dependent on the Dutch potato harvests and enabled him to jump tariff barriers. Though he worked to increase the scale of production, he did not bring his six potato-starch factories together in one huge production unit. Nor did he

36

Family-based management, 1895–1914

create a middle management. Instead he was in direct personal contact with all the leaders of his respective factories. The establishment of so many factories was not motivated by a wish to create jobs for his sons, because he had only one, E.J. Scholten, who indeed succeeded him after his death.58 For fiscal reasons, E.J. Scholten incorporated the many ventures of his father’s empire in 1905, setting up a large number of separate limited liability companies whose shares all remained in his hands and those of his three sons.59 At the beginning of the twentieth century, the company began to experience competition in its core business from farmers, who created their own co-operative companies to process their potatoes. This brings us to one typical aspect of the food industry as far as it relied on local raw materials: the rise of the co-operative movement between 1880 and 1914. The introduction of the centrifugal separator, an important innovation in butter preparation, made production on a larger scale than the farm advantageous. It was unattractive for farmers to deliver all their milk to a manufacturer and thus become dependent on the goodwill of an outsider. After all, they had to sell their produce daily and thus were more or less forced to accept the price on offer. After a conflict with a local dairy manufacturer, a few big farmers in Friesland took the initiative to set up the first co-operative dairy factory in 1886. Their example was quickly followed and dozens of co-operative dairies came into existence. In Friesland the factories were relatively large, made use of steam power and produced for export. They were sound business propositions. In the Southern part of the Netherlands the co-operative movement took a different shape. Here, small-scale farmers, supported by the clergy and local dignitaries inspired by self-help idealism, started with modest-sized factories. Gradually the movement spread to buyers’ combines and cooperative auction-marts, particularly in fruit, vegetables and flowers.60 Even large-scale factories such as sugar beet factories became organised as co-operatives. The sugar manufacturer J.A. van Loon was well aware of the potential power of the farmers and their good reasons to organise themselves. In 1908 he wrote to his colleague J. P. van Rossum: ‘You know as well as I do that a co-operative, if well managed, will pay much higher prices for the beets than we normally do and thus will lead to more cooperatives. The farmers don’t lack capital, they just need the courage.’61 As it turned out the farmers had the courage, not only for setting up sugar beet factories but also for potato starch and strawboard co-operative factories. At the same time farmers organised purchase co-operatives. In all cases, the main object was to get a higher price for the agrarian products and a lower price for their inputs, such as seeds and artificial fertilisers. The farmers, and particularly the small farmers, could also reap the benefits of the larger scale in purchases as well as in sales. The final achievement in this movement was the successful rise of the co-operative credit organisations. Co-operatives resembled family firms in that they

Family-based management, 1895–1914

37

were embedded in local networks. It could even happen that sons succeeded their father in management positions. Family management This overview of Dutch manufacturing is far from complete. We will discuss many more companies in the next sections. But it serves as a first indication of the situation at the beginning of the twentieth century. Small-scale, family-run, networking companies formed an important aspect of the Dutch manufacturing industry. There was a broad base of industries, but a clear absence of really heavy industry. As yet, there was little vertical integration. Families seemed to prefer to set up new separate ventures, held together by the family relationships or by one single entrepreneur. One could argue that the family itself was acting as a holding company, spreading its risks by investing in different ventures set up as separate partnerships, or joint stock companies whose shares were held by the family. The members of the family did not limit their investments to familiar territory. Several of the new industries of the late nineteenth and early twentieth century were financed by existing family firms. We have already seen how the banker and tobacco trader Frederik Philips from Zaltbommel provided the finance for Philips & Co, producer of incandescent lamps, in 1891. The manufacturer of sailcloth and vegetable oil, P.H. Kaars Sijpesteijn, established the first Dutch linoleum factory on the basis of patents acquired from the English producer F. Walton.62 Business leaders were very visible. The name of the family and the company were often the same. The visibility was enhanced by the fact that the leaders occupied their positions for a long time. Depending on how long they lived, they could easily be involved with their firm for thirty, forty or even fifty years. Gerard Philips led the company for more than thirty years and his brother Anton for more than forty years. Even in the managerial company Royal Dutch Petroleum one man, Henri Deterding, dominated the enterprise for nearly forty years. With leaders staying in the top position for a long time, they came to embody the company. Though there were many variations in their personalities, dynamic leadership was certainly a common characteristic. They had a dream and a strategy and often felt impatient towards those who didn’t share their grand vision. As stereotypes go, they were demanding for themselves as well as for others and better at managing expansion than consolidation, let alone contraction.63 Female entrepreneurship did exist, but hasn’t received much historical attention so far, in part because women’s contribution to a firm may have been hidden behind the name of the father, husband or son, in part because they were often involved with small businesses in retail and street selling, which left few archives.64 Little is known as yet about the internal organisation and management structures of the late nineteenth century and early twentieth century

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companies in the Netherlands, because research in the field has yet to begin. As big enterprises were slow to develop in the Netherlands, there is little reason to expect extensive managerial structures. The two railway companies had the kind of large workforce (together they employed nearly 35,000 in 1914) that seemed to necessitate formal managerial structures. The railway companies certainly contributed to a greater transparency of the national labour market. Interestingly, traditional ways of recruiting personnel through family and friends remained an essential part of their complex recruiting process, which was hierarchically structured. Through the internal labour market with various clearly defined career paths, employees were encouraged to remain lifelong with the company. There were both technical and administrative career paths. The labour market was also clearly divided between one market for permanent workers and another one for short-term contracts.65 Railways and governmental bodies were probably responsible for a marked rise in ‘white collar personnel’. The number of administrative workers nearly doubled between 1899 and 1909, increasing from 26,000 to 48,000. While in 1899 less than 2 per cent of the administrative workers were female, by 1909 this percentage had risen to 9.66 Contemporary sources, such as inquiries into working conditions, shed some light on the internal organisation of the firms.67 Most common was a simple hierarchical structure with the owners at the top. The owners, often family members, may have had an internal division of responsibilities or appointed one of them to supervise production. The daily management was in the hands of a manager, who delegated part of his responsibility to overseers or foremen. Depending on the size of the company, foremen too came in layers. Some owners left the daily management entirely to their manager, and seemed to be unaware of what happened on the workfloor; others were daily at the factory and kept an eye on every department. Because of the lack of written rules, the managers and foremen possessed a good deal of power over those working under them. For instance, some work was more rewarding than other. Cigar makers worked on a piece rate. They earned more if they were allowed to make the more expensive cigars. Thus the foremen could favour some and punish others in the way he distributed the work among them. A twilight zone was also the imposition of penalties. The foreman could be lenient or tough according to his whims. There was a marked difference between the world of the factory and the office, even though the office workers were often lowly paid as well and worked long hours. However, night shifts were unknown for office workers. From the study of Erik Bloemen we know that the books of Frederick W. Taylor, one of the great propagandists for scientific management, reached the Netherlands at the beginning of the twentieth century. In the US the large industrial enterprises of the early 1900s introduced a variety of measures to control costs, expand output and enhance co-ordination and communication within their organisations. The assembly lines intro-

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duced by the automobile manufacturer Henry Ford have become a symbol of this movement. Taylor has become well known for his claims of scientifically based techniques to increase productivity of labour or capital through labour-saving machinery, redesigning jobs to reduce ‘waste’ and incentive schemes to increase the output of workers. The Dutch machine manufacturer Stork showed some interest in Taylor’s innovative methods of determining work-rates. Anton Philips may well have picked up some of Taylor’s ideas when he bought machinery for his metal filament lamps in the US. Mostly, however, the Dutch manufacturers seem to have been lukewarm towards Taylor’s ideas.68 The absence of interest in Taylorism was particularly striking in the one famous Dutch carmaker with the brand name Spyker. The makers concentrated on high quality and technical excellence, but the numbers produced remained small (less than 200 per year before 1914) and the costs were too high. With tireless energy new types in the top segment of the market were introduced, but management seemed unaware that demand was growing for cheaper cars rather than high-class vehicles. Though the brand became well known through advertisements and respected because of good performances at rallies and races, profitable production remained elusive.69 The Dutch manufacturing industry before 1914 demonstrates a completely different picture from that painted by Chandler. In many respects it resembles British industry, where a preference for family-based management continued right up to 1914.70 Dutch manufacturing showed a preference for a production technology and internal organisation that made it possible to serve a wide range of markets at home and abroad, responding quickly to changing markets. This is not to say that the rise of the managerial firm completely passed by the Netherlands, only that these developments took place later.

1.2 The stimulating influence of the Dutch East Indies The period 1890–1914 saw the rise of manufacturing in the Netherlands, but the service sector did equally well: the banks, the trading houses and the shipping companies expanded their activities and nowhere was this more visible than in their combined efforts to explore the opportunities in the Dutch colony in the Indonesian archipelago. The Netherlands also had colonial possessions in the ‘West Indies’, including Surinam on the South American mainland, and the island of Curaçao. Compared with the Dutch East Indies these colonies were of considerably less importance in the period under discussion and this section, therefore, will only deal with the East Indies. In 1870 the Dutch government decided to open up the colony for private business. Up till then the colony was treated as a huge state-run estate sealed off from the outside world. By and large the colonial government pursued an open-door policy. Preferential treatment of Dutch

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imports was abolished in 1874. Foreign companies were free to invest in the colony, though in daily practice some foreign companies experienced mistrust or lack of co-operation.71 Dutch entrepreneurs responded to the new opportunities. Banks, traders and shippers followed by planters and miners flooded into the colony. Compared with manufacturing, the companies they set up were relatively large and often incorporated.72 The development of the colony experienced a slowdown during the long agrarian depression in the 1880s, when the prices of agrarian products were low. After 1890 agrarian prices picked up again and many adventuresome businessmen sought their luck in the colony. Large numbers of companies were established to profit from the natural richness of Indonesia and the general economic prosperity. A profusion of companies, many of them free-standing Some insight into this vigorously developing colonial life can be gathered from the registration of incorporated enterprises in colonial Indonesia. This source does not include small family firms and partnerships, thus it captures only part of the story, but certainly an important part of it.73 Also, it seems that the instrument of incorporation was used more frequently in colonial Indonesia than in the Netherlands itself. The reason might be that these activities were more risky and that in the colonial context it was harder to find finance through the more informal channels used in the Netherlands itself. Certainly the sugar crisis of 1884, which nearly brought down two colonial banks with extensive loans to sugar plantations, led to the incorporation of many plantations. Between 1870 and 1913 nearly 4,000 companies were incorporated in colonial Indonesia, with the highest level of newly incorporated companies in 1910. Throughout this period agriculture was by far the dominant sector in numbers as well as in volume of investment. In this sector sugar, coffee and tea plantations were already of long standing. Tobacco plantations came to fame with the development of the Deli tobacco estates in Sumatra from 1870 onwards. The turn of the century brought products such as cinchona, copra and most important of all, rubber. Mining, especially oil, became the most dynamic sector from the last decade of the nineteenth century. Obviously, not all 4,000 companies set up between 1870 and 1913 survived. Some disappeared through mergers or take-overs, others simply failed, but by 1913 there were still nearly 3,000 of them active. Of these, two-thirds had their headquarters in colonial Indonesia itself, 145 were foreign or European based, while 632 were based in the Netherlands. Though this number of 632 might not seem so large, these companies, headquartered in the Netherlands, were stronger in capital, larger in number of plantations, more diversified and more profitable than the average company in colonial Indonesia.74 Together the Dutch-based companies in colonial Indonesia made up

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the bulk of Dutch foreign direct investment. That is, if we follow the British custom of including colonial investment under the heading ‘foreign’ direct investment.75 Yet, most of these companies were not subsidiaries of Dutch multinational companies. In fact, most of them could be termed ‘free-standing companies’. Mira Wilkins coined this term ‘to describe a firm set up in one country for the purpose of doing business outside that country’. The term was adopted to contrast this type of investment over borders with the more familiar one of the multinational enterprise that begins business operations at home and then moves abroad, building on its competence and generally pursuing a related line of business. Originally, Wilkins supposed free-standing companies to be vulnerable and short-lived because of their lack of support from their home base, where the headquarters were very often small, hardly more than a ‘brass plate’ in the City. However, further research in the phenomenon revealed that free-standing companies could last a considerable time, though few remain today. Also, the phenomenon was not restricted to Britain, as she originally assumed.76 The Netherlands was home to many free-standing companies, the majority of which were active in colonial Indonesia. There were also Dutch free-standing companies outside Indonesia, but these were scattered and less successful, probably because they were too isolated. Despite the name, the true strength of the colonial free-standing companies lay in the fact that they were not really free-standing at all, but were in fact embedded in a colonial network.77 We concluded earlier that the Dutch manufacturing industry was characterised by regional networks and networks of families and friends, rather than by integrated companies. In the same way we can see in the colonial context a network of interlocking directorships and close business relationships behind the façade of seemingly free-standing investments. The colonial network What were the characteristics of the network of interlocking directorships? Several authors have collected data on companies and their directors to highlight this network. They used different sources and collected information for different years, ranging from 1886 to 1939. Yet their conclusions are remarkably similar: bankers, shipowners and traders had an important place in the network of interlocking directorships, while manufacturers were on the fringe.78 The central position of bankers in the network is no surprise. After all, the banks provided the financial means, or at least helped arrange them. The initiative to set up companies in the colony often came from people already living there. Traders, colonial officers or planters would discover promising new opportunities to grow coffee, tea or tobacco or to exploit a mine or oilfield. Sometimes they made a beginning by acquiring land or a

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licence. For real headway, however, they needed more financial support. Therefore, they applied to the home country for money and so, not surprisingly, the bankers played an important part in the colonial network. To raise capital, often a Dutch association or limited company was founded. If the official headquarters of the new company was located in a Dutch city, a free-standing company was born. (Incidentally, this means that the initiative to set up free-standing companies often came from the host country rather than the home country. In this respect free-standing companies were different from multinational companies from the beginning, because for the latter the decision to establish foreign subsidiaries was nearly always taken in the home country.) It could also happen that firms already in existence, for instance sugar factories or tea plantations, needed more capital. Their owner/managers would participate in founding a limited company to take over the existing plantation or factory. In cases where the money came from the Netherlands, the official headquarters was changed from colonial Indonesia to the Netherlands.79 Once the company was incorporated, help from the bankers could still be essential for expansion. Both banker and trading companies provided short-term loans with the future crops as collateral. The five banks that specialised in financing plantations were interested in 76 sugar companies, 73 coffee plantations and 59 other companies. They owned 44 per cent of the sugar production in 1884, 57 per cent in 1904. Their share was a few per cent less in the mid-1930s.80 Colonial traders often subsumed some of the lending functions of banks, so for that reason alone their prominent position in the network is easily explained. But nearly all traders had numerous interests, ranging from import and export to agencies for shipping and insurance companies. They were versatile intermediaries with strong connections in the retail trade and through their string of offices well established in a huge and fragmented archipelago. This made them into attractive partners for Western manufacturers and service providers. Though the large plantations exported their products themselves, many smaller ones used the services of trading houses.81 The representatives of Dutch trading houses in the colony also played an important role in the daily management of the free-standing companies. The most spectacular example was the Handelsvereeniging Amsterdam (HVA). The HVA changed from a trading house into an administrator and financial intermediary. The company owned and managed legally independent plantations, but it took integration further by laying out the largest sugar estate and factory in Java and one of the largest in the world.82 The Rotterdam trading house, Internationale Crediet- en Handels-Vereeniging, combined the trading of primary products with the administration of plantations. Some plantations were owned, others only managed.83 In the management of rubber plantations the trading houses H.G. Crone and Geo Wehry & Co were wellknown names.84

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Shipping companies had an evident interest in transporting the produce, the people and the capital goods, quite apart from the mail and the governmental employees. They also had links with shipyards both for building and repairs. The steamships needed coal or fuel oil in large amounts, which required negotiations with coal traders or mines and oil companies. In turn, the Amsterdam and Rotterdam merchants had an obvious interest in good connections between their harbour and foreign markets, including the colonial market. It is therefore not surprising that after the opening up of the Dutch Indies in 1870, traders and shippers worked together to create Dutch shipping lines to the colony based on steam power. The Amsterdam-based Stoomvaart Maatschappij Nederland (SMN) was founded in 1870 and the Rotterdam-based Rotterdamsche Lloyd followed in 1875. The government supported the SMN with transport contracts for general cargo, officials, troops and lastly the mail. The government, however, favoured the Rotterdamsche Lloyd less, because it was partially English financed. Transport between the different islands of the colony was in the hands of a Dutch-named but English-owned company. When the contract had to be renewed in 1887 the government more or less invited the two existing Dutch shipping lines to take over this function. The SMN and the Rotterdamsche Lloyd (RL) decided to set up together a separate company: the Koninklijke Paketvaartmaatschappij (KPM).85 The KPM was awarded monopoly rights for the transport of government goods and officials in return for the maintenance of unprofitable lines to remote destinations. By offering transport and communication the KPM strengthened state formation and economic infrastructure. In the KPM all communicating lines of the colony came together. The people sitting on the board of managing directors perfectly mirrored the various interest groups. Three people were the actual leaders of KPM, SMN and RL. Two were representatives of the Amsterdam and Rotterdam financial interests. One personified the colonial interests, while another one had political influence in the Netherlands. The leaders in the Dutch Indies got a seat on the board on their return to the Netherlands. Though the people changed in the course of time, their background and their specific function on the board remained the same until 1940.86 The density of the network was increased by close co-operation between the companies in the colony itself. The shipping sector showed a kind of co-operation and interaction that was also visible in other sectors in colonial Indonesia. The oil sector is an obvious example of an industry growing increasingly closer. The Royal Dutch Petroleum Company, which will be discussed more extensively later on, worked oil concessions of several free-standing companies, until these companies were gradually bought up completely. Already in 1913, nearly all Dutch free-standing oil companies were linked to Royal Dutch.87 Close collaboration also took place in the agricultural sector. Occasionally, the larger agricultural companies acted as administrators of smaller plantation companies. Java

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tobacco came from 40 estates in 1904, but was brought to the Netherlands by nine importers.88Also, there could be a close relationship between the companies in colonial Indonesia on a regional base. The managing director of the Deli Company growing tobacco was director of a Deli rubber plantation and a Deli railway company. This railway company was in fact set up by the Deli Company for their own transport needs. But this same managing director was also director of other tobacco companies. Many of these forms of co-operation lead to interlocking directorships. Conspicuous by their absence in the network were the Dutch manufacturing companies. Almost no managing directors of Dutch manufacturing firms were on the boards of the free-standing enterprises. The sugar refineries in Amsterdam might have been interested in sugar production in the colonies, but cane sugar from the colonies had to compete with European beet sugar. As beet sugar production was protected in most European countries, the competition was very unequal. Moreover, the transportation costs were high for colonial crude cane sugar. The largest Dutch sugar refinery, Wester Suikerraffinaderij, did indeed follow a policy of integrating backwards after 1911, but opted for Dutch beet sugar factories and showed no interest in colonial mills.89 The Dutch cigar-making factories used large quantities of Java and Sumatra tobacco. Yet, there was no more than an occasional or incidental link between Dutch cigar factories and tobacco cultivation in the colony or elsewhere.90 The explanation is quite simple: the Dutch cigar-making firms were too small to integrate backwards. One of the largest and most well known (at that time), the Dutch cigar manufacturer Ribbius Peletier, had a share capital of only f 700,000 in 1913, while the largest tobacco-growing company in Indonesia, Deli Maatschappij, had a share capital of f 9,000,000.91 In contrast, the Tabakmaatschappij Arendsburg was founded by the Rotterdam wholesale trader in tobacco and cigars P. van den Arend, who was interested in the cultivation of tobacco not as backward integration, but as a separate source of profit. Even if the tobacco turned out to be unsuited for the Rotterdam tobacco market and had to be sold somewhere else, he was still interested in starting a plantation in Java or Sumatra.92 The Dutch plated tin-can manufacturers might have been interested in the exploitation of tin mines. However, they preferred to import tin plate from Germany instead of processing tin ore.93 Rubber estates, which were set up in the twentieth century, were mostly initiated from outside the Dutch East Indies, often also from outside the Netherlands.94 It is clear that Dutch manufacturing companies did not dominate, much less monopolise, the products of colonial Indonesia. They trusted world markets to provide them with the materials they needed for production. As far as the manufacturers were linked to the colonial network, it was via the trading companies and was a result of their market-seeking strategies rather than because of the purchase of raw materials.95 As we have seen, textile and machinery manufacturers were interested in the colony

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as an outlet for their products. This market was most important for the textile industry, especially the cotton manufacturers in Twente. In the 1890s about 45 per cent of their exports went to the Dutch Indies market. In the 1900s this was still 40 per cent.96 Another sector that profited from the relationship with this colony was the machine industry. Companies such as Gebr. Stork & Co successfully specialised in machinery for the cane sugar industry. Having conquered the Indonesian market, they also were able to find other markets abroad. But the importance of the colonial market for the Dutch manufacturing industry should not be exaggerated. Dutch exports to the Dutch East Indies accounted for 30 to 44 per cent of total imports into the colony between 1890 and 1913, but exports to the Dutch East Indies were no more than 6 to 11 per cent of total Dutch exports, measured in current prices during the 1890–1913 period.97 Managing from a distance The great obstacle in doing business in colonial Indonesia from the Netherlands was the huge distance that had to be covered. In the nineteenth century communications were slow. An exchange of letters took weeks. The telegraph was fine for short instructions, but unsuited for an exchange of ideas and the forming of a common policy. Depending on where the first initiative to found the company was located, in some cases the management in the colony determined the general strategy, in others this was the task for the board in the Netherlands. There were information asymmetries on both sides that had to be taken into account. The board of directors in the Netherlands was best informed about the possibilities to attract financial means. Until 1914, they often possessed the most up-to-date information on commodity markets. They could easily get in touch with the producers of capital goods in the European countries. They were close to European staff who might be hired for administration and supervision or as technicians. In the colony, however, managers knew much more about local production conditions, about developments on the Asian markets, about the possibilities of hiring workers and how to motivate them. As economic development of colonial Indonesia took off, more qualified people became available locally as well, for instance through internal promotion. The managers in the colony were the only ones with up-to-date information about what was really going on in the company and in Indonesia generally. So both parties had different kinds of information and the better they were able to exchange this information mutually the more the company would profit. In this process of bridging the distance, the colonial network played a positive role in increasing the amount of information that went to and fro. Sometimes, the board in Holland appointed representatives of banks or trading companies in colonial Indonesia to keep an eye on operations. The directors in Holland certainly tried to keep track of what was

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happening with their investment in the colonies. They introduced budgets and asked for financial estimates. The KPM, for instance, asked its manager in the Dutch Indies to keep the archives in good order and make an internal yearly audit with extensive explanations of all developments. He was also supposed to write monthly reports for the board, but these never arrived. Instead, the manager kept in touch with the Netherlands by exchanging long letters with the head administrator at the headquarters in Amsterdam.98 The trading house Internatio widely used telegrams to exchange business data and instructions.99 But in the end, the board in Holland had little control over what was going on there from day to day. They could write angry letters if they felt that their money was being squandered and when no profits were generated. To intervene appropriately, however, was difficult. A common complaint was that the local managers were spending too much money on side issues. Sometimes the directors felt they had lost all control, and one of them could decide to visit the colony in person to take matters in hand. Apart from this drastic measure, most of the time the directors in the Netherlands had to rely on what their managers in the colony decided. On the other hand, when new capital was needed to expand the business or to make improvements in buildings and machinery, the local management was completely dependent on the board in Holland. Was it possible to convince them of the necessity of improvement or expansion? The directors in Holland were often considered overcautious and hard to convince. Though they had a more direct contact with the manufacturing industry in the industrialised countries, that fact did not necessarily imply that the orders were always correct. For their refinery in Sumatra, the Royal Dutch office in the Netherlands ordered machinery from the US and Europe, but in Sumatra they discovered that unfortunately valves and connections did not fit, because stock sizes in the two continents were not the same. It required considerable ingenuity on the spot to overcome these kinds of setbacks.100 While in the nineteenth century the directors in Holland had to rely wholly on their local representatives, in the twentieth century monitoring from Holland became easier. Communications improved and the knowhow of Dutch directors increased. It became common practice to appoint as managing director in Holland someone who had led the company overseas and wanted to return to live in Holland. By the age of forty, many liked to return. On the other hand, as business flourished the business community in colonial Indonesia became less inclined to follow ‘dictates’ from Holland. Though managing from a distance was certainly not easy, it was possible as long as the seas were open, the ships were coming in regularly, and the telegraph was functioning.

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The spectacular rise of the petroleum industry Out of the free-standing companies active in colonial Indonesia the most important of Dutch multinational companies arose: Royal Dutch/Shell. Royal Dutch started with a pioneer seeing an opportunity and then finding financial support in the Netherlands. A.J. Zijlker, who went to the Dutch East Indies as a tobacco planter, realised the possibilities of petroleum production close to the tobacco region of Sumatra. A beginning was made with small-scale exploration in 1884. When the results proved promising, the production of crude oil was taken in hand. To raise money a Dutch registered limited company, Royal Dutch Petroleum Company, was floated in 1890. Thanks to royal backing the new company succeeded in raising the necessary capital on the Amsterdam capital market.101 Royal Dutch had no operations in the Netherlands until 1902 and was therefore in its origin a free-standing company. Royal Dutch was not the oldest oil company in the Dutch Indies. The first mover was the Dordtsche Maatschappij established in 1887 for the exploration and development of petroleum wells in Java. The founder was the mining engineer Adriaan Stoop. The capital was raised by his brother Frederik Stoop, a banker in London, who despite his profession acquired most of the necessary money from his family members. Another brother, Jan Stoop, joined the company when production got underway. The enterprise was situated in one of the most densely populated areas of Java and therefore could sell its lighting oil locally. As early as 1889, the Dordtsche made use of gasoline for street lightning. Jan Stoop even introduced a ‘petroleum car’, with which he made a legendary journey in 1899, but did not follow up this experiment. The Dordtsche was very active as a manufacturer in developing the byproducts, such as fuel oil, lubricating oil and paraffin wax. Thus the process of diversification started early. The steady rise of sales and profits made it wise to turn the family company into a joint stock company with shares on the Amsterdam Stock Exchange, which took place successfully in 1897.102 With a share capital of fl.15,000,000 the Dordtsche became the largest Dutch company at that moment. The company seemed to be destined to become one of Chandler’s famous First Movers, yet in 1911 the shares were sold to Royal Dutch. The decisive difference between the two companies was their exposure to international oil markets. Because Sumatra had no home market, the Royal Dutch was forced to export its oil from the beginning, and thus was more directly confronted with the world market. J.B.Aug. Kessler and more particularly his successor H.W.A. Deterding did not see themselves as producers of oil, but wanted to make money out of the transport and trade of oil. This became clear when the Royal Dutch was suddenly threatened by a lack of oil because their main oil field was exhausted by 1898. Naturally, all efforts were directed to drill new wells, but in the meantime

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negotiations were opened with Russian oil producers to keep the company’s tankers and tank installations in business. That in this way they were competing with their Dutch Indies producers, even with their own production units, weighed less than the wish to keep the tankers and tank installations going and to keep the brand Crown Oil visible in the market. In 1899 the Eastern Oil Association was founded, a syndicate between the Royal Dutch and Russian producers. It lasted two years and was one of the many sales combinations in which Royal Dutch would participate. Cartel agreements and efforts to monopolise markets or come to a ‘rational’ division of markets characterised the world oil industry. In this world powerful players, such as the Standard Oil Company, the Rothschilds, Nobel and the Shell Transport and Trading companies, in turn fought each other or formed alliances. Henri Deterding loved this world and was an expert player in the intricate process of negotiations and closing a good deal. Through these international alliances Royal Dutch acquired a strong position in the sales of lighting oil and later on gasoline. This enabled the company to close deals with other oil producers with regard to their sales and in the end take over many of them. In 1902 Royal Dutch, Shell and Rothschild combined their sales activities in the Asian market in the Asiatic Petroleum Company. Deterding became head of the organisation, supervising the sales from his office in London. In the four years that followed, Royal Dutch fared much better than Shell, with the consequence that the Dutch company had the upper hand in the well-known alliance that took place in 1907. In the two new working companies that were set up, the Bataafsche Petroleum Maatschappij and the Anglo-Saxon Petroleum Company, Royal Dutch got a 60 per cent share and Shell 40 per cent. The alliance was a perfect match, because the Dutch company was strong in exploration, production and refining, while Shell possessed a well-developed trading and transport organisation. To produce and refine oil closer to the European market, Royal Dutch Shell turned to the Romanian oil fields. Several of the Dutch companies already active there were brought together in a new holding company. The purchase of oil fields in Russia formed the next step in the international expansion of the enterprise. When the Standard Oil Company threatened to enter the Dutch Indies, Deterding decided to attack this company in its home market by taking over companies in Oklahoma and California. Shell was already in the US with a sales organisation. The merger of its activities and the geographical expansion compelled the enterprise to reconsider its internal organisation. This led to centralisation of the expertise concerning exploration and production to ensure that experience gained in one country would benefit another. The sales department, however, was decentralised. Separate sales companies were set up in accordance with the law of the respective home countries. This reorganisation was still being implemented in 1914.103 Royal Dutch undoubtedly had an important influence on the develop-

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ment of Dutch business, though it is not easy to assess the influence precisely. Certainly the choice of Rotterdam as the site of one of their refineries in 1902 was important. Stork & Co was one of the few Dutch companies that got orders to deliver boilers as early as 1889. The Nederlandsche Scheepsbouw Maatschappij built tank installations in Europe.104 The Netherlands became an important home for its research centre. Many graduates from Delft University found their way into the worldwide business of Royal Dutch. Royal Dutch was the result of the international orientation of its leaders, especially Deterding. No doubt the company in its turn further stimulated the international orientation of business people in the Netherlands. Because of its enormous size compared with the rest of the industry, Royal Dutch dominated figures of Dutch foreign direct investment and the total asset value of the top 100 industrial companies. Though by and large the manufacturing companies were middle sized rather than large scale, the total value of assets of the top 100 Dutch companies was in 1913 already 20 per cent of GNP, higher than the German figure, which was 13 per cent and only a little lower than the US with 23 per cent. Without the Royal Dutch, however, the Dutch percentage would drop to 14 per cent.105 Multinationals Companies with control over foreign assets, notably production units abroad, were not a new phenomenon in the late nineteenth century. With some justification the seventeenth-century trading houses, including the Dutch East India Company, VOC, and the West India Company, WIC, could be seen as predecessors of the twentieth-century multinational companies.106 At the start of the twentieth century, direct foreign investment by Dutch companies accounted for about 20 per cent of all private foreign investment, if investment in the colonies is classified as foreign investment. The remaining 80 per cent were portfolio investments. The share of direct foreign investment in total foreign investment rose to 40 per cent in 1914.107 The Netherlands then occupied a fifth position after the UK, USA, France and Germany in the world’s stock of accumulated foreign direct investment. This was a comparatively strong position, considering the scale of the country’s economy. Before the First World War this strong position relied heavily on investment in the Dutch East Indies. Direct investment in the colony predominantly took the form of free-standing companies, as we have seen. Out of these grew a number of multinational companies. This was in particular the case with Royal Dutch/Shell. A small number of manufacturing companies had production units just across the Dutch border, often to avoid paying tariffs, and sometimes even went as far as Russia. The preferred method of entry was to build up an organisation from scratch. Take-overs were rather uncommon. We have already come across the potato-starch manufacturer W.A. Scholten, and

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we mentioned the yeast and alcohol producer NG&SF and the margarine producers Van den Bergh and Jurgens. They invested predominantly close to their home country, in Germany, Belgium and England. Van Berkel’s Patent, a Rotterdam producer of special slicing machines, had a plant in the US as early as 1909. The chocolate manufacturer Bensdorp & Co had a factory in Vienna.108 By 1914 this was all still very modest, as Schröter concluded in his study on multinational (manufacturing) companies from small countries. He also pointed out that Dutch foreign investments rose considerably between 1910 and 1914 and were concentrated in two sectors, food and oil. Dutch firms, as was the case with other firms from small European countries, were prepared to invest abroad in an earlier stage of their development than firms from large countries. The main reason for this difference in strategy lay in the limits of their home market. In general, he noticed that firms from small countries such as the Netherlands, Belgium, Switzerland, Sweden and Denmark displayed a different and more positive mentality towards entering foreign markets, including a willingness to take greater risks and communicate in foreign languages.109 The discussion on multinational companies often focuses on manufacturing companies, but some parts of the service sector were active abroad as well. Shipping and trading companies are by their very nature internationally oriented. Banks are closely linked with international financial transactions. However, multinational banks in the sense of organisations with foreign subsidiaries are a different matter. These kinds of banks hardly existed in the Netherlands before 1914. The Twentsche Bank had an office in London, but the Nederlandsche Handel-Maatschappij (NHM) was the only bank with real foreign network of offices. Even this bank was mainly concentrated in colonial Indonesia, with 17 agencies there, another five in Saudi Arabia and one in the other Dutch colony Surinam. There were also a number of other banks active in colonial Indonesia, but these can be seen as free-standing companies. Within services, insurance is often seen as an outstanding example of a national industry, life and health insurance in particular being overwhelmingly the province of domestic companies. Yet before 1914 it was precisely this sector that tried its luck on foreign markets. Of the 96 life insurance companies in the Netherlands in 1910, 22 had branch offices abroad, the other 74 operated only in the Netherlands. Those 22 companies had between them 49 foreign branches, of which 15 were in the colonies. Of these, three firms can be seen as truly multinational, since they were working in three or more foreign markets, excluding the colonies. The small size of the home market was the main motive to go abroad, as the Dutch insurance market was considered saturated. However, the costs of doing business abroad were underrated and profits turned out disappointingly low. The upheaval of the First World War ended this first wave of internationalisation in the life insurance sector.110

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The history of Dutch multinationals before 1914 is still underresearched. Even less is known about inward investments. During the nineteenth century British capital played an important role in public utilities, such as gas works and water boards, where they combined capital with technical expertise. British and German capital was invested in the Dutch railways, and French capital went into a number of French-styled banks, the Credit Mobilier.111 The southern parts of the Netherlands frequently attracted the attention of Belgian entrepreneurs. The paper mill in Maastricht from 1850 was a Belgium initiative, as was the Kempensche Zinkfabriek set up in 1892. In the latter case, the Belgian government had refused to give its founders a concession in Belgium for environmental reasons. Therefore, they crossed the border and set up a zinc production unit in the Netherlands. The company was not a subsidiary of a Belgium company, though the Belgian Dor family, which founded the Dutch factory, provided technical know-how and played an important role in its management, had similar factories in Belgium.112 Belgian sugar manufacturers were among the pioneers in the Dutch beet sugar industry.113 In these years the inward investments were probably predominantly individual decisions to set up an enterprise in the Netherlands, often taken by families looking for new opportunities to invest some of their money. These were not part of the strategies of multinational companies. Taylor and Baskerville, writing about the business history of Canada, concluded that there was a strong relationship between the tariff system and the growth of foreign direct investment, particularly from the US and Canada.114 The Netherlands had a free trade policy; therefore tariffs formed no special incentive for foreign companies to raise subsidiaries in the Netherlands. The absence of a patent law encouraged some foreign companies to come to the Netherlands, as we will see in the next section. Here, too, foreign factories were transferred to the Netherlands rather than part of an international business enterprise. During the period 1895–1914 business life was surprisingly international. The period has been characterised as the Cosmopolitan Era. In the Dutch case, the prospering colony in Asia contributed to business in general and to the international outlook of businessmen in particular. Many businessmen learned from trading with this colony to think internationally and go further abroad from there. The Dutch shipping industry profited from the relationship with the colony. The Dutch government encouraged shipping lines to order their ships from Dutch shipping yards, making the granting of privileges dependent on promises to place orders in the Netherlands (something it hadn’t always done in earlier years). Furthermore, colonial Indonesia was an important outlet for some Dutch manufacturing firms. The colony was probably more important as a source of income, though opinion among historians is still divided on the amount of income accruing to the Netherlands from its investment in the Dutch East Indies. In no period was the demand from the colonial

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companies on the Dutch capital market greater than in the years 1890–1913, and the public responded with enthusiasm.115

1.3 Businessmen and the spirit of free enterprise During the mid-nineteenth century the Dutch government joined the general movement towards economic liberalisation led by Britain. Excise duties were diminished or abolished, and with it business deregulated. The river trade with Germany was liberated and protective tariffs were considerably lowered in 1862 and as good as abolished in 1877.116 Behind the ideology of free trade was the belief that free trade would further the international division of labour and thus contribute to general economic welfare. Following the English lead, Dutch economists began to embrace the ideology of free enterprise. Though protectionism resurfaced after 1880 in continental Europe as well as in the US, the Netherlands official policy remained pro-free trade, as in Britain. After 1870 there were interesting changes in the Dutch political landscape, which included the emancipation of certain religious groups, in particular the Roman Catholics and the orthodox Calvinists, and the pressure for universal suffrage. Together these movements helped shape the peculiar Dutch way of organising social and political life along denominational and ideological lines, the so-called pillarisation or vertical linkages, which arose at the end of the nineteenth century. This is not the place to enter the debate on the causes and consequences of pillarisation in the Netherlands.117 However, one consequence that deserves mention here is that the vertical pluralism created new relationships between different social groups, workers, farmers, shopkeepers and industrialists, who formerly may only have been organised horizontally along social lines. The pillarisation shaped a social grid, which may have encouraged a willingness and ability to find solutions through negotiation and compromise. This had particular relevance for the relationship between employers and employees. In this section we will analyse the attitude of entrepreneurs with regard to the extent of their own entrepreneurial freedom of manoeuvre in three areas: trade and the restrictive trade practices, the patent law and the labour relations. Trade, restrictive trade practices, trusts and cartels The Netherlands adhered to the ideology of ‘free trade’. What did businessmen think about these issues? With regard to the abolition of protective tariffs, the opinions of business people were more divided. Traders were naturally in favour of free trade, but so were the Twente textile manufacturers. Other manufacturers, especially those in the southern parts of the Netherlands, were more in favour of protection, particularly when their continental neighbours began to raise their tariffs from

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the 1880s onwards. There were even concerted actions culminating in a big congress in 1887 to persuade the government to raise tariffs, but the Second Chamber remained unconvinced.118 It is fair to say that the businessmen were not ideologically inspired by this issue, but had a clear eye for their own direct business interests. Instead of raising tariffs in response to foreign tariffs there were more creative solutions. When, for instance, the sugar manufacturers were faced with an increase in French import duties on molasses, they decided to process their molasses themselves and for that purpose jointly built a processing plant in 1899, which still existed a hundred years later.119 The last decades of the nineteenth century not only witnessed the rise of large-scale enterprises in the US and Europe, but also efforts by these big companies (as well as small ones) to restrict competition and monopolise markets. The restriction of competition could take many forms ranging from company mergers to loose agreements between independent firms. The restrictive policies were often motivated as rationalisation measures. Restrictive trade practices could take the form of weak informal gentlemen’s agreements, stronger trade associations, various forms of retail price maintenance and sophisticated cartels. Regardless of the form, the agreeing parties sought to restrict competition if not to eliminate it altogether. The use of these agreements did not end business conflict. Rather, depending upon the effectiveness of private enforcement, selfregulation maintained co-operation through ongoing negotiation or intimidation. The restrictive trade practices raised concern with the general public and policy makers. In the US this led to measures to regulate big business, including anti-trust laws. Ironically, the American antitrust policy nurtured giant corporate enterprise, though the prosecution of cartel practices successfully blocked price-fixing practices. In Europe the attitudes of the governments towards trusts and cartels were more lenient. In fact, cartels were often encouraged. Tony Freyer, comparing the regulation of big business in Britain and America, argued that the ability to maintain and ultimately enforce cartel practices, as was the case in Britain, discouraged the investment in managerial hierarchies upon which the triumph of managerial capitalism depended. In turn, anti-trust often facilitated managerial efficiency.120 One might have expected that in the Netherlands, where distances were small and businessmen met regularly in many local, regional and national networks, restrictive practices would have abounded. From the 1880s onwards, business groups indeed privately negotiated and tried to enforce co-operative agreements within comparatively loose organisational structures. These kinds of agreements could be described as selfregulation. Sometimes they mirrored the old and long-discarded guild regulations. These were often local organisations of craftsmen, the booksellers, bakeries, builders, drapers, shoemakers and cabinetmakers. The aims were to diminish price competition and thus protect profits, to

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discourage low-quality products and falsifications, and generally to raise the standards of the respective craft. These measures to protect standards and quality could easily lead to a lack of innovation and adherence to traditional ways of producing. Many of these local craft organisations arranged themselves into national organisations. Before the First World War they made up the majority of employers’ organisations. It is interesting to note that small-scale business organised itself earlier than largescale industry. This may demonstrate that large-scale industry was not yet dominant. The manufacturers had a number of regional organisations, but they often became active only in times of crisis or conflict, for instance when a specific government measure had to be contested.121 Sales cartels were difficult to enforce in the Netherlands because of the country’s free trade policy. But purchasing cartels, such as the cartels of the manufacturers of potato starch and beet sugar, had their difficulties too. Both kinds of manufacturers were dependent on the purchase of local raw materials and both tried to keep the prices of potatoes and sugar beet low. The farmers made a successful countermove by erecting their own co-operative potato starch and beet sugar factories, thus making the cartels ineffective.122 A comparable event took place in the market for fertilisers. The import of potash for fertilisers was in the hands of 14 Dutch wholesalers, who were the sole representatives of the German potash syndicate. Their decision to set up a price cartel led to the establishment of the co-operative purchasing organisation Cebeco in 1899. The farmers’ co-operative movement enjoyed great sympathy from the public and met with considerable support from high places, including governmental organisations to advance the agrarian sector. The privately organised manufacturers and traders often felt disadvantaged.123 In the Netherlands, policy makers and the general public seemed to have been more concerned about the possible world-wide power of American companies, than about co-operation between Dutch companies. One obvious reason for this attitude was that the Dutch free trade policy gave foreign competitors easy access to the Dutch market, thus diminishing the effectiveness of national cartels. In that sense, one might argue that the US protection of its home market by the McKinley tariff of 1890 made it more attractive for entrepreneurs to try and monopolise their home market. In 1903, the socialist F.M. Wibaut published a book on trusts and cartels. He underlined the secret character of many agreements but nonetheless counted about fifteen national cartel agreements and Dutch participation in seven international agreements. He found national agreements among the manufacturers of salt, beet sugar, potato starch, bottles and glue, to name a few. Insurance companies and shippers also had their arrangements. Dutch participation in international cartels included international shipping and petroleum, while the Dutch wholesaler in coal, SHV, was part of a German coal cartel. Wibaut admitted that many cartels were not yet strong, but they were, in his view, the first signs

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of what would become a strong movement. A reviewer of his book, however, commented that he was far too optimistic about the importance of the cartels. Many agreements to restrict competition, nationally as well as internationally, were not effective or only short-lived.124 The history of the electrical engineering firm Philips, discussed at the start of the chapter, underlined this conclusion. As soon as the market for one type of lamp was regulated by a cartel, another type appeared for which the agreements were not valid. While the cartel helped to diminish the risk of devastating price wars for one product, it did not end competition between the participants. The international light bulb cartel was based on a new product, but the international glass bottle cartel centred on a new production process. The Americans may have had high moral objections to cartel agreements, but outside their country they happily encouraged restrictive trade practices. The American Michael Owens developed a bottle-making machine that revolutionised the sector. The owners of the Owens patents founded the Owens European Bottle Machine Company and set up a glass works in Manchester in 1907. Because the Owens machine was extremely efficient, all European bottle manufacturers had to possess an Owens machine to be able to survive. The German producers took the lead in organising a European-wide cartel in which the Dutch bottle manufacturers participated. To avoid overproduction, the producers agreed to fix the quantity of bottles each participant was allowed to produce. These agreements included arrangements for exports to the home market of the participants. They also fixed the number of Owens machines each member was allowed to buy. The purchase of the machine and patent rights required such a heavy capital investment that the participants wished to avoid overinvestment at all cost. The Dutch participant United Glassworks was only allowed to buy one machine, which greatly diminished the flexibility of production, because the machines were only cost-effective when high numbers of the same bottles in the same colour were produced. The only way to broaden the variety in production was buying more machines. And as this was not allowed under the cartel agreements, the only way to get this result was taking over another company. In this way, the cartel agreement in combination with the technical requirements of the new machinery encouraged concentration in the Dutch glass industry.125 In America and Britain merger movements took place in the period 1890–1905, both reaching their peak around the turn of the century. Typical for this period were the ‘multi-firm consolidations’ put together by industrial ‘promoters’. Cartel organisations were transformed into holding companies to create or maintain market power. The banker J.P. Morgan, for instance, created the US Steel Corporation in which nearly 800 production units were combined. In comparison with the American mergers, the British were more modest in numbers and sums involved. The textile finishing industry was particularly active in the formation of

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large combinations of 40 to 50 family firms, as happened in the Calico Printers’ Association, the Bleachers’ Association and the British Cotton and Wool Dyers’ Association.126 Dutch companies did not participate in this merger movement. Only in the 1900s did mergers begin to happen occasionally, but not on this scale, and neither with so many companies involved. If they took place, there was often an international link that triggered the merger, as was the case with the famous Royal Dutch and Shell alliance in 1907. Occasionally, national sentiments were raised when important Dutch firms threatened to become too involved with foreign companies via cartels or trusts. This was the case when the Holland Amerika Lijn (HAL) heard rumours that the Morgan Trust was buying up its shares in 1898. Immediately the board of directors decided to change the articles of association. In future the Dutch character of the company could be changed only with the consent of 90 per cent of share capital. The liner trade was heavily cartelised. The concentration in shipping lines increased in 1902, when the Morgan Trust created a combination of American, Belgian, English and German shipping lines: the International Mercantile Marine Co (IMMCO). Now the HAL became worried about being left out. The company did not like the prospect of isolation as a small carrier and therefore decided to enter the combination willingly. By selling 51 per cent of its shares to the English company Harland & Wolff, which participated in IMMCO with its White Star Line, the HAL became part of it. Later on, Harland & Wolff sold half of its HAL shares to IMMCO and the other half to the German lines HAPAG and Norddeutsche Lloyd. Through this division of its shares HAL maintained a greater independence of movement than it had dared to hope for. Yet, the sale of their shares showed the opportunistic attitude of these entrepreneurs towards the nationality of their company.127 Nonetheless, nationalistic arguments played a role in the founding of the holding company Nederlandsche Scheepvaart Unie in 1907 in which three shipping companies, including the KPM, were combined. The three companies remained independent in their outside contacts, but the purpose of the holding was to prevent foreign ownership of the three shipping companies.128 Royal Dutch/Shell used arguments of ‘national interest’ to prevent the Dutch government from giving its main competitor, Standard Oil, concession rights in Djambi in the Dutch East Indies in 1912. The Dutch government, however, was only half convinced that Royal Dutch/Shell deserved preferential treatment and decided to postpone the decision.129 Discussion on a national patent law In 1869 the Dutch discarded the law protecting new inventions that had been in force since 1817. One important reason for the abolition was the poor quality of the law itself: it did not protect inventors sufficiently. But

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another reason was the feeling that the Netherlands lagged behind the other European countries in modernising its industry. By making it possible to freely use all inventions at home and from abroad, the government hoped to encourage industrial innovation. At that moment, other European countries struggled with the question of whether or not it was wise to have a patent law. Soon, however, the general mood changed and most other industrialising countries adhered to some sort of patent law, turning the Netherlands (together with Switzerland that had no patent law between 1850 and 1907) into outlaws in the world of patent-granting nations.130 How did the Dutch business community feel about this absence of a patent law? Their views were divided and changed over time. Initially the issue does not seem to have been of particular interest. In 1886, however, an association of advocates of a Dutch patent law was founded and a lively debate resulted. By 1890 the association had 115 members, 46 per cent from the manufacturing sector, 18 per cent from trade and transport, 15 per cent from various backgrounds, including civil servants and 21 per cent unknown. The number of Delft engineers, 29, was disproportionately high. There were eight lawyers in this select group of advocates. Interesting, too, was the fact that nearly half of them lived in the three big cities Amsterdam, The Hague and Rotterdam. Less information is available about the opponents of the patent law. Here, too, a majority group came from manufacturing, trade and transport, though in this case probably more small-scale business. The number of Delft engineers was lower but that of lawyers was higher. The group was more spread over the country. The numbers are too small for far-ranging conclusions.131 However, if we look at the various organisations of interest groups we get the same picture. The association of engineers mostly favoured a patent law. Another association, one predominantly voicing the interest of small and medium-sized business, was initially against a patent law, then became more divided, until the majority was won over in favour of a law. The association for the promotion of industry more generally was a staunch supporter of the reintroduction of a patent law from the 1880s onwards. While the associations had moved towards acceptance of a patent law, the chambers of commerce, when asked to give their view on a proposed bill in 1893 were mostly opposed to it. Typically, the cities of Amsterdam, The Hague and Rotterdam were in favour, while Oldenzaal was against, because the textile industry in Twente was opposed to the law.132 Two other sectors, the machine building and chemical industry, were generally sympathetic towards a patent law. Both parties claimed that their policy was best for the general economic growth in the country, but neither of the parties could substantiate its claim. The experiences of manufacturers were so mixed that they did not point in one clear direction.133 Those who advocated the reintroduction of a patent law expected a stimulus to inventive activity, because the

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law would give the inventor a certain period in which he could exclusively reap the benefits of his invention. Those opposed to a patent law believed that in a policy of free trade the inventions should be freely accessible as well. No private interest should block the general interest through monopolising certain inventions and improvements to them. Economists were likely to stress this point, though the economist G.W. Schimmel remarked cynically in 1886 that the freedom to imitate did not amount to much, since Dutch industrialists, tradition-bound as they were, did not make appreciable use of it.134 A slightly more mercenary argument was that the paying of licences would raise the general price level. Historians of technology certainly came to the conclusion that during the nineteenth century Dutch business thrived on foreign technology, though they also concluded that the import of foreign technology was not a simple process of imitation, but required a considerable creativity on the part of the users.135 There are examples of industries that moved to the Netherlands to avoid patent action elsewhere, thus increasing economic activities in the Netherlands. For instance, the American owner of Vitrite Works, manufacturers of light bulb fittings, moved its plants from England to Middelburg, when confiscation threatened as a result of patent disputes.136 Another example is the Maastrichtse Zinkwit Maatschappij, producer of zinc-white paints, founded by a Belgian manufacturer in the 1870s. He first built a factory in Eijsden in 1870 and a few years later another one in Maastricht. He made use of the American Wetherill process and by choosing the Netherlands as place of business avoided the payments of patent rights.137 Did Dutch manufacturing really benefit from the absence of a patent law? Evidently, the Dutch manufacturers could use all inventions from home and abroad without any restrictions. However, the moment they exported their products, they ran the risk of infringing the patent laws elsewhere. For entrepreneurs aspiring to explore the world markets this seriously limited the benefits of an absent patent law. As mentioned at the start of the chapter, the light bulb manufacturer Philips made extensive use of foreign inventions and foreign machinery, but it could not and did not escape patent litigation abroad, because it exported most of its output. In fact, it had to export because lamps quickly became mass produced for mass markets. The margarine industry is often cited as the sector that hugely profited from the Dutch patent situation. The margarine manufacturer Dr. J.Th. Mouton was indeed one of the fierce opponents of the patent law. It is possible that the profusion of margarine factories would not have materialised had a patent law been in force at the time. Between 1872 and 1880 nearly 70 margarine factories were set up.138 With a patent law, maybe Jurgens would have been able to monopolise margarine production for a number of years. It is doubtful whether the patent situation would have made any difference in his international business, because the

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margarine patents were not very strong in any case. In fact, Jurgens faced litigation in England, his most important outlet, in 1881. His opponent was not the inventor of margarine, Mège Mouriès, but his former business partners J. Halphen and W. Cordeweener, who accused Jurgens and his English importer of infringement of the English patent granted to Mège Mouriès. Jurgens defended his case by pointing out that he was making his margarine by an entirely different process and had sold this product for years in various parts of England without any objection raised there by any person. Jurgens was able to convince the court of the fact that his margarine was indeed sufficiently different from the patent of Mège Mouriès. Had the decision of the court been otherwise, Jurgens might well have faced financial disaster.139 The absence of a patent law in the Netherlands did not exempt the Dutch manufacturers from patent suits abroad. Thus the absence of patents in the Netherlands was only of limited use to those industries that were interested in exports. And were not all Dutch manufacturers interested in exports? Not surprisingly then, an increasing number of manufacturers preferred to arrange patent matters in ways similar to other industrial countries. They found being outside the mainstream awkward. The chemical industry discovered that foreign manufacturers were reluctant to give Dutch firms licences, because they were afraid that others would use them as well without paying the dues. In 1889 the manufacturer Beynes discovered at a Paris fair that he could not buy certain machinery, because the Dutch had a reputation of copying all machinery.140 In fact, this habit of copying became less profitable as foreign mass production lowered prices. Committed manufacturers were also concerned that products imitated from abroad without proper knowledge of the whole production process could only be of poor quality. The Dutch machine building industry often preferred to acquire a licence because of the complexity of the machinery.141 A matter of concern was also that Dutch entrepreneurs would miss the opportunity of applying for patents. Thus Dutch industry would rely on foreign inventions instead of securing patents of its own. Instead of encouraging innovations the lack of a patent law would hinder them. By 1900, industry was convinced that a good patent law should be accepted. In the final acceptance political and ethical considerations played an important role. The Netherlands no longer wanted to violate rules that were accepted in the rest of the community of industrialised countries. It took another ten years for the government to get the patent bill through the Chambers. The bill eventually became law in 1910 and went into effect in 1912.142 Dutch industry and individual inventors reacted by submitting increasing numbers of patent applications. The possibility of securing patent protection at home also encouraged applications abroad. Schiff compared the Dutch patents granted by the United States, Great Britain, Germany and France with those granted to Norway and Denmark over the period 1900–1932. While the Netherlands lagged far behind Norway and

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Denmark in the period before 1912, they drew even in the 1920s and overtook both countries after 1929. The figures for patents applications were less spectacular but pointed in the same direction. Schiff came to the conclusion that the reintroduction of a patent system in 1912 gave an extra spurt to Dutch inventive activity, though he admitted that it is debatable whether the intensity of patent activity is a measure of the intensity of inventive activity.143 However, it is fair to say that the figures show that after the reintroduction of the patent law in 1912 the Dutch entrepreneurs began to participate actively in the modern world of applying for patents and upholding the temporary monopolies that came with them. Labour relations By modern standards, nineteenth-century working conditions were appalling. Employers and employees were considered free agents to negotiate the terms of employment. The results of these negotiations were not attractive for the workers. Though the Netherlands was less industrialised than its neighbouring countries, the ugly face of capitalism was visible in this country as well. The sad picture was revealed in 1887 through a parliamentary inquiry into the working conditions of the working population and more specifically into the question of how the prohibition of child labour since the law of 1874 had affected industry. The government appointed a parliamentary committee, which interrogated a large number of witnesses, including employers, employees, engineers and local notables such as mayors, doctors and pastoral workers. The inquiry revealed long working hours. Twelve hours was more or less the norm, but overtime could extend the working hours to 14 or 15. When workers changed from day to night shifts, they might work for 24 hours. In one Amsterdam printing firm it was not unusual to expect workers to take on the night shift, if someone had become ill, and continue with the day shift after a rest of no more than two hours. And this was even expected from boys aged 12. Many factories had unhealthy and sometimes dangerous working conditions. Steam boilers could burst, workers were exposed to flywheels, small locations contained too much machinery, ventilation was often inadequate, and temperatures could be excessively high, particularly in sugar factories or glass works. Accidents occurred regularly and were often unjustly blamed on the carelessness of the workers. Occupational diseases caused by dust or the use of certain chemicals were frequent. The results of this inquiry were published in 1887. The conditions it described were no longer taken for granted, nor accepted as the natural order of society, as might have happened fifty years ago. From 1860 onwards the standards of living of the working classes had been a hotly debated topic in socially more progressive circles. So far, the only piece of legislation to curb the freedom of enterprises in these matters was the law from 1874 prohibiting child labour. The inquiry of 1887 raised a storm of

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protest and led to legislation to regulate working hours for women and young adults in 1889 and to the introduction of a factory inspectorate. The often-cited comments of the manufacturer Pierre Regout, whose answers sounded particularly unfeeling, were notorious. He stated that he did not consider it hard for boys aged 12 to work all night long: ‘they can sleep during the day’, he argued, and ‘even after 12 hours getting glassware out of the oven, they are still running vigorously, as though they are playing’. Asked whether the general working conditions in his factory were not unhealthy he replied somewhat provocatively that ‘work in the factory is not as healthy as a summer by the sea or a winter stay in Nice, but it is a necessary evil, it can’t be arranged differently’. The committee was prepared to accept this last argument, but wanted to know what the firm did for workers when they were old and incapacitated after a life of hardship in his factory. The answer was surprisingly honest: maybe their children will look after them, but we do not give them any pension. We might help a few from a small fund, but the rest fall back on municipal poor relief. Pierre’s brother, Louis Regout, member of the Senate, confirmed that some work in the factory was so unhealthy that workers started to ail between 40 and 45. There was some form of sick pay, though not all workers were entitled to it. This depended entirely on the decision of the employers. The workers seldom received support from the firm in the form of pension money. He considered this a responsibility for the municipality and more generally thought the state should arrange pension funds. His main argument was that all firms would thus have the same obligations and thus compete on an equal basis.144 It is hard to tell whether working conditions in the Regout factories were worse then elsewhere; certainly other employers showed more awareness of the social problems in their replies to the committee and more willingness to improve poor conditions in their factories. Because most firms were still family firms the companies were predominantly seen as private property of the owners, where the owners had the sole right to take decisions in all matters concerned, be it the long-term strategy or payment of the workforce. Their relationship to their workers was decidedly paternalistic. They might raise wages if they felt inclined to do so, for instance to foster a good relationship with their personnel, but it should always be their free choice. They might have been well aware of the social hardship of the working population, but in most cases they considered providing work itself already as a social benefit. The employers interviewed by the committee often replied that they looked after their personnel in the event of illness or old age, but this always happened on a non-committal basis. In daily practice this often meant that they looked after their core personnel, those with specific qualifications or with whom they had longstanding working relations. The casual workers were treated more nonchalantly. Even if companies had funds, they seldom had clear rules. There were official working hours, but the amount of overtime work

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was arbitrary, depending on the amount of orders to be dealt with. If the pay was too low for a decent standard of living for the workers, then this was not the employers’ fault. After all, the manufacturers had to reckon with the heavy competition at home and abroad, which made it impossible to raise wage levels. The limit imposed on them by competition is a recurring theme and the obvious excuse for all negative aspects of their factories.145 The employers may have felt justified in their behaviour because mutual aid societies flourished amongst Dutch workers and trade unions also provided social benefits.146 A few entrepreneurs looked further than the dictates of the free market and tried to improve the standards of living for the workers in their own companies. In fact, they wanted to demonstrate that better working conditions were a paying proposition. These could go hand in hand with higher company profits. Interestingly, these entrepreneurs were the leaders of the larger companies and leading industrialists generally. We have already come across the names of J.C. van Marken with his Delft companies and C.T. and D.W. Stork in the textile and machinery industry. Van Marken looked upon the company as a co-operation between ‘capital and labour’ where both parties should have some rights. Others, such as the Catholic beet sugar manufacturer J.F. Vlekke or the Protestant brewer W. Hovy, considered it their Christian duty to look after their personnel and create a harmonious working community. Because of their progressive ideas towards shaping a positive relationship between employers and employees, they have been termed ‘social entrepreneurs’.147 Though their sources of inspiration were different, their practical measures were very similar. Their first measure was often the creation of a company magazine to explain their ideas to their own workers and find supporters for their point of view in larger circles, particularly among their co-manufacturers. The cornerstone in their social policies was the creation of a number of social funds to ward off the financial hazards of life in general and work in the factory in particular. Funds for sickness, invalidity, old age, death and for orphans and widows, saw light of day. Both employees and employers contributed to the funds and, remarkably for the last decades of the nineteenth century, the workers participated in the administration of the funds. These social security arrangements were nearly always obligatory, and as such there was an element of tutelage and paternalism in them. The workers were not to be trusted with their own wage, but had to be compelled to protect themselves and their kin. The companies of the social entrepreneurs were not the only ones with well-organised social funds. Other early examples were the Dominiale mines in Limburg and the railway companies. At the end of the nineteenth century, social security, however, was still piecemeal. A governmental inquiry into the working conditions in factories, held in 1890, found that 36 per cent of the inspected factories had no social benefits of any sort. Another 30 per cent of the employers stated that they gave optional support, while 20 per cent

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had some kind of private funds to which the employer contributed. Only 14 per cent of the factories possessed social funds in which the employers and employees participated and which guaranteed certain benefits. These were also the factories with the highest numbers of employees, on average 95 persons. The inspectors, the engineers H.W.E. Stuve and A.A. Bekaar, visited factories with more than 10 employees which used steam engines. Their inquiry covered 3,043 factories with 125,000 employees, which was about a quarter of all workers in the respective branches they visited. It is not clear whether the situation of the remaining three-quarters of the workers was comparable with those of the inquiry. The number of small firms was probably higher, and the support therefore lower. Van Genabeek, who grouped these figures, concluded that probably 50 to 60 per cent of the factory workers had some form of social care around 1890. The kind of insurance that was most commonly available was sick pay and medical and funeral expenses, while the companies often considered pensions or disability insurance too expensive for coverage.148 Van Marken was the first Dutch employer to experiment with a works council. He founded his works council, named ‘De Kern’, in 1878 to discuss the merits of an obligatory saving system. The first Kern was only an advisory body and consisted of the managers, foremen and three chosen representatives of the workers. In fact, the whole idea of a works council might well be related to the rise of the middle management. In 1883 there were already 16 officials in the works council and by 1890 their number had risen to 11 managers and 25 foremen from a workforce of 279.149 In the meantime, the Kern was restructured resulting in three different sub-councils and a wider representation of the workers. Discussions in the councils were not limited to the working conditions but could embrace the general strategy of the company, including reorganisations. Van Marken listened seriously to the voice of his workers’ representatives. In the end, however, the entrepreneur made the final decisions. The idea of a works council was taken over by his like-minded colleagues, including Stork and Vlekke and the textile manufacturer J.B.M. van Besouw.150 Profit-sharing schemes were considered a way to reconcile the interests of owners and workers. It was unrealistic to expect workers to buy shares in their company, apart from the fact that few companies were incorporated. In 1880, Van Marken asked his shareholders to include in the articles of association the stipulation that 10 per cent of the profits would be reserved for the employees. This money was not divided among the individual workers, but used to support the pension fund or to finance other activities in their interest. He made similar arrangements in the other two companies under his management. In 1897 his three companies were among the sixteen companies in the Netherlands that possessed some form of contractual profit sharing. Many more entrepreneurs had bonus schemes for their higher staff, but the amount of payment was left to the discretion of the employer.151

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Lastly, the various social entrepreneurs were active in setting up buyers’ co-operatives, mainly for coal and groceries. These initiatives of the largescale entrepreneurs went directly against the interest of the small-scale entrepreneurs, that is the local shopkeepers. The social entrepreneur Van Besouw was confronted with this conflict of interest in his own family. His parents were the owners of the local grocery shop. His workers were not forced to patronise this shop, but at the same time Van Besouw was reluctant to set up a competing co-operative. In the end his parents solved this dilemma by closing their shop. Van Besouw went ahead with a buyers’ cooperative under the telling name ‘Rerum Novarum’.152 Towards their colleagues the social entrepreneurs always underlined the enlightened self-interest of their progressive social policy. What benefits could Dutch manufacturers in general reap from organising social funds? Why were they willing to spend this money long before the government forced them? The first reason was to be able to recruit qualified personnel. Qualified workers often had to come from other regions or even from abroad. On leaving their familiar surroundings they also left behind their social networks and thus became more dependent on the employer. The second reason was to improve the general health and thus the productivity of their workers. Third, social funds were useful in binding workers, particularly the more qualified ones, to the company. Fourth, the funds helped to discipline workers, something that became more relevant when the scale of production increased. Penalties were a common phenomenon, and the payments were nearly always put into the social funds. Through the benefit payments employers could check on their employees when they were supposed to be ill or hurt. In some cases funds were used to discipline behaviour even outside the factory walls. The funds discouraged employees from setting up their own funds that might be used for other purposes, such as strikes. Lastly, the funds could play a positive role in bridging the gap between employer and employees; even more so, if employers were prepared to give their employees the opportunity to participate fully in the administration of the funds.153 A decisive moment in the history of social security came when the government tried to pass a bill on workmen’s compensation (industrial injuries) insurance in 1897, establishing a compulsory, collective insurance at employers’ cost and administered by a single government agency, the State Insurance Bank, Rijksverzekeringsbank. There was a massive protest from the employers, even from the socially more progressive entrepreneurs. ‘The opinion of the captains of industry was not even asked for in parliament’ wrote the secretary of the employers’ organisation indignantly.154 Some employers were simply against any influence of the state on their privately owned company. Others, such as Van Marken and Stork, were not against the insurance as such; they agreed with the principle that their workers had a right to be compensated for accidents. In fact, they welcomed legislation that would force their competitors into making

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similar provisions for their workers as they had done. However, they objected to the highly bureaucratic and costly way the insurance was going to be organised by the state. They argued that their own insurance arrangements were cheaper and more efficient, while offering the same protection to the workers. The latter claim only a few employers could really uphold. Their protests were so vehement because the manufacturers expected the government to follow up this Compensation Act with a whole series of social laws. This threat to their autonomy within their own companies brought the employers together on a national scale. The textile manufacturers took the lead and invited other leading industrialists of their time to organise themselves in one national Employers’ Association: the Nederlandse Vereniging van Werkgevers, which was founded in 1899. The Workmen’s Compensation Act was passed in 1901, but the employers secured a victory in one particular area: they were allowed to make their own financial arrangements to cover the insurance cost. Promptly, the newly founded Employers’ Association set up the Central Employers Insurance Bank. However, the government agency, the State Insurance Bank, did the medical inspection, decided the amount of compensation and guaranteed the payment.155 State influence had made its entrance into the companies and was there to stay. The turn of the twentieth century heralded a fierce struggle between employers and employees. The labour movement became more combative because workers wanted their fair share of the growing wealth. They may not have felt it in their personal lives, but real wages had been rising from 1870 onwards, particularly as a consequence of falling agrarian prices. Though nominally their wages would rise further in the first decade of the twentieth century, in fact the average real wages remained more or less unchanged between 1895 and 1913, after a continued rise from the midnineteenth century, which may have fuelled their determination to fight for higher wages and shorter working hours.156 To reach these goals they tried to cartelise the labour market by organising nation-wide trade unions, confronting employers with strikes. The organised labour movement in the Netherlands first made its appearance in the 1860s when the highly skilled artisans began to form associations and to organise actions against employers. In 1871 the Algemeen Nederlandse Werkliedenverbond was set up to embrace local and trade unions. Its neutral and moderate course made this union not particularly attractive for socialist workers who organised other unions, some of them leaning towards anarchism, others towards social democratic ideas. The latter group set up the trade union confederation Nederlandse Verbond van Vakverenigingen (NVV) in 1905, which successfully rallied the social democratic trade union interests. The Protestants, in particular the Calvinist leaders, tried to protect their workers against the supposed radicalism of the socialists and therefore encouraged the foundation of separate Protestant trade unions, which were brought together under the umbrella of the Christelijk

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Nationaal Vakverbond (CNV) in 1909. The Dutch Catholic church was opposed to labour unions, and only changed its mind after Pope Leo III published his Rerum novarum in 1891. A national organisation to encompass the Catholic local and trade unions was set up in 1908. There also remained a group of unions outside these three national organisations, particularly those with anarchistic leanings.157 Typical, therefore, for the Dutch situation was that the workers’ associations split on the basis of religious or political ideology into Protestant, Catholic, socialist and anarchistic groups. Though all associations wanted to improve the situation for the workers, there were differences in tactics and levels of demand. The Protestant and Catholic associations were more inclined to reach a compromise to further harmonious working relations, while the socialists bargained harder and longer and the anarchists looked for a total change of capitalist society. The employers were slow to organise themselves. The Employers’ Association set up in 1899 wrote in 1907 that powerful employers’ associations were rare in the Netherlands. They mentioned several reasons for this situation. Large-scale enterprises were of little importance in the Netherlands, they found. The Dutch employers were unwilling to give up their independence in determining the conditions of employment. Furthermore, they preferred regional to national associations, and were divided across religious and political lines. There were indeed large numbers of regionally based employers’ associations among textile manufacturers, distillers, diamond cutters, cigar manufacturers, printers and binders, coal miners and grain traders.158 Some of those, particularly the Amsterdam ones, participated in the first collective agreements on the conditions of employment, reached between associations of employers and employees. Diamond cutters, printers and cigar makers were the first professions to force the employers through well-organised strikes to accept them as partners in negotiating the working conditions in their factories. By 1914 more than 400 collective labour agreements had been concluded. This number would rise fourfold during the interwar years.159 Both state and workers thus had limited the entrepreneur’s autonomy in his factory. In the three fields discussed above, restrictive trade practices, patent law and labour relations, businessmen are revealed as a group that is often divided in opinion and more practically than ideologically inspired. They had an understandable wish to have the sole and only say in their factories, but were prepared to close trade agreements if competition was tough. Though interference by the government was generally resented, the support of the government in specific cases was greatly welcomed. The government’s labour regulations were grudgingly accepted.

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Conclusion In the expanding world economy of the 1895–1914 period, Dutch enterprises prospered. The family firm remained dominant with informal structures rather than horizontal or vertical integration. A few large companies began to appear, but the small or medium-sized companies were still in the vast majority. Yet, these companies were able to withstand international competition, because the Dutch market was basically unprotected. In fact, Dutch businesses were very internationally oriented, relying on imports, exports and the use of foreign technology. Their international outlook was stimulated by the great opportunities for enterprising people offered by the Dutch colony in Asia, the present republic of Indonesia. Just as Dutch manufacturing was characterised by regional networks and networks of families and friends rather than by integrated companies, the Dutch firms active in the colony were embedded in a colonial network of close business relationships and interlocking directorships. From the activities in the Dutch Indies rose one major company, the Royal Dutch Petroleum Company, which challenged the US first mover in this field, the Standard Oil Company. Though sympathetic towards the ideology of free enterprise, Dutch entrepreneurs were not above collusion or accepting the supportive hand of government. State regulations, however, were resented. In labour relations the employers had a great deal of freedom. Some used it ruthlessly to exploit their workers with reference to the tough international competition. However, many employers showed a more human face, willing to help out under special circumstances. Arrangements for their workers were seen as favours rather than rights. As workers began to organise themselves, employers learned the necessity of negotiations.

2

A small country in an era of war and protectionism, 1914–1945

Introduction Few periods in history saw so many quick changes in economic and political fortunes as the years 1914–1945. It was a period of monumental strains and uncertainties, of borders closing and opening again, of markets lost and won, of state intervention and withdrawal, of nationalistic sentiments set against economic considerations. This high volatility imposed specific demands on entrepreneurs, including a great deal of flexibility. It was not just volatility business people had to cope with. They were also experiencing the disintegration of the highly interconnected economic world of the late nineteenth century. Gradually the world was descending into economic nationalism and protectionism. In these politicised surroundings companies from small countries were more vulnerable towards the nationalistic policies of larger nations. Even if one’s economic insights were sound, political decisions could change circumstances dramatically, making a mockery of long-term strategies. This was a period of high unpredictability, in which fortunes were made and lost. The outbreak of the First World War in 1914 signalled the end of a long period of economic growth and international interconnectedness. For many it came as a shock that such a destructive war was really going on in the Western world. Illustrative is the reaction of the Netherlands Chamber of Commerce in London in 1914: When sometimes dark clouds appeared in the political sky we consoled ourselves with the reflection that we lived in an enlightened age, an age of unexampled mastery over matter, physical progress, and striking developments in every sphere of the intellect. A large European war seemed impossible. Ever expanding and multiplying commercial, cultural and intellectual communication among the nations had intertwined their interests as never before. It was unthinkable that the attainments of all these unifying forces would be destroyed, and the world put back many years in its development towards a higher level of human existence. (. . .) Alas, the year has taught us that these theories were unrealistic.1

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The war brought decisive interruptions in the flows of imported goods and raw materials, both hindering production and creating new opportunities for production at home. Exports were physically and politically obstructed, but demand was high and prices rose. The war years were a period of ad hoc experimenting and on-the-job learning for all the warring industrial states, and also for those who were indirectly affected. Those at war suffered huge losses of lives, some also saw tracts of land turned into battlefields, and all had to make major shifts in their economies to step up the production of arms and ammunition. Public finances were stretched to the limits. Occupied countries like Belgium were also dragged into the war economy. For neutral countries the war brought more mixed blessings, with major obstacles but also chances. The war blocked settled ways of doing business, but also created new opportunities for those who were quick enough to spot them. Political decisions had a decisive influence on all economic aspects. Government intervention became all embracing, but disappeared to a great extent soon after the war. The labour movement displayed its rising power and succeeded in frightening – and sometimes overturning – the establishment.2 In Russia the communists succeeded in overturning the Tsarist regime, a regime change that was followed by nationalisation of foreign subsidiaries and by the virtual segregation of the country from the international economy. The end of the war brought more uncertainty for business, including financial chaos and runaway inflation in large parts of Europe, including Russia, Germany, Austria, Hungary and Poland. Some fortunes made during and directly after the war years were lost in the depression of 1921–1922. The war had diminished Europe’s economic integration with the formation of nine new economic territories, 13 new currencies and 20,000 kilometres in additional customs frontiers.3 From 1923 onwards a few prosperous years appeared, the so-called roaring twenties. There was optimism about a return to the pre-1914 international economic integration, symbolised by the return to the gold standard. Though trade recovered in the 1920s, there was no full catching up. In terms of shares of world trade, Europe lost out, while North America and Asia were the winners.4 The concentration process in industry, encouraged by the war, picked up again in the 1920s, causing the second ‘merger movement’, the first being the merger movement of the turn of the twentieth century, which was particularly visible in the US. In the second merger movement Britain fully participated with the result that by 1929 Britain had far more big businesses than France and Germany, widening the gap between Britain and Europe.5 The merger movement went hand in hand with a process of what contemporaries termed ‘rationalisation’, a rational and more efficient use of the means of production. The upswing period was accompanied by the introduction and spread of new consumer goods like cars, radio sets and washing machines, though initially these goods were

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predominantly destined for the happy few. Not all countries, however, shared equally in the upswing. Particularly in the two main trading partners of the Netherlands, Germany and Great Britain, economic growth was relatively slow. The US, on the other hand, was hardly touched by the First World War. Even for the prosperous countries, the ‘fat’ years lasted less than the proverbial seven. The Wall Street Crash of 1929 marked the start of the deepest depression of the modern era, with the numbers of unemployed rising to unprecedented heights. In a scramble to safeguard the home economy, large countries adopted protective measures. While collaboration between national governments and their national industries and national labour forces intensified, the doors to the outside world were shut. The US set the tone with the Smoot-Hawley Tariff in 1930 and other countries followed suit, leaving smaller nations such as the Netherlands in a disadvantaged position and damaging world trade in general. Even Britain, the champion of free trade, withdrew into its empire. By raising higher tariffs against non-imperial goods, it furthered trade within the empire. Once again business people had to change their policies, to adjust to entirely different circumstances, to re-think their long-term strategies. As the free market obviously failed, cartels and government support became highly acceptable. International interaction receded further as countries such as Germany began to follow an autarchic policy and prepare themselves for war. According to Harold James, the Great Depression had deeper roots than just the tumble of the stock markets and the fragility of financial mechanisms: The financial catastrophe brought back all the resentments and reactions of the nineteenth century, but in a much more militant and violent form. Instead of a harmonious liberal vision of an integrated and prosperous world, beliefs about the inevitability of conflict and importance of national priorities gripped populations and politicians.6 Perhaps the depression of the 1930s was so severe because it took place during the downward swing of the third Kondratieff wave. Writing in the 1930s, Schumpeter looked for clusters of innovations to explain the dynamic of the long waves. Taking his ideas further, Freeman and Perez linked technological with institutional changes. They suppose that long waves are caused by changes in techno-economic paradigms. A new techno-economic paradigm develops initially within the old, showing its decisive advantages during the ‘downswing’ phase of the previous Kondratieff cycle. However, it becomes established as a dominant technological regime only after a crisis of structural adjustment, involving deep social and institutional changes. In this interpretation, the downward period is characterised by a mismatch between the rising new

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technological regime and the old institutions, which tend to change only slowly.7 The 1930s therefore mark the end of a period in which electrification and steel had dominated the world economy and the beginning of a new constellation of technologies based on oil, aircraft and tanks as well as the automobile and consumer durables.8 This theory might help explain why the period 1914–1945 was volatile, both in economic and political respects. Though not referring to the long wave theories, Jan Luiten van Zanden argued that the period 1914–1945 was characterised by three tensions between the old liberal economic order of the nineteenth century and the new ‘anti-market forces’: the rise of the nationally based welfare state, the increasing power of labour unions, and the rise of big business with its internal markets. These ‘anti-market forces’ would dominate the post-Second World War period. This was generally true for the Western countries, but applied particularly to the Netherlands.9 The final blow to international interconnectedness came with the start of the Second World War. To some extent this war was a repeat of the First World War. The trading lines were once again interrupted through national policies, mines and submarine warfare. Governmental influence increased and national resources flowed into the production of planes, tanks and ammunition. While the military losses were smaller, civilian casualties were much higher. Battles moved faster over larger distances and more countries were occupied militarily. The Second World War became more truly global when Japan and the US entered the war on opposite sides in December 1941. Out of the war two superpowers, the US and the USSR, emerged, united in their efforts to combat the Axis powers, but falling out soon after the end of the war. The European countries found themselves delegated to a more modest role as second tier political powers. For the Netherlands the situation during the two wars was completely different. Neutral in the First World War, it became occupied by the German forces in the Second. Instead of the relatively comfortable position as a neutral state, it found its economy geared to the war ambitions of Germany. This chapter will explore how Dutch companies coped with the highly volatile period between 1914 and 1945. The First World War changed the strategies of Dutch enterprises in a number of important ways. Companies became more vertically or horizontally integrated, they worked closer together with the government and they began to accept workers and their unions as respectful negotiating partners. Initially the prosperity of the 1920s seemed like a return to ‘normalcy’ and companies began to resume their pre-war strategies. But the international world had altered fundamentally, and company strategies changed tack once more during the depression of the 1930s. The Second World War brought employers, employees and government (as well as the occupying forces) even closer together in such a way that little remained of ‘free enterprise’ during the course of the war. The managed economy was taken to extremes. Naturally, individual choices still mattered, but most business decisions

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were taken through collective processes. Perhaps the only entrepreneurial ambition that did not change during the 1914–1945 period, though circumstances to fulfil this ambition changed dramatically, was the desire to seek out international markets and invest abroad. The circumstances of this period shaped the Dutch tradition of giving foreign subsidiaries their own ‘national’ identity, producing local products for local markets.

Interlude 2: The Philips family firm becomes a multinational company The Philips Glowlampworks, Limited, is acknowledged to be the premier lamp manufacturing concern in Europe, possessing processes, plants and machinery, which have hitherto enabled it to manufacture lamps on the most economical basis and of the very highest quality. Similar plant, machinery and processes have now been installed at the works of the Edison-Swan Company.10 This quote from the 1920 annual report of the Edison Swan Electric Company in London mirrors the changes that took place during the First World War in the position of the Philips company. Chapter 2 deals with the ups and downs of the period between 1914 and 1945 with two World Wars and two economic recessions as well as a number of boom years. The volatility of this period made mockery of the long-term business strategies, but for enterprising and flexible entrepreneurs there were ample opportunities, as the history of Philips shows. The First World War set off a process of vertical integration. Even though the Netherlands remained a neutral country during the First World War, it became difficult for Philips to get materials such as argon gas and glass bulbs. Therefore the company began to produce its own argon and set up a hydrogen factory as well. In 1916 Philips even delivered argon to the London factory of the General Electric Company. A glass factory was built in 1915. When shipping became increasingly hindered, Philips bought its own ships and sailed the seas. Despite mines and submarines, miraculously no ships were lost. New opportunities for Philips’ sales arose in countries where their German competitors lost their markets. Philips also profited from the fact that the warring countries had to concentrate their efforts on products essential for warfare and as a consequence devoted less attention to lamp technology. The Japanese manufacturers concentrated on China and South-East Asia, the US producers on Latin America, Australia and South Africa, while Philips delivered everywhere as was its custom. The US market, however, had to be given up in 1916 for patent reasons. Elsewhere, more than enough outlets could be found to increase production considerably during the war years. The policy of vertical integration was supplemented by horizontal integration. By 1920, Philips possessed the majority of shares in Volt’s Metaaldraadlampenfabriek and all the shares of Pope’s Metaaldraadlampenfabriek, its two most important Dutch competitors.11

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The relationship with General Electric was sorted out after the end of the war, which resulted in an agreement in 1919 to respect each other’s home markets and to exchange patents and know-how. Philips paid a licence fee to the International General Electric Company and the latter took a 20 per cent participation in Philips’ enlarged share capital. This participation continued until 1952.12 The contract with General Electric brought Philips into the inner circle of the international lamp industry. After the war, the three Berlin electrical manufacturers combined their production of lamps in the Osram Company and began to negotiate an international lamp cartel. This resulted in the Phoebus cartel in 1924, in which Philips also participated. The cartel arrangements included production quotas, prices and exchanges of patents and technical know-how. It stabilised developments in the lamp industry until the Second World War,13 giving Philips the opportunity to concentrate on new developments such as the production of electron tubes and radios. Philips management was characterised by an efficient, rational and scientific approach. This was true of their attitude to their physics laboratory, where tasks were not limited to troubleshooting and testing but extended to research intended to support the diversification of the company. The leader of the research laboratory created an academic culture, encouraging research staff to publish in leading international journals and attend scientific congresses all over the world. Academics from universities were invited for in-house seminars. Most important of all, researchers were stimulated to apply for patents.14 The scientific approach was also used in personnel management and the organisation of production. In 1924 the first ‘psycho-technician’ arrived to test nearly all job applicants to assess their suitability for certain types of work. This applied also to the many women working on the assembly lines. Wages were set according to modern scientific principles. Professionals were hired to look after the social welfare policy of the company, the human face of the company.15 During the 1920s, Philips became a true multinational company. It followed the traditional route from exports through agents via sales organisations to foreign production units of its own. This route was followed twice, first for incandescent lamps and then for electron tubes and radios, because in the 1920s Philips diversified its production into consumer electronics, including complete radio sets. Sales organisations abroad often were set up in collaboration with the agents who had originally pioneered the market. Philips took its agents’ interests into account because of their local knowledge, their experience and their trading connections. The establishment of production units depended on patents, licences and cartel agreements as well as tariffs. In bulb manufacture Philips either took over a local producer or tried to enter the market by offering one of the local manufacturers technical assistance in exchange for a share in the company. By the end of the decade, Philips owned production units in Poland, Spain, Belgium, France, Italy, the UK and Sweden. It had sales organisations in many more countries, including Brazil and China.16 The export of electron tubes and radio sets was pushed vigorously by a worldwide coverage of sales offices. Manufacturing in the Netherlands boomed in the

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late 1920s. The number of employees in Eindhoven, the basis of Philips, increased from a modest 2,000 in 1922 to 9,000 in 1927 and no less than 23,000 in 1929, a growth of 14,000 in two years.17 As Philips expanded, professional management entered the company. Remarkable in this context is how Anton Philips (one of the original owners) viewed the relationship between company and employees in 1929. In the past, he argued, leaders and owners of companies were the same and therefore every penny spent on the workers meant less profit for the owner. In the modern incorporated company, ownership and management were uncoupled. Even the business leader had become an employee. It was in the interest of both to combine a thriving company with fair payment of wages and good social care. Instead of looking exclusively after the interest of the owners, the managers of the modern company divided their attention between the interests of the employees and those of the company as a whole, which would ultimately result in attractive dividends.18 The spectacular growth of Philips in the Netherlands came to an abrupt halt in the autumn of 1930. Profits went down in 1931 and 1932. As a company working in a small and largely unprotected home market, Philips was dependent on overseas sales more than its competitors and therefore it was more affected by restrictions on trade and monetary instability. In the market for bulbs its main problem was heavy Japanese competition in overseas markets, while in electron tubes American competitors menaced Philips sales. In both sectors Philips temporarily lost market share, leading to lower sales. Philips continued to push sales of radio sets, accepting low profits in order to increase market share. This strategy paid off, as Philips became one of the world’s leading manufacturers of radio sets, no doubt because high productivity gains were realised in this new field. In all three fields part of the production was transferred to foreign affiliates in response to tougher trade restrictions. Thus, in the Philips case, the depression caused an increase in foreign direct investment. As a consequence of all these measures, half of the workforce in Eindhoven had to be dismissed between 1930 and 1932. The economic crisis of the early 1930s revealed the organisational weakness of the Philips company. Despite the introduction of professional managers, too much still depended on the intuitive leadership of Anton Philips himself. Financial control and direction of activities had not kept pace with the rapid expansion. Measures were taken to introduce tighter regulations and more professional managerial structures.19 However, the family – including the in-laws – remained prominent in top positions till 1977. By 1934 the worst was over. Financial results improved, but the efforts to overcome the obstacles of protectionism had to be stepped up. The company continued to decentralise production. During the second half of the 1930s the national character of its foreign subsidiaries became more marked under pressure from various governments. This pressure was particularly strong in countries which followed a nationalistic or autarchic policy. In time the workforce abroad far outnumbered that in the Netherlands. By 1939 Philips employed 19,000 people at home against 26,000 abroad.20

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The Second World War once again created dramatically new circumstances. The Netherlands were occupied by the Germans in May 1940, but before that fatal date Philips had already made legal preparations to transfer the seat of the company to Curaçao and to bring its British and American activities under separate trusts. The board of managing directors decided to flee the country at the very last minute. They went first to England and moved from there to New York, where they expected to be able to keep in contact with their world-wide business. In August 1940 they announced defiantly in an advertisement: ‘A world organisation carries on!’21 Thanks to the policy of establishing selfsufficient manufacturing units in many different countries all over the world, the organisation would be able to survive without the support of the parent company in Eindhoven. However, things were not as easy as this sounded, because the subsidiaries needed products from Eindhoven, just as Eindhoven needed the foreign subsidiaries as outlets. The Germans wanted Philips Eindhoven to stay in commercial contact with the subsidiaries in neutral countries, particularly those in Europe. The managing directors in New York, however, were inclined to see this as collaboration with the enemy, but could not supply these subsidiaries themselves. The result was that many of the national organisations had to be guided by their own counsel in relation to their own local circumstances. After the US became involved in the Second World War, Philips supported the Allied war effort by setting up production units in the US.22 In the occupied Netherlands, Frits Philips was the only member of the managing board still in the country. As the only son of Anton Philips he took over the leadership of the Dutch part of the company. The Germans, however, placed the company under German administration, which seriously limited the space for manoeuvring for the Dutch directors. The Germans also tried to combine the continental European Philips companies with German ones, but did not succeed because of the complicated international structure of the enterprise. German pressure, the wish to safeguard the business and the aim of retaining employees in the country all combined to keep production going. Even though most employees would have wanted it to be different, increasingly the company’s factories manufactured products for Germany and the German war effort.23 In the meantime living conditions deteriorated. Being located in the southern part of the Netherlands, Eindhoven was liberated by the Allied forces in September 1944, half a year earlier than the northern part of the country.

2.1 The First World War and its aftermath The Netherlands declared itself neutral in 1914 and was indeed able to stay out of the First World War. Though it did not belong to the group of warring countries, it was seriously affected by the war nonetheless. Business relied heavily on imports and exports, which both became increasingly hampered as the war progressed. Borders were closed, trade routes blocked, and restrictions were imposed on the free transfer of capital. The

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war made itself felt throughout the country in many ways. In fact, the threat of war in July 1914 caused such a fall in shares that the board of the Amsterdam stock exchange decided to close the market for an indefinite time. The call money market came to a standstill, which seriously affected the main credit supply. The population reacted immediately with a run on the banks and the stockpiling of commodities. Though the government had little experience in economic intervention, it conferred with business leaders and proclaimed a series of measures to combat the chaos. Gold exports were banned, so for practical purposes the Netherlands left the Gold Standard. As a result, traders were confronted with great uncertainty over exchange rates. The stock exchange reopened only on 9 February 1915.24 The Netherlands became caught between the competing claims of Germany and Britain (and later the US). The advantageous geographical position of the Netherlands, at the crossroads between the two expanding economies of Britain and Germany, now became a major disadvantage. In the German military plans an invasion of the Netherlands was not deemed necessary. Because Rotterdam was an important transit harbour for the densely populated and highly industrialised German hinterland, it was also in Germany’s economic interests to respect the neutrality of the Netherlands as long as Dutch merchants acted as intermediaries for its supply of overseas raw materials and food, including grain from America. Britain, on the other hand, wanted to starve Germany by putting pressure on the Dutch government not to trade with their enemy. An ingenious solution to this dilemma was found in entrusting a private company with far-reaching responsibilities for negotiation with British officials on the one hand and regulating and administrating Dutch trade on the other. In November 1914 a group of prominent directors from banks and shipping companies founded the Nederlandsche Overzee Trustmaatschappij (NOT, Dutch Overseas Trust Company). The NOT acted as a guarantor to Britain that contraband goods handled by the trust would not be forwarded to Germany. Its guarantee was implemented by contracts with carriers and importers that the goods concerned served for the Dutch home market only. Formally, the government was not involved. As the war continued, Britain declared ever more goods to be contraband. As a result the NOT’s administration turned into a bloated bureaucracy. At its highpoint it employed a thousand people. The NOT did not possess any coercive powers over shippers and traders to guarantee that the goods, once they arrived in the Netherlands, would not be exported to Germany, though it tried hard to achieve these ends with contracts and administrative measures. Imported raw materials, processed in the Netherlands and then exported to Germany, posed a particularly delicate problem. Undeniably, goods imported via the NOT did reach Germany, despite the NOT guarantee. The Dutch government, however, had its own reason to discourage re-exports to Germany, as these threatened home consumption.

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Exporting became increasingly advantageous as prices rose to great heights. The Economist of April 1916 praised the NOT as ‘a stroke of genius’.25 International trade became more and more difficult as the war progressed. Britain controlled the seas, and its embargo on supplying Germany with any goods needed in wartime applied to neutral countries, too. As one contemporary remarked somewhat bitterly in 1916: Our shippers long experienced how ‘Britain rules the waves’, but the situation is getting worse because ‘Britain waives the rules’.26 British measures came on top of German submarine attacks. It was therefore difficult to import from overseas. Dutch producers profited from import substitution and a rising demand for their goods in Germany. In the early years of the war there was a flourishing export trade in agrarian products. Goods that could no longer reach the London market could be re-routed to Germany. The longer the war lasted, however, the more difficult it became to purchase raw materials and intermediate products. Imports from Germany, including essential imports of coal and chemicals, came under threat as well because Germany demanded Dutch exports, particularly of food and tropical commodities, in return. In June 1917, the US, after entering the war, announced a total trade embargo, which also prohibited American exports to the Netherlands. In early 1918 the Allies sequestered 132 Dutch ships in US and British ports. Queen Wilhelmina condemned the act as ‘ship robbery’, but the stocks of major shipping lines rose on the Amsterdam stock exchange because the US and Britain promised generous charter rates.27 During 1917 and 1918 shortages in food and raw materials became a serious problem in the Netherlands. While in nominal prices the added value in manufacturing and services increased during the 1913–1918 period, in real prices both declined to almost half of the 1913 level by 1918. Added value in constant prices in agriculture remained more or less the same over the war period and only fell back a little in 1919. As soon as the war had ended and imports could enter the country again, manufacturing and services picked up and experienced such a rapid growth that, according to the latest estimates, the Dutch economy showed a real per capita growth between 1913 and 1921 of 2.4 per cent, higher than nine other Western European countries.28 The Netherlands as a neutral country apparently did well out of the war and its aftermath. The upheaval caused by the war had several important consequences for the Netherlands. The interaction between government and business increased considerably. The government became very active in economic affairs, in some cases cloaking itself in the entrepreneurial role, while leading figures from the world of business assumed governmental responsibilities. The extraordinary circumstances created by the war also led to closer co-operation between companies, resulting in both horizontal and vertical integration. The upheavals of the Russian Revolution and

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the German socialist revolution reverberated through the normally so quiet Netherlands. The disruptive effects of the war did not end with the armistice of 1918 but continued until the early 1920s. Close alliance between business and government The Dutch government had two major concerns in coming to grips with the war: keeping out of the war and keeping the population fed at reasonable prices. These goals ran partly contrary to those of business people who were seeking the best paying markets for their produce. To ensure enough food for the Dutch population, the government gradually introduced all kinds of distribution measures, including the rationing of bread, grain, meat, butter and sugar, to name only a few products. These measures mainly involved the agrarian sector, but also had consequences for trade and manufacturing. Exports were severely restricted, sometimes forbidden outright, then again made conditional. The measures were often ad hoc and not very effective, as the government lacked experience of interfering in economic life. Export regulations could work as a trade-off. For instance, for the export of sugar the manufacturers needed government consent, which was given only if the joint producers and traders put a certain amount of sugar at a certain fixed price at the government’s disposal to serve the home market. One of the most interesting consequences of these government regulations was that the different parties in the supply chain were thrown together to refute, discuss or implement the government measures. This way they got to know each other very well, and learned to deal with economic issues through joint discussions. These cartel-like discussions were sanctioned, even encouraged by the government. From there it was only a small step to cartel agreements or the formation of federations or even holding companies. The Dutch sugar industry took such a step forward. In the pre-war period, this sector had already begun to discuss the restructuring of its industry because the joint production capacity of existing factories was larger than the quantity of available beets. This over-capacity was caused by the foundation of a number of large-scale co-operative beet sugar factories after 1900. These co-operatives had a close link with the beet growers and therefore could compete successfully with the private factory owners. The private factory owners on their part concluded that having fewer but larger factories would be their best course for survival. Their attempt to concentrate sugar production fitted well with the strategy of the largest refinery, the Wester Suikerraffinaderij (Wester Sugar Refinery), which wanted a closer link with beet sugar factories because an innovation in the processing of beet made it possible for them to produce a ‘white sugar’ that came close to refined sugar. This meant on the one hand the arrival of new competitors and on the other less raw sugar for the independent refineries. The Wester took over its first beet sugar

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factory in 1911. The refiners exported a large part of their product, but for the Dutch home market they had reached a cartel agreement in 1911. The First World War accelerated the integration process because the Dutch market became increasingly important. Government measures to protect consumers led to increased contacts among all sugar producers and refiners, including the ‘arch-enemies’, the co-operative sugar factories. In the meantime, the Wester was buying up beet sugar factories and closing delivery contracts with many others. In early 1918, the managing directors of the Wester laid out plans for creating one Central Sugar Company that would encompass all Dutch refineries and sugar factories, private companies as well as co-operatives. The great benefit of this centralisation was, according to its proponents, that it would allow the industry to work more efficiently; to concentrate production in a smaller number of larger factories; to send the beets to the nearest factory instead of transporting them across the country in competition with each other; and to have one selling organisation. To show the world that raising prices was not the object, it was stipulated in the articles of association that 50 per cent of the surplus profits would go to the farmers who delivered the beets. During the ensuing negotiations, the co-operatives decided not to join. However, all private sugar manufacturers and two refineries merged into one holding company, CSM (Centrale Suiker Maatschappij) in 1919. At the moment of its creation it belonged to the top manufacturing companies in the Netherlands. In 1920 it was larger than the electrical engineering company Philips, measured in total assets. It was, however, smaller than the oil company Royal Dutch Petroleum or the margarine producers Jurgens and Van den Bergh. Not all were happy with this concentration movement, dismissing the new company as ‘the Sugar-trust’. The socialists consoled themselves that these concentrations would make the eventual (and naturally inevitable) future socialisation easier. The wholesalers felt particularly threatened. With the end of the war and the resumption of international trade, however, CSM did not have the dominant position the wholesalers feared or CSM may have hoped for.29 The influence of the government on the creation of CSM was only indirect. Far more active was the government’s involvement in the creation of two other large companies: the salt works Koninklijke Nederlandsche Zoutindustrie (KNZ) and the steelworks Koninklijke Nederlandsche Hoogovens- en Staalfabrieken. The disadvantaged position of Dutch industry in being dependent on the import of intermediate and raw materials was strongly felt during the war. For that reason, the Dutch government began to reconsider its position of non-interference. In fact, the state had already taken up the exploitation of coalfields in Limburg in 1901. The motives for this step were mixed and partly opportunistic. Mining in the Netherlands was still mostly an unexplored territory. The way the government granted concession rights did not function satisfactorily. There was a certain pressure to keep the exploitation of Dutch

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coalfields in national hands. Also, state exploitation would make it possible to take proper care of employee interests.30 The support for a salt mine and refinery therefore seemed a logical step. At that time, importers of refined salt and salt refineries, which used imported raw salt, served the home market. In 1897 the salt refiners formed a cartel to arrange prices, paying conditions and quotas. One of the participants was the relatively young company Rotterdamsche Zoutziederij Kolff & Vis, who produced according to a new technology. The two owners of the company, however, wanted more; they were interested in a closer link between the salt refiners and the chemical industry and they hoped to find and exploit salt from Dutch soil. Klaas Vis’ attempt to drill for salt in 1902 failed. In 1903 the Dutch parliament passed a bill that made exploration the sole prerogative of the government. Drillings went on, mainly to find ‘kalizout’, which was unsuccessful. However, salt was found in the eastern part of the country. Vis and Kolff and several others applied for a concession. No agreement could be reached, because the government preferred a role for private enterprise, while parliament wanted to retain a say in the exploitation of mines. It needed the war and the dwindling imports of raw salt to get the plans through. In 1917 Vis and Kolff once again tried to get a concession but failed in the first instance. Opposition came from socialists who wanted the state to take the exploitation entirely into its own hands, and from several other members of parliament, some in league with their fellow refiners, who were against a monopolistic position for one particular refiner. Government then encouraged Vis and Kolff to open negotiations with the other salt refiners, thus stimulating co-operation between competitors. To get all parties on board, the state was given a greater share of surplus profits (50 per cent) in the proposed company and the other refiners got a fixed share of the Dutch market and guaranteed deliveries of raw salt. On this basis, parliament agreed to grant a concession to the Koninklijke Nederlandsche Zoutindustrie (KNZ). The new company started with drilling in 1918. The war was over by the time the first Dutch salt reached the market. But KNZ was there to stay, and it played an important role in diversifying the Dutch chemical industry.31 The other government-supported company set up during the war was the blast furnace and steelworks Hoogovens. The Dutch metal and machinery industry had always relied on imports of iron and steel. There was little inclination to integrate production vertically. It required wartime isolation to demonstrate the hazards of this policy. In 1912 the iron foundry and steelmaker De Muinck Keizer had asked its most important Dutch customers in machinery and shipbuilding whether they would be interested in jointly setting up a modern steelworks or in participating in such a venture. The answer was ‘no’. De Muinck Keizer went ahead with his plans on his own. The new steelworks came into operation in 1915 and functioned very well, despite increasing shortages in raw materials. In fact,

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business went so well that in 1916 De Muinck Keizer decided to extend his works with a Siemens-Martin oven and to turn his family firm into a limited liability company. He invited his banks and, once again, his customers to participate in the company. This time the response of the customers was positive. In 1917 the NV Nederlandsche Staalgieterij voorheen J.M. de Muinck Keizer was founded. By that time, however, the building costs had risen to such heights that the construction plans were put on hold.32 In the meantime and involving the same group of manufacturers as well as traders in iron and coal, the banks and the government were discussing plans to establish a large blast furnace and steelworks in the Netherlands. This resulted in the foundation of the company Nederlandsche Hoogovens en Staalfabrieken in 1918. The Dutch government took a 25 per cent share in the company, while the city of Amsterdam was prepared to take a further 15 per cent share if the plant was built in its vicinity. Though the plans for Hoogovens ripened under war circumstances, the return to free trade was nonetheless a vital precondition for success. It was decided that the new plant would be located near the coast in order to enable cheap overseas imports of both coal and iron ore. In 1919, an agreement was reached between Hoogovens and De Muinck Keizer, by which Hoogovens took a large financial interest in De Muinck Keizer and production was divided between mass steel manufacturing (Hoogovens) and specialities (De Muinck Keizer). Hoogovens did not start production until 1924. The ideal of vertical integration of blast furnace, steelworks and rolling mill plate was never realised in the interwar years. Production of Hoogovens was limited to pig iron. Ironically, most of it was exported as well. The project probably lost most of its urgency when the war was over. Instead of striving after an independent Dutch position, co-operation with the German industry was established. Through its by-products Hoogovens made new types of activities in the Netherlands possible, such as the synthesis of ammonia for the manufacture of nitrogenous fertilisers. Thus the company contributed to the diversification of Dutch manufacturing.33 Vertical and horizontal integration The obstacles created by the war challenged entrepreneurs to find new routes, new products and new business partners. Obstacles were there to be overcome. During the first two war years, the NOT had succeeded rather well in keeping trade flowing, but in the course of 1916 scarcities began to appear on all fronts. Rising prices created high profits, which strongly motivated the entrepreneurs to keep going and expand their business in new ways. On the other hand, increasing stocks and rising prices proved a cash drain, so companies began to attract more capital. The result was expansion, vertical and horizontal integration on a scale unknown until then, and transformation of family firms into limited

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liability companies. The number of industrial companies listed on the Amsterdam Stock Exchange doubled in six years, from 93 in 1914 to 182 in 1920. The issue of shares and debentures, both public and private, by manufacturing and trading companies increased from an average of 17 million guilders per year in the 1904–1914 period to 109 million guilders per year in the period 1915–1920.34 New share issues found ready takers, no doubt partly because of an abundant capital supply and high dividends. The willingness to buy shares reached a peak in the immediate post-war period. Dutch banks relaxed their former reservations towards financial commitments to industry and began to supply credit on a large scale. They allowed short-term instruments to cover long-term credits, expecting that full access to a company’s accounts and a seat on the board would sufficiently safeguard these credits. In their eagerness to please their clients, banks set aside all their traditional caution during the credit boom between 1915 and 1920.35 The banks thus supported the concentration process in the Dutch industry. By creating new joint stock companies the two objectives of incorporating family firms and merging horizontally or vertically could be achieved simultaneously. Horizontal mergers took place within a wide range of industries, among them cigar manufacturers, paper wholesalers, producers of superphosphate, rubber manufacturers, firestone producers and ropeworks.36 For instance, the Amsterdam paper wholesalers Gerard Loeber and G.H. Bührmann formed the Algemeene Papiermaatschappij in 1918. The new company had six offices in the Netherlands, one in London and one in the Dutch East Indies and about 60 agents all over the world.37 Three producers of superphosphate merged in the new holding Vereenigde Chemische Fabrieken (VCF). The initiative to merge seems to have come from the Rotterdamsche Bank, which, after a takeover of its own, served these three producers. With the fourth producer, the ASF, a pooling agreement was reached the following year. Initially intended to regulate exports, co-operation went further with an exchange of managing directors and directors.38 As a reaction to this concentration, the first co-operative manufacturer of fertilisers, ENCK, was set up in 1920. A booming business during the war was the preserved food industry. The Vereenigde Conservenfabrieken, founded in 1916, tripled share capital in three years, while adding more factories to the company. The Vereenigde Nederlandsche Chamotte Fabrieken, formed in 1919, was a combination of producers of firestone and builders of firestone ovens, who had been able to expand their business because German competition had fallen away.39 These combinations were mainly horizontal mergers. Vertical integration took place in the cotton industry. Until 1914, the cotton industry in Twente had relied to a large extent on the import of yarn. The war encouraged the manufacturers to increase their spinning capacity so that it would match their weaving capacity. The war problem of shortages could not be solved in this way, because yarn as well as raw

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cotton became increasingly scarce. The expansion in spinning capacity, however, continued after the war, bringing the integration of the Dutch industry more in line with (though still behind) its European counterparts.40 As told in the interlude, the war also set the light bulb manufacturer Philips off on a path of vertical integration. In the chemical industry the war years signalled the beginning of concentration and large-scale production. The government showed great interest in this sector because the Dutch army was in need of high explosives and only through the co-operation of several chemical firms could continued production be assured. By creating this co-operation the government encouraged co-operation in other fields. One man, the chemistry professor Gerrit Hondius Boldingh, had a dream to create one large national integrated dye industry on the scale and complexity of the German dye industry. Now that the German imports had fallen away, the moment seemed right to realise this dream. He tried to get support from the banks, the customers, the suppliers, his colleagues and the oil company Bataafsche Petroleum Maatschappij (BPM), subsidiary of Royal Dutch/Shell. His attempt, in 1918, to bring five chemical firms together in one holding company failed because three firms withdrew from the negotiations. A second attempt to create co-operation within a looser structure succeeded and in 1920 the Nederlandsche Kleurstoffen-Fabriek was founded. Two chemical firms were closely involved with this project, while two others participated in the share capital, as did the bank NHM and the oil company BPM. One firm, Chemische Fabriek Vondelingenplaat, preferred to continue working on its own. The dream of Boldingh had come true at last, the company had been realised.41 The margarine manufacturers Jurgens and Van den Bergh took a great leap forward during the war years by integrating both vertically and horizontally. Jurgens was by far the more ambitious of the two. In every direction Anton Jurgens expanded his activities until he had a stake in the whole supply chain, from oil milling and fat melting to retail trade. He was fully expecting business to expand after the war ended. Because he ascribed the rise in oil prices more to traders than to scarcity, he started trading in West African palm kernels in 1916 to bypass British traders in that product. Jurgens entered into secret agreements for copra supplies in the Dutch East Indies, and also invested in production units for processing copra into oil. Together with the American company Kellogg he built an oil mill in Argentina. In Germany Jurgens took a considerable interest in cooking fat. When the export of margarine from the Netherlands to England became impossible, the logical next step was to build a margarine factory there. In the Netherlands Jurgens acquired a number of local firms. He even entered the soap industry, which used the same raw materials as the margarine industry. It was a firm response to the decision of the British company Lever Brothers to penetrate the margarine industry. Together with the candle manufacturer, the Stearine Kaarsenfabriek

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Gouda, Jurgens created a holding company, the Maatschappij tot Exploitatie van Zeepfabrieken, which took over nine soap factories in the Netherlands and had a share capital of 9 million guilders in 1920.42 Jurgens also made possible the ambitious expansion plans of the grocery retailer De Gruyter by participating in the share issue of 1917, thus becoming a major shareholder. In order not to antagonise the other retailers, this deal was kept secret.43 This participation was seen as a first step toward bringing all retailers together in one company, preferably De Gruyter. However, when the negotiations between De Gruyter and its main competitors ended without results, Jurgens instead took a majority of the preference shares of the grocery retailer Albert Heijn, when this family firm was incorporated in 1920.44 The ambitious new ventures of Jurgens were paid for by increasing share capital and by bank loans. The total capital employed by Jurgens increased from 32 million guilders in 1914 to 146 million guilders in 1920, an impressive amount in the context of Dutch manufacturing business at the time.45 The war made manufacturing companies painfully aware of their dependence on supplies of raw materials. Until 1914 smoothly performing trading houses had always ensured that industry could meet its needs on Dutch markets. The war put an end to that, setting manufacturers thinking about the desirability of vertical integration. Industry was getting itself involved in trade, as the case of Jurgens showed. Another example was the holding company Tabaks-Unie, founded in 1920 to combine the Maastricht tobacco manufacturer Philips with a tobacco trading company. Some trading companies were worried about their position. As early as 1917, the directors of the SHV, traders in coal, noticed that manufacturers were beginning to threaten the position of trade: It will be plain to anyone who has kept his eyes open during this highly unusual period in our economic life that producers will become steadily more influential as time passes, while the importance of the pure intermediate trade will steadily decline. We thus believe our goal should be to become as strong in this respect as our Limburg competitors by gaining influence over mines with an equally favourable geographical position and which produce similar coal.46 SHV responded to the threat to its position by integrating backwards. Thus the war and the subsequent economic boom stimulated Dutch industry to co-operate, concentrate and diversify its activities. Collaboration between capital and labour So far, we have discussed collaboration between companies and between government and business, but the war also influenced the relations between business and labour. All of these forms of collaboration under-

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lined the reigning doubts about the ultimate efficiency of the free market economy. The boom and bust of the free market economy was compared unfavourably with the ideal of rational organisation of business through collaborative entrepreneurs and a supportive government in order to balance supply and demand harmoniously, to create stability in employment and to make fair wages for the workers possible. Since the beginning of the war the socialists had ‘postponed’ their class struggle and worked constructively with the government to overcome the problems created by the war. The first obvious problem was the threat of unemployment. The labour unions became accepted partners of the government in discussing labour problems and helping support the unemployed through social benefits financed by the government. The membership of trade unions nearly tripled from 234,000 members in 1914 to 683,000 in 1920. The number of nationwide collective wage agreements increased as well, from a modest 87 in 1914 to 984 in 1920.47 That workers became more acceptable as partners might also be concluded from the increase in works councils from a handful before the war to more than 100 in 1922.48 In some sectors, for instance in the shoe, cigar and printing industries, the possibility of a works council was included in the collective wage agreement. The councils varied widely in status and organisation. Few had proper articles of association. One works council consisted of foremen only and the director discovered to his surprise that the workers much preferred to get in touch with him directly. He remarked somewhat naively that the foremen were less humane and tolerant towards the workers than the management had been, and that he had to protect the workers from their own works council. Normally, however, councils consisted of a less one-sided representation of the labour force. Mostly the works councils had the right to advise on wages and working conditions, though the trade unions played a far more important role in wage negotiations. According to a contemporary study, many employers appreciated their works council because it gave them better insight into the opinions of their workers and helped them to get practical problems and irritations sorted out.49 The proposal of the socialists to establish works councils with the right to discuss company policy and have full oversight of financial accounts, however, was not well received by the liberal employers’ organisation. It argued this would create the same confusion as one would get if soldiers were allowed to participate in decisions about the strategy and tactics of the general.50 In these years the discussions on workers’ participation took place on the level of the industry rather than the individual company. One sector in particular, the printing industry, seemed to have found the right way forward in harmonising the interests of workers and employers. In December 1916 the printers celebrated two achievements in collaboration. The three organisations of employers had just formed a federation to further their joint trade interests, including agreements on prices and terms of delivery. This federation had successfully reached a

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second collective wage agreement with the four workers’ unions. Both agreements would hopefully ensure lasting economic peace within the printing sector, if only the outsiders would care to join the federation. The workers had achieved higher wages and improved fringe benefits. Most impressive of all, both parties had agreed to set up a Central Commission, consisting of employers and employees in equal numbers, to settle disputes about the collective agreement. Remarkable was the absence of a neutral president. Such was the trust in their collaboration.51 Undoubtedly, their optimism was highly influenced by the profitable years just behind them. The war had created a lively demand for leaflets and brochures announcing all government measures. For instance, the publisher of trade magazines, Misset, saw its business boom. Subscriptions tripled during the war. Their offices were expanded and machinery renewed and enlarged. Its new magazine on the agrarian industry, launched in 1915, was an instant success in subscriptions, though profits came in more slowly. The number of employees rose steadily.52 Printing was basically (though not entirely) a national industry and during the war there was no danger of foreign competition. Under these favourable trade conditions, agreements and compromises were relatively easy to reach. The secretary of the printers’ federation, J.A. Veraart, believed that the collaboration that had been achieved within the printing industry could and should be transferred to other sectors. He heralded a new era of industrial organisation. With his forceful and challenging publications he started off a lively discussion. Incidentally, the printers were not too pleased about the turn the discussion took because their own organisation was not entirely the blueprint Veraart showed the world. In fact, Veraart soon left the printers’ federation, but he went on advocating his ideas. Basically he argued that each industry should bring its producers and employees together in arranging joint minimum prices that would enable the producers to pay fair wages to their workers and earn an acceptable living for themselves. To avoid price-cutting, new entrants should be hindered, for instance through contracts with the deliverers. Harmony within the industry should be the result.53 His ideas did not go unchallenged. Economists were the first to point out the disadvantaged position of the consumer, who would have to pay a higher price for his goods and thus become a victim of the harmony reached elsewhere. This was all the more a matter of concern as prices rose continuously during the war years, which seemed to underline the vulnerable position of the consumers. There was also doubt about the lasting success of the scheme in sectors that were more exposed to international competition than the printing industry. The lock-out of new entrants meant there were winners as well as losers in the new system. Not all was going to be harmony.54 The criticisms were in a way predictable. More surprising was the amount of support for many of the ideas. So much had co-operation become the normal way of life during the war that a thorough reorganisation of business life seemed

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a realistic and desirable option. The management consultant Ernst Hijmans spoke in 1922 of the organisation of producers as ‘the third way’, between the anarchy of capitalist competition and the bureaucracy of socialism.55 Particularly in the Catholic organisations of employers and employees, these ideas were picked up and further elaborated. In 1919 they launched an ambitious plan to structure industry and agriculture through a central committee, three sub-committees for large companies, small businesses and the agrarian sector; and sub-subcommittees for each industry. In each industry the ‘industrial committee’ of employers and employees would decide prices and wages. Even the consumers were given a place in this big scheme.56 Though the plan did not materialise, the ideas persisted throughout the inter-war years. These ideas of organising production and consumption more rationally and harmoniously had no doubt been furthered by the threat of socialism. Rethinking capitalist organisation of production got a new sense of urgency when the revolutions in Russia and Germany demonstrated the power of Marxist ideology. Towards the end of the war food scarcity, high prices and inadequate distribution systems led to food riots and strikes in the Netherlands as well as in other European countries. Labour unions became more radical in their demands. The feeling of threat felt by the establishment can be illustrated by a short piece by the Dutch writer Nescio: ‘Vae Victis’. He pictured a family sitting on their lawn in the lush summer with children playing around them: ‘Soon the fountains of hate would spring up from black crumbly holes in our well-kept shiny lawn. But still we were drinking tea and playing tennis and driving cars and being greeted obediently.’57 For some business people the threat was very real. The aircraft builder Anthony Fokker had a factory in revolutionary Germany. One day in November 1918 he found his factory occupied by rebellious soldiers. The workers were put into leadership positions and they forced him to empty his local bank account to pay for their needs. He escaped through a trick and fled to Berlin in disguise.58 These stories found their way to the Netherlands and undoubtedly influenced policy making. The Catholic organisations in particular responded to this mood by suggesting concessions towards labour, which fitted well with Christian ideas on harmony and charity. One of these concessions was the 8-hour working day. Though for women and children the working day in factories had been limited to 11 hours in 1889 and 10 in 1911, no restrictions applied to male workers. In many cases their working day tended to have a similar length nonetheless, because men often worked alongside women and children. Certainly the excessive hours of the nineteenth century were no longer the rule. The socialists had long campaigned for an 8-hour working day. In November 1918, when the First World War came to an end, the leader of the Social Democrat Labour Party, P. Troelstra, seized the moment of discontent among the workers to threaten the authorities. It is still a matter of debate

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whether the socialists really wanted to proclaim the revolution, but they certainly succeeded in achieving important concessions in a matter close to their heart: the length of the working week. The Catholic Minister of Labour, P.J.M. Aalberse, went even further than the socialists and proposed an 8-hour workday in factories, a weekly free day (preferably Sunday) and a free afternoon on Saturday, which came to 45 working hours a week. This proposal went further in the Netherlands than elsewhere in Europe. With surprising speed legislation was rushed through Parliament. Many entrepreneurs did not even wait for the outcome to introduce the 8-hour working day in their factories.59 With markets opening up after the termination of the war, they were willing to make concessions towards their workers, as they were eager to profit from the expected upturn in business. As we will see in the next section, the post-war upswing was much shorter than expected. The mood of optimism suddenly changed to one of gloom. Soon after the introduction of the 45-hour working week, employers began putting pressure on the government to lengthen the working day again to 48 hours, which was the usual length elsewhere in Europe. This change took place in 1922. The principle of the 8-hour working day, however, survived the post-war crisis despite heavy attacks from employers, particularly in the textile and shipbuilding industries. Whether or not employers were opposed to shorter working hours mainly depended on international competition and the share of the labour costs in their total production costs. In shipbuilding, the textile industry and brick making, working hours were relatively long. Here the employers frequently used the provision to apply for permission to work overtime. It is doubtful whether these measures were really relevant to their companies’ survival. The economic upswing after 1923 certainly contributed to the general acceptance of the 8-hour working day.60 A short but fierce crisis The First World War and its aftermath brought difficulties but also new opportunities and high profits for Dutch companies, as we have seen. However, the bill for these profits was presented in the early 1920s. In 1920 the commodity markets collapsed. During the war, stocks had accumulated because of lack of transport, and now massive volumes flooded the market, bringing low prices in their wake. In addition, sales to former belligerents such as Germany and Austria-Hungary remained low because of adverse and worsening exchange rates. Industry had strongly increased production, benefiting from the continuously rising prices. At the start of the war, business had profited from working up cheap raw materials into increasingly expensive products. Now, the reverse happened. While their stocks of raw materials were bought at high costs, they had to deliver products at ever lower prices, sometimes below the cost of production. The merchant houses found themselves in severe weather. First, they

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lost heavily on their stocks. The Handelmaatschappij S.L. van Nierop wrote that the uncontrollable price falls had come down like an avalanche, sweeping everything in their path. Then they had orders outstanding with manufacturers, which they could only cancel at a loss. Finally, they had often delivered goods to customers who had run into trouble themselves and could no longer meet their obligations. Losses on debtors revealed themselves somewhat later than the losses on stocks, so many companies discovered the gravity of the situation only gradually. The crisis wiped out old traders and new traders alike, but the crash hit new companies particularly severely. The Compania Mercantil Argentina, founded in 1915 to trade in grain, appeared to ride out the storm during 1920 only to run into losses of 18 million guilders in 1921, and that on a capital of 20 million guilders. Liquidation was unavoidable. The small trading house Hagemeyer, which had optimistically incorporated the family firm in 1920 to increase its financial scope, had to cut down its activities and reduce its staff numbers. After a financial reorganisation, the company found the way upward again.61 Several of the wartime creations mentioned earlier had to be slimmed down severely and reorganised financially. This was the case with the ropeworks, cigar manufacturers and the producers of firestone. Others had to be liquidated altogether. The Algemeene Papiermaatschappij was dissolved, while the two constituent family firms continued separately, both much reduced in size.62 The cigar manufacturer Gebr. Philips derived little pleasure from its combination with the tobacco trader. The TabaksUnie nearly brought the company down when it went bankrupt in 1922. Only through an arrangement with holders of debentures could the original cigar-making business be saved.63 The food preservers Vereenigde Conservenfabrieken had to be liquidated in 1922, which greatly added to the problems of their bankers. Another of the post-war fiascos was the Nederlandsche Kleurstoffen Fabriek. The start-up process went slowly. By the time the company was ready to enter the market, the German competitors were back in business. The aim of the company had been to remain completely independent of German imports. Thus the company had to start with a limited number of products, while the market demanded a full range of dyes. Potential customers in the textile industry preferred to return to their traditional German deliverers. Also, one of the participating firms became in fact a fierce competitor. All these elements combined to make NKF a failure. By contrast, its smaller Dutch competitor Vondelingenplaat was a great success. It had used a different strategy: it made use of German imports wherever necessary, and therefore could offer a full range of dyes. Also, it started earlier and therefore had been able to profit from the high prices directly after the war. Lastly, it expanded more slowly within its own financial means, not with huge amounts of bank capital. The founder Boldingh left NKF in 1923. The company lingered for a number of years until, final

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humiliation, it was taken over by the German company IG Farben in 1931.64 The expansionist Jurgens also went through a difficult time. Its ventures into raw materials and oil producing suffered most from the heavy fall in commodity prices. The activities in the Dutch East Indies and Argentina had to be closed down. Losses in these areas could not be offset by profits from the core business because the margarine works, too, suffered from lower prices and higher competition.65 The soap business gave disappointing results and this holding company had to be drastically reorganised in 1924.66 In 1921 Jurgens experienced such heavy losses that the company was in urgent need of fresh capital. Issuing more shares was impossible and the banks were equally unwilling to provide more capital. Thus the company was forced to issue debentures under unfavourable conditions in 1922. Anton Jurgens, reflecting on the turn of fortune, wrote in that year: ‘It is sorry indeed that after such a heyday for people and businesses such a débâcle had to follow. It looks as if Holland is gradually becoming a graveyard of reputations.’67 This statement sums up very well the disappointing experiences of many Dutch companies in the early 1920s. With so many of their clients in difficulties, unable to meet their financial obligations, the banks’ assets became dissipated or frozen. Their risky practices became exposed. Both national and regional banks ran into losses. According to contemporary estimates, more than 200 million guilders in bad debts had to be written off in the years 1920–1922. Many provincial banks had to close their doors, as had a number of small business banks. The financial system was shaken to its foundations in 1922–1924 when Marx & Co Bank (what’s in a name?) failed. This Rotterdam bank had been particularly active in investment banking. Two other banks, the Bank-Associatie at Amsterdam and the Rotterdamsche Bankvereeniging only escaped bankruptcy thanks to the, reluctantly given, support of the Nederlandsche Bank. This crisis brought an end to the investment banking practices that the banks had adopted in previous years without sufficient provision to face the inherent risks. They might have used the crisis to build up more experience in investment banking, including hiring accountants to judge the quality of loans, but instead the banks preferred to return to their traditional commercial banking practices. As a consequence, Dutch industrialists complained repeatedly about the lack of credit facilities from Dutch banks during the inter-war years.68 The crisis of the early 1920s was a serious episode in the eyes of contemporaries and company histories bear ample testimony to it, telling about financial losses and unused production capacity. Dividends plummeted in 1920 and 1921.69 However, recent growth estimates for the Dutch economy during the 1913–1929 period show the overall impact of the crisis was low. Economic growth in the Netherlands was higher than anywhere else in Northern Europe during the period 1913–1921 and really spectacular from 1921 to 1929.70 Though the fall in prices and

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demand created a temporary setback, economic growth, particularly in manufacturing, could be resumed quickly. During the war, production capacity was increased and machinery renewed. As soon as demand picked up again, production could be resumed easily and more efficiently than before thanks to modernised production facilities.

2.2 From roaring twenties to gloomy depression The years 1924–1940 were another period of expansion and downturn, which heavily taxed the flexibility of entrepreneurs. For many European countries, former warring countries as well as neutrals, economic growth during the 1920s was modest. The Netherlands, however, displayed strong economic growth, stimulated by an increase in exports of 6.8 per cent per year between 1923 and 1929.71 The share of Dutch exports in world trade increased. This was possible despite the increase in wages during the First World War thanks to investments in cost-saving machinery as well as rationalisation measures. Manufacturing more than other sectors contributed to the growth of the gross domestic product. The share of the manufacturing industry in GDP rose from 21 per cent in 1913 to 28 per cent in 1938. Its share in employment, however, remained about 24 per cent during this whole period, indicating a strong rise in labour productivity. Indeed, Herman de Jong concluded in his study on Dutch manufacturing, that compared with the United Kingdom, Germany and Belgium, growth of industrial output per capita in the Netherlands was significantly higher between 1913 and 1938. Two factors contributed to this better performance. In the first place, the lower level of labour productivity in 1913 created more room for improvement. Second, Dutch industrial output was not reduced during the First World War as had happened in neighbouring countries. Dutch productivity levels were relatively high for foodstuffs, paper and in some metal industries, notably shipbuilding.72 Industrial production grew particularly fast in 1928 and 1929. The Dutch economy was doing so well that it seemed as though the stock market crash of 1929 would not affect the country. In 1930 the Dutch economy still functioned reasonably well. However, after the British pound was devalued in 1931 and the German Reichsmark became inconvertible, the country experienced the full force of the international depression. Moreover, the depression lingered longer than elsewhere. Between 1933 and 1935 the Netherlands was worse off than its trading partners. Unemployment figures began to rise rapidly and reached their peak in 1936. The Netherlands did not follow Great Britain in the devaluation of its currency. In 1931 there were sound monetary reasons for this decision, but this policy was continued too long. The high value of the Dutch currency affected exports, which were also seriously hindered by the protective measures of many of its trading partners. Notably Dutch trade was affected negatively by German exchange control, introduced in

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1931, which ultimately resulted in heavily regulated bilateral trade relations.73 Between 1931 and 1936 the Dutch share of world exports diminished. This was even more true for industrial products because, unlike agrarian products, these were not supported by governmental policy. In the mid-1930s, industrial exports were about 40 per cent under their 1929 level.74 To a certain extent manufacturing industry succeeded in compensating for the loss of world markets through achieving a greater share in the home market, helped by protective measures of the government. In some cases foreign direct investment was stepped up to compensate for lost export opportunities. Efforts of the Dutch government to support industrial exports through international trading conferences were unsuccessful, however. The Dutch government had little to offer in these kinds of negotiations. Moreover, for electoral reasons it was inclined to give priority to agrarian interests over those of manufacturers. The devaluation of the Dutch guilder in 1936 brought some relief, but much of its positive effect was taken away by the world-wide slump of 1938 and the sluggish bilateral trade with Germany. The recovery during the remaining years of the 1930s was closely linked to war preparations. Internationalisation of Dutch enterprise The 1920s were characterised by a ‘scramble for foreign markets’. From companies based in small home markets like the Netherlands, growth strategies automatically led to expansion abroad, either through exports or foreign direct investment. As mentioned above, the Dutch share in world exports increased during the 1920s and diminished during the 1930s. Comparable figures for changes in foreign direct investment are not available. Rough estimates suggest that the Dutch share in the world’s stock of foreign direct investment increased from 6 per cent in 1914 to 10 per cent in 1938. The majority of these investments were in the Dutch East Indies, with the US coming second. In 1938 the Netherlands was the third largest direct investor in the US, after the UK and Canada.75 The case histories of the main Dutch multinational companies discussed below suggest that foreign investments continued during the 1930s, while exports diminished. Clear figures to ascertain this point, however, are not yet available. As inhabitants of a neutral country, Dutch companies did not face sequestration of their subsidiaries abroad during the First World War as did their German counterparts. The Russian Revolution, however, brought serious losses, not only for the oil company Royal Dutch, but also for smaller companies such as timber traders. One might have expected that entrepreneurs would have acted carefully with regard to expanding their production facilities and their exposure abroad after the crisis of 1921–1923. However, there was little sign of restraint. Optimism about the future was reigning. Entrepreneurs gave first priority to the growth of sales, prepared to reinvest all their profits. International activities took the

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form of newly set up foreign subsidiaries and take-overs as well as international mergers. The strategy of expansion changed when the crash of 1929 brought prices tumbling down. From that moment onward attention had to be focused on profitability, on return on investment. From concentration on sales the focus shifted to achieving higher efficiency. In this process of reorganisation, international involvement could either increase or diminish, depending on how the company was situated. As befitted their international ambitions, Dutch entrepreneurs engaged in the new world of aviation, including the production of aeroplanes, the building of airports and the creation of a national airline company. Captains of industry, shipping and finance joined forces to create the Royal Dutch Airlines (KLM) in 1919, the oldest airline still in business in 2003. After some deliberation, KLM chose as its base the airbase Schiphol, which was created for military purposes during the First World War. In 1920 KLM started regular flights with chartered planes to London, Hamburg and Copenhagen, followed the next year by Brussels and Paris. The airline received government subsidies to cover its losses and in 1927 the government became a major shareholder in the company. The government had a special interest in the airline because of the better contacts it created with its colonies, in particular the Dutch East Indies. The first flight to Batavia (the present Djakarta) took place in 1924. From 1929 KLM maintained a regular service to Batavia, followed by Curaçao in 1935.76 KLM became a good customer of the Nederlandsche Vliegtuigenfabriek, set up by Antony Fokker after he had moved his production facilities and stock of aeroplanes from Germany to the Netherlands. Another Dutch pioneer in aircraft production was Frits Koolhoven.77 Important customers for the airlines who were using these new aircraft were no doubt the managers of major multinational companies. Four companies in the Netherlands took the lead in foreign direct investment during these years and they would dominate the Dutch economy for most of the twentieth century: the oil company Royal Dutch/ Shell, the combination of the margarine makers Jurgens and Van den Bergh to become Unilever, the artificial silk producers Enka (AKU) and the electrical engineering firm Philips. Philips was the only wholly Dutchowned company of the four, the other three were the result of crossborder mergers, remarkable in itself because cross-border mergers were rather unusual at the time. Royal Dutch/Shell was already the most important Dutch company in 1913 and would continue to be so. From the start it had more activities outside the Netherlands than inside, and this would be the case throughout the twentieth century, even though in the inter-war years its presence at home would become more marked with the expansion of refining, the growth in technical assistance from headquarters and the development of the research laboratory. The First World War divided the companies of the Royal Dutch/Shell Group into three parts: those belonging to the Allies, those in the camp of the Central Powers and

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a third neutral camp. This circumstance required complicated diplomacy in which the dual nationality of the enterprise was used to safeguard its various subsidiaries as much as possible, but this policy still could not prevent the destruction by the Allies of the Group’s operations in the Romanian oil fields. The disruption of war increased local management responsibility. During the war the strategic importance of oil for warfare became increasingly clear. Oil provided fuel for the fleets, the tankers, the tanks and the planes. As a consequence, the enterprise did well during the First World War. The subsidiaries in the US flourished and new refineries in Venezuela and Curaçao were built. Naturally there were damages and losses to report, including those in Romania. The most shocking experience, however, was the nationalisation of the Russian possessions without compensation.78 The expansion policy continued in the 1920s. For Royal Dutch/Shell the crisis of the early 1920s was only a minor event, which hardly affected its dividends. The rising demand for petrol for cars boosted the oil industry. Production of crude oil in the Dutch Indies, the US, Venezuela, Romania and Mexico was extended. The Group started production in new countries, including Trinidad, Ecuador, Argentina, Sarawak in British Borneo and Egypt. With its tank installations, sales organisations and about thirty refineries, it had build up a world-wide presence. The enterprise also diversified into the chemical industry by taking in hand the synthesis of ammonia together with Hoogovens in 1929. A second factory for the manufacture of nitrogenous fertilisers was set up in California, which became the first factory of the Shell Chemical Co. in the US. By 1929 Venezuela and the US had become the largest oil producers within Royal Dutch/ Shell.79 This growth, however, came at a price, when the crash of 1929 brought oil demand down and oil prices plummeted. In the US Shell entered the depression with an organisation built on the crest of a boom at boom prices. During the 1920s attention had been focused on turnover more than on productivity and efficiency. The downturn of the early 1930s therefore hit Shell in the US harder than its competitors in that country. Beaton summed up the problems thus: ‘Like many others who had expanded rapidly during the late Twenties, the Shell companies were now faced with reduced markets, sharply reduced prices, high depreciation charges arising from the high prices they had paid for their facilities, and a large amount of long-term debt at relatively high rates of interest.’80 World-wide production of oil exceeded demand with the consequence that prices went down. How best could the Shell Group adjust itself to these circumstances? The oil industry already had a tradition of trying to balance production and demand by international agreements. In 1928 the major oil producers had gathered together at the Scottish castle of Achnacarry, owned by the chairman of Shell, Henri Deterding, to come to an agreement. Whether these cartel agreements were effective is doubtful. They certainly failed

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when they were most needed in the early 1930s to deter oil prices from falling.81 Nonetheless, the effort of Deterding was directed towards tackling overproduction by agreements with co-producers on an international or national basis. As far as possible exploration within the Shell Group was put on hold and production cut back, while some refining units were closed and sales organisations had to economise on staff. Large numbers of employees had to be dismissed, though overall figures are not available. The Shell Group encompassed all stages of the oil industry, from exploration to sale at the pump. It even diversified into chemicals. Less clear is to what extent its operations were really vertically integrated. It is generally supposed that the oil industry is one of the prime examples of vertical integration, but what Beaton tells us about Shell in the US trying to combat the depression gives another impression. When prices for crude oil went down, the Shell companies in the US decided to produce less themselves and buy more cheaply on the market. The same thing happened with petrol: when prices were extremely depressed, it was considered good business to purchase rather than refine a large part of the company’s requirements.82 As the company expanded, its company structure became extremely complicated, with an intricate web of holding companies and hundreds of fully owned subsidiaries, joint ventures and participations. Some effort was made to simplify these financial and ownership structures. From 1933 onwards the company results gradually improved. The nationalisation of the Mexican oil fields in 1938 was a setback, but at least the Mexican government was prepared to pay compensation. In these years, the Group was not in the habit of giving general employment figures in its annual reports, but for 1935 and 1936 it made an exception. World-wide the company employed 180,000 people in 1935 and 184,000 in 1936. These figures suggest an upward trend after 1935 and show the astronomical size of this international enterprise.83 The margarine producers Jurgens and Van den Bergh began their policy of creating foreign subsidiaries before 1913. In fact, Van den Bergh had become an English incorporated company in 1895 because the family found it easier to raise money in London.84 The two families, Jurgens and Van den Bergh, could not decide whether they were going to compete or co-operate. They addressed each other as ‘our friends’ but kept a close watch over each other’s movements, making sure not to be outdone or left behind. They reached a profit-pooling agreement in 1906 that was suspended during the First World War. It was resumed in 1920, but never really implemented, because they could not agree on the transfer of profits under the agreements. In the same year, 1920, they jointly concluded a complicated deal with the central European companies Schicht AG and Centra AG. The extensive Austrian-Hungarian monarchy had been their home market before 1914, but trade barriers had fragmented their base after the war. After the early 1920s crisis, Jurgens and Van den Bergh both expanded abroad rapidly, seeking to increase their shares of

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various European markets, including Britain, Germany, France, Belgium and Scandinavia. Acquiring a leading position everywhere seems to have been their main aim. They pursued this aim by taking over local firms, preferably the market leaders in each country.85 Discussions on their profit-pooling agreement resulted in the decision to merge in 1927. Somewhat to the dismay of some members of Van den Bergh, this was going to be ‘a merger of the two businesses instead of an amalgamation of the family interests’.86 The merger had an original construction, taken over from Van den Bergh and intended to simplify legal and fiscal issues. A dual Anglo-Dutch enterprise was created: all activities were combined in two holding companies, the Margarine Unie NV for the continental part of their operations and the Margarine Union Ltd for the British part. The two parent companies were linked together by a profitpooling agreement. The board members in both companies were identical.87 The central European companies, Schicht and Centra, were included in the merger the following year as were the Dutch firm Hartog (margarine and meat products) and the French–Dutch combination Calvé-Delft (vegetable oil). Two members of the Schicht family entered the boards of directors, underlining the international character of the company. Immediately after the merger, measures were taken to bring some order and economic rationality to the accumulation of production units. Soon negotiations were started with the English Lever Co., soap producers that had begun to manufacture margarine. The first idea was to divide activities: Margarine Unie the margarine production and Lever the soap. However, these two activities were so closely linked through their raw materials that the decision to merge the two companies wholly was taken in 1929. The ingenious legal construction of the dual personality was taken over from the Dutch company. The new concern had two head offices, the main one in London, and an additional one in Rotterdam.88 Roughly, the margarine and more generally the continental part of the company was supervised by Rotterdam, the soap and overseas part, including interests in India, Africa and the US, by London. The Unilever merger was among the largest mergers at the time. In 1930 the English Economist wrote admiringly about the ‘Unilever Galaxy’: Of the outstanding business combinations of recent years, the building up of the Unilever combine has been one of the most noteworthy. The fusion of the Margarine Union group and Lever Brothers in December, 1929, the securing of control of United Africa, and the subsequent stores in Great Britain, constituted one of the biggest industrial amalgamations in European history. There was brought under single dictation, as far as trading policy and finance were concerned, a group of companies of world-wide ramifications and multitudinous functions, extending from the production of vegetable oils in the tropics to the catching of whales in the Antarctic, from the

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manufacture and marketing of margarine, soap, perfumeries, and cattle foods to the retailing of groceries and the keeping of fish shops and restaurants.89 Immediately after the merger, Unilever started to rationalise production. At least three plants in the UK were closed. The continental part had already gone through a similar process a bit earlier, but more was needed under the adverse economic circumstances of the depression years. No longer focused on sales, the main concern now became profitability, the return on investment. The sales of margarine suffered from governmental support to the agrarian sector, which favoured the production of butter. More attention was therefore given to branding the margarine, which still was far from universal in this period. In soap, on the other hand, the policy was to diminish the large number of brands and create greater production efficiency. Despite the depression, turnover in soap kept growing during the 1930s. The profitability of continental activity diminished as nationalistic protection increased. Overseas activities did better, however, and the US subsidiaries performed more than satisfactorily.90 Besides the two Anglo-Dutch multinationals, a German–Dutch combination arose during the 1920s. This combination involved the manufacture of a new and research-intensive product: artificial silk. The Dutch company Eerste Nederlandsche Kunstzijdefabriek (Enka), set up in 1911 by the chemist Dr. J.C. Hartogs, was no prime mover in this field. In fact, Hartogs had worked at the British viscose company Courtaulds for a short time before founding his own company. He used the same method as Courtaulds, though presumably made some improvements of his own. The company history is rather vague about Enka’s patent position, but the company apparently acquired a number of patents on which its foreign expansion could be built. Enka worked almost exclusively for foreign markets. The company greatly profited from the high demand for artificial silk during the First World War. Exports to Germany were thriving. The profits made in Germany were used to finance new production facilities in the Netherlands. Some sort of secret agreement was reached with the German Vereinigte Glanzstoff Fabriken AG (VGF) soon after the war. It is unclear whether the two companies agreed to divide markets or exchange research or both. They worked together in a small Dutch holding for the sale of yarn. While prices of rayon went down, production increased enormously. In 1923 the number of employees was nearly 2,000, rising two years later to about 4,000. In the mid-twenties Enka expanded abroad because tariffs threatened its exports. Two existing factories were taken-over in Italy, while new factories were built in the UK, US and Germany. The German subsidiary was a joint venture with VGF. Enka also had a short-lived subsidiary in France. With the Dutch competitor Hollandsche Kunstzijde Industrie (HKI) some co-operation was achieved, after Enka acquired shares in HKI.91

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In 1929 the German VGF and Enka merged in the new holding company Algemeene Kunstzijde Unie (AKU). This move was motivated by their wish to diminish competition and strengthen their technological and economic capabilities. Both companies kept their legal independence. As VGF was by far the largest company, one might argue that Enka was taken over. However, Enka was financially the stronger of the two parties, and the new company was based in the Netherlands. Control was equally divided between the German and Dutch parties, as were the priority shares of which each received 22. Interestingly, the British company Courtaulds was somehow involved in the sideline as this company received four priority shares, underlining how intertwined the international world of rayon had become.92 In the same year, VGF concluded an agreement with IG Farben regarding the sale of artificial silk in Germany. Samual Courtaulds had hoped that the merger would diminish Enka’s fierce competition in export markets, but in this respect he was disappointed. He wrote to Fritz Bluethgen, the leader of VGF in 1931: When you made the Glanzstoff–ENKA combination, we were told that Glanzstoff would definitely control it, and therefore we were inclined to welcome it, for we thought that in future Enka’s power for mischief would be removed. I am sorry to say that, as you well know, this has not been the case: first in one market and then in another Enka has led the way in a sales policy which has resulted in an excessive and unnecessary forcing down of prices.93 Courtaulds was also disappointed about his VGF shares, which had been transferred into AKU shares. Shortly after the merger, the AKU share prices dropped dramatically. His original investment was worth no more than a third after less than two years. As was the case with Unilever, AKU ran into serious trouble shortly after the merger was completed. Prices of viscose yarn had already gone down steadily during the 1920s, but continued to do so until a low was reached in 1936. This had dramatic consequences for employment. To give some indication of the problems, the number of AKU employees in the Netherlands had to be reduced from nearly 8,000 in 1929 to about 4,000 in 1931 and further to 2,200 in 1936. In the meantime, the production of rayon in kilos remained the same, while the production measured in length of yarn increased. Despite this phenomenal increase in productivity, profits fell relentlessly until 1937 when the first signs of improvement appeared. Foreign presence was consolidated rather than expanded, though from 1937 onwards the results of the subsidiaries in the US improved. Because of German protectionism, VGF became more independent within AKU than was intended at the merger. During the later 1930s, the home market became of some importance for this exportoriented company for the first time in its existence.94

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The discussion so far might give the impression that only large companies had foreign subsidiaries. However, this was not the case. Smaller companies also tried their luck abroad. The annual survey of companies listed on the Amsterdam Stock Exchange throws some light on the small multinational companies, though this source is naturally incomplete because smaller companies were often not listed and therefore did not appear in this survey. During the inter-war years there were about 20 manufacturing companies with at least one foreign production unit, not counting the firms with one subsidiary in the Dutch Indies only. Most had two to four foreign subsidiaries. Sometimes they took over an existing production unit abroad or participated in the share capital of a foreign company, but often they started from scratch with an entirely new plant. The preferred countries were Germany, Belgium and France, though the rest of Europe attracted some attention, as did the US and Latin America.95 The chocolate manufacturer Bensdorp & Co, dating back to 1840, had foreign factories in Germany and Austria, and sales agencies in many countries, including Britain. The family firm Noury & van der Lande, manufacturer of bleached flour, had subsidiaries in Germany, France and Britain. The firm also considered a production unit in the US in 1926, but instead it sold its US patents to the US firm Agene. The foreign expansion of Van Berkel’s Patent, established in 1898, was based on a number of strong patents, including one for slicing machines and for automatic scales. Subsidiaries were set up in many countries; initially most were probably sales organisations, but in the inter-war years Van Berkel owned one factory in the US and seven in Europe.96 The influence of the depression of the thirties on the foreign expansion of Dutch companies was twofold. On the one hand, companies shut down their foreign subsidiaries because they were loss making, at least in the short term, and the companies could no longer afford to invest in lossmaking activities. On the other hand, rising tariffs and governmental strategies to increase employment within national borders encouraged companies to set up foreign production units. For instance, the distiller De Kuyper discovered that its vital Canadian market had become increasingly difficult to serve from the Netherlands home base as a result of everincreasing import duties levied on foreign distilled beverages in that country. In 1932 an agreement was concluded with the distillery Meagher Bros & Co to produce and sell De Kuyper genever for the Canadian market in a joint venture, for which De Kuyper put down 70 per cent of the capital required. A malt distillery was even constructed to make the true Dutch gin. This being a family firm, the son of one of the family partners, Henry de Kuyper, went to Canada to become head of the Canadian joint venture. When prohibition in the US was repealed, another joint venture was set up there.97 Van Leer Packaging, manufacturers of oil drums, started its foreign expansion in the 1930s with drum factories, following in the footsteps of the oil industry. The company set up factories

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in countries where it already had sales organisations, including the UK, France and Germany, as well as in Trinidad, Belgium, South Africa, Nigeria and Curaçao.98 The evidence of both large and small multinational companies seems to suggest that internationalisation via foreign direct investment continued throughout the 1930s, while exports of manufacturing products declined seriously. Fluctuating business in the Dutch East Indies Business in the Dutch East Indies was just as volatile as in the Netherlands itself. Frequently strategies had to be reconsidered. The First World War disrupted trading between the country and its colony. New trading routes were explored, particularly to the US, and continued to be used after the end of the war. While traditional products such as tea, tin and tobacco continued to be marketed in the Netherlands, new products such as oil, rubber and copra found their way predominantly to markets outside the Netherlands with the US as an eager buyer of the rubber, so essential for its car manufacturing. Dutch exports of machinery and textiles were strongly oriented towards the Dutch Indies, but as a whole the colony remained of limited importance as a market outlet for Dutch exports. The First World War stimulated the foundation of new companies, particularly with regard to import substitution. The number of newly established companies peaked in 1920.99 The war brought the first efforts to create a manufacturing industry in this colony otherwise dominated by agriculture and mining. The results were disappointing and in the case of the copra oil industry even off-putting. The history of the Oliefabrieken Insulinde is a fine example of the opportunities and hazards of colonial enterprise as well as the disruptive effect of the First World War and its aftermath. In 1903 a small vegetableoil mill was set up in Blitar. During the following years, production increased and new machinery was installed. The necessary capital for expansion was sought and found in the Netherlands and the company was listed on the Amsterdam Stock Exchange in 1912. During the First World War prices of copra oil rose to great heights and the company expanded enormously, building new factories and taking over others. Though increasingly reluctant, the board of directors in Holland went along with seven issues of new shares. In 1920 the Oliefabrieken Insulinde was among the ten largest Dutch manufacturing companies measured in assets. However, the company had the misfortune that two of its most senior managers in the colony died within a short time span. The board in Amsterdam was unable to provide the right management quickly enough. When copra oil prices started to decline from 1920 onwards, the company went adrift and had to be liquidated in 1922. It was a free-standing company and perhaps for that reason more vulnerable than a multinational company would have been. However, the experiences of the mar-

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garine manufacturer Jurgens with its production of copra oil in the Dutch East Indies were very similar. It had to close down four factories at a great loss.100 Both histories illustrate the 1920–1923 crisis, a world-wide phenomenon that also affected this colony. In the previous chapter we cited a study of the colonial business community in 1913. Of the nearly 3,000 incorporated companies active in the colony, 632 were based in the Netherlands. A comparable survey based on the same source, made for 1930, shows a remarkable continuity. The number of incorporated companies was again nearly 3,000, of which 655 (23 per cent) were headquartered in the Netherlands. Nearly half (43 per cent) of the companies were Dutch, but headquartered in the colony. This is another sign that colonial society developed its own dynamic, closely related to that of the Netherlands yet no longer entirely dependent on it. The remaining companies were Chinese (24 per cent) or headquartered elsewhere (8 per cent). A modest 2 per cent were headquartered in the colony and of Indonesian origin. Partnerships and family firms were not included in these surveys, which might explain the small number of Indonesian companies in the sample.101 The companies headquartered in the colony were smaller than those headquartered in the Netherlands. This was the case in 1913 and it still held true for 1930. They were also more vulnerable and showed a higher failure rate. They paid lower dividends, which could mean that they were less profitable or, as Thomas Lindblad supposes, they were more inclined to keep profits in the company to ensure continuity.102 This explanation suggests that listed companies had a negative influence on the reinvestment of profits. More study is needed to confirm this suggestion. Little is known about the functioning of these Dutch Indies-based companies, because up till now these have received less attention from researchers than the larger Dutch-based companies. The Dutch-based companies, though modest in numbers, were the largest in capital and the most diversified in activities. This was already the case in 1913 and was still true in 1930. These companies were relatively large because expansion was frequently the reason to turn to the Dutch capital market for money and in this process the companies often became headquartered in the Netherlands. This was, for instance, the case with the above-mentioned Oliefabrieken Insulinde. In the 1920s a further process of concentration and increase in scale took place. Sumatra tobacco cultivation was the most advanced in this respect. Four companies came to dominate this cultivation under the undisputed leadership of the Deli Maatschappij. During the last year of the First World War shipment of tobacco was impossible with the result that huge stocks had to be financed. For many smaller plantations the burden was too great for their financial means and they were taken over by bigger and financially stronger companies. Also, the big four were able to issue new shares on the Amsterdam stock market to take over smaller competitors who were

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affected by the 1920 drop in commodity prices. In one case, the four jointly took over a large tobacco company that had come up for sale in 1921.103 Sugar production continued to be dominated by the five banks active in this sector, including the HVA. Rubber cultivation, on the other hand, was less concentrated. This sector was characterised by a number of large-scale Western enterprises, both Dutch and British, and many smallscale indigenous plantations. In the petroleum industry, the concentration process led to a near monopoly position for the Bataafsche Petroleum Maatschappij, a subsidiary of Royal Dutch/Shell, by 1914. However, the monopoly turned into an oligopoly during the inter-war years. First, the Bataafsche had to accept the Dutch government as partner in a joint venture to exploit the Jambi concession in 1921. Next, the Dutchbased subsidiaries of the most important American competitors, Standard Oil Co. of New Jersey, started operations in the Dutch Indies in 1922. The American company Caltex set up a Dutch subsidiary in 1930. It participated with the Bataafsche and the subsidiary of Standard Oil in the newly founded oil company active in New Guinea (Irian Jaya).104 Mining was the one economic sector in which the Dutch government wanted to have a stake. Its involvement was stepped up during the inter-war years. The tin mines in Bangka had been in the hands of the government since 1813. The tin at Bilitung was exploited by a private company, which however had to pay the government five-eighths of its profits. In 1922 the Billiton Maatschappij ran into financial difficulties because of low tin prices. At the same time the company had to negotiate with the government about the continuation of its concession after 1927. This resulted in a reorganisation of the Billiton company in 1923 in such a way that the state became five-eighths owner of the new holding company encompassing the old company. In due course, another tin company and the exploitation of bauxite were also brought under this new holding, the Gemeenschappelijke Mijnbouw Maatschappij Billiton. Though the government became part-owner, management of the mines remained in the hands of the private company, Billiton Maatschappij.105 The same was the case with the joint venture in oil, in which the Bataafsche acted as manager. Thomas Lindblad, discussing business strategies in late colonial Indonesia, concluded that the leaders of a number of Dutch-owned companies placed a great deal of emphasis on continuity because the overseas investors expected the colonial regime to provide an attractive investment climate for years to come. Continuity was achieved by expansion or diversification. A strategy of quick gains was likely in situations where the renewal of concessions was uncertain, as in the case of Billiton, or where the future prospects were grim, as happened in the sugar industry in the 1930s.106 The 1920s were the heydays of colonial enterprise in the Dutch East Indies, an ‘Indian summer’, all the more outstanding in retrospect because prosperity did not last. With the New York stock market crash of October 1929 the colony became trapped in a downward spiral. In fact, commodity

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prices had already started their downturn somewhat earlier. Business life was more seriously affected in the colony than in the Netherlands. Trading volumes and profit margins rapidly declined. The sugar industry collapsed. In 1933 one of the managers of Internatio, a trading company with substantial interests in sugar plantations, returned to the Dutch East Indies after a four-year absence. Describing a landscape nearly empty of sugar cane, closed factories and empty loading bays already marked by a lack of maintenance, and warehouses brimming with sugar turning into syrup, he confessed himself more moved by this industry’s desperate situation than he had been after reading all relevant annual reports and statistics.107 And the figures were dismal enough. Measured in tons the export of cane sugar fell by two-thirds between 1929 and 1936. Measured in guilders the situation was worse. Exports diminished from 307 million guilders in 1929 to 35 million in 1935; little more than 10 per cent of the 1929 value was left in 1935. Of the 179 sugar factories in business in 1930, only 39 were still functioning in 1935. For rubber, the second important export product, the situation was nearly as dramatic. In tons exports remained fairly stable and even increased after 1936, but in value they fell by 86 per cent in the three years between 1929 and 1932. After the 1932 low, the export value picked up and with fluctuations increased to well above the 1929 level in 1940. Though the fortunes of the various export products differed, tea, coffee and tobacco all had to struggle with falling exports till at least the mid1930s.108 The expansion strategies of the 1920s had to make way for survival strategies. Commodity producers attempted to consolidate prices by cutting production, resulting in less land reclamation and less soil cultivation. Dismissing personnel and lowering wages were another way to cut costs and bring expenses in line with diminished incomes. Traders dedicated to supplying agricultural equipment saw their turnover drop sharply. The population’s spending power declined, reducing the demand for everyday consumer goods. Planters, bankers, traders and shippers all found their business affected. Many companies could no longer pay dividends and some had to reduce their capital. In the early 1930s, businessmen in the Dutch East Indies were still doubtful whether or not to take joint measures or accept government interference. Initially, the leaders of the top plantation companies held the opinion that the crisis should be allowed to run its natural course, weeding out the weaker businesses and clearing the field for the most efficient producers. As prices continued their relentless decline, however, most businessmen lost their confidence in the efficiency of the market. Co-operation and government measures were reluctantly accepted, for some products earlier than others. The Sumatra tobacco planters were well enough organised to arrange their own restrictions in production. The colonial government intervened in the sugar industry by making the export of sugar subject to a licence system in 1931. Though the majority of the sugar planters agreed with this measure, they were unable to arrange a

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quota system amongst themselves. Under government pressure a single seller organisation for the sugar industry was set up, followed by governmental production arrangements. In the tin industry the situation was relatively simple because the government had such a big stake in this sector. The Dutch Indies participated in international agreements to restrict tin production as early as 1931. In rubber cultivation the plantation owners waited until the price was down to 10 per cent of its 1927 level in 1933 before agreeing to reduction schemes, which first came into force in 1934. By the end of the thirties practically all commodities from sugar to tea, rubber and tin became subject to international production agreements.109 Keeping in mind how deep the prices of commodities plummeted and to what extent production was limited during the 1930s, it seems surprising that so many of the Dutch colonial companies were able to weather the storm. For example, of the 140 free-standing companies listed at the Amsterdam Stock Exchange in 1913 and active in the Dutch East Indies, most of them plantation companies, 61 per cent were still active in 1937, 16 per cent were taken over or merged, while only 23 per cent had disappeared.110 In the generally protectionist atmosphere of the 1930s, colonial nations like Great Britain and France developed a system of imperial preferences. The Netherlands had been a staunch supporter of free trade since the 1870s. Basically this was a rational policy: the Dutch market was too small to subsume the large commodity exports of the Dutch East Indies, while the colony offered only a limited outlet for Dutch manufacturing products. Nonetheless, the economic depression led to efforts to create a closer economic co-operation between the two. In practice, this meant support for the Dutch manufacturing industry more than the reverse. Preferential treatment for the import of cane sugar in the Netherlands, for instance, met with fierce opposition from agrarian interests, and therefore was not introduced. On the other hand, the colonial government was pressed to create a system of import licences to support Dutch manufacturing industry. The Twente cotton industry notably profited from these regulations. These measures were predominantly directed towards cheap Japanese exports. They resulted in higher costs of living in the colony and thus indirectly increased the production costs of the companies working there. The Indonesian population as well as the Western companies in the colony had the distinct feeling that Dutch interests were favoured above theirs. Arjen Taselaar in his study on the colonial lobby in the Netherlands concluded that this group, though well organised and certainly not powerless, had in the end less influence with the Dutch government than the agrarian community and the manufacturing industry at home.111 The difficulties in the plantation economy led to a renewed interest by the colonial government in furthering manufacturing production for the domestic market. Several initiatives were developed in co-operation with the business community in the Netherlands. A committee of prominent

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leaders from industry and banking was charged with analysing opportunities for industrialisation. Schemes were drafted for establishing an aluminium industry. The threat of war inspired a demand to set up an indigenous chemical industry in collaboration with German manufacturers. None of these ambitious schemes produced concrete results. What succeeded, however, were a number of private initiatives. Several European and US manufacturers had already established production units in the colony to get closer to their markets, including the cigarette factory of the British-American Tobacco Co, the tyre factory of Goodyear and the margarine works of Unilever. Several merchant houses responded to official aspirations to create local industries by devising modest plans of their own, hoping to realise them with government support through guaranteed purchases or with market regulation. These initiatives led to the production of calicoes, paints, steel barrels, bicycles and leather. In 1939–1940 the country was nearly self-sufficient in a considerable number of products such as copra oil, beer, cigarettes, cigars, various leather goods, soap, frying pans and drums.112 Whatever the growth potential of these initiatives, the Second World War would bring them all to a halt. Between 1914 and 1938 Dutch direct investment in the Dutch East Indies more than doubled. However, the share of the colony in the total Dutch foreign direct investment diminished. While in 1914 the estimated stock of accumulated Dutch foreign direct investment in the Dutch East Indies was 75 per cent of total Dutch FDI, in 1938 it amounted to no more than 60 per cent.113 By 1938 Dutch entrepreneurs had spread their wings further than their foremost colony. At the same time trade relations between the Netherlands and its Asian colony became looser. As a result the mutual trade between the two countries became even less exclusive during the inter-war period than it had been before.114 The loosening of the commercial ties between mother-country and colony was all the more remarkable as other colonial countries, such as Britain, Belgium and France had much closer ties in the early 1930s.115 One could interpret the diminishing of the mutual trade between the Netherlands and its Asian colony as a missed opportunity. One can also argue, as Jan Luiten van Zanden does, that apparently Dutch industry was competitive enough to find markets in Europe and had no need to rely on an exclusive colonial relationship, as Britain did with its system of Imperial Preference in the 1930s.116 From the perspective of the colony one can also see this relative independence as a sign of the emancipation of the colonial economy. Management, organisation and rationalisation At the beginning of the twentieth century, Dutch companies were practically all small or medium sized. By 1930 this situation had changed. At least four multinational companies, Royal Dutch/Shell, Unilever, Philips and AKU had reached a scale and scope that made them comparable with the

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Chandlerian company. These four companies would have appeared in Chandler’s US list of 200 top companies measured in total assets in 1930, though only two, Royal Dutch/Shell and Unilever, would have figured in the top 100 list. But between the top four Dutch manufacturing companies and the rest of the top 100, loomed a large gap. The total assets of the fifth company, CSM, were less than a third of the total assets of the fourth company, AKU.117 Measured in workforce, the four could also enter the international league, with numbers of employees world-wide ranging from 180,000 in 1935 for Royal Dutch/Shell, to 45,000 in 1939 for Philips.118 Figures in Table 2.1 show how in manufacturing in 1906 more people were working for small firms (less than 10 employees) than for large firms (200 or more employees). In 1939, however, nearly half of the people employed were working in companies with more than 200 employees. Professional managers made their entrance into business life at this time. Yet, the family firm did not disappear. Of the top 100 manufacturing companies in 1930, 14 were still family partnerships with ownership and management united. Another 17 started as a family partnership but had been turned into listed companies by 1930; the family, however, remained in a leading position. A further 30 companies started as a family partnership, but changed over the years towards less family-oriented managerial structures. This happened by seeking access to the capital market, by mergers and/or by appointing salaried managers. In most of these companies, family influence was still noticeable. In other words 61 or nearly two-thirds of the top 100 manufacturing companies were either family firms or had the family firm as their background. Of the remaining 39 companies, five were co-operatives and 19 could be characterised as personal in the sense that one or two persons decided to start a business and succeeded in raising funds within an informal circle of acquaintances. Even if the initiators themselves were salaried managers, it often happened that their sons followed them into managerial positions. Only six companies were managerial companies with professional management and financing Table 2.1 Company size in manufacturing in the Netherlands, 1906–1939 Percentage of workers in firms with:

1906 1920 1930 1939

Less than 10 employees

From 10 to 199 employees

200 or more employees

27.5 18.3 21.7 19.1

48.8 44.0 39.4 38.8

23.6 37.7 38.9 42.1

Source: J. van Gerwen and C. Seegers, ‘De industrialisatie van Nederland en het industriële grootbedrijf: beeld en werkelijkheid’, Neha-jaarboek voor economische, bedrijfs – en techniekgeschiedenis 66 (2003): 138–170, 156.

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through the stock market, while a remaining nine were somewhere between the personal and managerial company, on their way to developing more objective methods to attract professional management and capital.119 Of the top four Dutch manufacturing companies, two were managerial from the outset: Royal Dutch and Enka/AKU. Unilever still had a clear family presence in 1930, though the influence of professional managers was rising. With the merger of 1929 the stakes and rights of the founder families were precisely defined. They were not abolished until 1937. Many members of the founding families held positions on the boards of directors for some years after the merger, in one case up to 1963.120 Philips started as a typical family partnership and the Philips family, in particular Anton, remained prominent during the inter-war years. At the same time, professional management entered the company and played an important role during the economic crisis of the early 1930s. As many of the Dutch companies were relatively small, their organisational structure hasn’t received the kind of attention that is given to US companies. In family firms the division of tasks was often determined by the specific qualities of the family members and the demands of their industry. Thus one member took care of production, another of sales or purchases, while the youngest member of the family often supervised the administrative staff. The functional division was the most logical in many cases. The merits of multi-divisional organisation were not a subject much discussed in these years. The truly large companies in the Netherlands were at the same time multinational companies. Their real concern was the interaction with and between their subsidiaries in various countries. Wars and protectionism both required these subsidiaries to have a large amount of autonomy. Under these circumstances, the multi-divisional organisation structure did not make much sense. For two multinationals, Royal Dutch/Shell and Unilever, the organisational issues were even further complicated by their bi-nationality. Though AKU was formally a Dutch holding company, it was in fact a Dutch–German merger and it too faced similar complexities. The expansion of the 1920s and subsequent economic depression of the 1930s posed serious problems for the entrepreneurs. How did they organise their expansion? Did they introduce new machinery, new methods? What about the introduction of the assembly line? How did they tackle diminishing outlet opportunities? In manufacturing, productivity rose impressively during the inter-war years, particularly between 1925 and 1935, when the average productivity growth rate amounted to 5.4 per cent per year. The relatively high wages and shortened working day formed strong incentives for the manufacturers to introduce labour-saving production techniques in the 1920s. Labour was substituted by capital. Likewise the depression in the 1930s motivated rationalisation measures. The only way to keep up sales was to offer the products at ever lower prices. Apparently manufacturers did not diminish production, but preferred to

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keep production up by finding ways of making their products more cheaply. This led to reductions in labour.121 Such was the concern for the effects of mechanisation on employment that the government introduced a bill to halt mechanisation in the cigar industry temporarily, a very exceptional measure, but one that was accepted in 1936 by Parliament under the pressure of high and persistent unemployment.122 It is tempting to relate the huge productivity rise in the inter-war years directly to the influence of the scientific management movement. As mentioned in Chapter 1, the books of Frederick W. Taylor reached the Netherlands at the beginning of the twentieth century. The trade unions, in the Netherlands as elsewhere, were originally opposed to Taylorism, because they feared it would place the workers under higher pressure and destroy their specific working skills. Gradually, however, they became more appreciative of the opportunities scientific management might create, such as the limitation of physical labour and the elimination of waste. Most importantly, the rise in productivity could and should also benefit the workers.123 Surprisingly little is known about what actually happened at shop-floor level in the Netherlands, but the assembly line has been the subject of a recent study. Dutch labour inspection held an inquiry into the use of assembly lines in 1932 and found that only a few factories used them. One of them was the Ford motorcar factory in Amsterdam. Assembly lines also functioned in the manufacturing of electronics, in particular radio sets, in some factories in the food sector for sorting or packaging, and in the shoe and clothing industries. The frequent use of the assembly line in the clothing industry was striking because these were often small factories not normally associated with the assembly line. Criticism of the assembly line and its tendency to force the pace of the (often female) workers concentrated on this sector, which already had a bad reputation with respect to working conditions. However, the use of assembly lines as such was not generally criticised, only their misuse under certain circumstances.124 Interestingly, the first management consultants in the Netherlands to set up their own consulting firm had a socialist background. They were engineers from Delft with work experience in the Netherlands and abroad. In 1920 they established their ‘Organisatie Advies Bureau’ (OAB). During the inter-war years at least three more consulting firms with a technical background were formed, while the American–French consulting firm Charles E. Bedaux opened a branch in Amsterdam in 1929. Philips, AKU and Unilever were among its clients.125 What did the consultants do and how important was their contribution to the rise in productivity? The OAB gave practical advice about production planning, wage rate systems, the correct speed for machines, routing, administration of stocks and cost calculations. Clients were found in the engineering and textile industry, but also in government administration. Their first effort to set up a planning room at the textile firm Ter Kuile

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was not a great success. It took much longer and was thus more expensive than expected and the client was far from content. The commission to analyse the wage rate system in the machine-building factory Jaffa, on the other hand, led to extensive reorganisation and a long-term relationship with the company.126 Another management consulting firm, Adviesbureau voor Bedrijfsorganisatie, concentrated on cost calculations, work efficiency through analyses of movements and work planning. In issues of work distribution they often found their major opponent in the foremen. They successfully introduced the assembly line for packaging in the chocolate factory of Van Houten in 1926 and soon after in a number of other companies, including the paper manufacturer Van Gelder Zonen. Between 1925 and 1938 this consultant received commissions from 94 companies, including 25 textile companies, on average seven to eight commissions a year.127 With four to five consulting firms in existence during the inter-war period the number of companies receiving organisational advice must have been modest. If we assume on the basis of the Adviesbureau voor Bedrijfsorganisatie that each consulting firm may have handled about ten substantive commissions a year, it means that about 500 companies benefited directly from their expertise during the whole inter-war period. The number of companies with more than 50 employees in manufacturing alone amounted to 2,458 in 1930. Of those 530 had more than 200 employees.128 Even if the advisers had limited themselves to this latter category, which clearly wasn’t the case, then those companies would have had at most one project during 20 years. In reality, advisers often returned to the same company several times. The number of consultants was still modest. The association of consulting engineers (ONRI), most of whom worked for the government and government-related institutions, consisted of 13 members in 1918. Slowly this number rose to 30 in 1930 and 43 in 1938, not a number to bring about major changes, though they were good at publishing and spreading their ideas. The Dutch association of management consultants, established in 1940, counted 21 members in 1947, including both engineers and social scientists.129 Engineers and social scientists were not the only professionals giving organisational advice. Some accountants, though certainly not all, considered it part of their task to advise the clients they were auditing on broader organisational aspects. Their advisory work concentrated on administrative issues and fiscal policy. Some accountants were involved with working out the tricky details of cartel arrangements. The accountant Th. Limperg even had a department for ‘External Organisation’, which dealt with cartel issues.130 By 1940 there were 600 active members of the Dutch association of accountants, of whom nearly 400 were independent professionals.131 Most of their time would have been devoted to regular auditing work. The direct influence of the consulting profession on the companies can only have been modest. However, the indirect influence may well have

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been much greater, because the consultants were eager promoters of their ideas through publications and conferences. Engineers and accountants played the leading role in the establishment of the Dutch Institute for Efficieny (NIVE) in 1925. High hopes that this institute would become a mass movement in promoting the ideas and techniques of scientific management did not materialise. Dutch business appeared unwilling to provide the necessary financial means. Government subsidy, however, gave the institute some room for manoeuvre from 1931 onwards. The main achievements were a monthly periodical, yearly ‘efficiency’ conferences and a number of workshops. The institute reached a milestone when it was invited to organise the fifth international scientific management conference of the Comité International d’Organisation Scientifique in Amsterdam in 1932. With 700 participants and much newspaper publicity the conference was considered a success. The number of NIVE members rose from 86 in 1928 to 581 in 1934, after which date a decline set in, until the numbers picked up again to reach 650 in 1938.132 Though the NIVE was not directly involved in advising companies, it helped spread ideas about scientific management amongst administrators and personnel managers in both government and business employment. Perhaps the most important factor in the rise of productivity has received the least attention so far from historians: the persuasive influence of the suppliers of machinery that made the increase in productivity possible. For instance, the engineering company Stork learned about Taylor’s ideas through the purchase of machines in the US.133 The mechanisation of the office during the inter-war period can serve to highlight this point. The interplay between those advocating modernisation and the companies that produced the means was obvious during the International Exhibition of Modern Office Equipment, organised in Amsterdam in 1911. From then on office managers, importers of office machinery and management consultants combined to promote the introduction of office technology. At least 13 manufacturers of typewriters were present at the Efficiency (economy drive) Exhibition organised in 1922. The Efficiency Exhibition in 1935 was organised by the Dutch association of importers and manufacturers of office equipment. The contact between user and producer was an important factor in developing office machinery. In 1933 four accountants established a consulting firm for organisation and efficiency, Raadgevend Kantoor voor Organisatie en Efficiency. Three of them came from the Amsterdam office of Burroughs, manufacturer of adding and calculating machines, which underlines the fact that the industry itself was active in advising. In this case the three accountants had left Burroughs because they had become dissatisfied with the less than objective advice the company gave to its clients. In some cases the pioneering companies became themselves promoters of the efficiency movement. This happened with the Rotterdam bank Robaver, which was among the first companies to introduce punch card technology in the Netherlands.

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To realise this innovation, the company had employed as consultant a man who had previously worked for an importer of office machinery. Though not all innovations were a success – the introduction of the punch card technology at the PCGD was an outright failure – the Netherlands made substantive headway with the new office technology, ranging from typewriters and calculators to addressographs and punch card systems. According to the IBM historian: ‘little Holland became an important unit in the computing world’. No doubt IBM had helped the country to reach that stage.134 Huddling together during the depression The depression of the 1930s brought employers, employees and government closer together just as had happened during the First World War. Nonetheless, entrepreneurs remained divided on the desirability of mitigating free enterprise. Until the First World War, industrial cartels had been an exception rather than the rule in the Netherlands. The war had changed the attitude of Dutch manufacturers towards communities of interest. By 1930 about a third of the top 100 manufacturing companies were involved in some kind of national gentlemen’s agreement or international cartel.135 It was not until the 1930s that co-operation between companies became really frequent. The agreements restricted, but did not eliminate, competition, since agreements often related to specific products or markets, while others remained unregulated. To prevent what they considered ‘unreasonable price-cutting’, prices and sales conditions were arranged. Sometimes areas of interest were agreed upon or cartel members’ clients respected. The economic collaboration was often defensively opportunistic and fragmentary, as for instance in the cotton industry. Only when they felt forced by necessity were these liberal entrepreneurs prepared to relinquish part of their independence.136 The Dutch government felt basically sympathetic towards cartel agreements because these were seen as an effective way to fight unemployment and loss of production capacity. The voluntary agreements, however, had their limits. One problem for companies was that they had no effective means to deal with outsiders who refused to enter the agreements. For the government it was a matter of concern that cartels might abuse their power by making excessive profits. The Dutch government therefore proposed a bill to regulate cartels in such a way that these could either be forbidden or made obligatory for all companies in a specific industry. The employers had mixed opinions about the bill. They were pleased with some governmental support to fight outsiders or ‘free riders’ yet feared too much interference and positively disliked the participation of labour unions.137 The bill became law in 1935 under pressure of the depression, but until the Second World War no cartel was dissolved, though seven were made obligatory.138

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The business community had always been divided over the issue of protection through import tariffs or quota systems. In the context of the Dutch East Indies, even liberal entrepreneurs were prepared to accept protective measures during the 1930s, as we have seen. The same happened in the Netherlands. Trade regulation was accepted as a way out of the reigning crisis of the capitalist production process. In international trade agreements, the Dutch government was unable to achieve much room for exports from the manufacturing sector, partly because the promotion of agrarian exports was considered more important. However, the government shielded home industries from cut-throat competition from abroad through import tariffs and quotas. The share of Dutch manufacturing industry in the home market increased in sectors that were supported by a quota system. Imports of raw materials and intermediate products increased and relatively more finished products were exported. The protective measures fostered the survival of domestic production capacity. There was no clear link between the level of business prosperity in particular branches of industry and the degree to which they were protected. The quota policy, which must have had an upward influence on prices, did not affect the real incomes of employees negatively. Apparently the workers shared equally in the benefits of the protective measures.139 Through its trade policy and by accepting the case for cartel agreements, the government had taken a step forward in interfering in the free market. The logical next step was interference in collective labour agreements between employers and employees. In 1937 Parliament accepted a bill that enabled the government to either forbid or make collective agreements compulsory for all companies in a sector. The employers held mixed views about the law. The law had the clear advantage of forcing outsiders to accept labour agreements, thus making production factors more equal across Dutch companies. On the other hand, companies working for export markets were concerned about the rise in their labour costs. One might wonder whether there is a relation between collective labour agreements and high wages. Surprisingly enough, Jan Luiten van Zanden found a negative correlation between labour organisation and nominal wages for the period 1930 and 1935.140 Whether wages were relatively high or low depended mostly on the competitiveness of the sectors and their production for the home or export market. This finding suggests that employers were able to lower their wages more effectively if they were prepared to negotiate with the trade unions and explain the need for lower wages. Under the depressed economic circumstances of the thirties, the trade unions very likely gave employment priority over higher wages. The discussions of the early 1920s, on softening the harshness of free market capitalism through rational organisation of business on the industry level, reappeared in the 1930s. In 1931 the government introduced a bill to set up ‘industrial committees’ in all sectors of industry. In the committees, employers and employees would discuss a wide range of social

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issues. The committees could advise or mediate, but had no power to enact. In a later version of the bill, the possibility was opened that at some later date the committees would get the power to make regulations. The liberal employers were opposed to the bill because it went too far, while the socialists were opposed because it offered too little. Nonetheless, the bill passed in 1933.141 This piece of legislation seemed little more than a token gesture, accepted by all the moderate minds because it was neither revolutionary nor highly demanding, yet promising more harmonious relations between labour and capital. With its emphasis on advice and mediation, it suited the Dutch tradition of consultation and compromise.

2.3 The Second World War On 10 May 1940, German armies invaded the Netherlands, shattering the illusion that the Netherlands would be able to maintain a neutral position as it had during the First World War. Thus the country became directly involved in the Second World War that had broken out in September 1939, when Britain and France declared war on Germany after that country had invaded Poland. Within five days the Germans defeated the Dutch army. The air raids on Rotterdam put an end to any hopes of defending the country against the overpowering German armies. Queen Wilhelmina and the council of ministers fled to London, setting up an official Dutch government in exile there, leaving behind a country in shock and confusion. Dutch companies with international operations suddenly faced two regimes, one in allied territory, and one under German occupation. Once again business people were confronted with an overnight change in their business environment. Overseas markets soon were mainly out of reach. Worse, the enemy was ruling the country. The most pressing question now became how to behave under foreign occupation? Having escaped this fate during the First World War, Dutch politicians, business people and the population as a whole had no earlier experiences to fall back on to serve as guidelines in this new situation. Though the Netherlands was unprepared for foreign occupation, it had actually made preparations for war in the late 1930s based on experiences during the First World War. The government had built up stocks and created official agencies, called Rijksbureaus, to control the distribution of food and industrial raw materials. A rationing system was already devised. Individual companies had also increased their stocks. Multinationals as well as international traders took measures to ensure the continuation of their international activities. Without special legal constructions Dutch companies ran the risk, in case of a German occupation, that their foreign possessions would be confiscated as ‘alien’ or ‘enemy’ property by governments at war with the Germans. Measures included the transfer of headquarters to overseas colonies, the establishment of trusts or management companies and emigration of managers and technical experts. Royal

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Dutch/Shell and Unilever, with their dual nationalities, transferred subsidiaries from one holding to the other. Other companies such as the trading company Hagemeyer, effected a formal move of the company seat during the war. For this purpose, the exiled government set up a special commission to validate the legal formalities for such a move, and to appoint new executives and new supervisory directors. None of these preparations were superfluous, nor were they sufficient.142 Adapting to new circumstances The distiller De Kuyper, which relied heavily on overseas markets, immediately felt the consequences of the German occupation. Exports to Great Britain, by far their most important market, became impossible. As early as June 1940, the company found itself forced to dismiss personnel. To keep production going, the partners looked for new sales channels. In August, the opportunity presented itself to fill large orders for Germany. The company made use of this as these orders offered ample compensation for the lost export orders. Dismissed workers could be re-employed.143 A similar story can be told for many companies. While most overseas imports and exports fell away following the German occupation, simultaneously the German market, which was mostly shut off during the 1930s, opened for Dutch business, and this market had an almost insatiable demand for all kinds of goods.144 In some cases the home market also picked up. There was an increasing demand for books, for instance. The bindery of Proost en Brandt could substantially expand production during 1940 and continue production at a higher level till 1943. The company did some work for German publishers, but most of the increase came from Dutch demand. The sugar manufacturer CSM could initially continue sugar production as usual, because the growing of sugar beet was not restricted. However, the refinery, which relied on imported raw sugar, had to diminish its production considerably. Océ van der Grinten, producer of copying paper, had an unexpectedly busy time in Rotterdam following the air raids, which destroyed the inner city. People urgently needed copies of their documents.145 Builders, too, were much in demand to repair damage in Rotterdam and elsewhere. Rebuilding houses was obviously ‘business as usual’, but what about rebuilding airports, all the more as the rebuilding went hand in hand with enlargement?146 Here were ethical questions that had not been addressed before the war and hardly seem to have been discussed in the early weeks and months of the occupation. Governmental guidelines for civil servants, mainly based on the situation that only part of the country would be occupied, forbade direct involvement in enemy warfare. This prohibition included the production and transport of weaponry or the building of fortifications. These guidelines, however, were not widely distributed even among civil servants, and were practically unknown among business people.147 The Nazis considered

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the Dutch their ‘brethren’, members of the same ‘German race’, whom they wanted to bring into the German Reich. Therefore, the Netherlands was not administered by the army but by a civil administration. Initially, German policy was targeted at creating a ‘loyal co-operation’ between the Dutch and the Germans. Many measures were formulated as proposals or requests within the existing legal framework. Behind this façade, however, was the steely power of the military victor. Moreover, the rulers in Berlin had contradictory views. Not all saw the Netherlands as a friendly country. Some were of the opinion that the Netherlands was a conquered nation to be plundered as much as needed and possible.148 An example serves to show the whole mechanism of negotiating with the occupiers. In June 1940, while the fight in France was still going on, the Dutch iron and steel industry received German orders that clearly were related to the warfare. H.G. Winkelman, supreme commander of the Dutch forces, decreed that the Dutch firms were not allowed to accept these orders. However, he did not possess the authority for these kinds of decrees. The Dutch ministers were in London and could not be consulted. The heads of various governmental departments were in the main inclined to interpret the guidelines flexibly in order to avoid the imposition of German administrators or the transport of machinery and workers to Germany. The German negotiators indeed threatened to bring the Dutch iron and steel industry under German administration if the firms refused their orders. The entrepreneurs then decided collectively through their trade organisation to accept the German orders.149 Similar situations repeated themselves endlessly. The Germans preferred the Dutch to co-operate willingly, but if not, they had endless ways of applying pressure. One of their threats was to put a firm under German supervision, another to take top managers as hostage or put them in prison. Even if the time in custody lasted only a few weeks, the fact that they could be arrested again at any moment kept the managers on tenterhooks. An occasional execution further intimidated them. In many cases, business leaders compromised in order to safeguard their company, to keep their employees at work, to forestall even worse measures. After all, nobody knew how long the ‘New Order’ was going to last. It therefore seemed essential to keep business going and keep people at work. Well aware of walking a tightrope, many entrepreneurs sought closer co-operation with each other and with representatives of the Dutch government, perhaps seeking shelter and justification in joint decision taking. For the purchase of raw material and intermediate products, firms had to address the Rijksbureaus, the official agencies set up in late 1939 and early 1940 in co-operation with business to deal with the problems of scarcity. With their endless forms that had to be filled in, these organisations created an enormous bureaucracy, but they also offered a certain measure of legitimacy, all the more as they were seen as a continuation of the Dutch government. This was not entirely correct because each Rijksbureau had a

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German Referent (supervisor). The direct interference of these supervisors increased as the war progressed.150 Of course, there were companies that did not need any justification to work for the Germans, that were happy to strike out on their own, to negotiate directly with the occupying forces to profit all the more from the war. The builders of the Atlantic Wall were notorious in this respect. There were those who truly sympathised with the new regime. These were in a minority and mostly shunned as collaborators with Germany. The majority was against the new regime, but nonetheless prepared to continue its activities within the new context, prepared to negotiate and reach compromises. After each compromise Dutch entrepreneurs hoped the matter was now settled for good, but before long German demands increased, and new compromises had to be found. All through the war moral questions kept recurring. Where was the cut-off point? The answers varied but, as the war progressed, more and more business people decided to draw a line, to refuse at least certain orders, to step down or even to go underground. German threats to place companies under direct German administration were real enough. For instance, the Centrale Arbeiders-, Verzekerings, en Depositobank, a life insurance company linked to the labour movement, was placed under German supervision together with all Dutch ‘marxist’ parties in July 1940. This happened on the instigation of Rost van Tonningen, an active member of the Dutch National Socialist party (NSB), who during the war became president of the Dutch Central Bank and Minister of Finance. He forced a new pro-German Dutch managing director on the Centrale. Several directors stepped down or were forced to step down, but one director and the managing director stayed on for the best of the company. However, they too left some months later, when contrary to all corporate laws, the representatives of the Germans began to issue new shares and nominate new directors to the board, all in preparation for turning the company into a subsidiary of the Volksfürsorge, the insurance company of the Deutsche Arbeitsfront. Though forced out of the company, the former directors kept in touch with some of the personnel during the war years, making plans for the future, ready to return as soon as the war was over.151 Some categories of companies were automatically placed under German administrators, others only when there were specific reasons. Multinational companies, for instance, all had to deal with German administrators, as did all colonial companies after the occupation of the Dutch East Indies by Japan in 1942. The experiences with the German administrators were mixed. Some were inclined to leave the management of the company in the hands of Dutch leaders, others tried hard to please their German bosses. There was always the risk that a relatively lenient administrator would be replaced by a tougher one. This formed another factor to take into consideration in the endless balancing act of entrepreneurs towards the occupying forces.

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A cog in the German war machine Despite the fact that overseas trade became severely hindered – a serious handicap for an internationally oriented country – the Dutch economy boomed during the first year and a half of the war. This was predominantly the result of the opening of the German market, which had been difficult to penetrate for Dutch firms during the 1930s, first because of the high value of the guilder and inconvertibility of the Reichsmark and later because of the isolationist policy of the Nazi government. This situation was entirely reversed after the German occupation. In the summer of 1940 Dutch industry obtained German orders worth 902 million guilders, or 15 per cent of the 1939 Dutch GDP. Perhaps production could have been even higher if the Germans themselves had not taken possession of most Dutch pre-war stocks directly after occupying the country. Employment in private enterprises increased from 1.4 million in 1938 to 1.6 million in 1941. The increase in production led to higher profits and expansion of production capacity in 1940 and 1941. For many companies, the financial results in the first two war years were better than those during the 1930s.152 The first signs of trouble ahead, however, were already felt in the autumn of 1941, when coal became scarce because the Dutch coalmines were forced to deliver large quantities to Germany. The severe winter of 1941–1942 added to the problems. The first companies were closed and many households were left in the cold. In 1942 the coal situation improved temporarily, but by that time other raw materials and intermediate products had become scare.153 The same was true for consumer products such as tea and coffee. Inferior substitutes were created to replace them. Albert Heijn, for instance, introduced an ersatz product under the brand name ‘Smalsko’, which meant ‘tastes like coffee’ (smaakt als koffie).154 As early as August 1940 the Germans drew up plans to reorganise all European economies, fully integrating them into one Great German economy under their guidance. One way of achieving this end was ‘Kapitalverflechtung’, increasing the financial interests of German companies in their European counterparts.155 As a whole this policy was not very successful.156 Dutch firms were not particularly co-operative and the financial structures were often complicated. The Germans concluded that their policy was doomed to fail for international companies such as Philips and Unilever, because of the huge amounts of capital involved, the wide spread of their markets and the international entanglements of these large multinationals.157 The policy met with more success where the Dutch companies already had financial links with German companies before the war. This was the case for instance with AKU, founded in 1929 through a merger between the Dutch Enka and the German Vereinigte Glanzstoff Fabriken (VGF). During the 1930s both companies had developed more independently than was originally intended. In September 1939 the

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German members on the AKU board and their Dutch counterparts on the Glanzstoff board were withdrawn. In May 1940, however, the German members returned to AKU in full force, while the opposite was not allowed. To ensure a German majority shareholding, the Deutsche Bank purchased AKU shares, partly from the company itself. AKU used the money to set up two new factories, which should have helped solve the problem of scarce raw materials.158 The steelworks Hoogovens had possessed a financial interest in the German company Vereinigte Stahlwerke since 1926. Under considerable German pressure this situation was reversed. In 1941 the Vereinigte Stahlwerke did not acquire the desired majority, but nonetheless 40 per cent of the share capital of Hoogovens by taking over shares from the state and the city of Amsterdam. The Vereinigte Stahlwerke nominated five members of the board of directors and a ‘representative’. The nomination of a managing director from Vereinigte Stahlwerke could be avoided, but soon German officials, whatever their formal titles, were exercising an increasing influence over the company.159 Not only big but also medium-sized companies experienced pressure from German companies to integrate their business. The German firm Schmallbach contacted Thomassen & Drijver, manufacturer of cans, in 1941 for a take-over bid. The firm had even convinced the US Continental Can Company, of whom both firms were licensees, to send a telegram advising Thomassen & Drijver to accept this offer. The Dutch company was not in a hurry and not until 1943 was some form of co-operation created.160 Another way in which the Germans hoped to reorganise the European economy and bring it to higher efficiency was by creating a new organisational structure, comparable with the one they had introduced in their own country. In the 1930s Dutch business life had abounded in trade organisations, gentlemen’s agreements and cartels. However, these were voluntary and there always were outsiders. The Germans wanted to impose a system that was obligatory for every company. In October 1940 a committee of nine members from the business community, including three members of the Dutch fascist party, was appointed by the Germans to create this new horizontal organisation of business with sector groups, branch groups and branch subgroups. Formally the whole purpose of this organisation would be for business to rule and regulate itself. Under wartime circumstances it was unlikely that any freedom of business would materialise. Nor were most business leaders very sympathetic towards the new organisation, if only because at the same time their own organisations were dissolved. In fact, they tried to hold on to their own familiar structures as much as possible and nominated their old members to the new councils. The German introduction of the authoritarian leader principle was considered unsuitable for a Dutch organisation and in most cases either circumvented or ignored. It took two years before the elaborate new structure was ready. By that time, the Germans were no longer in the mood to hand over any decision-making powers to the organisation. The

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Dutch National Socialist party was deeply disappointed that so few of its members were included in the new organisation. As to the Germans, their direct war effort had become more important than the creation of a business organisation suitable for a New Europe that still lay in the distant future.161 More threatening for Dutch companies than changes in their trade organisation were German measures to round up Dutch workers to fill the need for labour in German factories. In this area, the highest officials in Berlin strongly disagreed amongst themselves. Some preferred to let labourers stay in their own countries and produce goods for Germany, while others thought German war industry would be better served by bringing in foreign labour forcefully. The latter group won and in the autumn of 1942 German officials began to visit Dutch companies to determine how many of their employees could be sent off to Germany. Both employers and employees were strongly opposed to these measures and tried to evade them. Employers argued that they needed every one of their workers, though in fact in many companies production was by now slowing down because of a lack of raw material. If anything the action made them more willing to accept German orders. Employers tried to bargain about the numbers of employees to send off. This strategy may have helped occasionally, but ultimately large numbers of Dutch workers were forced to work in Germany, particularly in 1942 and 1943. Another way to free labour and increase the efficiency of production at the same time was the closure of factories. Between 1940 and 1944 more than 4,000 firms or production units were closed. Most of them, however, were small. Of the 2,120 firms closed in the tobacco industry, 1,600 were one-man businesses. In the leather industry, too, many of the closed firms were independent shoemakers. Of those who lost their jobs, some started production for the black market.162 Klemann, who extensively studied the Dutch economy during the Second World War, concluded that the ‘Arbeitseinsatz’, forced employment in Germany, did more harm to production in the Netherlands than it benefited the German economy because of the large numbers of workers that went underground. While in 1942 and 1943 about 550,000 workers disappeared out of the economy, only 242,000 went to work in Germany.163 Ironically, this also made the earlier German investments in the Dutch industry even less effective. As Richard Overy remarked: ‘The poor co-ordination between the investment priorities of the state and its foreign labour policy, which saw a stream of capital flowing out of Germany and a stream of labour flowing in, considerably reduced the usefulness of captures for industry, and compromised German war-production plans.’164 The Jewish people were isolated and stigmatised as a group more or less from the start of the war. In many of the Nazi measures against the Jews, Dutch companies were indirectly involved and by not protesting openly became tacitly part of the whole process. In October 1940 all firms

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that had Jewish owners, leaders or a considerable Jewish influence had to be registered. Jewish directors or managing directors often stepped down voluntarily in order to forestall any difficulties for their companies. In March 1941 new measures against Jewish firms followed; they either received an administrator, or were sold or liquidated. One of the more important Jewish companies to be saddled with a German administrator and Nazi sympathiser in 1941 was Zwanenberg’s Fabrieken. This administrator used his power to make propaganda for Nazi institutions. In 1944 he sold the company to a German combination and even extracted a large sum of money later that year, when the Allied forces had already liberated the main factory in Oss.165 The Jewish owners of smaller companies were often forced to sell their personal belongings. German firms were eager buyers, as were some of the Dutch who sympathised with the regime, or who simply saw an opportunity for easy gains.166 Whatever payment the Jews received for their companies they had to bring to a special Amsterdam branch of the bank Lippmann-Rosenthal & Co (Liro), a Jewish bank under German supervision. In the course of 1942 Jewish people had to bring all their money and shares to this bank, and Dutch banks were requested to transfer this sum from their banks to the Liro bank. The major banks did not like to take these measures and most of them were slow to execute them, hoping that the end of the war might come soon. But as the end came late, their stalling did not have any real impact. Jewish people were forced to sell their shares. Again, banks and traders did what they were ordered to do. Banks urged the German occupiers to permit them to sell the shares on the Amsterdam Stock Exchange rather than the Berlin Stock Exchange. For one reason, they could well do with some extra business and for another Dutch companies did not want to see large numbers of their shares fall into German hands. On the Dutch stock market these shares found a willing market.167 In 1942 the Jewish people and the insurance companies were ordered to register all Jewish life insurance, followed a year later by the instruction to commute insurance policies into lump sums. Though most insurance companies did not want to actively trace their Jewish customers, they complied with the measures for those clients who made their identities known. The Liro bank provided them with lists of names to make evasion impossible. Here, too, some insurance companies tried to retard the measures.168 From 1941 onward Jewish people were also forbidden to travel, which created serious problems for certain professions, including commercial travellers. Though there was no general protest against these measures, firms were certainly willing to find individual solutions for their Jewish employees. The next step, however, was the decree to dismiss all Jewish employees. Again, as we can see in many company archives, employers were reluctant to go along with this decree, but in the end they all did. A few firms, such as Philips, created a special Jewish department in the hope that this would safeguard their jobs as well as their stay in the Netherlands. This was cer-

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tainly well worth the try because, from 1942 onward, Dutch Jews were deported to German concentration camps from which very few returned. But the Philips strategy was only partly successful. The company’s Jewish employees were deported, though not until June 1944. A relatively large group survived, which may have been the result of this delay.169 From 1942 onwards, the war entered every aspect of daily life for everybody in the Netherlands. The military repression became harsher and more widespread, the scarcity more generally felt. Efficiency in industry diminished severely. Though companies were very ingenious in finding solutions, in applying alternative raw materials, at some point even the alternatives themselves became scarce and anyway, the alternatives often took more time and gave a less satisfactory product. Though Dutch production increasingly was exported to Germany, Dutch willingness to produce for the Germans clearly diminished. Many post-war stories about sabotage and actions to slow down production seem to apply to the years after 1942. A situation of real chaos developed after September 1944, when the Allied forces succeeded in freeing the southern parts of the Netherlands while the northern parts remained under occupation for another long and harsh winter. The vicissitudes of companies varied by sector. In manufacturing, the first year and a half were busy and profitable for many Dutch companies, though not for all. In the paper industry, dependent as it was on the import of raw materials and export of finished products, production levels fell immediately after the start of the war. The beet sugar industry did reasonably well during the first two war years, while demand for preserves was so high that the jam manufacturer Taminiau could expand its production capacity. The financial year 1940/41 was the first profitable year since 1928/29.170 The manufacturing sector as a whole saw its production go down slightly in 1940, but made up the loss in 1941, ending 1941 slightly higher than 1939. This favourable situation totally changed after the end of 1941, with rising difficulties and diminishing production from 1942 onwards. Turnover and profits went down and for many firms – though not for all – the last two war years were heavily loss making.171 During the first two war years, the Dutch manufacturing sector had been able to increase its production capacity, but it was not able to renew and maintain this capacity sufficiently during the remaining three war years. Though production capacity after the war was greater than before, it was at the same time older and in parts worn out, a situation that would have serious consequences for the rebuilding of Dutch industry after the war.172 Merchant houses operating in the Dutch East Indies lost their main function. Consequently, these firms had to make a fresh start in domestic trade within the Netherlands, if only to meet the costs of their head offices. Trade with Germany was still possible and there were always unusual deals to close. Hagemeyer succeeded in making profits, though nothing fancy, enough for covering costs. The same was true for

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Lindeteves-Stokvis. Jacobson van den Berg & Co hired its personnel and premises out to the Rijksbureau Distex, running the rationing of textiles. While Germany was still a winning side, the aforementioned M.M. Rost van Tonningen developed plans for Dutch colonies in Eastern Europe. He nursed hopes to interest companies such as the colonial trading houses for this project, used as they were to operating in such circumstances. In June 1942 the Nederlandsche Oost Compagnie was set up to co-ordinate business development in prospective colonies. The plans failed, however, to raise any enthusiasm in the Netherlands.173 While international trade diminished by 75 per cent during the war and domestic trade by nearly 50 per cent, earnings were on the whole less affected. The sector profited from the fact that stocks were small, turnover was fast and hardly any goods were left unsold. Legal earnings did not drop below the 1938 level until 1942. When earnings on the black market are included, the added value in this sector did not fall below the pre-war level until 1944.174 In retailing similar effects helped to sustain earnings during the war despite diminishing sales. In fact, the ‘shops around the corner’ were better off during the war than during the 1930s or the post-war period, because under the special war circumstances they had competitive advantages over the chains and co-operatives. The scarcity and rationing made advertising, one of the advantages of the chains, superfluous. Manufacturers preferred to deliver to the small shops because these could not claim such high discounts as the chains. Most importantly, customers favoured shops in their neighbourhood, not only because travelling became increasingly problematic, but also because they hoped to get preferential treatment as regular customers. This was particularly true for the small grocers. Thanks also to a wide range of ersatz articles, the turnover of these shops shrank by no more than 10 per cent up to 1944, and 20 per cent in 1945. As was the case with wholesaling, earnings improved because all old stocks could be sold off, new stocks were smaller and turned over faster, and fewer perishable products had to be thrown away. On the other hand, the shopowners and their families spent a quarter more time on administration, mainly sticking coupons on official forms.175 To round off this discussion on the various sectors, banks and insurance companies weathered the storm well. Their main problem was to find a profitable outlet for the rising sums of money entrusted to them. The added value of the financial sector showed a dip during 1941 when interests went down, but otherwise stayed at between 85 and 100 per cent of the 1938 level.176 Dutch business outside the Netherlands The history of Dutch business outside the Netherlands during the Second World War is unfortunately still largely unexplored territory. Until now only Philips has published a serious study devoted to this war period, and even that only partially covers territory outside the Netherlands.177 For

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multinational companies the war situation was hugely complicated. It was practically impossible to be in touch with different parts of their business empire located in countries that were at war with each other. Even contacts with subsidiaries in neutral countries were tricky. Subsidiaries in Europe were hard to reach from the US even if contact was still allowed. The result was that many of the national organisations had to be guided by their own counsel in relation to their own local circumstances. The situation was particularly complicated for enterprises with dual nationalities like Royal Dutch/Shell and Unilever, or with two main bases in different countries such as AKU. On both sides of the warring camps, national subsidiaries became involved in the war industry, though the Allied war effort was supported with more enthusiasm than the German or Japanese war economies. Those living outside occupied territory could afford a higher moral stance towards trading with the enemy than those inside, and this led to considerable misunderstanding on both sides that took some time to sort out after the end of the war. While the Netherlands was occupied, its colony in Asia remained free until March 1942. The much smaller colonies in America (including Surinam and Curaçao) remained independent all through the war, though the important oil refineries, so essential for the war effort, were under protection of the US forces. Initially, business in the Dutch East Indies could be carried on. The Dutch-based companies were suddenly cut off from their head offices in the Netherlands, but continued to have contact with London. At the request of the government in exile in London, traders began to build up large stocks in the Dutch East Indies, partly with supplies bought in from China and Japan. Rubber and tin restrictions were still in force, but the high demand for rubber and tin from the US, which was building up strategic stocks, would have allowed the increase of production. With regard to rubber, the Dutch government was reluctant to increase quotas, because it might disturb existing production ratios in the colony. Tin quotas, however, were extended considerably.178 Activities in the Dutch East Indies came to an abrupt halt with Japan’s lightning advance through Asia starting in December 1941 and its subsequent occupation of the colony from March 1942 onwards. Far more than had been the case in the Netherlands, production capacity was wilfully destroyed. In the East Indies, the Dutch succeeded in destroying some of their infrastructure, some productive units including part of the Billiton tin works, and particularly the oil installations of Royal Dutch/ Shell, whereas the German surprise attack in Europe had delivered the Dutch productive system more or less intact into enemy hands. Just as the Dutch had destroyed production capacity more vigorously in the colony than in their own country, the Japanese were more ruthless than the Germans in simply taking over the Dutch companies without much legal justification. Banks were closed and then liquidated, while Japanese banks took over their functions. All stocks from export traders, wholesalers and

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European shops were confiscated. The European plantations were expropriated and taken over by the Japanese army, which brought them into a Japanese syndicate.179 Japanese companies, particularly the Zaibatsu and other big businesses, increased their investment in the territories occupied by the Japanese. The Mitsubishi Trading Company was mainly concerned with agriculture. The Mitsui Bussan Kaisha was involved in shipbuilding and electro-technical engineering. Through its joint venture Toshiba it took over the well-equipped Philips factories in Surabaya.180 The Japanese had a clear interest in the continuation of economic activities, with sugar plantations and cinchona plantations receiving special attention, but even so they gradually began to remove all European staff, deporting them to concentration camps.181 European women and children were subsequently also imprisoned. The Japanese occupation regime led to great personal misery, extensive material damage and the complete disruption of the economy. The Indonesian population, which was supposed to be liberated, suffered just as much as the enemies of the occupation regime. The first post-war annual reports of the Dutch colonial companies with their long lists of deceased staff provide a sad testimony to the large numbers of casualties suffered during the war in the Dutch East Indies. The long delay in drafting such reports underlines how difficult it was after the war to get any insight at all into what had happened to these companies while the fighting lasted.

Conclusion Two world wars and a deep economic depression posed serious limits to the expansion and free flow of business activities. Under these circumstances the Dutch entrepreneurial strategy of trusting in international trade, the family firm and informal structures gave way to strategies of vertical and horizontal integration. During the 1920s the large-scale enterprise became a prominent feature in manufacturing industry. As the Netherlands was a small country, large-scale companies were at the same time multinational companies. The 1930s brought collaboration through cartel agreements, both national and international. The attitude of employers towards their employees became more inclusive and labour unions were accepted as negotiating partners. The collaboration between business and Government was close during the First World War, but returned to a more distanced position during the 1920s. For most industries the protection of the home market was less promising than free export possibilities. During the depression business leaders were once again inclined to accept the protection of the government through its trade policy and its support for cartel agreements. Increasingly, being a successful entrepreneur meant being a good mediator, negotiating with competitors, labour unions and governments. In an economic system characterised by the process of ‘creative destruction’, employers,

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employees and government tried to bring some rationality and order. The German occupation added an element of force to this evolving corporatist business system. Dutch business became a cog in the German war machine, which led to the exploitation of the Dutch economy and impoverishment of the whole population.

3

Following the American lead, 1945–1975

Introduction The period 1945–1970 was one of strong economic growth world-wide. The first years were characterised by recovery and reconstruction, while 1950 marked the beginning of what Maddison has phrased the ‘golden age of unparalleled prosperity’. As the main reasons behind high economic growth, he mentioned a well-functioning international order, domestic policies devoted to the promotion of high levels of demand and employment, and the diffusion of technical knowledge. In two of these three factors, international interaction and the diffusion of technical progress, the US very much took the lead.1 According to the long wave theory, this period is unanimously seen as the upswing of the fourth Kondratieff wave. Writers differ somewhat in their choice of the main technological innovations behind this upswing, but they generally mention the petrochemical industry, synthetic materials, electrical equipment, aircraft and, more generally, mass consumer goods.2 Freeman and Perez typify the fourth Kondratieff wave as ‘Fordist mass production’, a name that interestingly refers as much to organisational as a technical innovation. They see cheap oil as the key factor behind economic growth in this upswing period, just as low-cost steel was the key factor during the third wave. In their view the new techno-economic paradigm could come to its full potential in the post-war period, because of the rematch with its institutional setting. The main features of this institutional setting were large diversified companies, foreign direct investment, a regulative government, social partnership with unions, the spread of company R&D and mass tourism, to name a number of the main characteristics.3 As the term ‘Fordist mass production’ suggests, the US dominated this post-war period. Its influence had many faces, political and economic as well as cultural. At the end of the Second World War Europe was severely damaged and impoverished. The Europeans were determined to rebuild what had been damaged, to recover the prosperity that had been lost. In this resolve the Americans, who had come to Europe as the victors and liberators, formed a shining example. They combined determination and

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self-confidence with efficiency, wealth and power. They were willing to lead the world and what was more attractive than to follow their lead?4 The US took the initiative in stimulating the growth of national economies by smoothing out international finance and international trade. Under their guidance the United Nations set up a financial system that would facilitate the development of a prosperous international economy (Bretton Woods, International Monetary Fund and the International Bank for Reconstruction and Development) and reduce trade barriers by lowering tariffs on a wide variety of products around the world (GATT). On the other hand, as part of the Cold War, the US hindered trade with the Soviet Union and the Eastern European countries, thus reducing trading options for Europe and blocking their relationship with foreign subsidiaries in those countries. The Second World War also marked the end of colonialism and here too the US exercised its influence. The Dutch felt this influence very keenly when they unsuccessfully tried to re-establish their authority in the Dutch East Indies. The US was prepared to help Europe back on its feet through an extensive aid programme, the European Recovery Programme, that has gone down in history as the ‘Marshall Plan’. This programme consisted of direct financial assistance through aid and loans, combined with pressure on European countries for economic co-operation and liberalisation of trade. Only in an integrated Europe could European industry reap the benefits of mass production and mass consumption in the same way as in the US. A small but essential part of this aid was technical assistance to help increase labour productivity, because higher productivity was necessary to increase standards of living.5 Europe responded massively to these productivity programmes, being well aware of the huge productivity gap between themselves and the US. Many business leaders, employees and governmental officers took the opportunity to visit the US and learn from the American experience. The opinion of American experts about European managers was not particularly flattering. Though the latter sometimes had good practical skills, they did not seem to understand the rudiments of human relations, management control or marketing and remained perversely unwilling to share important information. Moreover, those at the top were the least capable of all, according to American experts in 1953.6 To what extent the visits of Europeans to the US led to changes in processes and organisation at home is a matter still under debate.7 The transfer of ideas and techniques from one country to another was a complex process. If anything, it was more a matter of carefully considered adaptation than of wholehearted adoption of American production techniques.8 Zeitlin argued that in fact Europe and Japan were wise to refrain from taking over the American model of mass production together with a host of systematic management techniques, organisational structures, and research and marketing services, because their own way of producing with greater diversity and flexibility turned out to have lasting value as

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developments in the 1970s made clear.9 In the British case, however, Tomlinson and Tiratsoo felt less patience with adherence to traditions. They concluded that even without turning to mass production, British industry could have learned more than it did from a wide range of American techniques with regard to specialisation, standardisation, simplification, materials handling and quality control.10 Undeniably Europe succeeded in catching up with US productivity. For a group of 12 European countries the gap narrowed from 46 per cent in 1950 to 70 per cent in 1973, while by 1992 European levels had risen to 87 per cent of US productivity figures.11 In management the influence of the American ideas and methods remained strong long after the Marshall Plan had expired. The message from the US was that managing a company was something one could and should learn. The old intuitive business leaders, often the owners of family firms, had to make room for professional managers.12 Professional managers were those who had studied the principles of management and were able to analyse their performance systematically. The second message, implied in the first, was that professional managers could manage every kind of company once they had learned how to manage well. Therefore, they could easily switch from one company to another. One step further was the idea that any degree of diversification of the company was possible if corporate level managers had the requisite general management skills. Diversification was frequently achieved by mergers. The true leader of a company should not only know how to organise, but also how to map out the future of the company, how to develop a business strategy. Such a strategy would include an analysis of the company’s strengths and weaknesses, plus a long-term analysis of its markets, both actual and potential.13 Devising a long-term strategy made sense, because the future was deemed predictable. This concept was linked to Keynes’s teaching on how governments could control economic crises. The feeling that the Americans had some useful managerial ideas to impart to Europe was enforced by the success of American companies. Their products, supported by modern marketing techniques, flooded the markets. Not only their products were exported, but the companies themselves extended their production units to foreign countries. In many European countries competition from US subsidiaries was keenly felt in their own home markets. The motto ‘if you can’t beat them, join them, or at least use their own models’, seemed the best way forward. After the Second World War the Dutch were full of admiration for their American liberators. They were impressed by their political power, economic prosperity and high standards of living, which were seen as the direct result of the efficiency of their industry. Naturally, the Dutch wished to copy the ‘American way of life’ with its connotations of freedom, liberty, vitality and casualness.14 In fact, many believed that looking at America was like a ride in a time machine: you could see your own distant future.15 The Dutch were prepared to follow its example, but occasionally

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felt frustrated by the US display of political power. With the independence of Indonesia the Dutch lost whatever power they might have had in the past to back up their economic interests. They became a small and open economy, more than ever dependent on the fortunes of world trade. The Netherlands shared in the general economic growth in the golden postwar years. Though Dutch population growth was relatively rapid between 1947 and 1973, the country nonetheless achieved a per capita growth in Gross Domestic Product of 3.73 per cent annually, compared with 3.98 in north-western Europe and 2.43 in the US.16 It was hugely to their advantage that world trade expanded all through the post-war period up till 1973. Dutch companies felt the competition of US subsidiaries at home, but were eager to set up foreign subsidiaries themselves. Through inward and outward foreign direct investment, the interaction with the world economy at large was intensified. In government–business and labour– business relations the country continued on the collaborative path set out in the previous period. With regard to industrial efficiency and management the Dutch showed an increasing interest in American ideas. The merger movement took hold of the Dutch industry in the late 1960s as it did elsewhere in Europe. The giant company, however, proved not to be as stable as expected. Nor was the economy as a whole as steady and manageable as hoped. The mid-1970s would bring a reversal of fortunes.

Interlude 3: Philips achieves rapid expansion in consumer mass markets As a producer of consumer products such as lamps, radio and TV sets, electric shavers, vacuum cleaners and other household appliances, the NV Philips’ Gloeilampenfabrieken in Eindhoven became the embodiment of the age of mass production and mass consumption. The company also exemplified another ambition, that of bringing technological progress to the world. After the Second World War the board of Philips returned from its US refuge to the Netherlands to rebuild the heavily damaged enterprise. It decided to keep its American trust alive, because the US was seen as the place to be. Philips wanted to stay in close touch with the important and much admired technological innovations emerging in the US. Not in all respects, however, did the board follow the American lead. Notably it differed with regard to cartels and industry organisation. Discussing post-war developments, Van Walsem, one of the managing directors, wrote in 1944: ‘Uncoordinated free enterprise and free trade, unfettered production and unregulated flow of goods from one country to another, in the end defeat their own purpose and lead to chaos.’17 Philips preferred to continue its pre-war alliances and cartel agreements, but this was not the policy of the Americans, who not only hounded cartels in their own country, but also tried hard to convince Europe to follow a similar policy. Resumption of the exclusive cross-licence agreements between Philips and its American counterparts was no longer possible, but Philips succeeded in closing

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non-exclusive licence agreements with AT&T, General Electric and RCA. The friendly relationships with these companies was possible because Philips was not active in the US markets with its main products, while the American companies were not yet interested in the fragmented markets of Europe.18 Philips was the most important wholly Dutch-owned multinational company and as such a source of considerable national pride. In 1946 Philips possessed factories in 26 different countries and sales organisations in 44 countries.19 Interestingly, the company nonetheless chose to present itself as a Dutch company focused on serving the interests of the nation. In its 1946 articles of association two goals were formulated: a long-term welfare policy and the creation of as many useful jobs as possible, to serve the best interests of all those who were involved with the company. Top management went even further by placing the interests of the employees above those of the shareholders.20 In conformity with their ideas of a fruitful collaboration between industry, labour and government, Philips built up an extensive social care programme for its workers, consisting of housing facilities, medical care, schooling and social– cultural activities, including the famous Philips football club PSV.21 The company welcomed American-inspired ideas on management. Personnel managers from Philips were active in the Dutch study teams visiting the US, but the company applied the American solutions judiciously. In 1953, Philips compared its own personnel policy with the US example and concluded that the Americans were ahead in spotting and developing talented people, in furthering internal promotion and in setting targets and defining the content of functions with their related responsibilities. Philips considered itself ahead in selection methods, in internal information, solving problems on the shop floor and preventing grievances, and in furthering good internal relationships through works councils at different levels of the company.22 After the Second World War Philips set up a board of managing directors, bringing an end to the practice of one-man leadership introduced by Anton Philips. The board confirmed the decentralised international organisational structure that had developed during the 1920s and served the company well through the 1930s and the war period. The Philips concern was seen as an ‘industrial democratic world federation’. The various national organisations, in which the Philips subsidiaries in each country were brought together, kept their considerable local autonomy, though they were also required to remain loyal to the company as a whole. In the organisational structure introduced in 1946, product and national co-ordination stood on an equal footing. In practice, the national organisations were able to retain their independence, reducing the product co-ordinators to a predominantly advisory role. Not only were products adjusted to local taste in order to satisfy local consumers, but national organisations were also embedded in the business systems of the countries in which they were working, assuming some of their characteristics. This decentralisation worked well as long as markets were fragmented, as was the case in Europe, and also in Latin America, where Philips set up many factories in the 1950s. Latin America attracted considerable investment as a consequence of its

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import-substituting policy. Philips’ factories in Australia and India too worked predominantly for local markets.23 An interesting example of adjusting to local circumstances was the development of the Philips organisation in the US. The main instrument of growth in this country was ‘financial engineering’, which led to the formation of a conglomerate through mergers and take-overs. Initially, most of the activities were unrelated to Philips’ core business because of the tacit market division between Philips and the US electrical companies. In the 1960s Philips changed its tactics, and strove after greater cohesion between the activities in the US and its own technical competence, though still via take-overs of existing companies. The growth of the NAPC (North American Philips Corporation) was impressive. In 1970 it belonged to the 200 largest industrial companies of the US. The product harmonisation with Philips, however, remained limited. The most important Philips product exported to the US market was the double-headed electric shaver under the brand name Norelco.24 Entrance to the Japanese market took place in yet another way. After Japan regained its independence in 1951, the Japanese government encouraged its industry to connect with Western companies for technical assistance. Thus Toshiba reached an agreement with General Electric and Hitachi with the American company Philco. Konosuke Matsushita, however, preferred an alliance with Philips, as he explained in later years: Our corporate cultures were basically compatible, I felt, and it appeared that Philips saw the same advantage in a tie-up that we did. European and American companies are quite different in character. We were familiar with the latter because part of the legacy of the Occupation was the flood of American technology into Japan, but I felt that European technology, which at that point had scarcely been introduced at all, would be indispensable to the further development of Japanese industry.25 Matsushita was interested in the flexible and small-scale machine technology Philips had developed for small European markets, which he considered more suitable for Japanese and Asian markets than American technology. In 1952 Philips and the Matsushita Electric Industrial Company set up the joint venture Matsushita Electronics Corporation, which Matsushita managed with technical support from Philips. For Philips the agreement had a unique character, because for the first time it offered technical assistance to a joint venture it did not manage itself. The joint venture brought Philips attractive royalties as well as an outlet for machines and components.26 Philips world-wide enterprise experienced strong growth during the 1950s and 1960s, which even surprised the board of managing directors. Part of this growth could be explained by the way its foreign subsidiaries were embedded in the local economy, which helped sell the locally manufactured products. Strong national organisations with a national identity of their own also had a distinct advantage when competing in the market for high-technology products,

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such as telecommunications and nuclear energy, in which Philips tried to play its part. But local embeddedness had its price, too. This became clear when the European market became more integrated. Philips was an advocate of European economic integration. However, integration undermined the company’s competitive strength, because the process of increasing production scale through allocation of production capacity took time. The managing directors of the national organisations in the various European countries were reluctant to close local factories out of social and political considerations, the safeguarding of employment being one of the strongest arguments. The board of Philips felt sympathetic with this argument and was therefore unwilling to enforce tough decisions. As a consequence, the product organisations were unable to implement efficiency measures.27 The tension between the national and product organisations was not the only internal contradiction. Another was the choice between intermediate and end products as a core business. Philips often gave precedence to the production of intermediate products over final products, as was for instance the case with cathode ray tubes for TVs. In the market for these tubes Philips created a leading position by using them in its own sets as well as selling them to competitors. They followed the same practice with compact cassettes. The collaboration with competitors increased sales and could also help in setting standards, which subsequently would be followed by others. On the other hand, by selling its components and intermediate products to other manufacturers, Philips strengthened the competition, diminished its own visibility in the market and made itself dependent on those manufacturers. Philips’ unhappy history with the computer industry underlines this point. When in 1948 Bell’s laboratory developed the transistor, it was immediately clear to the industry that their challenge would be to move from electron tube to semiconductor technology. The Philips’ Physics laboratory took up the new technology and studied both production and application. In 1954 production was started and, with some effort, innovations in the field were closely followed. With computers, however, Philips was reluctant to move forward. Instead it preferred an agreement with IBM for an exchange of know-how and licences and for the delivery of components, including electron tubes and semiconductors. However, a few years later IBM decided to end the agreement and produce its own components. Precious time was lost and though Philips decided to set up its own computer division, and spent vast amounts of money on it, the lost ground could not be recovered. The same threatened to happen with chips (the integrated circuit). As there didn’t seem to be a market for chips outside the military market, Philips was not keen on developing this new technology. It changed its mind in 1966 and entered the race with a licence from Westinghouse. As it turned out, developments in this technology were fast and the market was very cyclical, but Philips persisted in staying in this market despite high costs.28 Measured in sales, Philips achieved second place world-wide in consumer electronics by 1969. Its position in high-technology products such as telecommunications or computers was modest. Here, Philips could not entirely over-

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come the disadvantage of having a small home market. The company had rapidly expanded world-wide. The number of people employed increased from 90,000 in 1950, of whom 44 per cent lived in the Netherlands, to nearly 400,000 in 1975, of whom only 23 per cent lived in the Netherlands. However, profitability had not kept pace with the growth in turnover and employees.29 Perhaps, this outcome should not come as a surprise. After all, had not the board of managing directors concluded directly after the war that the interests of employees were more important than those of shareholders?

3.1 The managed economy: between socialism and capitalism In government–business and labour–business relations, the Netherlands continued on the collaborative path set out in the previous period. In many respects the old ideas mingled well with the messages from America. After the long economic depression of the 1930s and the great disruption and destruction of the Second World War there was a general wish to rebuild the country and work jointly for economic prosperity for all. Old controversies between Protestant and Catholic, between socialist and liberal ideologies should be reconciled in order to achieve a higher aim: a new future for the whole nation. Some idealists envisaged a complete new order with new political parties. This vision, however, did not materialise. Though the old political parties re-established themselves sooner than idealists would have wanted, the spirit of co-operation continued well into the 1960s. Building further on the ideas developed in the inter-war years, the Christian Democrat parties were looking for a middle course between a liberal ideology of free enterprise and a socialist ideology of state regulation. Lying in the middle, the Christian parties were able to govern continuously in the post-war years with either the socialist or liberal party as partner in a coalition government. A close and constructive co-operation between the government, the trade unions and the employers’ organisations was considered crucial in the creation of economic growth and prosperity. The economic prosperity the US had been able to achieve formed a beckoning prospect, a welcome reminder that the goal was realistic. Private companies had to play a pivotal role in the economic development of the country, notably in creating employment for the growing population. For that reason, entrepreneurs could count on government to support their ventures. On the other hand, their companies were no longer seen as private vehicles for profit maximisation, but were part of society at large. Companies were ascribed a societal responsibility. Furthermore, the state and the business community together shared responsibility for those who were vulnerable because they stood outside the labour process. A system of social security was quickly built up after the war, gradually extending benefits to larger groups at higher levels of social welfare.

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Industrial relations and the centrally directed wage policy Even during the last months of the German occupation, representatives of forbidden organisations of employers and workers began to discuss the post-war reconstruction, in which their organisations would play a vital role. They took preliminary measures to establish a private association, the ‘Foundation of Labour’, as the meeting point and lead organisation of all their trade associations. The main initiative for this social partnership came from D.U. Stikker, representative of one of the employers’ associations. So urgent did he consider the matter that he didn’t give himself time to celebrate the liberation of his country. Instead he was busy writing his manifesto to introduce the new foundation to the public. It appeared on 7 May 1945. The main message was: ‘employers keep open your factories, workers fulfil your duty’.30 In the meantime, the government in exile had developed its own ideas on labour relations. For the time being all wages would be controlled by the ‘College van Rijksbemiddelaars’, a group of independent experts nominated by the government. Despite initial reservations, the government granted the Foundation of Labour, a private organisation, the formal right to advise the government on all matters related to wages. In the post-war period governmental pay policy was dominated by the wish to reconstruct the economy and create jobs for the growing population. In order to invest in future economic growth, wages and living costs should be kept low and consumption should be constrained. This strategy of austerity found general acceptance, because it was believed that, by investing in economic growth, in due course the whole population would benefit. The policy of low wages was achieved through an extensive system of consultation between representatives of workers, employers and the government. This system built further on the custom of collective labour negotiations developed during the inter-war years.31 Between 1945 and 1963 the system worked more or less as follows: after consultation with the Foundation of Labour, the government gave general directions on how much wages were allowed to rise. On this basis the trade organisations of employers and workers in the various sectors negotiated their collective labour agreements. The above-mentioned College van Rijksbemiddelaars would then judge the labour agreements and decide whether the outcome was in line with governmental directions. If they agreed with the results, they could make the labour agreement compulsory for all companies in the sector. If they disagreed entirely, which seldom happened, a new labour agreement had to be negotiated.32 Through this system of centrally organised collective bargaining, individual employers ceded a great deal of their decision-making power over wages in their own companies to their national representatives. What they gained, however, were equal conditions of pay in their industry and a constructive social relationship with their workers. In the first post-war years

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the system also led to low wages, which allowed them to compete in foreign markets. Workers went along with the policy because it promised full employment for the present and better prospects for the future. On the macro-economic level the trade unions had acquired a prominent position on an equal footing with the employers to be consulted by the government on all major economic and social policy decisions. Under this centrally directed pay policy, wages were initially kept at a minimum level to ensure a minimum income for workers on the one hand and to advance reconstruction on the other. Wages were linked to the cost of living. From 1954 onwards, wages were allowed to rise more than the cost of living through a series of annual ‘welfare’ pay rounds. These raises were seen to reflect the rise in labour productivity. Employees were at long last able to benefit from rising prosperity. At the end of the 1950s, the centrally guided pay policy began to show cracks. The goal of full employment was achieved so well that in some sectors there was a scarcity of labour. Some employers were prepared to pay higher wages than the collectively agreed ones, particularly in sectors where high rises in labour productivity created room for further pay improvement. In 1959 a certain measure of decentralisation of the system was introduced whereby pay rises were linked with increases in labour productivity. However, after years of centralisation, this differentiation in wages was not acceptable to workers, nor was it possible to find satisfactory ways of determining the exact rise in labour productivity needed to determine the appropriate increase in payments. What happened was that the labour unions negotiated first in strong sectors, those willing and able to pay higher wages. The other sectors then could do little else than follow the lead of the strong sectors. From 1963 labour scarcity rather than committees and endless rounds of negotiations dictated wages. The result was a steep rise in wages. From a low-wage country, the Netherlands became a high-wage country and for a number of industries, including leather, textiles and clothing, international competitiveness declined dramatically.33 While the system of tripartite wage negotiations did not succeed in keeping the wages low after 1954, it contributed to social peace. In comparison with other European countries, the Netherlands has traditionally enjoyed a high degree of industrial peace and relatively few strikes. During the 1950s and 1960s, the number of strikes and days lost through strikes were at an historically low level.34 Social harmony also characterised the internal policies of companies. This was part inspired by US ideas on human relations and welfare policies with the Ford Motor Company and its Social Department as a striking example. These measures helped in recruiting staff. One might argue that a social policy was another form of vertical integration. This time neither purchasing nor distributing were integrated but the ‘reproduction of the labour force’. If this relationship makes sense, then the high point of company social policy can be expected to coincide with the summit of

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vertical integration generally. For manufacturing companies with large amounts of fixed capital it was important to have permanent access to the necessary workers. Modern production methods like mass production and the assembly line demanded from the workers regularity, reliability and work-specific qualifications. As long as the companies found ready mass markets for their mass-produced goods, they could follow a social policy of keeping a large workforce tied to the company through welfare policies and attention to human needs in their management techniques.35 As we have seen, this was certainly true for Philips in Eindhoven. The steelworks Hoogovens had similar policies, though its medical care programme was more modest. In the Philips case, the company itself manufactured medical instruments as well as medicines, making their focus on medical care more logical.36 Both companies also shared an interest in the human relations approach in management developed in the US. These ideas fell on fertile ground in the Netherlands because they fitted with the ideas of a fruitful collaboration between employers and employees, and with the Moral Rearmament movement. Not only Hoogovens and Philips, but also other large companies such as Unilever, AKU, State Mine and Werkspoor, actively promoted the human relations approach, including Training Within Industry. Management consultants and social scientists were enthusiastic about the new approach. Study trips to the US resulted in reports and more in-depth studies. However, the results in individual companies are more difficult to measure, as we will also see when we discuss the promotion of labour productivity, which formed part of the same movement to modernise Dutch business.37 Before the war progressive employers in the Netherlands set up works councils in their companies on a voluntary basis. The councils had different forms and no formal rights. Mainly they served as vehicles for employers to inform themselves about aspirations on the work floor, and to explain themselves to their workers if they wished to do so. In 1950, the law on works councils was introduced, making the works council mandatory for all companies with more than 25 workers. In the case of the US, Blackford concluded that management was generally willing to grant higher wages, but only if unions gave up any aspirations to influence how executives ran their companies.38 One could argue that the situation was the opposite in the Netherlands. In order to get the co-operation of the workers in keeping wages low and business internationally competitive, employers were prepared to accept the workers as social partners in their company and give them a ‘voice’, though this voice was only a modest, advisory one. The task of the works council was not to represent the interests of the workers per se but to serve the interests of the enterprise as a whole.39 The emphasis lay on the company as a community of interest in which harmonious labour relations should reign, with fair payment, job satisfaction and steadily increasing labour productivity. The actual wage bargaining was done outside the individual company. As explained above,

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collective agreements were negotiated between trade unions and employers’ associations at the level of industrial branches under the guidance of the government. The 1950 Act on the Works Council did not provide for co-determination with the workers. The council was allowed to advise, but the entrepreneur kept the right to take all decisions. The employer as head of the enterprise was also chairman of the works council. A major point of discussion with the trade unions was the question of whether the councils should be made up of representatives of the unions or of candidates chosen freely from the workers. As usual in the Netherlands, the parties reached a compromise: the unions were given the right to nominate candidates, but it was also possible to include a few ‘independent’ candidates. One of the major flaws in the law was a lack of sanctions against companies which refused to set up a works council. The idea was that a council could only function if the employers co-operated willingly.40 Particularly in companies with 25 to 100 workers, the entrepreneurs considered this formal institution superfluous. A survey in 1960 revealed that nearly all companies with more than 500 employees had established a works council, while this applied to only 19 per cent of the firms with 25 to 50 employees and 42 per cent of the firms with 51 to 100 workers.41 The factor which best explained the presence of a works council of any significance, apart from company size, was the existence of a modern personnel or labour relations department. The latter became popular in the Netherlands during the 1960s. Also, the longer a council existed, the more established, active and sophisticated it became.42 Research on the functioning of the works councils showed mixed responses. Employees generally appreciated the work of the councils and were reasonably content with the results. Some, however, were disappointed with the subjects provided by employers for discussion, which were considered insignificant. They complained that, for example, the council members were allowed to discuss the new bike shed extensively but were not even kept informed about a major takeover. The employers on the other hand argued that the quality of the discussions often had such a low level that it was not possible to hold meaningful discussions. Though the councils should formally represent the interests of the company as a whole, in practice they mostly discussed the direct interests of the workers, the organisation of their work, the layout of the offices and work spaces, the secondary labour conditions as well as the yearly football matches or trips.43 Some companies took the works council seriously. One of the family owners and managing directors of Océ-van der Grinten considered giving their works council the right to comment on the nomination of managing directors, but the legal adviser of the company did not consider this a very good idea and this right was therefore not formally constituted.44 Discontent with the functioning of the works councils led to a new law in 1971. Interestingly, this law gave the works council a dual role:

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representation of employee interests was added to the task of contributing to the best functioning of the firm. In some matters related to labour conditions and working hours, the entrepreneur had to ask the council not only for advice but also for approval. Basically, the works council, however, kept its advisory role. Adjusting to reality, the law made the works council only mandatory for firms with more than 100 workers. Council members obtained the right to hold pre-sessions without the employer; they gained protection against dismissal and were offered training and other facilities to be paid by the employer out of a common industry fund. They were allowed to bring in outside experts, though only with the permission of the employer, who also had to bear the costs. One interesting addition was the requirement to organise a yearly meeting between the works council and the board of supervisory directors. By this time the labour unions were feeling doubtful about the councils, wondering whether they were partners or competitors in representing the labour interests.45 The reform of 1979 brought more fundamental changes in the rights and obligations of the works council, which will be discussed in the next chapter. Government and the promotion of the manufacturing industry The active role of the government was not restricted to labour relations. The war economy had been strictly regulated by endless government measures. This raised the question of how many of these measures would be kept in place after the end of the war. In 1945, the socialist Minister of Economic Affairs in the first post-war government, Hein Vos, introduced a Central Planning Bureau and an ambitious scheme for a corporatist organisation of the economy. Nationalisation of industry was no longer one of the objects of the Dutch socialist party. Vos’ ideas were a mix of socialist ideas for a planned economy and Catholic views on industrial organisation developed during the inter-war years. The plans showed some resemblance to the forms of business organisation created during the war, but the emphasis was on vertical not on horizontal integration. Every industry sector would get its own public organisation to regulate all aspects of production and distribution. The boards of these organisations would consist of representatives of employers and employees, but the chairman would be a government representative. This figure would have considerable executive power. Business would effectively be placed under governmental supervision.46 Despite the general mood of co-operation, there was no great support for these proposals. Business people much preferred to hang on to their own private organisational tools to structure their industry, such as cartels, gentlemen’s agreements and trade associations.47 New proposals were drawn up, this time more in line with earlier Catholic ideas. In the new plans, business organisation consisted of a mix of vertical and horizontal organisations, while business was basically free to set up such a structure or not. The role of government was far more

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modest as well. The employers remained opposed to even the most watered-down plans. Though they were prepared to accept the influence of trade unions in matters of labour relations, they were utterly opposed to any influence by them on their economic policy. The bill for the ‘Publiekrechtelijke bedrijfsorganisatie (PBO)’ passed Parliament in 1950, yet the PBO became effective in agriculture and the retail sector only. One institution of the new law, however, would have lasting influence. As top of the new business organisation was created the Social Economic Council (SER), a tripartite body of representatives of the employers, employees and the ‘Crown’, in equal numbers. The members of the ‘Crown’ were independent experts nominated by the government. The SER became the advisory body for the government in social as well as economic issues. Its carefully considered advice on social care, workers’ representation and company law was held in high esteem.48 The short history of the PBO is illustrative of the post-war development: business was prepared to cooperate with labour and government, but the basic principle remained freedom of enterprise. In governmental post-war reconstruction plans, business played a pivotal role. The government was faced with two major problems: an acute deficit on the balance of payments, particularly a dollar shortage in 1947, and the prospect of increasing unemployment for a growing population. The extension of manufacturing industry would solve both problems because it would create new jobs and would, if the industries were carefully selected, either deliver goods for export or diminish the need for imports. Which role should the government play in guiding the economy in this direction? The answer of business people was clear: dismantle all the rules and regulations; the need for permits for imports, for export, for new production facilities, for buildings, etc. Give us freedom and the rest will follow in due course, they argued. Left wing politicians would rather have kept a closer watch over industry. However, the elections of 1946 gave the Catholic party the lead over the Socialist party. From then on the role of government would be supportive rather than directive.49 In solving the urgent problem of the deficit on the balance of payments, and more particularly the dollar shortage, the Marshall Plan played a considerable role. The US plan for aid in the form of loans and gifts was announced in 1947 and went hand in hand with propaganda emphasising the virtues of the free market economy and the unselfishness of the American people, who were prepared to help less fortunate countries reach the prosperity they had already achieved. Started as an economic assistance programme, the Marshall Plan became increasingly part of the Cold War waged against the communist Soviet Union. A prosperous Western Europe would prevent the spread of communism. In this context the US urged Europe to increase military production and make greater efforts to improve labour productivity by using American-style practices in labour relations, industrial organisation and workplace routines.50 The Americans

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expected the European countries that were receiving their support to advertise this help vigorously. According to a Dutch survey held in March 1948, no less than 87 per cent of the Dutch population was already aware of the Marshall Plan. Of those, 68 per cent thought this help should be accepted, 22 per cent had no opinion, while 10 per cent were against acceptance. The opponents were afraid that the Netherlands would become too dependent on the US, the dollar and American big business, while some considered the aid directed against communism and the Soviet Union and therefore not acceptable. In the same survey, the Dutch were asked why they thought the Americans were prepared to give this help. The most frequently cited motive was economic self-interest, including the safeguarding of foreign outlets and economic growth generally. Second, the Dutch mentioned the struggle against communism; third, the wish to help Europe and lastly the wish to increase American economic power. Even the Dutch who were only too pleased to accept American aid had no doubt about the mixed motives of the Americans. That selfinterest might rate high in the US offer to help was not condemned, however. On the contrary, it made the help more acceptable if both parties would get something out of the deal. Many Dutch people agreed with the need to fight communism in any case.51 Between 1948 and 1954, the Netherlands received 3,600 million guilders of Marshall aid, which amount represented 4 per cent of the national income.52 The US aid came on certain conditions, as one might have expected. One of the conditions was that US companies got free access to the Netherlands. This condition formed one of the reasons why, for example, Philips had some doubts about the wisdom of accepting the Marshall Plan. The company was afraid that its US competitors would thus get an easy entrance to the Dutch market.53 The US kept a watchful eye over the kinds of goods that would be imported with its dollars. For instance, the Amsterdam sugar refinery of CSM, which earned large amounts of dollars with the export of refined sugar, discovered that the aid could not be used to finance its raw sugar imports.54 In 1949 a request from KLM to import three aeroplanes was declined with reference to the interests of US aviation.55 Most of the imports through the Marshall Plan (71 per cent) reached the Netherlands during the first three years (1947–1950). These imports represented 12 per cent of total Dutch imports. Corn and cotton figured high on the list, followed by ore, iron, steel and oil. For the rest, imports were a mix of foodstuffs, raw materials, intermediate products and machinery. US aid was not given directly in dollars but in goods imported from the US. The Dutch importers paid the normal market price for the imports, but could pay in Dutch guilders, which were put in a special account, the so-called countervalue money account. The Dutch government could only spend this money in close consultation with the Americans, who wanted it to be used for clearly visible projects. Under US pressure, nearly a fifth of the total amount was used for military projects. Incidentally, the Dutch car

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and shipbuilding industry profited from these expenditures. Also a quarter could be used to diminish the state deficit. The remaining money was spent on a large number of repair projects. A modest 1 percent was used to raise productivity.56 At the time the vital importance of the Marshall Plan for the economic reconstruction of the Netherlands and the standard of living of its population was strongly emphasised. Certainly the Netherlands received one of the largest amounts of gifts and loans per capita, because it was considered to have suffered the highest damage during the war. Fifty years later the opinion amongst Dutch historians about the importance of the Marshall Plan is more reserved.57 There is a general feeling that the Marshall Plan helped solve the problem of dollar shortages, which became urgent in 1947 as a consequence of military operations in the Dutch East Indies.58 Dollar aid was used for the import of goods and machinery essential for economic reconstruction, thus averting the risk of an economic slowdown. Yet, the goods imported through the Marshall Plan were only a modest part of total imports and no industry was totally dependent on them, apart perhaps from the cotton industry. This sector was able to import large amounts of raw cotton as well as new machinery. Some individual companies benefited. The steelworks Hoogovens, for instance, could realise an important extension and innovation.59 The strong support of the US for international co-operation and liberalisation of trade were of long-term importance to Dutch industry, which has always been hugely dependent on international trade. With the immediate concern for the dollar shortage and the balance of payment deficit lifted, the government could concentrate on its plans to promote manufacturing industries. Between 1949 and 1963 the government published eight reports on industrialisation in the Netherlands in which the need for industrialisation was underlined, targets were formulated and measures were announced. Only in a small number of cases did the government take an active part in furthering industrialisation. Because basic industry was considered particularly important in stimulating economic growth, the state invested in the chemical division of the state coal mines, the new rolling mill of the steelworks Hoogovens, the establishment of a soda factory and in public utilities for electricity and gas.60 Most of the other governmental measures can be labelled as ‘creating a favourable investment climate’. The government diminished the number of regulations left over from the 1930s and the wartime period, giving business more freedom to act as it saw fit. Fiscal measures were taken to encourage companies to make extensive use of internal financing. The companies eagerly responded by increasing their investment. Schooling was promoted to raise the quality of ‘human capital’ as well as to make education more democratic, by making higher education more accessible for the lower classes. Under American pressure, measures were taken to increase labour productivity. The American example also taught that the

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key to future success lay in research. Because the Netherlands was behind the US in technology, part of this knowledge should be imported from the US. For that reason the government encouraged foreign investment, especially that of US companies. For the future, Dutch producers should concentrate on knowledge-intensive products and therefore invest in fundamental research. Industry itself, and particularly the big companies, attached great importance to purely scientific work which would result in saleable products only in due course. The government supported this ambition by creating institutions for fundamental research in different industry sectors. These were particularly relevant for smaller companies. The amounts of money spent on research in the Netherlands quickly rose during the 1960s. Most of the money came from Dutch industry rather than foreign sources.61 In 1963 the government published its eighth and last industrialisation scheme, in which it ended the emphasis on manufacturing and introduced a more general economic growth policy. From this point on, the government focused on a macro-economic trade cycle policy, inspired by the theories of Keynes, and the advance of favourable investment conditions. Attention was given to the R&D structure, the promotion of exports, the regional distribution of economic activities and the need to promote the increase in scale of small companies. In the early 1970s government policy changed once again. First, it underlined the negative influences of economic growth with regard to the environment. Next it became deeply involved with the need to restructure some economic sectors. The new policy slogan became ‘selective economic growth’, an economic growth based on respect for the environment, careful use of raw materials and energy, a better geographical distribution and a fairer international division of labour.62 The targets of the eight industrialisation schemes were fully reached and more. The manufacturing sector expanded and employment increased to such an extent that the labour market came under pressure. It remains a matter of debate whether this was indeed the result of governmental measures or followed automatically from the favourable circumstances in the world economy. What government policy achieved, however, was a change in perception. In the past, the Dutch had seen themselves as a colonial and trading nation. In the late 1940s they began to perceive themselves as a modern industrialised nation.63 Indeed, never was the manufacturing industry more important as an employer than in the 1950s and early 1960s. The Netherlands had been a late starter in the industrialisation process. When the process really got going in the early twentieth century, the depression and the Second World War interrupted expansion, but in the mid-twentieth century the country fully entered the stage of the industrial nation. With obvious pride the Dutch looked to national heroes such as the Fokker aeroplane factory, the carrier KLM, DAF truck and car manufacturer, and Philips. Even more important was

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the expansion of the chemical industry. Rotterdam harbour became a huge industrial area with the new petrochemical industry at its core. One big chemical complex interlinked with pipelines arose at the harbour sites. Not only Royal Dutch/Shell, but also foreign companies such as Caltex and Esso, built their refineries in the Netherlands, providing industry and households with fuels and petrol. The petrochemical industry delivered the raw materials for soap production and a growing plastics industry. The surprising discovery of this period was that the Netherlands was not without primary products after all. It was known that the Netherlands had modest coal reserves, which were indeed exploited, though this exploitation was gradually terminated in the 1960s. In the 1940s oil was discovered and consequently exploited. But the real find came in 1959 with the discovery of large reserves of natural gas in Groningen by NAM, the joint venture of Shell and Esso. It took Shell a number of years of further exploration to establish the enormous size of this gas field.64 On the basis of experience in the US, Esso promoted the idea of creating a dense national network for distribution of gas to individual households as well as large industrial users. In their master plan they particularly focused on the central heating of houses, which would require ten times more gas than cooking. After careful study, Shell became convinced of the feasibility of the master plan. NAM asked permission to create this new national distribution network, which would include the transition from industrial gas to natural gas. The government insisted on having a stake in the distribution of gas. This resulted in the foundation of a new company in 1963, the NV Nederlandse Gasunie, in which the state shared 10 per cent, the state mines 40 per cent and Shell and Esso 25 per cent each. The Gasunie hired US contractors to cover the country with pipelines in record time. At the same time it started a drive to convert furnaces, central heating and other appliances from the use of industrial gas to natural gas. This big operation was finished in five years. The use of gas was also promoted because it was considered environmentally friendly. The use of cheap natural gas for industrial purposes further boosted the economy.65 It would be wrong, however, to ascribe post-war economic growth entirely to the expansion of manufacturing. Through mechanisation and research the agricultural sector achieved an impressive rise in labour productivity, while the superfluous labour force could find employment in the manufacturing sector. The agricultural sector and the related food industry made up a large part of exports.66 The service sector contributed even more than manufacturing to the increase in employment. Traders and transporters benefited from the expansion of international trade. Rotterdam became one of the most important harbours of the world measured in tonnage. Commercial banks found new business in serving the private client. They offered their clients saving accounts, mortgages and,

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another American invention, facilities to buy on credit. A dense network of retail banks spread over the country, in particular during the 1960s. Another novelty in retailing was the rise of the self-service store, also an American innovation. Interestingly, it was not one of the chains, but an individual grocer who took the first step. In 1948 Van Woerkom opened the first self-service store in the Netherlands. He tried to convince his clients with the announcement: ‘A small piece of America in the Netherlands’ and added the words: ‘the best service is self service’. Other enterprising individuals followed, but it was not until 1952 that the chains Albert Heijn and De Gruyter were won over to the self-service concept, mainly because of the growing competition of others. The grocery chains, however, did take the lead a few years later with the introduction of the supermarket, the ‘one stop shopping’ concept, also developed in the US. Albert Heijn opened its first supermarket in 1955, Edah and Simon de Wit followed in 1959 and 1960 and De Gruyter in 1962. The introduction of the supermarkets was as successful as the self-service concept.67 The Dutch consumer, however, never warmed to the next logical step, the hypermarket, which was very successful in Germany and France. Also, town planners and municipal agencies in the Netherlands opposed rather than promoted the development of the hypermarket in order to protect the existing businesses in the city centres. To whom does the company owe its responsibility? Business began to thrive during the 1950s. The support labour had offered by accepting relatively low wages and government had encouraged through creating a favourable investment climate led to the question: ‘who actually owns the company we are all so eagerly supporting?’ Formally the shareholders owned the company, but did that also mean that their interests should decide the future of the company? The Social Democratic party argued that the company should be a democratic institution with a societal responsibility and they were not alone in this view.68 These arguments mirrored ideas from the 1920s about the rational organisation of industry sectors on the basis of a harmonious collaboration between employees and employers, with proper regard for the position of consumers. However, the new debate concerned individual companies, particularly the big companies, and how these could be made more democratic by adding the voices of three more parties, employees, consumers and society at large, to the voice of the shareholders in the decisionmaking centre of the company. Legislation was seen as the principal route towards democratisation of the company. In 1975 the president of the Social Economic Council proudly remarked that the renewal of company legislation signified a breakthrough towards democratisation of social and economic life.69 The first step in getting more of a grip on the company was becoming

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better informed about what went on inside the enterprise. To reach this end, stricter rules for publishing financial data in the annual reports were introduced in 1971. One of the new obligations was information on sales and number of employees. Some hoped the better information would also make a discussion possible about the division of the benefits of the enterprise between shareholders, managers and employees.70 Though it was not an official requirement, in the 1970s companies began to publish social reports alongside the financial reports in which they highlighted their social policy, including the functioning of the works councils and their health and safety measures. The changes in the position of the works council in the law of 1971, discussed above, meant the workers were allowed to voice their own interests louder in this particular body, though their representatives retained the responsibility to keep an eye on the sound functioning of the company as a whole. More importantly, in the new company law of 1971 the works council got the same rights as the shareholders regarding the nomination of members of the board of supervisory directors in limited liability companies above a certain size. The main power of the board was the appointment and dismissal of the board of managing directors. According to the new law, the members of the board of supervisory directors nominated themselves by a system of co-option. However, the works council, the shareholders’ meeting, the board of managing directors and the board of supervisory directors were all allowed to propose nominations for the board of supervisory directors. Both the works council and the shareholders’ meetings had the right to veto a nomination. Shareholders were no longer considered more important than employees. This unique Dutch solution was the result of a surprise compromise worked out in the SER between representatives of employers, employees and independent experts nominated by the government.71 Works councils and shareholders’ meetings had the same measure of influence, or perhaps one could better say, both had equally little influence, because the nomination took place through co-option and not through elections by either shareholders or workers.72 In yet another respect shareholders and employees received similar rights. In 1928 the shareholders had gained the right to demand an independent inquiry into the management of the company if they had legitimate reasons to suspect gross mismanagement. A similar right to demand an inquiry into gross mismanagement, if other remedies had failed, was given to the trades unions in 1970. Requests were to be directed to the Companies Chamber, a specialist department of the Court of Justice in Amsterdam. The importance of the position of employees was again underlined in the SER code of conduct with regard to mergers, formulated by the SER in 1970 and approved by the government. The code of conduct demanded that entrepreneurs give the trades unions prior information about mergers and takeover plans on condition of secrecy.

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Employees were thought to have a right to this information because mergers and takeovers could greatly influence their position. After all, many mergers were undertaken with the explicit purpose of raising efficiency through redundancies. For that reason, the code of conduct included involvement of the trades unions in drawing up a social plan. All these new laws and regulations limited the freedom of entrepreneurs. Thus, understandably their first reaction was opposition, and only gradually were they prepared to accept these measures. But the other side of the coin was that entrepreneurs began to hold society, in this case the government, responsible for the continuity of the firms. After all, they were creating employment and large amounts of capital were sunk into industry. Government, therefore, should help them overcome temporary setbacks or give support in case whole industries needed to be restructured. The employers’ organisations were against government support for individual enterprises because this affected the competitive position between the companies. They observed of this type of government support that ‘bad business drives out good business’.73 However, general support measures, such as restructuring programmes for labour-intensive industries and tax reductions, were welcomed. Indeed, the government financed a number of restructuring reports from the mid-1960s onwards. In 1969, inspired by the British Industrial Reorganisation Corporation, the employers’ groups asked the government to set up a similar organisation in the Netherlands. The government did indeed set up the Nederlandse Herstructureringsmaatschappij (Dutch Reorganisation Corporation) in 1972, but the organisation was different. Dutch style, it was a tripartite body and it had an advisory role only. It did not have financial means of its own and its activities were limited to drawing up reports. As an instrument for restructuring it was unsuitable. An added problem was that industrial sectors were no longer homogeneous and therefore the interests of the individual enterprises varied too much for one common sector policy.74 As the results of these sector-based measures turned out to be limited, gradually the government got dragged into substantial financial support for individual companies during the late 1970s. The welfare state and consumer capitalism As elsewhere in Western Europe, the Netherlands developed a welfare system, but the Dutch welfare state developed relatively late and then created one of the most generous systems in Europe.75 During the war, at the request of the Government-in-exile in London, the Van Rhijn Royal Commission drew up a blueprint for a new post-war social security system in the Netherlands, inspired by the British Beveridge Plan, which was in its turn inspired by the Atlantic Charter. This Charter formulated a group of basic human rights, including ‘Freedom from Want’. In the Dutch welfare system, two kinds of insurance developed: employees’ insurance and

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national insurance for all citizens. In the general mood of reconstruction the Social Democratic and Christian parties passed an Emergency Pension Law in 1947, which was succeeded by the General Old Age Law of 1956. This was the first universal national insurance programme. Employees’ insurance already comprised the Workmen’s Compensation Act from 1901, an Invalidity and Old Age pension that became operative in 1919 and a Sickness Insurance Law, the implementation of which was delayed until 1930. Unemployment insurance, with premiums shared between employers and employees, was enacted in 1949 and became operative in 1952. The Dutch system had income-related contributions and benefits. People were to be able to continue to live more or less on the level they were used to. Employers agreed on the extension of the system of social security. However, they repeatedly voiced their concern about the costs of the whole system and the influence of social insurance on wage costs and the competitiveness of Dutch industry.76 The system of social protection was rounded off in the 1960s with two all-embracing laws, the General Assistance Act of 1963 and the Disability Act of 1967. The General Assistance Act provided a minimum income to all citizens who were unable to earn a living for one reason or another. It offered a modest alternative to gainful employment. The Disability Act insured workers against the inability to do their usual work, whatever the cause. The old invalidity work benefit had only offered protection against work-related invalidity. The new law provided a relatively easy exit route from work. The state, employers and employees worked harmoniously together to set up this system of social care, based on solidarity of workers with nonworkers, which seemed both humanely justified and economically sustainable. Underlying the introduction of the law was the supposition that the number of applicants would remain modest and during the favourable economic circumstances of the 1960s this supposition seemed justified. The level of benefits was increased during the early 1970s. Together with a rise in number of claimants this led to a sharp rise in social expenditure as percentage of GNP from 8 per cent in 1950 to 15 per cent in 1970 and 24 per cent in 1980. In 1950 Dutch expenditure was slightly lower than that in five other European countries, but in 1970 the 15 per cent of the Netherlands was already considerably higher than the 11 per cent of the other five countries, while in 1980 the distance was even greater: 24 per cent in the Netherlands and 13–14 per cent in the other five.77 The Netherlands went from one of the lowest- to one of the highest-spending welfare states. The welfare state contributed to the ‘age of affluence’. The US had already entered the age of consumer capitalism, and after the Second World War it was Europe’s turn. The goods brought in with the American armies had acted as a foretaste. The age of mass consumption reached the Netherlands slowly. The 1950s saw a growth in the consumption of household goods, but in 1957, more than ten years after the war, merely one in

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three households possessed a washing machine, and only a very privileged 3 per cent could boast a fridge. Vacuum cleaners were more widespread, being present in 67 per cent of households. By 1972 fridges and washing machines had become standard equipment, to be found in respectively 88 and 86 per cent of all households. A radio was common property in 1960, but only one in four households possessed a TV. In 1963 the social democrat politician J.M. den Uyl argued that every worker had the right to have a car standing before his front door. The reality was still far removed from this ideal, though the number of cars increased rapidly during the 1960s. In 1960 there were 46 cars per 1,000 inhabitants and in 1970 this number had grown to 189. To give a last indication of the slow rise of the age of consumer capitalism, in 1960 only 30 per cent of the population had a telephone at its disposal. In 1969 the number had increased to 43 per cent. During the 1950s the biggest rise was in the consumption of durable consumer goods such as radios and washing machines, and of clothes, food and drink. The 1960s showed a rise in expenditures on travel, particularly cars, recreation (holidays) and again consumer goods, including TVs. In the 1970s household goods became relatively less important; instead, comfortable living and drinks were on the rise. On the whole life became more comfortable and new possibilities to explore the world opened up.78

3.2 The spread of the managerial enterprise In the 1950s and 1960s the managerial company became widespread in the Netherlands. This development was closely related to the new managerial wisdom coming from the US. The first example of American influence in managerial matters was the post-war productivity drive. Management consultants in particular warmed to American ideas. The positive view of the managerial firm contrasted sharply with the family firm that had to struggle against a negative image as an outdated institution. The poor performance of the textile industry, a sector in which family firms dominated, added to the negative image, though the causes for their troubles lay elsewhere. All kinds of cartels and gentlemen’s agreements were popular with business and quite acceptable to government and the general public as long as they didn’t negatively affect the public interest, in particular consumer interests. In the 1960s the cartels lost much of their significance. Instead, economic strength was sought in mergers and takeovers. In this the Netherlands followed the trend abroad, in the US as well as in Europe. Mergers and takeovers became increasingly popular ways to solve the problems of struggling companies. However, there were limits to the benefits of restructuring. Whether mergers did create profits in the end is a matter still under debate.

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The productivity drive Directly after the Second World War Dutch manufacturing was plagued with the problem of low labour productivity. A number of factors contributed to this low level. During the war years machinery and buildings had suffered from a lack of upkeep or outright damage. Detailed governmental regulations diminished efficient distribution of raw materials. Over-strict labour regulations made the input of labour less flexible, and low wages may have discouraged entrepreneurs from investing in new capital goods.79 On the need for increasing labour productivity the Americans had a strong opinion. Initially, the Dutch government was reluctant to participate in US-supported technical assistance projects to increase labour productivity. It was not that the government was not aware of the importance of raising productivity, but it was disquieted by the US claims that the benefits of a rise in productivity should be shared equally between producers, employees and consumers. For the government full employment and high exports were the first priorities, while higher wages would have to wait until economic recovery was well under way. Nonetheless, in 1950 a Dutch national productivity centre was set up to co-ordinate activities in the Netherlands. A year later a minister for the promotion of productivity improvement was nominated.80 Up to 1956 some 1,300 Dutch people travelled to the US to study American technology, management, labour relations, agriculture, distribution methods and consumption patterns. The Dutch were impressed by the Americans’ hospitality and their eagerness to share their knowledge. The Americans showed the foreign visitors their most successful companies and their high-level institutions. No wonder the visitors returned home with an almost unanimously positive view of America. The Dutch admired the large-scale production, the modern machinery and the highly efficient internal organisation that they saw. Even more than the technical progress, they admired the Americans’ looser, more informal relationships between managers, bosses and the workers, and the stress on internal promotion and learning within industry. Though they concluded that American and Dutch societies differed widely, they were nonetheless optimistic about the possibilities of learning from the US. The only complaint was that the exchange of ideas was very one-sided, taking for granted that the US could not possibly learn anything from Europe.81 The visits were followed by study reports, articles, lectures, courses and seminars to disseminate the newly acquired knowledge in the Netherlands. In some branches of industry, including the clothing and printing industry, the visits led to the establishment of productivity centres for their specific branches. The most difficult part, however, was to put the newly acquired knowledge into practice, to convince companies to make meaningful changes. For historians this is also the most difficult part to trace: how were companies affected? Frank Inklaar, who studied the technical assistance and

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particularly the study visits to the US and their follow up, came to the following conclusions: If we take a look at the introduction of American methods and technology in every-day practice, the picture is extremely varied. In trade and industry the study visits seem to have been particularly valuable for ambitious companies of some magnitude. For smaller companies the American practice was not as relevant. Big companies had their own means of remaining up to date.82 Inklaar also supposed that the positive influence was more marked for the agricultural sector than for the industrial one. As far as industry was concerned, the interest of the study teams soon moved from technical matters to more general managerial issues. There was great enthusiasm for the human relations approach but, according to Inklaar, the knowledge transferred was mostly a template, a concept without a well-defined content. The template was filled with Dutch views on the firm as a working community, on solidarity between classes and with personal preferences of the employers. Management consultants undoubtedly benefited most from the whole productivity drive, according to Inklaar. They participated in several study teams and received regular commissions from sector organisations as well as individual companies. The social scientists were another group of professionals who acquired higher status and wider employment through the application of American-inspired knowledge.83 Other studies confirm that the American influence on Dutch management consulting was strong. Britain played an important intermediate role. The management consultant B.W. Berenschot was one of the most active promoters of US management techniques. The new ideas ranged from better layout of machinery to discussion methods and sensitivity training.84 Sometimes Dutch firms directly asked American management consultants for organisational advice. This was the case in 1957 when Royal Dutch/Shell hired the American firm McKinsey & Company to reorganise its head offices in The Hague and London.85 The US influence on management consulting and education continued into the 1960s. The mid1960s also saw the founding of new business schools attached to universities.86 Dutch enterprises thus experienced the American influence both directly through their own contacts with the US and indirectly through the productivity work in their sectors and the activities of USinspired management consultants and social scientists. Looking backwards, it is ironic to notice that those industries that were most active in the government-supported productivity movement, the book binderies, the textile, leather and shoe industry and small metal industries, were also the sectors that faced the most serious problems in the late 1960s. It is possible that they were already facing problems and therefore more open to management advice. If so, they didn’t get the

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advice they needed. The book bindery and paper wholesaler Proost en Brandt had enthusiastically modernised its bindery in the 1950s and 1960s. A number of management consultants were hired to improve routing, layout, planning and cost calculation. A merit-rate pay system was introduced, which led to predictable unrest among the workers and did not satisfy management either. The newest machinery was bought. But all efforts to modernise the bindery and raise productivity did not increase the profits; quite the contrary. While capacity rose, flexibility diminished. Despite endless managerial advice and frequent changes in management, the modernised bindery never fulfilled the high expectations of its owners. In the early 1970s it had to be closed down. A number of factors caused this disappointing outcome. The modernised bindery had become dependent on exports, while rising wages in the Netherlands from the early 1960s onwards affected its international competitive position negatively. More importantly, however, the traditional bindery had become an industrial company, one based on mass production and mass consumption, which demanded a different kind of leadership: more systematic, more rigorous and less opportunistic. The managing directors of Proost en Brandt, with their main interest in the wholesale paper trade, were unable to provide that kind of leadership. They were open to the need for changes and were prepared to hire experts repeatedly, but that was not enough. The far-reaching demands which industrialisation of their bindery placed on management were insufficiently realised by the company as well as its many advisers.87 The history of the Proost en Brandt bindery raises some doubts about the relevance of the American-inspired managerial advice it received. In this respect, there is an interesting similarity with experiences in the Dutch clothing industry. The textile industry was very active in the productivity movement. No fewer than seven productivity teams went to the US in the 1950s, two of them related to the clothing industry. This sector created a productivity centre and had the constant attendance of management consultants, particularly Berenschot and Horringa. Yet, despite all these efforts, the clothing industry collapsed in the 1960s. Frank Inklaar suggests two explanations for this paradox. First, the implementation of all the suggested productivity measures left much to be desired. Second, the entrepreneurs gave insufficient attention to the issue of marketing their products, because they could sell them easily in the 1950s. When difficulties arose in the 1960s they were unprepared.88 This touches on a more basic problem of the whole productivity drive: Europe, let alone the Netherlands, did not have the kind of mass market that was at the basis of the American mass production. Large-scale production was mostly an American phenomenon that could not simply be transferred to the Netherlands.89 The US advisers were well aware of this problem but considered that many of their productivity measures were still useful to European industry.90 For the clothing industry or for the Proost en Brandt

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bindery and other equally industrialised binderies, these measures did not work out. A similar story could be told about the leather and shoe industry. Here, too, productivity centres were established and rises in productivity achieved. However, nearly all companies disappeared during the late 1960s and early 1970s.91 The Third World took over the mass production of these goods, while those companies that had specialised and diversified were able to survive. It seems that the industries and their consultants were so fixed on copying the American way that they did not notice in time the new way mass production was going to be organised: through low-wage countries in the Third World. The history of these industries underlines the argument of Zeitlin that the American model of mass production had serious limitations in different organisational and environmental contexts.92 Further research is needed to decide whether indeed these industries might have survived, if they had used other competitive strategies, based on greater product diversity and productive flexibility. By the end of the 1960s, some doubts about the appropriateness of US management advice clearly had crept in. As the economy of Japan seemed to be doing surprisingly well, the management consultants shifted their attention from the US to Japan. As early as 1969 a Dutch study group, organised by the SER amongst others, made a trip to Japan to learn about their production methods.93 The family firm under pressure In the 1950s the family firm had to struggle against a negative image as an outdated institution.94 Why was the family firm considered unsuited within the then prevailing economic context? First of all, after 1945 the Netherlands had a mixed economy. The government tried to create a setting in which the production factors of capital and labour could work together harmoniously. The companies were held responsible for creating employment and furthering economic growth and were no longer seen as the personal possessions of family, partners and shareholders. The conviction that companies had a societal responsibility invited pleas for comanagement, profit sharing and ownership schemes for employees.95 A family firm with a privileged position for members of the family and inherited wealth no longer seemed fitting in a democratic society. The notion that a family firm was unsuited for a democratic society was also encouraged, or perhaps inspired, by management thinking in the US. For instance in 1964 the question was raised: ‘Is family management contrary to the fundamental American creed advocating free competition, equality of opportunity, and the best man for the best job?.’96 In their article on modern management in Western Europe, the authors argued that European firms were often smaller than American firms, that many were still family firms, with the result that only a small elite reached the top of the

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organisation. That top was even more elitist because an academic degree was required. The system caused a lack of horizontal mobility and therefore a certain measure of inbreeding that hindered the spread of new ideas and new technologies. A Dutch management consultant cited this particularly unflattering picture of European management with obvious approval. He agreed that the family firm was based on privileges of birth and class that had become outdated. In competing for scarce capital and managerial talent the family firm would very likely lose out and society had little reason to support the established family firm in their economic struggle. Newly established family firms, however, might still have some benefits for the economic future.97 This brings us to the second argument against the family firm. The management theories developed in the US seemed to argue that professional managers were better than family members in running the business. Management of the company was not an inherited capability but something that could and should be learned systematically. The professional, modern, rational manager was contrasted with the irrational, traditional members of the family firm. The fact that the succession to leadership was hereditary seemed immediately to imply that incapable people were managing the company, while chosen managers were sure to possess the necessary capabilities. These theories strengthened the image of the family firm as an antiquated institution. Interestingly, a study from 1961 showed that in fact the vertical mobility among the directors of incorporated though not listed companies (mostly family firms) was greater than among the directors of listed companies. The leaders of family firms apparently came from a more varied background. The directors of listed companies more often had academic titles, which points to higher formal training. The influence of local and family ties was more marked in the family firms than in listed companies, but that certainly didn’t mean that the influence of family relationships had completely disappeared in listed companies.98 The third reason to question the family firm sprang from the fact that after the Second World War high priority was given to reconstruction and economic growth. Family firms that preferred to keep the expansion of the company within the financial means of the family were blamed for retarding economic growth. In addition, their ability to innovate was doubted on the grounds that family traditions might well obscure their views. Family partnerships would do best to turn themselves into limited liability companies, to find financial means outside the family and to employ professional managers, who would bring the old-fashioned firm to new heights thanks to modern management techniques.99 Outsiders were not the only critics of the family firm. The leaders of family firms themselves had doubts about the wisdom of continuing their activities within the traditional structure. One of the obvious reasons for this was the fiscal policy that made partnerships unattractive. During and

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after the war, fiscal burdens increased considerably in taxation of profits as well as in succession rights. The latter could create serious liquidity problems. Turning the partnership into a private limited company could solve this problem. In fact, many family firms were limited companies with a private character. In 1960 only 2 per cent of all limited liability companies were public, while 98 per cent were private. Most of the private ones were indeed family firms.100 Still, the private limited company offered only a partial solution to the problem of enlarging a firm’s financial means. Therefore, the next stage often was the issuing of shares and listing on the Amsterdam Stock Exchange. The company opened up. This often was the moment to accept outsiders in the top levels of management. In fact, keeping highly qualified second-tier management could be a problem for family firms if the way to the top was barred by family prerogatives. A wide range of companies in different sectors in the post-war period, ranging from retail and wholesale to chemicals and machinery, all decided to bring their family companies to the stock market and increase the influence of outsiders on their management. The grocery retailer Albert Heijn became listed on the Amsterdam Stock Exchange in 1948. The two brothers Gerrit and Jan Heijn urgently needed more money for expansion of the business as well as for compensation for their five sisters, who were not allowed to inherit a part of the company and therefore had to be bought out. The share issue was a big success. The employees seem to have been surprised to learn from the published annual accounts how profitable the company had been during the past years. The family Heijn continued to play an important role in the management until 1989.101 In paper wholesaling, where family firms had dominated the scene for a long time, a major change took place in the early 1950s. Of the ten leading firms, three had already been incorporated before the war, while five followed their example between 1949 and 1953. The director of one of those family firms, Ulco Proost, would have preferred to keep the company in the hands of the family, but he also was of the opinion that a business, like a plant, should be allowed to follow its natural growth. To finance this growth, outside money was necessary, the reason why Proost er Brandt decided to issue new shares and list its shares on the Amsterdam Stock Exchange. Shortly after, management from outside the family was included on the board.102 The three brothers Van der Grinten, owners of the family firm Océ-van der Grinten, initially decided to hang on to the family character of the firm, even though it meant they had to slow down expansion. For legal reasons, the company was incorporated in 1952 but all shares remained in the hands of the three brothers. However, gradually they became convinced that their family business would inevitably grow into a large company, which would need a different kind of management and larger financial scope. In this case the decision to nominate the first outsider to the board of directors in 1956 preceded the decision to

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turn the firm into a listed company, which took place two years later in 1958.103 A recent study on the strategies of six family firms in the food sector concluded that the desire to expand constituted the main motive for these firms to address the capital market and overcome their natural reluctance to open up the family firm. For three of the six companies this decisive moment came between 1947 and 1959, when the need arose to apply a new and more capital-intensive technology.104 Also in the cotton industry banking loans and issues of public shares became accepted ways to finance expansion or the renewal of machinery, as for instance happened with H.P. Gelderman & Zonen in 1961.105 In the 1950s many family firms changed their structure gradually by incorporating the company, issuing new shares and admitting outside managers. In the 1960s families often used mergers or takeovers to ensure the continuation of their firms, even though this also meant the end of the family tradition. The unfavourable situation in the cotton industry, the traditional stronghold of the family firm, contributed to the negative image of the family firm. The persistence of the family firm was held at least partially responsible for the poor economic performance of this sector. The history of the textile manufacturer Van Heek & Co provides the historian with evidence of how the family firm typically placed the interest of the family, its wealth, social status and the continuation of its social position above the firm’s goal of profit maximisation. In periods of prosperity this attitude stimulated the growth of a company but in downturn periods it had a restraining and negative effect.106 The slow decline in the textile industry in the 1960s seemed to illustrate this point. However, it does not seem entirely fair to blame the family firm for the blind-alley situation of the textile industry. The industry came out of the depression and war period with a large but obsolete set of buildings and machinery. The traditional colonial market was lost to the low-wage competition of Asian producers, who were already gaining strength during the inter-war years. Responding to the need to increase labour productivity, the cotton manufacturers invested in new machinery in the 1950s. However, they also had to take into account that they would have to find an outlet on the fragmented and demanding European market. Therefore the manufacturers chose the kinds of machinery that would enable them to change runs frequently and serve high-quality markets.107 This choice limited their savings in labour costs. Diminishing labour costs by increasing production was also difficult because in the late 1950s it became clear that there was a worldwide overcapacity in the cotton industry. In the 1960s rising wages added to the problems, and when sales began to go down, and profits began to fail, new investment in labour-saving techniques became increasingly difficult. The simultaneous need to raise labour productivity, diminish production capacity and invest in new technology while profits went steadily down posed an insolvable riddle to the industry. One possible solution was further specialisation combined with the

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shedding of unprofitable production. The other option was merging with co-producers, which many at the time and afterwards considered the best and most logical solution.108 The fact that many family firms were reluctant to follow this path seemed another demonstration of their negative influence on the fortunes of their business sector, despite the fact that in some cases the liquidation of the firm might well have been the most sensible option, certainly for owners and perhaps even for the employees. One textile firm in Tilburg, the woollen spinning factory Pieter van Dooren, chose this option. After having been active in the textile business for nearly 150 years, the family members decided to find a living outside the firm, to stop production and invest the family funds in more profitable ventures.109 In many cases the mergers that ultimately took place did not bring new long-term perspectives for either the companies or their employees. It took too long for the benefits of rationalisation and cooperation to be realised and in the meantime financial losses increased the pressure to close down production units. In the end, whatever recipe had been chosen, specialisation or concentration, none would have worked without dismissing a large number of employees. However, this was an unattractive course to take in a period where companies were first and foremost seen as communities of workers and managers rather than vehicles for investors to earn a profit. Ironically, for most of the post-war period, the industry had struggled to find reliable and qualified employees. Nonetheless, dismissing large numbers of personnel was a sensitive issue, and the prospect of large redundancies even motivated the government to come forward with some support measures. The Dutch government guaranteed certain loans and offered investment allowances, though it was not prepared to forbid imports of mass-produced goods from Pakistan because it also wanted to help underdeveloped countries to build up their industries. However, the European Union took some measures to restrict textile imports.110 None of these measures were enough to preserve the textile industry in the Netherlands. Only a number of small specialised firms, such as the jute and linen weaver Zwartz, survived. The latter survived just because it was a family firm, small, flexible and specialised.111 Also, the first movers on the path of concentration, the combination Nijverdal-ten Cate, saved their company, though only after diversifying into entirely new ventures. Most of its textile activities were closed down in endless rounds of reorganisation.112 From this excursion into the textile industry, we can learn that there was no universal failure in the functioning of family firms. Even in this difficult industry, some failed while others succeeded. There is insufficient evidence to dismiss the family firm as an outdated institution. However, what is typical for the family firm is that it functions in two different spheres, the firm and the family. In the whole discussion on change and continuity within the family firm, business historians have overlooked the changes in the family itself,

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in the norms and values of family life and its place in society. Tacitly they have assumed that the family remained unchanged, but this is clearly untrue. As elsewhere in Europe, in the Netherlands a process of individualisation took place, which had important implications for the family structure and culture. People married less, divorced more frequently and attached less importance to their marriage. These trends affected the coherence and continuity of families. Through the frequent remarriages the nuclear family became more diffuse.113 In this context it also makes sense to study the changing nature of parent–child relationships. The number of children per family declined and the relationship between parent and child became less hierarchical and authoritarian after the Second World War. Children gained more freedom in making vocational choices. The position of women as the focal point of the harmonious family changed when women reached for higher education levels and began to play more active roles outside the family circle.114 These changes must have had a bearing on the management of the family firm. For instance, because the relations between family members have become more egalitarian, there is no longer any reason to assume that families will adopt a paternalistic management style. Rather, families can be expected to act as teams promoting team work in their firms. How exactly changes in the family and the family firm are related is still unclear and needs further study. Cartels, mergers and diversification Though Dutch entrepreneurs were energetically opposed to the rational organisation of business under state guidance as proposed by the first post-war government, they gladly accepted all kinds of private trade organisations. Cartels, gentlemen’s agreements and trade associations were very popular with business and quite acceptable to government and the general public. Often the same sector had a number of different agreements. For instance, in the beer industry nearly all breweries were represented in the Centraal Brouwerij Kantoor (Central Brewery Office). The CBK was established in 1939 to tackle the many wartime problems. During the war, beer had been gradually watered down, which had diminished its reputation. After the war, the CBK introduced a general beer price agreement which set minimum prices and maximum discounts. It also started a general publicity campaign to get customers back by assuring them that ‘the beer is fine again’, that is of pre-war quality and strength. The campaign ran until 1965. The price agreement was lifted in 1956 under pressure of the minister of Economic Affairs. Two main breweries, Heineken and Amstel, also members of the CBK, reached an understanding to respect one’s clients ‘on principle’ in 1947. What this ‘on principle’ really meant remained unclear. The understanding was what remained after the managing directors of the two breweries had unsuccessfully tried to reach a

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merger deal. In 1949 five main breweries, again including Heineken and Amstel, concluded an agreement to maintain the status quo and respect one another’s clients. Thus the breweries Heineken and Amstel were part of at least three different agreements. However, many agreements were unclear as well as difficult to enforce. In the sixties the strategy would move from agreements to mergers.115 The Dutch cartel law, introduced by the Germans in 1941 and confirmed in the cartel law of 1958, did not forbid cartels, but it allowed the government to interfere if cartels led to abuse. From 1962 onwards cartel agreements had to be reported to the Minister of Economic Affairs. The Cartel register was secret, though general information was presented to the Second Chamber and thus made public. A survey for 1968 revealed the existence of no less than 466 cartel agreements in the manufacturing sector alone. Of these 175 concerned price agreements, 149 related to sales conditions and 122 to the division of markets. Some of the other agreements related to production matters, the centralisation of purchase or sales departments or financial matters.116 How effective were the cartels and gentlemen’s agreements? The minutes of the ‘Group of X’, the ten or so most important Dutch paper wholesalers, give some insight into the functioning of one gentlemen’s agreement. The Group of X was formed during the 1930s. During the first post-war years, the paper trade was still regulated by the government. From 1950 onwards, the Group resumed its negotiations over price lists, discounts and sale conditions. The meetings took place between the managing directors themselves, a small group of people who knew each other well and often were friends, even though they remained each other’s competitors. There were outsiders, but the Group tried to put pressure on them via the paper manufacturers, asking them to demand higher prices from wholesalers outside the agreement. The Group argued that the manufacturers also profited from the higher prices the Group was able to get from its customers. The Group could impose no sanctions. The system was based on trust, and on the fact that the world of paper wholesalers and paper manufacturers was small. It happened frequently that during the meetings one of the Group members was asked to justify certain deals. There was always a ready excuse, a special batch, or a special occasion. In fact, they were all trying to cheat a little bit, but they also knew that the others would come to know of it and therefore it was in their own interest to keep the cheating within a narrow margin. In all likelihood, the agreement thus helped to stabilise and keep up prices. However, in the 1960s the Group itself increasingly doubted the effectiveness of its agreement.117 The lenient cartel policy in the Netherlands was a far cry from American free market ideology. In 1949, the Americans launched an anti-cartel drive, together with their productivity drive. They tried to hunt down cartels, first by introducing legislative reform and next by employing the legislation vigorously. Neither within the multinational framework nor in

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the national area was their aim achieved. Asbeek Brusse and Richard Griffiths came to the following conclusion: The American anti-cartel crusade in Europe was not crowned with success, but became mired in obstruction and equivocation. Cartels did not disappear after the war but became part of the political economy of reconstruction. They often operated not with the disapproval of national governments determined on their extinction, but with their knowledge and, occasionally, support. (. . .) Far from disappearing, cartels emerged to become a widespread and powerful feature of European recovery.118 This observation applied not only to national cartels but also to international cartels that had operated in the 1930s and were quickly reformed in the post-war period. One might wonder whether the cartels were seemingly so successful because the 1950s were a sellers’ market. Companies could all expand their business and therefore had no need to achieve expansion at the cost of others. After the Treaty of Rome in 1957 Dutch entrepreneurs had to take the tougher European rules into account. However, it took years before these rules began to have any real impact. In the sixties, the cartels lost much of their significance, though many were formally kept alive. Instead, economic strength was sought in mergers and acquisitions as well as combinations. In this respect the Netherlands followed the trend abroad, in the US and Europe. This period of heightened merger activity can be interpreted as the third merger wave. The first took place before the First World War and was predominantly an American movement. The second wave, in the 1920s, was characterised by the creation of large enterprises to challenge the dominant companies of the first merger movement. The formation of Unilever and AKU fitted into this pattern. The most typical phenomenon of the third merger wave, which started in the 1950s in the US, was the rise of the conglomerate. The third merger wave did not reach the Netherlands until the mid-1960s. The number of mergers in manufacturing and wholesaling rose from 12 in 1958 to 65 in 1965 and 323 in 1969.119 Each merger had its own rationale, but a number of common motives surface in the company histories. Mergers were seen as a way to grow quickly while internal growth was expected to take time. The most frequently mentioned argument for mergers was the increasing competition on foreign markets or the home market. The sellers’ market of the 1950s had come to an end, while trading restrictions were slowly diminishing, leading to increasing competition in foreign markets. Most marked was the integration of the European market, which was an important outlet for Dutch companies. The pressure was stepped up by the arrival of American subsidiaries in Europe. For Dutch companies the problem of growing international competition was made worse by rising wages, which

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diminished their competitive advantage. Mergers could potentially help by increasing market power and opening up the possibilities of higher efficiency and economics of scale. Possibly the same effect could have been achieved by internal growth, but most companies considered this process too slow to keep up with competition. H.W. de Jong concludes that mergers will take place under circumstances of increasing competition if the economic prospects are still sufficiently favourable to give confidence in the future growth of the company.120 This was clearly the situation for Dutch companies in the 1960s. Technological developments were also mentioned as motives for mergers. Research and development were considered important sources for innovation but they were also costly, with uncertain returns. Larger companies could more easily carry this burden. For the chemical companies AKU and KZO the combination of their research activities formed an important reason for merging in 1969, which resulted in the company AKZO. The computer technology of these years required large mainframe computers, which were so costly that only large companies could afford them. This new technology was one of the merger motives for banks. Of the many more personal motives behind mergers, two stand out. First, the ambition of some managers was to reach a certain goal, for instance to become leaders of increasingly large and mighty empires. Second was the more modest wish of some family owners to assure managerial succession in their companies or capitalise the value of their family holdings. For these goals, mergers offered an obvious solution. In the Anglo-American literature on mergers and acquisitions much emphasis is placed on the importance of financial considerations and the actions of financial swashbucklers. If the stock market value of a company falls below the perceived real value, then a takeover promises to create a financial surplus. This valuation ratio can lead directly to a takeover. The threat of a takeover bid can also lead to merger strategies by the existing management in order to forestall a takeover by others.121 This kind of financially driven strategy was virtually absent in the Netherlands. In the 1970s and 1980s less than 3 per cent of mergers took place though a public bidding for shares, and even those were seldom hostile takeovers.122 Many mergers and takeovers involved family firms with no listing on the stock market. If the merger involved two listed companies, then the deal was negotiated between the boards of (managing) directors. Only very occasionally did the board of directors of one company directly address the shareholders of another company. If they did, the chances of success were small because of the protective measures against hostile takeovers that were used routinely in the Netherlands. In the US the third merger wave was dominated by the formation of conglomerates. This was less true for the Netherlands. Until 1970 the majority of mergers in manufacturing and wholesaling (62 per cent) were horizontal, 12 per cent were vertical and 26 per cent conglomerate.123 However, the number of conglomerate

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mergers increased during the early 1970s. Also, the rise of the conglomerate was one of the most discussed and admired phenomena of that time. Horizontal mergers, intended to diminish costs and increase economic efficiency, were particularly relevant for traditional industries, such as textiles and metals. We have already discussed the textile industry and discovered that mergers were seen as the best course, but did not succeed in preserving the industry. The shipping industry was another sector in which mergers were used to create a brighter future. From the early 1960s, the shipbuilders wrestled with rising wages and therefore a loss of competitiveness in international markets. In 1964 seven major shipyards came to the conclusion that building new ships had become loss making and that repairs and other activities had to take care of the profits. They blamed Japanese competition. Japanese shipyards were bigger, technically more advanced, had cheaper labour and received state support, which enabled them to give their customers cheap credit. The shipbuilders asked the Dutch government to take action. The government responded by nominating a committee to study the situation in shipbuilding. In 1965 the committee came up with two conclusions. The shipyards should seek closer co-operation in order to modernise and introduce serial production. In addition, the government should make international competition more equal by giving the same financial support for supplier credit as the Japanese government. In order to receive government support the shipbuilders agreed with the committee’s conclusion on the need for concentration in their sector, even though they were not entirely convinced. Some preferred a stand-alone policy and others were following a diversification policy, described as ‘creeping onto the land’. Nevertheless, the report prompted a merger process. The government actively encouraged the mergers, making them a precondition for further financial support. Loss-making companies were thrown together with profitable companies in the hope that the strong partners would get the weak partners back to profits. After a number of smaller mergers, this policy led in 1971 to the formation of the RSV (Rijn-Schelde-Verolme). Five of the seven main shipyards that had raised the alarm in 1964 were brought together. The new company could begin the process of reconstruction deemed so necessary to give this sector a new future. This task turned out to be more difficult and time consuming than was foreseen, if only because managers could not decide on the best organisational structure to reap the efficiency benefits of the new combination. The crisis in the tanker industry following the first oil price shock added to their misery.124 Like the textile industry, shipbuilding also demonstrated how difficult it was to reap the potential efficiency benefits of mergers. This is not to say that all horizontal mergers were doomed to fail. Two mergers in the banking sector in 1964 were a lasting success. The Dutch banks experienced an increase in competition on the home market because the traditional division of working territories between the banks

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disappeared. The commercial banks entered the private savings market in order to acquire funds for their medium-term business financing, while the agrarian co-operative banks extended their credit activities outside the agricultural sector. To reach the private client with an increasing number of services, banks had to expand their network of local branches. This was a costly strategy that made combining networks through merger an attractive option. The large number of retail clients stimulated the banks to introduce computers for handling large quantities of data, but this technology was expensive and demanded large-scale operations. For the NHM the loss of its traditional territory, colonial Indonesia, was another important stimulus to merge. Its merger partner, the Twentsche Bank, was affected by the loss of textile exports to the former colony because the textile industry was one of its main clients. The Rotterdam Bank was confronted with industrial clients, such as oil refineries and shipyards, which increased in size and demanded larger loans than the bank could afford. The Amsterdamsche Bank had no direct reason to look for a merger but it didn’t want to be left out and become one of the smaller banks while its competitors were making merger plans. In 1964 all these considerations led to two large banking mergers, which resulted in the formation of the ABN and the AMRO.125 Comparable motives of economies of scale, increasing competition and the increase in scale of their industrial clients led to the merger of the two co-operative banking organisations in 1972. The resulting Rabobank immediately became the largest bank measured in assets, though a few years later it was again surpassed because its rivals, ABN and AMRO, expanded through takeovers.126 Another horizontal merger, between two important breweries, Heineken and Amstel, in 1968 was successful too. The trigger for this merger was the arrival of foreign brewers, notably Allied Breweries and Stella Artois, in the Dutch home market. Through concentration the two Dutch brewers expected to improve their competitive position, which turned out to be true.127 The strategy of vertical integration was often used in combination with horizontal integration, as for instance in the textile industry, or with diversification. The international trading companies tried all three strategies from the mid-1960s onwards. The big merchant houses held merger talks with each other, but were also interested in entering the manufacturing sector. A report by the Federation of Dutch Wholesalers from 1969 clearly stated that the trading companies would only survive if and when they developed from independent intermediaries into a conglomerate of trade and industry, acquiring manufacturing interests either by merging with industry or by setting up their own production facilities from scratch. Hagemeyer was very active in acquiring manufacturing companies, particularly in the leather and metal industries. The Hagemeyer management was aware that the ventures they were taking over had their difficulties, but they were optimistic that they would be able to turn them around thanks to their organisational capabilities and marketing skills.

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The acquired companies were sometimes considered as vertical integration, sometimes as diversification more generally. The trading company Internatio opted for a combination with the transport company Müller and added activities in engineering, electrical fittings and the metal industry. The coal wholesaler, SHV, first expanded into oil and natural gas and subsequently diversified into groceries and building.128 The manufacturing companies, on their part, started to buy up trading companies. During the early 1970s the steel manufacturer Hoogovens, for one, took over several wholesalers in building materials to boost its sales in the building industry.129 One of the most frequently cited examples of the move towards conglomeration was the OGEM. This company, formerly working in colonial Indonesia, was active in public utilities, building and wholesale trading. This conglomerate, much admired at the time, was created through an endless string of mergers and takeovers.130 The phenomenon of cross-border mergers reappeared in the 1970s after an absence of forty years. From 1970 onwards Akzo intensified its old relationship with the German enterprise Vereinigte Glanzstoff Fabriken through merging and integrating the chemical fibres activities of both companies in Europe. In 1972, after years of negotiating, the steel manufacturer Hoogovens combined with the German company Hoesch to form Estel. The idea was to increase efficiency through specialisation, with Hoogovens concentrating on crude steel production and Hoesch on rolling and processing, while the intermediate products would be shifted between the two. The third important cross-border merger, also with a German partner, was the merger between the aircraft builder Fokker and German company VFW in 1969. Fokker specialised in the civil market, while VFW was mainly involved in military projects. The combination hoped to build up a truly European-based aircraft industry.131 All these mergers were planned in the boardrooms of the various companies. The managing directors had lots of time to think about mergers because the managerial wisdom of the late 1960s decreed a division between the daily running of the enterprise and long-term strategy making. By cutting the board members off from the operational side of the companies, the managing directors were able to devote their time to planning and plotting mergers and acquisitions. The managerial literature helped them to think in this direction, as well. Often, these ideas reached management through management consultants, but in the case of the sugar company CSM the book by H. Igor Ansoff, Corporate Strategy, was used directly by the managing directors to analyse the strength and weaknesses of their company and to decide in which product–market combination they wished to expand. They also looked at the examples set by the OGEM and the SHV. The analysis of their strengths and weaknesses, however, did not easily point them in the right direction for future expansion.132 The diversification strategy was inspired by a general idea of hedging risks. By not putting all their eggs in the same basket, the

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company could expect that losses in some areas would be compensated by profits in other areas. In some cases the managers were inspired by the more sophisticated idea of differences in the life cycle made famous by the portfolio analysis of the Boston Consultant Group. This analysis was based on two elements: the product life cycle and the cash flow cycle. According to this theory, companies should analyse their product range to find out in which phase of the product life cycle the product belonged, the early start (question mark), the growth (star), the saturation (cash cow) or decline (dog). Products in their early start and growth phase were supposed to need ample cash that should be provided by products at the end of their life phase, particularly in the saturation period, when large sales brought in profits and new investment was no longer needed as the product was reaching the end of its life cycle. Conglomerate companies had the task of managing their cash flows in such a way that the money made by cash cows was invested in new, promising products, so that they could develop from question mark to star and in due course become the new cash cows.133 Some Dutch companies such as the above-mentioned CSM, and Akzo, DSM, Océ, Bührmann-Tetterode and SHV used the Boston portfolio analysis to guide their investment decisions.134 Whether mergers did indeed provide benefits is hard to decide, particularly in the Dutch situation, because even Dutch literature invariably refers to foreign research results. Also, the criteria to assess the mergers differ. H.W. de Jong concluded in 1989 on the basis of studies for the US and Europe that, as far as Europe was concerned, probably about a third of the mergers failed, while about a fifth had no positive or negative effect.135 A large international research project at the end of the 1970s by Dennis Mueller concluded for Belgium, West Germany, France, the Netherlands, Sweden, Great Britain and the US that ‘no consistent pattern of either improved or deteriorated profitability can (. . .) be claimed across the seven countries. Mergers would appear to result in a slight improvement here, a slight worsening of performance there’.136 These sobering results were obviously not yet known in the late 1960s. At that time, mergers were more criticised for the economic power they seemed to create than for their possible lack of added value. The mergers created large companies that seemed invincible and that dominated the Dutch economy. During the mid-1970s, the large manufacturing companies reached the zenith of their economic importance. Though the best way to measure their economic importance would be to measure their added value, these kinds of figures are not available for most of the twentieth century. Instead historians often use the total assets. These figures give some indication of the scale of their operations in comparison with the national economy. The total assets of the top 100 manufacturing companies as percentage of GNP rose from 20 per cent in 1913 to 62 per cent in 1950 and further to 88 per cent in 1973. After 1973 they diminished to 77 per cent in 1990. For the US the total assets of the top 100 manufacturing com-

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panies were 18 per cent of GNP in 1950, 30 per cent in 1973 and 35 per cent in 1995, considerably lower. The same was true for Germany. There are no comparable figures for 1973, but for 1950 and 1995 they were respectively 16 and 35 per cent. Should the assets of the Royal Dutch/ Shell be excluded, Dutch developments would be more in harmony with the other countries, but the top 100 would still dominate more than in the US or Germany.137 Not only did the large manufacturing companies dominate the economy, but they were also run by a handful of managers with interlocking directorships. The trade union leader Mertens warned in 1968 about the concentration of power in the hands of 200 people in business and politics who all knew each other well and met frequently. Political scientists picked up his theme. They studied the relationships between companies and their (managing) directors and concluded that the banks and their (managing) directors were the spiders in the web. The two cooperative banks (that formed the Rabobank in 1972) were the exception, though they played a central role of their own in the co-operative movement.138 A later study confirmed these findings. Comparison of national relationships between companies in a number of European countries and the US showed that in Germany and the Netherlands banks were the main integrators of the network, though the German network was both denser and more centralised than the Dutch. However, this study also underlined another aspect of the Dutch network of interlocking directorships: the role of retired executives of manufacturing companies in knitting the network together. These network specialists, or big linkers, acted as opinion leaders in business and as industrial spokesmen.139 The fact that during the 1970s the banks were singled out as the hidden force behind the big companies was understandable because business expansion became increasingly financed by bank loans. After 1965 profit margins went down, which increased the difficulty of turning to the stock market. By using bank loans, businesses hoped to profit from the difference between interest and profit rates, but during the 1970s, when inflation started to rise and interest rates went up, these loans became an increasingly heavy burden on the company. While dividends could be passed over for a year, interest payments could not. How vulnerable companies had made themselves became clear when the recession of the 1970s set in. Soon worries over the economic power of big companies abated when they turned out to be in danger. Instead, worries about the safeguarding of employment took over.

3.3 Internationalisation, losses and gains The Second World War had brought disruption of the entire international trading network. Dutch business had become divided into three different areas, each with their own different experiences. After the war, the three

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stories came together: one of those who had stayed in the country and suffered the German occupation; another of those who had been in the Dutch Indies and suffered the Japanese occupation; the third of those who had lived outside those two areas, in Britain, the US or elsewhere. Initially the three groups had difficulty in understanding each other and the specific needs and problems of their differing situations. However, the three were united in their wish to rebuild Dutch business inside and outside the country. In this ambition, a lasting relationship with colonial Indonesia seemed vital. However, it was not to be. As it turned out, neither Dutch international trade nor the country’s position as foreign direct investor were ultimately dependent on the possession of colonies. During the Second World War a private study group in London, chaired by P. Rijkens, the Dutch president of Unilever, had prepared a report about the country’s future commercial policy, and this group argued that Dutch interests would be best served by a global liberalisation of trade and finance. An Anglo-American alliance would be the most advantageous for the country, because, in their view, the Netherlands was an outpost of the Atlantic world on the European continent and a transit port for the continental German hinterland. In the occupied Netherlands the views on trade relations were somewhat different, with more emphasis on European collaboration but the same wish for liberalisation.140 The US was a firm advocate of liberalisation of trade and the creation of an integrated European market. However, the first five years after the Second World War were still littered with protective measures, worse than during the 1930s. Each country in Europe operated an exchange control regime and tariffs; in addition endless quantitative trade restrictions were in place. Bilateral agreements provided the only channel for intraEuropean trade. During the post-war years the Dutch government exerted itself to achieve multilateral agreements by cobbling together bilaterals. This policy pivoted around the universally accepted importance of trade with Germany and overseas trade. A breakthrough in trade relations with Germany came in 1949, when Germany’s imports were completely liberalised. Immediately, Dutch exports poured into that country. In 1950, international settlements became much easier when the European Payments Union was founded. This created a multilateral clearing system among those European countries belonging to the Organisation for European Economic Cooperation, set up in 1948 as the framework for the Marshall Plan. However, innumerable restrictions continued to weigh down trade with the most important trading partners.141 After 1950 Dutch exports began to rise and even reached higher market shares than those in the 1920s. Nonetheless, Dutch policy makers continued producing one trade initiative after the other, afraid as they were of a return to the closely protected world of the 1930s. Though they would have preferred a wider European alliance, which would have included Britain, the Netherlands were among the six founders of the

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European Coal and Steel Community in 1951, and they signed the Treaty of Rome in 1957, which saw the beginning of the European Economic Community.142 Both the Dutch employers’ organisations and the major multinational companies supported initiatives to achieve greater European economic integration and lobbied with their counterparts in other European countries. The formation of the EEC did not really mean the start of a common market, but it signalled the beginning of a process to create a common market in due course. Business people were expecting a common European market to materialise soon and based their strategies, notably mergers and increased scales of production, upon these expectations. The process of integration, however, took much longer than foreseen in 1957, continuing throughout the rest of the twentieth century. The long-harboured wish of the Dutch to include Britain became true in 1973. However, with the introduction of Britain, the Netherlands lost its position as closest ally of the US and UK in the continental EEC.143 Loss of the Dutch East Indies: political and economic decolonisation For the Netherlands the Second World War came to an end when the Allied armies liberated the country from the German occupation in May 1945. In the Dutch East Indies the end came when Japan capitulated in August 1945. At that moment no Allied forces had as yet landed in the archipelago. Making use of the power vacuum, the Indonesian nationalists proclaimed the independent Republic of Indonesia. The result was a struggle for liberation that lasted four years. Though the Netherlands had been humiliatingly defeated both in Europe and in Asia, it took the restoration of its rule in the Dutch East Indies for granted. The Dutch government counted on its Allies to help restore its former colonial rule. In their view, law and order had to be re-established before gradual steps towards independence could be taken. Continuation of the special link between the Netherlands and Indonesia seemed self-evident because of their centuries-long relationship and because of the huge economic importance attached to the colony. Dutch business also expected that it could pick up the threads where they had broken in 1942. The political reality, however, had changed dramatically. During the war the Allies had used slogans such as political self-determination and democracy to inspire their soldiers, many of whom came from former colonies. Soon the call for independence would sweep away the former colonial regimes. Despite the chaotic political situation after 1945, most Dutch companies in Indonesia tried to get back to business as soon as possible. Many had to start from scratch as not only all stocks but also the entire administration was lost, while buildings, production units and plantations had been severely damaged. Merchant houses, working in the cities, could get back to business as soon as they acquired some office space. For manufacturers, however, the damage to their production facilities was a serious

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handicap in the recovery process. It took the brewery Heineken a year to get back its premises and then nearly another year to produce its first beer. Despite (or perhaps because of) the political–military situation, sales in 1948 and 1949 surpassed pre-war levels.144 Plantations had suffered most of all. At a minimum they were heavily damaged, sometimes even past repair. In many cases plantations as well as mines were simply out of reach for their owners because the Nationalist fighters occupied them.145 In mid-1947 the Netherlands attempted to regain control over the Indonesian archipelago by military force under the telling name of ‘Operation Product’. More than a thousand enterprises were returned to Dutch authority. The military operation, however, did not put an end to the unrest, terrorism and armed attacks, which continued to threaten ordinary daily business. As they considered business more important than politics, Dutch business people working in Indonesia began to accept the idea of an independent Indonesia as the most realistic solution. As a consequence, the second military operation, launched in December 1948, found less support among them. Instead, they felt greatly relieved when the agreement between the Republicans and the Dutch government was signed in December 1949, formally acknowledging the existence of an independent Republic of the United States of Indonesia.146 Pressure from the US had played an important role in this outcome. In 1947 the Dutch government welcomed US dollar support because it needed extra money for preserving its colonial empire in Asia. Ironically, as it turned out, the Marshall Plan worked the other way round. It gave the US a means of putting pressure on the Dutch government to end the colonial war and withdraw from Indonesia.147 For the Dutch government the independence of Indonesia signalled the moment to focus entirely on the Netherlands and to further economic growth and exports by promoting growth of manufacturing industry at home. The Dutch companies working in Indonesia, however, tried to continue their business under the new political circumstances. Only some plantation companies were so severely damaged that it seemed useless to make a new start.148 Most entrepreneurs were optimistic that the agreement had created a basis for economic recovery and growth in Indonesia and that Dutch experience and finance would be essential elements in this recovery process. Though many Dutch business people had recognised the inevitability of political decolonisation during 1947, few had been aware of the desire for economic decolonisation that also manifested itself among the Indonesian population. The aspirations for economic independence would increasingly come to influence developments in the young state. Between 1950 and 1957 the Indonesian economy was able to grow rapidly. This resulted from the numerous repair works carried out everywhere, in which fairly modest investment achieved quick results.149 Plantations, manufacturing industries, mining and oil companies all resumed their activities and in some cases, as in rubber cultivation and the oil

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industry, with good results. During the first years of independence, the Javasche Bank (which operated as the central bank), the railways and tramways, the airline, and several gas works and power stations had been brought under government control. Merchant houses were not nationalised, but in 1950 the government introduced a system of import licences and trade credit arrangements to promote the growth of Indonesian importers. This nationalist ‘Benteng’ policy proved successful in as far as that by the mid-1950s about 70 per cent of imports were nominally traded by Indonesians. As often as not, though, they were not really responsible, acting as figureheads for Chinese importers running the business.150 Dutch importers found ways to continue their import trade, using their various exporting branches, but they encountered many obstacles. The optimism within the Dutch community that business in Indonesia would once again flourish as during the heydays in the 1920s gradually gave way to a feeling of disenchantment. Even after independence, armed attacks and political unrest continued to be part of daily life. Currency restrictions hindered the extension or renewal of production facilities. Transfer of profits was controlled. In most cases profits did not arrive in the Netherlands until 1957, but only with considerable delays and cut in half by the deduction of taxes. More problematic than delays and taxes, however, were the rising demands of labour, which undermined profits themselves. Strikes to support wage demands regularly interrupted business. With rising labour costs and declining productivity, plantations and labour-intensive manufacturing, in particular, struggled to keep going. The Unilever subsidiary concluded that demand for soap, margarine and cooking oil far exceeded supply. The bottleneck was the supply of regular workers. They moved into a factory as swiftly as they moved out.151 From the mid-1950s Dutch companies were increasingly confronted with an official policy then known as ‘Indonesianisation’. The government, keen to promote the appointment of Indonesian staff to senior positions in business, began to restrict the influx of foreign staff. Dutch companies were not averse to hiring more employees locally, for after all this would reduce the expense of sending people over from the Netherlands. However, finding suitable local staff proved difficult. Dutch merchant houses attempted to safeguard their position in Indonesia by seeking new opportunities and by adapting as much as possible to the demands of the new government. One may well ask why most companies showed such curious determination to continue working in Indonesia. First, alternatives proved hard to find. Second, in spite of all restrictions, Indonesia continued to offer profitable business opportunities. And finally, Dutch businessmen stayed because they had boundless confidence about being indispensable in Indonesia. The trading company Internatio expressed this feeling tellingly in 1956 by stating that the situation in Indonesia was strenuous and complicated. The country was sliding down economically and for Dutch entrepreneurs it was

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increasingly difficult to maintain themselves. However, the company definitely fulfilled useful, important and hopefully also lucrative functions.152 Nearly all companies woke up to a nasty surprise when in 1957 the curtain fell for Dutch interests in Indonesia. A political row over the position of Irian Jaya, still in Dutch hands, led to strikes and the occupation of Dutch establishments. In December 1957 all Dutch companies were put under government supervision. Contacts between local management and the Dutch head offices were forbidden. Most people with Dutch nationality took this as a signal for leaving the country, placing the management in the hands of Indonesian managers, and hoping to return at some future time. Between December 1957 and mid-1958 about 36,000 Dutch people returned from Indonesia to the Netherlands.153 Some companies, including the trading company Borsumij, attempted to find ways of continuing activities in Indonesia, either through joint ventures or through the construction of advisory management companies. It was all to no avail. Borsumij had to leave Indonesia in 1959. The former colonial bank NHM was about the last to repatriate its staff in 1960. The Dutch possessions were nationalised in 1959 and 1960. The two Anglo-Dutch multinationals succeeded in keeping their activities going for a while. Initially it was unclear whether the government would consider Unilever a Dutch or an international organisation. The business was put under government control in 1965, but handed back to Unilever in early 1967.154 Royal Dutch/Shell kept going by replacing its Dutch personnel with other nationalities and changing the legal structure in 1960 by founding PT Shell Indonesia. Six years later all Shell interests in Indonesia were sold to the Indonesian government as part of its general strategy to nationalise the oil industry.155 The subsidiary of the Dutch brewery Heineken happened to be formally part of an international financial group. The brewery changed its name and Heineken withdrew as technical adviser in 1960. Sales went down immediately. In 1965 the factory was not nationalised but placed under Indonesian supervision, while all European staff were dismissed. Two years later the much-diminished business was returned to Heineken.156 Though nationalisation came as a surprise, the Dutch had been cautious with new investment in Indonesia in preceding years. As a source of income, the former colony had become less important. The contribution of colonial investment to national income formation in the Netherlands was estimated at 8 per cent of Dutch national income in 1938. For the late 1940s and early 1950s this contribution was calculated at only 2–3 per cent.157 Also, the dense network of interlocking directorships, which had existed between the companies working in or for the Dutch East Indies, spectacularly disintegrated between 1946 and 1962.158 One could argue that the loss of the colony for the Netherlands came in two stages, first political independence in 1949, and then the economic rift eight years later. This gradualness probably softened the blow. Nonetheless, many trading houses, mining and plantation companies and manufacturing

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firms disappeared through liquidation, merger or takeover. This was particularly true for the free-standing companies that had only a head office in the Netherlands and no activities outside Indonesia. Some disappeared without leaving a trace.159 The Amsterdam Stock Exchange lost a prominent group of shares. After 1945 some companies began to look outside the Dutch East Indies for alternative investment. Their success in finding alternatives was mixed, but their search led them to explore many parts of the world as possible working space and in this way added to the international orientation of Dutch business. Theories of foreign direct investment often assume that companies invest abroad because they have certain advantages over local firms or can create advantages for themselves, such as avoiding tariffs by moving into another country. For Dutch companies working in Indonesia one could argue that push factors were more important than pull factors in their decision to redirect their investment to other overseas countries. Nonetheless, these companies were willing to undertake new ventures because they thought they derived ownership advantages from their experiences in tropical agriculture and more generally from working in a developing country. For utilities, bound by concessions and local facilities, redirection of their activities was not self-evident. One of those companies, however, succeeded surprisingly well. The gas and electricity company OGEM sold its main works in Jakarta to the Indonesian government in 1954, while the rest of the company was nationalised in 1959. In the beginning of the twentieth century it had already deployed similar activities in the other Dutch colonies in the ‘West’, that is Surinam and the Dutch Antilles, with Curaçao as the main island. After OGEM had to leave Indonesia it extended its overseas activities to South America, but at the same time took over a Dutch company specialising in installation techniques to get a foothold in the Netherlands. During the 1960s and early 1970s the company concentrated increasingly on the Netherlands through a large number of takeovers.160 It was generally considered as the archetype of successful diversification in the mid-1970s. Like utilities, banks also received special attention from the Indonesian government. As we mentioned before, the circulation bank Javasche Bank had been nationalised after independence. Two other banks disappeared through takeovers after their activities in Indonesia had been confiscated. The NHM, the oldest and largest of the colonial banks, had sufficiently spread its activities to be able to survive. In compensating for the loss of Indonesian revenues, growing banking activities in the Netherlands were more important than the international network that the NHM had built up in the 1950s. Nonetheless, the severing of its Indonesian ties served as the main motive for the merger with De Twentsche Bank in 1964.161 Plantations were bound to the soil. Nonetheless, even before the confiscations, large companies such as the Deli Maatschappij and HVA and several smaller companies set up operations outside Indonesia to spread

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their risks. HVA established large sugar plantations in Ethiopia. They created a world of their own with irrigation works, roads, factories, houses, schools and a hospital. The managers were convinced that they owed their success to their experiences in Indonesia.162 Other Dutch companies, however, found their Indonesian experiences less helpful than they hoped. Deli Maatschappij, for instance, could not make a success of its plantations in Malaya, Panama and Paraguay. It did succeed in continuing its operations by turning to the rich Western markets with diverse activities ranging from trading, the production of household appliances, to oil and gas exploitation.163 For HVA success turned sour when Ethiopia nationalised its company in 1975. This signalled the end of the HVA. Trading companies can move more flexibly from one country to another, but quite a number still disappeared after 1957. Some were taken over; others tried to survive through mergers. Soon after the war, some colonial traders turned to other Asian countries. Later on they tried their luck in Africa. They anticipated that their know-how would be of value in their new markets. Wherever they turned they encountered the same problems of decolonisation that had confronted them in Indonesia. Regimes changed overnight, followed by policies to protect national economies from foreign pressures. These included tariffs, restrictions on the transfer of profits, demands for local participation and difficulties with supplying work permits for foreign staff. The hope that at least in Africa the process of decolonisation would take place twenty years later was dashed. The traders certainly made occasional profits, but nowhere in Africa did they succeed in building up lasting business. Neither was South America the right place to be for traders in the 1950s because of the instability of the regimes and the policy of import substitution. In the mid1960s the remaining colonial trading companies began to shift their activities to prosperous and politically stable countries in Europe, and particularly to the Netherlands itself.164 For Royal Dutch/Shell and its Dutch employees it was a sad moment when they were driven out of their ‘birth’ ground, but the company had already spread its wings world-wide during the first decade of the twentieth century. Unilever and Philips had opened their subsidiaries in Indonesia relatively late, while the other important Dutch multinational, AKU, never had a subsidiary there. For these companies the loss of Indonesia was not very significant. A policy of foreign direct investment remained characteristic for Dutch business in the years to come. Though quite a number of individual companies lost out when the bonds between the Netherlands and Indonesia were broken, Dutch business as a whole did not need the protection of colonial ties to invest abroad, as we shall see in the next section.

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Dutch multinational companies in fragmented markets In the previous chapter we concluded that Dutch foreign direct investment (FDI) increased during the inter-war years, but that investment in colonial Indonesia became relatively less important. The Second World War was very disruptive with regard to foreign direct investment. In 1947, the stock of foreign direct investment was 40 per cent less than it had been before the war, mainly due to divestment in the colonies. By 1947, direct investment in the colony accounted for 48 per cent of total direct foreign investment, compared with 60 per cent in 1938 and 75 per cent in 1914. During the following decades, direct investment abroad increased faster than national income. In 1960 and 1973, the Netherlands occupied third position in the world’s stock of FDI after the USA and UK; a decade later it still ranked third or fourth. Inward direct investment also rose steadily during this period, but outward nearly always exceeded inward direct investment, apart from the early post-war years and the late 1960s.165 Figure 3.1 shows the flows of inward and outward investment between 1948 and 1975. The remarkable rise in outward investment in 1958 and 1959 was caused by two successive share issues by the Royal Dutch Petroleum Company, one to finance the acquisition of the Canadian Eagle Oil Company. The Netherlands owed its strong position as foreign direct investor to the fact that the country was home to at least four large multinationals, 3 inward outward 2.5

in percentage GDP

2

1.5

1

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19 48 19 49 19 50 19 51 19 52 19 53 19 54 19 55 19 56 19 57 19 58 19 59 19 60 19 61 19 62 19 63 19 64 19 65 19 66 19 67 19 68 19 69 19 70 19 71 19 72 19 73 19 74 19 75

0

Figure 3.1 Dutch inward and outward direct foreign investment, 1948–1975 (source: M. van Nieuwkerk and R.P. Sparling, De betalingsbalans van Nederland: methoden, begrippen en gegevens (1946–1985), Monetaire monografieën, nr. 7 (Deventer: Kluwer, 1987); CBS, Tweehonderd jaar statistiek in tijdreeksen, 1800–1999 (Voorburg: CBS, 2001)).

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two of which had a mixed, Anglo-Dutch nationality. The four major Dutch multinationals from the inter-war period resumed their expansion after the war. The presence of Royal Dutch/Shell became more marked in the Netherlands itself. Its refinery in Rotterdam became the largest in Europe with the added task of balancing the production of its smaller refineries elsewhere in Europe. Alongside the refinery large chemical works arose, active in a number of fields, including detergents, plastics, solvents and pesticides.166 Not only did the Netherlands turn out to have exploitable oil reserves, but also more importantly large reserves of natural gas were discovered in 1959, as mentioned above. Royal Dutch/Shell took a leading part in the exploitation.167 After the Second World War Shell had to give up its activities in Eastern Europe but it repaired and expanded its activities in oil and chemicals in many regions, including Venezuela, a booming post-war oil region.168 The position of Shell in that other booming oil region, the Middle East, was weak. Here the American companies with the backing of their national government succeeded in getting the best contracts. However, Shell used its vast experience in trading and distributing by reaching an important contract with Gulf Oil to sell its Middle East oil in 1948. It would later get an important foothold in Oman.169 While the enterprise was expanding its world-wide business, its internal organisation had been left basically unattended since the merging of the activities of the two companies in 1907. Royal Dutch/Shell was not even formally one company, but in fact two holding companies with two head offices in two different countries held together by an agreement. In 1957 the US management consultant McKinsey & Co. was hired to advise on a new organisational structure. Thinking up new structures took two years. The top management structure was clarified through the establishment of the ‘Committee of Managing Directors’ (CMD), drawn from the board members of both parent companies. McKinsey’s recommendation that the two parent companies should share one chairman and one chief executive officer, as was usual in the US, was not followed, however. Instead, the chairman of the CMD was only first among equals, and decisions were taken by mutual consent. The most important change was the creation of a new level between the parent and the operating companies in the form of four ‘service companies’, two in London and two in The Hague. Interestingly, the service companies had an advisory role with regard to the hundreds of operating companies, which in the reorganisation obtained a greater independence to arrange their own businesses. The staff magazine published the new structure and added a recipe for a powerful cocktail called the ‘McKinsey Mixture’: ‘Two glasses of this and you will be in a complete maze.’170 The new structure did not include Shell Oil, the US affiliate of Royal Dutch/Shell. Though Royal Dutch/Shell was majority shareholder, it gave Shell Oil a considerable degree of autonomy and allowed it to present itself as an American company with American directors and guided by

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American decision-making. A policy of decentralisation and awareness of national sentiments fitted more generally in the strategy of Dutch multinationals, but Tyler Priest argues that in the case of Shell Oil one could speak of a special kind of ‘Americanisation’ of the company after the Second World War. The Americans asserted a real independence and for decades there was very little integration between the American affiliate and the rest of the Royal Dutch/Shell Group. During the war America had become the world’s centre of innovation in technological as well as organisational respects, and Shell Oil was part of this world. Therefore, it acted as adviser to the other operating companies of Royal Dutch/Shell, which were only too pleased to learn new methods from the Americans. Under its US leadership Shell Oil grew into a major industrial concern that few Americans regarded as anything other than American. Shell Oil could function relatively autonomously because it had built up fully integrated operations that were for the most part independent of the rest of the Group. Its main frustration was that its majority shareholder did not allow it to set up foreign subsidiaries of its own.171 The big oil companies, of which Shell was one, were seen as typical examples of large integrated companies, which through cartelisation were able to exercise a great deal of power. The similar prices of oil at the gasoline pump seemed proof of this collusive behaviour. In 1959 the Royal Dutch company argued in its annual report that this view was misleading: The larger groups of oil companies are generally referred to as ‘integrated groups’ – that is to say, each of them engages in all phases of the oil industry: exploration, production, transportation, manufacturing and marketing. Even so, no single group is self-sufficient in all these phases, and they must all meet determined and formidable competition at every stage, from each other as well as from the many ‘nonintegrated’ companies.172 Yet, as far as integration applied to this sector, the 1950s and early 1960s were probably the heydays of internalisation for the oil companies. From the mid-sixties onwards, the oil-producing countries increasingly demanded their fair share in the producing companies, sometimes going as far as nationalising the ventures in their country. Of the major oil companies, Royal Dutch/Shell was the only one with a dual nationality, which might have helped in negotiating sensitive nationalistic issues. The journalist Antony Sampson, who popularised the name ‘Seven Sisters’ for the major oil companies, remarked about Shell that it was misleading to speak entirely in terms of English and Dutch, because in its staffing Shell was probably the most international firm in the world.173 The threat of nationalisation encouraged the enterprise to diversify its activities. In the early 1970s coal, metals and nuclear energy were seen as promising new directions.

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The other Anglo-Dutch multinational, Unilever, had internationalised its activities as much as Shell. In 1948 the company worked in 50 different countries with about 400 companies and nearly 20 years later that number had risen to more than 500 companies spread over 60 countries.174 Even before the Second World War Unilever was active in Asia and Africa, but only afterwards did it become more active in Latin America. However, the emphasis remained strongly on the rich countries in the Western world. In 1955 nearly 60 per cent of all sales were in Europe, by 1965 this had risen to 65 per cent and in 1980 it was 70 per cent. Unilever was considerably diversified before the Second World War and that process continued after the war. In the 1950s Unilever expanded through internal growth, while in the 1960s acquisitions became the preferred growth strategy. Many small and medium-sized family firms ended up in Unilever. Within the Unilever concern, national organisations had a great deal of autonomy, a tendency strengthened by the Second World War. This was particularly true for Unilever’s operations in the US. Despite the fact that its once flourishing businesses in the US began to fall behind the performance of its main competitors after 1945, Unilever maintained an arm’s length relationship with its US affiliates, leaving them entirely under American management. According to Geoffrey Jones, Unilever in general lagged behind the competition in the post-war years, especially in detergents. He blamed this, among other reasons, on the company’s business culture that viewed making profits as only one of several considerations.175 In the 1960s Unilever introduced a system of ‘product co-ordination’. The big issue was whether the local or the product organisations would play the main role in decision-making. In 1966 the accent was finally placed on the product organisation, at least in Europe. However, local management kept a large measure of freedom, and that was certainly true for the US as well as for developing countries. Fieldhouse used the word ‘federation’ to describe the organisation of Unilever.176 The third largest Dutch multinational, Philips, which we discussed at the start of the chapter, also used the expression a ‘federation’ of national organisations to describe its international organisation, which greatly expanded during the 1950s and 1960s. The fourth largest Dutch multinational, AKU, was involved in lengthy post-war negotiations about the foreign subsidiaries of its German merger partner Vereinigte Glanzstoff. As a result, AKU got back the Enka subsidiaries in the US and UK, but lost the former Glanzstoff ventures in the US. AKU diversified its activities and started production of synthetic yarn and chemical intermediate products in addition to viscose. It entered new fields in joint ventures with American companies, which led to new factories in the Netherlands. To speed up the development of new products, results of research were supplemented with licences from both DuPont and ICI. After the old subsidiaries in the US, Spain, Italy, Germany and Austria were expanded, attention was paid to the developing countries.

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Joint venture factories were opened in Mexico, Columbia and India. In 1969 the textile part of the business was fully integrated with the Glanzstoff activities and renamed Enka-Glanzstoff, while at the same time AKU merged with the Dutch chemical company KZO into AKZO. Thanks to this diversification into the fields of basic chemicals, pharmaceuticals and paints, AKZO could survive the crisis in synthetic fibres that appeared in the 1970s.177 These four multinationals were large companies by European standards, three of them leading the Fortune lists of largest industrial companies outside the US ranked by sales. Table 3.1 highlights the Dutch companies among the top 50 from the first list drawn up by Fortune for 1962 through to 1975. Not only the two Anglo-Dutch companies, but also Philips had prominent positions, while AKU (AKZO) had a more modest ranking. Alongside the major multinational companies were many smaller firms involved in international activities. For instance, many trading and transport companies possessed their own international networks, and some of the dredging companies worked on big projects abroad. The company Van Leer Packaging continued its foreign expansion on the basis of oil drums and succeeded in creating an international enterprise with 62 factories in 30 different countries at the end of 1969. The company was active in Europe, Asia, the US, Africa, Latin America and Australia.178 Another example of a specialised internationally active company was the chemical firm Naarden that set up production units in Europe, Asia, South Africa, the Americas and Australia on the basis of a niche in tailor-made scents and flavourings.179 The medium-sized company ENCK, a co-operative producer of fertilisers and pesticides, opened factories in South Africa, Rhodesia and Kenya. This pioneering part of the business worked with a great deal of local autonomy.180 Though the many foreign subsidiaries concealed many different stories, broadly speaking we can conclude that in the 1950s Dutch companies often went abroad through the establishment of new production units or joint ventures. The basis was an ownership advantage in the form of a specific product or technology, sometimes backed up by patents. In the 1960s, foreign expansion increasingly took place through acquisitions Table 3.1 Ranking of Dutch companies in the list of largest 50 industrial corporations outside the US (ranked by sales) 1962

1965

1970

1975

1 Royal Dutch/ 1 Shell 2 Unilever 8 Philips 47 AKU

1 Royal Dutch/ 1 Shell 2 Unilever 7 Philips 46 AKU

1 Royal Dutch/ 1 Shell 2 Unilever 4 Philips 30 AKZO

1 Royal Dutch/ 1 Shell 4 Unilever 5 Philips 45 AKZO

Source: Fortune, August 1963, 1966, 1971 and 1976.

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to speed up the process because starting from scratch was considered too slow. Sometimes the purpose behind acquisitions was to buy market share, but often the acquired companies also possessed interesting knowledge. This was particularly true for ventures bought in the US. Just as companies within the Netherlands began to take over firms to diversify their activities, in the same way foreign firms were taken over in the course of a diversification strategy. The geographical spread of these foreign subsidiaries showed an interesting change over time. Unfortunately, for the 1950s and 1960s no general figures are available to illustrate this change. From the individual company histories, however, it appears that in the 1950s there was a rising interest in investment in developing countries. Directly after the war, the Ministry of Economic Affairs argued that Dutch companies should seek export markets in the less industrialised countries with low consumption levels and large populations because export to the dollar countries would be too difficult.181 The same reasoning probably led to an interest in investment in developing countries. We have already mentioned that the former colonial companies looked for alternatives in the developing countries. The large multinationals also considered Africa and Latin America as continents with interesting possibilities.182 The experiences in these countries were, however, disappointing. Political regimes in Africa changed frequently, causing disruption and uncertainty. Closed markets in Latin America limited the scale of production and led to other inefficiencies. Suspicion towards the policies of multinational companies and outright nationalisations made the investment climate less favourable. Thus the emphasis in investment policy shifted towards the politically stable and rich countries of Europe and North America. This became clear when De Nederlandsche Bank published detailed figures for the first time in 1973. Half of the stock of foreign direct investment was invested in the EU, next came the US (14 per cent) and the Caribbean (11 per cent). Southeast Asia was of modest importance (4 per cent), while investments in Africa were insignificant (0.5 per cent). The bulk of foreign direct investment was in manufacturing and the extractive industries (85 per cent, of which 47 per cent were oil and chemicals). Services were only 13 per cent of all investment, but this proportion would rise significantly in the 1980s.183 Characteristic of nearly all Dutch multinationals in these years was decentralised organisation. Subsidiaries in the various countries were given a great deal of local autonomy as well as a great measure of local identity. This strategy had been useful in times of protectionism and during the Second World War. However, national autonomy persisted in the 1950s and 1960s, particularly in companies such as Philips and Unilever that produced locally for local demand. Typical of this attitude was the policy of a small and specialised company in flavours and fragrances, Polak and Schwarz. It wrote in 1947 that each foreign subsidiary

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had a great measure of independence and that it was the firm’s intention to continue in the same way in the future.184 Perhaps this preference for independent national organisations had to do with the small domestic market of the home country compared with the larger markets of the host countries. The foreign subsidiaries were encouraged to use local knowhow about marketing and product variation. Another factor was language. Foreign subsidiaries were in general not expected to use the Dutch language. Instead the Dutch managers prided themselves on their knowledge of foreign languages. The Dutch multinationals were slow to explore the potential advantage of one coherent European market, perhaps because this process of integration moved forward so slowly. Franko, who studied the European multinationals, concluded that reallocation of production did not seem to be a major preoccupation for most continental firms prior to 1971.185 The most independent of all were the US subsidiaries of the Dutch multinationals. The physical distances in America, its large and complex market, the size of subsidiaries in comparison to their mother companies, the different company laws and in particular the opaque US anti-trust laws all contributed to the fact that the US subsidiaries behaved like separate kingdoms. No doubt the distinct feeling that America had a leading position in the world further encouraged this independence.186 The Netherlands as host for multinational companies While Dutch capital was flowing out of the country, at the same time foreign capital was flowing back in. In fact, directly after the Second World War inward direct investment exceeded outward investment for a number of years. In large measure this flow came from the US. Under the Marshall Plan the US government actively promoted US investment in Europe. Before the Second World War, US companies had no great presence in the Netherlands, while on the other hand the Netherlands had a relatively strong position in foreign direct investment in the US.187 In 1938, the Netherlands was the third largest direct investor in this country, after the UK and Canada.188 In the bilateral agreements between the US and the Netherlands with regard to the Marshall Plan the stipulation was included that US companies should receive the same treatment as Dutch companies. Thus they could share equally in imports paid for by Marshall dollars. For example, the car assemblers Ford and Kaiser-Frazer used some of the Marshall funds to extend their assembly plants in the Netherlands. Incidentally, Europe showed no great interest in the huge American cars, so the Kaiser-Frazer plant soon had to be closed. US oil companies were able to step up their exports to the Netherlands under the Marshall Plan.189 Another element of the agreements under the Economic Cooperation Act was a guarantee arrangement for US companies investing in Europe. The Dutch government did not like this arrangement because it

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might affect the amount of dollars available for Dutch purposes. It discouraged US companies from making use of the guarantee regulation, but otherwise the US companies were more than welcome. In fact, the guarantee regulation was seldom used, mainly because the US companies were not so eager to invest in Europe in the 1950s.190 No official statistical information on the number of foreign establishments in the Netherlands is available. However, over the years a number of authors have tried to form a picture. The earliest effort concluded that between 1945 and 1960, 158 foreign establishments were set up in the Netherlands, of which half (78) were from the US.191 According to another survey, in 1964 this number had risen to 199, of which 100 came from the US. Together these foreign establishments employed 29,500 people of whom 19,000 (64 per cent) worked for the US companies. The second most important country was the UK, followed by other European nations such as Sweden, Germany, Switzerland and Belgium.192 The US establishments were predominantly wholly owned. In 1960 only a modest 15 per cent were joint ventures with Dutch companies, while for the UK companies this ratio was 39 per cent.193 (The 1964 survey did not include joint ventures.) On average the US firms had about 200 employees, so they were of medium size. Measured in number of employees, the US position was particularly strong in the machinery industry, including the production of typewriters, and in the manufacture of instruments. Measured in foreign direct investment, the oil industry dominated. The US contribution to the Dutch economy was worthwhile because it added to the diversity of its industry. The US subsidiaries also encouraged a growth in supply companies. Contrary to what those who see American firms as large integrated companies might have expected, they relied on local suppliers to a far greater extent than Dutch firms. Through their presence in the Netherlands the US introduced their system of working with supply companies, which contributed to the growth of local Dutch firms.194 The foreign establishments of the European countries were spread over a large number of sectors, including food and beverages, chemical industry and machinery.195 In these surveys the trading and service companies were not included, neither were the sales offices. During the 1960s the number of foreign establishments in the Netherlands quickly increased. Because of the large contribution of US companies, most of the literature of this period deals predominantly with their motives to invest in the Netherlands.196 The country was seen as an attractive gateway into the European market, a market that the US through its Marshall Plan had tried so hard to make into a more unified one. In the 1950s the Netherlands was also a low-wage country, but this was no longer true after 1963. Labour peace, however, continued until the early 1970s. The Netherlands was considered attractive because of its political stability. Foreign entrepreneurs also mentioned the ‘international mindedness’ of their employees, including their knowledge of languages.197 A survey in

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1966 investigated why existing Dutch-owned companies were willing to relinquish some or all control to US enterprises. This question related only to about 20 per cent of US direct investment in the Netherlands, because in these years the US companies preferred greenfield investments. The motivation of existing Dutch companies to associate with US firms was first to enhance growth and improve market penetration. The second reason was to strengthen their technological position and add to research and development. Four out of five family firms sold their company to US firms because the owner wished to retire and did not have a corporate heir.198 The worries of the French journalist Servan Schreiber about ‘Le Défi Americain’, the technological and managerial gap between US and European companies as demonstrated by the arrival of US multinationals in Europe, found little response in the Netherlands, perhaps because the Netherlands had its own multinational companies. Nor did the state support mergers to create ‘national champions’, that is companies of sufficient size to compete successfully in world markets and address the ‘American challenge’, as happened in France and Britain.199 However, here as elsewhere, multinational companies in general were criticised for their power to shift employment and juggle with profits through internal pricing. Doubts were also voiced about their connections with governments and the defence ministry, the so-called ‘military–industrial’ complex. The worst excesses of the military–industrial complex seemed to come from the US. From a country to be admired and followed, the US turned into a country to be feared and critically watched.

Conclusion After the Second World War the Dutch looked to the US as the Promised Land: democratic, energetic, innovative and prosperous. The Netherlands could never become as powerful, but perhaps it could hope to reach the same measure of prosperity. The US had a marked influence on the Netherlands, notably on its efforts to free world trade and on its technology and managerial concepts. By the early 1970s the Netherlands had indeed entered the stage of the ‘affluent society’. This result was achieved through a constructive co-operation between workers, employers and government. By building up a manufacturing industry, the Netherlands had entered the stage of mass production and mass consumption. Companies became larger and were being managed more systematically, the US being the main inspiration for ideas on management and business strategies. Some older industries became obsolete, but at the time it was supposed that a joint effort of entrepreneurs and government should suffice to solve this problem through restructuring. The most often used strategy for restructuring was to create larger entities through mergers and takeovers. This strategy reflected trust in the economies of scale, in

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the predictability of the future and in the quality of professional managers. The cosy business culture at home went hand in hand with a continued ambition to be active in international markets. The Netherlands lost its main colony, but nonetheless resumed its place in the international economy and profited from the expansion of world trade through exports and foreign direct investment. At the same time, as a small open economy it became more vulnerable to the international economic cycle.

4

Competing in the global economy, 1975–2000

Introduction During the 1970s economic circumstances changed completely, dashing the previous decade’s optimistic expectations about the future. First of all, the system of stable exchange rates crashed when the US suspended the dollar’s fixed gold parity in 1971. This step created deep anxiety in currency markets and led to radical changes and continuing fluctuations in the rates of exchange. Then in 1973 the first oil shock generated high oil prices and strong fluctuations in commodity markets, slowing down economic growth. Unemployment rates began to creep up, raising concern about a possible return to the dismal unemployment of the 1930s. Apparently, Keynesian recipes were not able to ban economic recession permanently. The efforts of governments to encourage the economy through government spending only worsened the situation. The obligations of the welfare state formed a further burden on government, though the benefits helped in keeping up consumption. Deficits threatened to spiral out of control. Companies in Western countries felt burdened by high taxes, high wages and interfering government bureaucrats. Finally, the second oil shock of 1979 heralded an economic slump. Many Third World countries struggled with huge debts, partly caused by high oil prices. The prospects of sharing the fruits of economic growth in due course receded. The world turned out to be much more chaotic than many had thought or hoped. The managed economy had failed. The real cause of economic recession, however, lay deeper, argued Piore and Sabel. The productive organisation characterised by mass production and mass consumption had reached its limits and run out of steam. The time had come to rethink production and return to the old crafts and flexible specialisation. They found examples of these flexible specialised networks of independent smaller firms in the Italian region of Emilia Romagna or the German region of Baden Würtemberg.1 The huge advantage of flexible specialisation, in their view, was the fact that flexible producers could more easily adapt to changing consumer preferences. Perez and Freeman elaborated these ideas in their long-wave theory. They

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argued that the world economy had entered the downward cycle of the fourth Kondratieff wave. It would soon experience the upswing period of the fifth Kondratieff, but only after a period of struggle in which institutions had to be adapted to technological changes. Though the long-wave theory comes with many variations, there is a general feeling that the technological basis for the upswing of the fifth Kondratieff is the information and communication technology with its large investments in internet and telecom networks and its abundant supply of chips as motors of the development. The new information technology would pose different demands on production techniques, industrial organisation and labour relations, and would make different kinds of organisations possible. In particular, the new computer technology created the opportunity for all sorts of flexibility in production, organisation and labour relations. The old Fordist system of mass production in large integrated companies would make way for flexible networks and individual consumer preferences. Working hours would become more flexible.2 Whatever the deeper causes behind the economic recession, the predictable reaction of national governments was to protect their national interests. The outstanding feature of the 1980s was the strong competition from Japan and other Asian producers. In shipbuilding, cars and electronics, Asian firms took the lead, supposedly thanks to their flexible production systems within existing large firms, which allowed them to respond to changes in consumer preferences. The competition on world markets was no longer just between the US and Europe, but Japan and its surrounding Asian countries arose as a third industrial power in the capitalist world. Kenichi Ohmae, director of McKinsey Japan, drew attention to this fact by introducing the concept ‘Triad’ for Japan, the US and Europe as the three economic world powers.3 Strong competition from Asian companies led the European countries towards protectionism. To safeguard the achievements of the welfare state, these countries were less and less willing to lower tariffs, and they increasingly resorted to other means of obstructing imports. A notorious example of such a policy was the decision of the French government to transfer the custom clearance of video recorders from La Havre to an understaffed custom office at Poitiers, which dramatically reduced the imports in 1982 and 1983. The issue could only be resolved after Japan had agreed to ‘voluntary’ restrictions on the exports of video recorders.4 To halt the rise of protectionism, GATT opened new negotiations during the mid-1980s, the so-called Uruguay round, drafting an agenda which included the liberalisation of trade in primary products and the supply of services. The Uruguay round lasted longer than expected, but agreement was finally reached in 1994, after which GATT was reorganised to become the World Trade Organization in 1995. Trade conflicts, particularly over agriculture and the treatment of Third World Countries, did not go away, however. Quite the contrary, protests built up against the

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increasingly interconnected nature of the world economy, a development captured in the word ‘globalisation’. It was not just an intellectual debate, but the protesters against globalisation took to the streets and made their voice heard forcefully at the meetings of the WTO and annual summits of the most important industrial countries. While the GATT negotiations were still in full swing, the political situation in Europe changed profoundly. A turn in the political climate of the Soviet Union signalled the end of the Cold War. In the autumn of 1989 the Berlin Wall dividing East and West Germany came down, after which the communist regimes in Eastern Europe and in Russia fell like dominoes. The collapse of the Soviet Union left the United States as the one hegemonic world power. At about the same time, the European Community embarked on building a single internal market, on the one hand removing barriers to trade within the community, on the other drawing sharper boundaries with the world outside it. During the mid-1980s the member states had agreed to strive for a completely liberated internal market by 1992, which did indeed materialise at the agreed time. The next step was the creation of a monetary union in 1999, with 11 European countries, including the Netherlands, participating. Britain, however, opted to stay out for the time being. The euro currency was successfully introduced in 2002. The end of the Russian influence in the Eastern European countries posed new challenges for the European Union. Though the Union welcomed the inclusion of the Central and Eastern European countries in principle, it was less forthcoming in practice. The negotiations on the terms under which ten European countries could be included in the Union dragged on till 2003.5 In the 1980s the word ‘globalisation’ emerged as both promise and threat. One of the first to use this expression was Theodore Levitt, who wrote in 1983: A powerful force drives the world toward a converging commonality, and that force is technology. (. . .) The result is a new commercial reality – the emergence of global markets for standardized consumer products on a previously unimagined scale of magnitude. (. . .) Gone are accustomed differences in national or regional preference. Gone are the days when a company could sell last year’s models – or lesser versions of advanced products – in the less-developed world. And gone are the days when prices, margins, and profits abroad were generally higher than at home. The globalization of markets is at hand.6 The word globalisation caught the imagination and quickly became a household name for all kinds of developments, ranging from the creation of a world market in consumer goods and companies which plan their production facilities on a world-wide basis, to international capital

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markets, cross-border alliances and mergers and growing foreign direct investment. Though local markets, local tastes and local consumer preferences undoubtedly remained important, business became more global. According to the UN World Investment Report 1999, international production was at the core of the process of globalisation. Technology flows played an important role in international production and international trade was stimulated by it. One illustration of the trend is that the outward stock of foreign direct investment as percentage of gross domestic product increased world-wide from 5.3 per cent in 1980 to 11.9 per cent in 1997.7 Not all economists, however, were convinced that the world economy was indeed becoming global. One line of argument was that, measured in trade and foreign direct investment, the world was not becoming more internationalised in the 1990s than it had been before 1914. The trend, if there was one, was therefore not unprecedented.8 This argument may have been true for 1994, and it was certainly true for Dutch trade, but it became harder to uphold towards the end of the 1990s, in particular with regard to foreign direct investment. Another objection was that regionalisation was a better word to capture these developments than was globalisation. The world economy was not really becoming global, but instead had formed into three powerful economic regions, which traded vigorously internally but far less externally with each other or with the less developed countries outside these blocks.9 Also, there seemed to be little evidence that companies were moving production to low-wage countries on a massive scale, and therefore it was wrong to use this argument to lower wages in developed countries. Yet another debate concerned whether consumer taste was indeed converging world-wide, and whether the multinational companies were at all near to becoming global players. Ruigrok and Tulder argued that none of the Global 500 enterprises on the Fortune 1993 list could be categorised as a truly global company. About 40 of the 500 achieved more than half of their sales abroad, less than 20 had more than half their production facilities abroad, and only 19 had half of their staff abroad. Foreigners on the board of directors were the exception rather than the rule. Among the Fortune 500 enterprises the multinationals from small countries stood out as the most internationalised.10 Even more hotly debated than the state of globalisation per se was the question whether it was a positive or negative development. Were the developing countries losing out or would everybody benefit equally from economic growth created through international trade? The end of the Cold War heralded the triumph of capitalism over communism. Advocates of the free market economy blew their trumpets. However, which capitalism had actually won – the American variety, the European or perhaps the Japanese? Which system was the best and for whom? During the 1990s, without doubt, the US variety dominated with the rise of information technology, financial wizards and euphoria on the stock markets. New financial instruments were introduced and share

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prices rose to unprecedented heights, particularly those in the telecom and information technology sectors. Though some predicted the speedy end of the boom period, others argued that the economy had entered a new phase thanks to information technology, the so-called New Economy. The 1980s saw the change from the large mainframe computers to the small personal computers, which invaded offices as well as people’s homes. User-friendly software made computers accessible for many. Then the 1990s brought the shift from computing to communicating. By integrating computers into networks, new ways of communicating became possible within companies as well as between companies and their customers and the world at large. A swarm of new companies was launched to build businesses on the possibilities of internet and email. In 1995 the US journal Fortune enthused: ‘Wake up to the New Economy’. They explained: Now the new economy is here, challenging us with a brave new world, one informed and empowered by a distribution and power of technology that even the science fiction fantasists have trouble staying ahead of. (. . .) We are fortunate that this new economy arrives at the fin de siècle. This means that when we take stock of ourselves upon entering the twenty-first century, we can – for all our frailties – comfort ourselves with this thought: we’re not standing still, and we’re not headed back whence we came. We’re heading forward. Fast.11 Mergers were another prominent feature of this period. ‘They are, like second marriages, a triumph of hope over experience’, wrote The Economist in 2000.12 Mergers, and more particularly mega-mergers, took place in all industrial sectors, from the oil industry (Exxon and Mobil), motor vehicles (Chrysler and Daimler Benz), banking (Citibank with Travellers to form Citigroup), accountancy (Price Waterhouse and Coopers & Lybrand), the computer industry (Compaq and Hewlett Packard) and the technology sector (AOL and Time Warner), to name just a few. The twentieth century ended in an optimistic mood, predicting greater riches for larger numbers of people. However, the collapse of shares of technology companies cast some dark shadows ahead. With hindsight we know that the 1990s were indeed a boom period with inflated expectations, much the same as previous booms, and that 1999 marked the end of that period. For Dutch business the 1970s were turbulent years. While struggling with the economic recession, business people were confronted with increasing hostility at home. The practice of tripartite consultation, so important in the post-war years, did not function at all well during the 1970s. All participants were convinced that something needed to change, but they disagreed over priorities, policies and instruments. It needed the deep crisis after the second oil shock of 1979 to bring all parties together in a policy of wage moderation. Between 1979 and 1982 many businesses

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failed, including several big conglomerates, which resulted in high unemployment. The year 1982 was the turning point. The international economy picked up, which helped the recovery of Dutch business. The conglomerate fell into disgrace. Instead companies turned back to their ‘core business’. The volatility of the economy had made business people fully aware of the benefits of flexibility in their business organisation. Business units, networking and strategic alliances became the new keywords. Flexibility became the central notion in labour relations too, though some of the flexibility was more myth than reality. The government withdrew to a certain extent from economic life. However, the treasured welfare state remained basically intact. The already extensive internationalisation of the Dutch economy increased even further. Both inward and outward investment rose, as did imports and exports. Without much debate or soul searching, the Netherlands embraced the euro currency. In the global economy Dutch companies were confident about their competitiveness. During the 1990s, the Netherlands was consistently among the top ten countries in the IMD World Competitiveness Scoreboard measured in overall performance; in 2000 the country even ranked third, ending the twentieth century on a positive note.13 Unfortunately, the booming economy did not last, and the twenty-first century started with another recession, bringing a tumbling of the Netherlands on the Scoreboard ranking and a tumbling of prices on the stock markets with disappointing financial results and corporate scandals. These stories, however, will be part of another book.

Interlude 4: Philips under pressure in global markets The last quarter of the twentieth century formed a difficult period for NV Philips Gloeilampenfabrieken, to be renamed Philips Electronics NV in 1991. Its competitive strength lay in decentralisation and in its range of products and markets, while global markets seemed to demand specialisation and centralisation. There are two ways of looking at the recent history of Philips. On the one hand the company had a number of widely published marketing failures and was in constant reorganisation, with numbers of employees dropping from the maximum of 402,000 in 1973 to 219,000 in 2000. On the other hand, Philips was one of the few companies to make the transfer from one technological system to the next, from the electron tube technology to the chip technology, from the Age of Fordist mass production to the Age of Information Technology. Though it gave up its ambition to manufacture computers itself, it remained active in the supply of chips and other components. In the market for consumer electronics Philips was the only Western firm that chose to hold out against Japanese competition from giants such as Sony and Matsushita. Former competitors in Europe, including AEG, Telefunken, Blaupunkt, Siemens and Ericsson, had either stopped or sold their activities in this field, and the same was true for the American competitors RCA, General Electric and Zenith.14

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In the 1950s and 1960s Philips had built up a sprawling enterprise with products ranging from radios, TVs and records to telecommunication, medical systems, pharmaceuticals and cyclotrons. It had production units in more than 50 countries. There seemed no end to Philips’ ambitions to play a part in many different markets. Entrance into new markets was sometimes stimulated by inventions in its Physics Laboratory, sometimes by foreign subsidiaries that came up with proposals for local takeovers. Profit margins, however, were dangerously low in the late 1970s and during the recession of the early 1980s. The company experienced the full force of Asian competition in consumer electronics and the constant pressure of rapid changes in technology. In the 1970s and early 1980s Philips tried to solve the problem of too many small production units spread over Europe. In this effort it was helped by the general recession of the early 1980s, which made it more acceptable to make employees redundant, though in the Netherlands it came as a shock that Philips would want to dismiss its workers. In this respect Philips illustrated the general trend towards greater flexibility in labour relations as well as in the organisation of production. The goal of providing employment disappeared from the company statutes.15 As it was no longer necessary to encourage employees to stay a lifetime with the company, social welfare programmes were gradually dismantled in the 1980s. The Philips housing corporations gained independence, as did medical care. Cultural activities, including the Philips theatre and the exhibition space in the original Evoluon building, ceased. The premier league football club PSV remained, but the donor relationship was turned into a sponsorship one.16 The concentration of production in central supply units for Europe made some progress, in particular in lighting and consumer electronics. In the first half of the 1980s Philips closed 80 of its 275 factories. But world-wide there were still 420 factories in 1985.17 The number of factories also diminished because the company shifted its strategy away from vertical integration in order to become more flexible. Already at the end of the 1960s internal suppliers lost their monopoly position within the company. The next step was to make the internal suppliers into independent companies. This happened with paper and cardboard production in the 1980s, more slowly followed by the metal and synthetic material sectors. Instead, Philips welcomed the Japanese idea of comakership. The transfer from simply subcontracting to a co-maker strategy with exchange of knowledge and techniques based on a long-term perspective did not come easily to the company. In some cases it worked, but in others the suppliers felt they were not really involved in the creative process, while they had to bear the brunt of fluctuations in sub-contracting volumes.18 The comaker strategy was all the more interesting for Philips because the company was not only a buyer but also a supplier. Thus it knew all about the vulnerable position of the supplier who is dependent on one or two customers. In the meantime, the European market was still not as fully integrated as business people wished for. Philips participated in the action by major European companies to encourage the European Union to speed up the creation of an internal market in 1983. Other goals were government support for European

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research programmes such as Esprit and Race, and protection against Japanese competition, or, as some argued, Japanese dumping practices. The tariffs against Japanese imports had only limited success in diminishing competition because the Japanese companies responded in the predictable way by establishing production units in Europe.19 No doubt governments welcomed this result because of the local employment it created. In the early 1980s, the management consultant Prahalad had advised Philips to divide its portfolio of activities into core and non-core, and into interlinked and stand-alone. Though the categorisation was useful in itself, the exercise was not immediately accompanied by an assessment of the long-term prospects of the various business units, nor by a conclusion as to which to keep and which to sell off.20 However, this issue was taken up again in 1987. Parts of the core business were lighting, consumer electronics, components and telecommunication and data systems. Non-core were medical systems, large household appliances, defence systems and industrial and electronic acoustic systems. Apart from the medical systems, most of the other activities identified as ‘non-core businesses’ were gradually sold off in the 1990s.21 The range of activities became more focused. Together with the identification of core and non-core business, the lingering problem of the national versus product organisations was addressed. National variations in product specifications and marketing were no longer considered desirable in the developing global market. The same products should be marketed world-wide, and produced wherever it was most advantageous to the company. This strategy led to a major shake-up of the company in the late 1980s, when the business (product) organisations at long last triumphed over the national organisations. The first national organisation to be brought ‘in line’ was the American subsidiary. The majority of shares in Philips’ main subsidiary in the US, North America Philips Corporation, were still in the hands of the US Philips Trust, set up just before the Second World War to keep this part of the business out of German hands. The Trust had a large measure of independence from Philips. In 1987, after legal skirmishes, the Trust was ended. At the same time, Philips bought out the remaining shareholders of the North America Philips Corporation, taking full control of its US activities.22 Within Europe the co-ordination of production led to further closures of factories and loss of employment. In some cases, production was transferred to low-wage countries. As early as 1965 Philips set up a factory in Taiwan to produce televisions, later followed by the production of semiconductors and integrated circuits. In 1987 the company moved to China, where the labour costs were lower than in Taiwan, in a joint venture with Chinese companies. The production of television tubes was transferred from Taiwan to China. In 1991 Philips was the largest European investor in China.23 Asia is not only considered an attractive investment region because of its low wages, but also because of its large markets. Philips remained devoted to research and the development of new technologies. Its valuable store of patents played an important role in cross-licensing,

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which routinely took place in this industry. As competition rose and profit margins diminished, however, the company’s research had to be more focused and more readily applicable. The innovation process needed to be speeded up because product life cycles became shorter. One way of moving faster was negotiating strategic alliances. From the start alliances played an important role in electrical engineering, but these alliances were used for market division and setting joint standards. Philips sometimes succeeded in getting its own technical standards accepted by industry and consumers, as was the case with the compact cassette and the CD player, but in the case of the video recorder it had to give up its V2000 system. Increasingly, alliances were also used to speed up the process of innovation. In the production of chips Philips had a long history of catching up with developments in the US and later Japan. One such attempt to catch up was the alliance with Siemens in 1984 to develop the mega memory chip. The effort was supported with governmental subsidies from both countries, but it did not reach expectations. Demand for the static random memory chip on which Philips had concentrated its research efforts turned out to be much smaller than expected.24 The joint venture with Lucent to belatedly enter the market for mobile phones was not successful either. In 1999 Philips set up a joint venture with the Korean company LG Electronics for flat screen production and development. The reorganisation in the late 1980s did not immediately lead to rising profits. Quite the contrary, in 1990 the company suffered such heavy losses that company watchers began to discuss the option of a break-up. Though parts of the business were sold, the company was kept together. After the reorganisation of 1990 under the code name Centurion, Philips enjoyed a number of profitable years and rising share prices. The sale of some successful businesses, including Polygram in 1997, helped sustain the good results.25 In its efforts to remain competitive, the company tried to become mean and lean, to diminish its number of management layers, while enhancing the co-ordination between its many businesses.26 Looking back, the history of Philips is a long tale of valiantly catching up with technological developments elsewhere, in particularly in the US. In consumer electronics the company could boast some ‘firsts’ as well as commercial successes in CD technology and, more recently, DVD. In lighting and television tubes it achieved a leading position world-wide. In computers, however, it had to give up, but in chip technology it struggled to keep in the front line for certain types of chips. Financial results over the last 30 years were modest at most, but by the end of the century the company had succeeded in staying in business for more than 120 years, despite the sea changes it had confronted for well over a century.

4.1 The glide into economic recession The Netherlands became an affluent society in the 1960s, but once this stage had been reached, its attractiveness began to lessen. It seemed to be high time to think of the quality of life instead of economic growth. The

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consensus about the future, which had reigned for two decades, disappeared. Worse, the economic cycle reappeared to challenge the achievements and preconceptions of the third quarter of the twentieth century. Entrepreneurs were faced with a new set of challenges that needed different strategies. For Dutch businesses the 1970s were a turbulent period. While struggling with the economic recession, business people were confronted with increasing hostility at home. Between 1979 and 1982 many businesses failed, including several big conglomerates. These failures resulted in sharply rising unemployment figures. Worries about unemployment contributed to a greater appreciation of the entrepreneurs in society who were, after all, the ones to create jobs. While the large bureaucratic manufacturing companies obviously had failed to sustain full employment, better performance was expected from the small and medium-sized firms with their greater flexibility. The recession of the 1970s speeded up the transformation process from a manufacturing to a service economy. Downward spiral in an unfriendly business climate The economic recession of the 1970s hit Dutch industry particularly hard. Some sectors such as the leather, textile and clothing industries and shipbuilding had already run into trouble during the 1960s. A strategy of increasing scale and lowering costs had been pursued through mergers and acquisitions, but the results had been disappointing. Often the restructuring programmes took too long to implement and by the time they were in force the benefits of restructuring were undone by increased wage costs. A strong currency further undermined the Dutch international competitive position, resulting in stagnating exports. Rising oil prices also affected the performance of Dutch industry. From the mid1960s, high wages and low energy prices had steered manufacturers towards buying labour-saving equipment with a disregard for fuel efficiency. These investments now became a liability rather than an asset, even more so following new energy saving requirements inspired by environmental concerns. Structurally weak sectors such as textile, clothing and footwear suffered from declining sales, because competition from newly industrialised countries was particularly severe here. However, the pacemakers of the 1960s, the oil industry and the chemical industry linked to it, also faced rising prices for raw materials, over-investment and a drop in turnover. Only food processing continued on an even keel. The electrotechnical sector and the engineering industry appeared to do comparatively well, with the exception of shipbuilding, but the building slump at the end of the 1970s also affected parts of the electro-technical industry.27 Under these difficult economic circumstances, diversification strategies turned out to be of limited value, because difficulties seemed to appear in all sectors at once. The trading company Hagemeyer found its recently

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acquired ventures in manufacturing an encumbrance rather than a support. With the optimism of traders, they had hoped to bring new life to waning manufacturing companies by increasing their international sales through Hagemeyer’s own marketing network. This synergy, however, did not work. Instead, turnover declined because of fierce international competition. One subsidiary after another entered upon a downward spiral. Losses would lead to the dismissal of the responsible managers, followed by a reorganisation of production, which usually meant a cut in production enforced by reducing working hours or by redundancies. However, as fixed costs remained, unit costs did not drop sufficiently to restore sales, so the losses continued or even worsened, and the newly appointed managers were dismissed. A new round of cutbacks began, which equally failed to push costs down sufficiently, in particular because turnover had meanwhile dropped further. After the second round a third was necessary and in the process employees and staff became equally demoralised. The trading company Internatio-Müller initially found that its spread in activities did enable losses in one sector to be compensated by the profits of another. On the other hand, the same spread ensured that the conglomerate was never without one problem or another. The first oil crisis pushed the manufacturing subsidiaries into the familiar spiral of falling sales and rising costs. Each productivity rise was cancelled out by a new downturn of the economic cycle. Evaluating its diversification strategy of the 1970s, the management of SHV, another trading company, concluded that the benefits of synergy had been overestimated and the social problems associated with the acquisition of large workforces had been seriously underestimated. The same applied to the problem of integrating companies with entirely different cultures.28 While the trading companies were far from happy with their diversification strategies, manufacturing companies were equally disappointed with the results of the trading companies they had purchased. In both cases, the parties did not know the business of the acquired companies sufficiently to understand what they were letting themselves into. For instance, the conglomerate OGEM pictured synergy advantages from acquiring the trading house Lindeteves Jacoberg, expecting this company to sell its products abroad. However, Lindeteves Jacoberg had a large number of Asian branches, most of them small, independent and involved in commodity trading, which were not only hard to manage but also offered no outlet for OGEM products. More fundamentally, traders wanted to have the freedom to choose suppliers in order to serve their clients as best as possible.29 Conglomerates not only struggled with the learning problem of combining different kinds of activities. Also, integrating a large number of companies in a short period of time turned out to be difficult from an organisational point of view. If the management left existing structures in place, the holding company did not reap the benefits of the combination.

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However, if the top management created entirely new structures, they disrupted the existing networks and relationships, with the risk of damaging the established business before building up new activities. In the 1970s the reigning philosophy was to integrate organisations. This required an extensive support staff, which was often housed in prestigious head offices. Small firms considered the availability of a large professional staff at head office a strong argument for joining large companies until they experienced how the overhead costs were eating up all their profits. The social climate of the 1970s did not help business either. Workers’ militancy increased in the Netherlands as elsewhere in Europe. Though the system of negotiations between the central organisations of trade unions and the employers’ associations continued, the former consensus disappeared, only to return in the 1980s. In 1973 the trade unions organised a large strike demanding a reduction in income differentials through reducing the automatic cost of living adjustments for higher income groups. The employers reacted with a determined refusal and a further strengthening of their association by appointing a full-time, salaried president. The trade unions broadened the scope of their demands, for example to include more influence on decision-making within companies. The government, dominated by the Social Democratic party which came to power in 1973, supported their claims with its slogan ‘spread of income, knowledge and power’. Left wingers looked with great interest to the experiments in Yugoslavia with workers’ control.30 A company policy of dismissing people to raise profits was frowned upon. As long as the company as a whole made profits, it was deemed unacceptable to dismiss employees of particular plants only because these plants happened to work at a loss. The good part of the business should be able to help the weak parts through bad periods, which were supposed to be temporary in any case. Akzo discovered the strength of public opinion when it wished to restructure its chemical fibres business in 1972. The employees of the subsidiary in Breda succeeded in preventing the plant’s closure by staging a sit-in. Public opinion and the social democrat government turned against Akzo. Even within its own ranks doubt arose about the rigorous restructuring policy. Management decided to keep the factory open, but the situation in chemical fibres did not improve and when the chemical part of Akzo also ran into losses, closure became inevitable. Ten years after the workers’ victory, the curtain came down for the Breda plant.31 The militant attitude of the workers and public sympathy for the struggle to keep jobs were not lost on other employers. During the 1970s they were careful about dismissing workers. In the case of diminishing sales they often started with the option of shortening the working day. Only when losses persisted did they turn to the alternative of redundancies. The government of the mid-1970s, dominated by the Social Democratic party with its policies aiming at income re-distribution,

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democratisation of the company and selective economic growth, was not popular with the business community. In 1976 nine CEOs of multinational companies took the unusual step of sounding the alarm bell over the deteriorating business climate by writing an open letter to the Prime Minister, Den Uyl.32 The workers’ pressure for more power within companies found expression in the new law of 1979 on the works council. In the new works council employers were no longer members, let alone in the chair. The council consisted of employees only and was seen as an instrument of workers’ control. In the 1950 Act, the works council had the task of representing the interests of the company as a whole. The reform of 1971 gave the council a dual responsibility, representing the workers’ interests as well as contributing to the best functioning of the firm. In the 1979 Act the task of the works council became first and foremost the representation of employees’ interests. However, the law took great pains to assure regular consultation between the works council and the employer. Employer and council had to meet within two weeks after either party asked for such a consultation. The law decreed that at least six times a year the employer should organise a consultation with the works council. Initially employers were afraid that the new law would radicalise labour relations. However, that did not happen. In fact, the relationship turned out to be mostly constructive. The stronger rights of the council resulted in a better and earlier information flow from the employers. The councils played an important role in company and workplace restructuring. On average they acted more energetically on social and personnel issues than on economic and financial ones. On technological matters, the councils often lacked expertise, while managers were more reluctant to involve them in strategic decisions on finance and technology.33 How did the new works councils function? Jelle Visser, who studied the works councils, came to some fairly positive preliminary conclusions. The presence of works councils increased the quality of decision-making. The need to consult the works council prevented a hit-and-miss style of management decision-making. The works councils contributed to a higher degree of workers’ commitment to the company. It gave the workers more security and fairness. Visser found no evidence that works council legislation scared away businesses and thus lowered the level of investment and employment in the Netherlands. As an added societal benefit of the works council, Visser mentioned the upholding of workers’ rights, as well as attention to and prevention of the external effects of firm behaviour: ‘as local enforcement agents, trained in the weighting of conflicting interest, they may also help find customized and flexible solutions’. Obviously, not all works councils had these beneficial effects and some were simply inactive, but by and large they were positive instruments in the hands of the workers.34 Soon after the new law on the works councils had come into force in 1979, many council members encountered the challenge of

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having to discuss massive layoffs of personnel when companies ran into heavy losses. Spectacular failures During the 1970s, government expenditure and consumer spending softened the impact of the economic recession in the Netherlands. As a result the seriousness of the economic situation remained obscured until the second oil shock of 1979 struck the Dutch economy with redoubled vigour. Interest rates rose to unprecedented levels, and as a result companies which had financed their expansion with loans faced severe difficulties. Bankruptcies became the order of the day and were not limited to small firms. During the 1970s the number of annual bankruptcies increased from 1,700 in 1970 to 2,600 in 1979. This number more than doubled in the early 1980s to a peak of 6,900 bankruptcies in 1982 and a still worrying height of 6,000 in 1983. Unemployment rose rapidly from 4 per cent of the total working population in 1979 to 14 per cent in 1983. In that year a staggering 800,000 people were unemployed.35 It came as a huge shock that large, established companies, some of them conglomerates, could go bankrupt. The paper manufacturer Van Gelder Papier, the RSV shipyards and the building and trade conglomerate OGEM were some spectacular examples of what could go wrong. Van Gelder Papier was the largest Dutch paper manufacturer in the Netherlands, employing 6,000 workers in 1975. During the 1960s, the company had diversified its activities, which ranged from a large number of different paper products and packaging products to asbestos felt. The conglomerate strategy, however, failed to bring in rising revenues, quite the contrary. Top management realised the spread of activities could cause problems of control and therefore opted for a strategy of centralisation and specialisation. However, it was hard to streamline the large conglomerate, because it consisted of originally rather independent factories. It did not help either that employees questioned and retarded every proposal to close down factories. Nonetheless, the number of employees went down steadily from 6,000 in 1975, to 4,700 in 1979. At the same time, the building of a modern production unit for newsprint turned out to be more expensive than expected. In 1980 drastic measures were needed to keep the company afloat. Belatedly the company changed its organisational structure by introducing decentralisation and profit centres at lower levels in the organisation. Several subsidiaries were sold off in order to raise money. The number of employees declined further to 2,600 in 1981. However, these measures could not prevent the insolvency of the company in mid-1981. At this point the government was no longer willing or able to support companies in financial difficulties. Van Gelder Papier, a household name in the Dutch paper industry, had to file for bankruptcy in 1981. Immediately it started an initiative to save employment and con-

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tinue the various activities under a new regime. One production unit was closed down permanently. All the other factories were able to continue, though only after major restructuring involving a further loss of employment. In 1985 about 1,900 people were employed in the former Van Gelder subsidiaries.36 The next spectacular failing was OGEM, the conglomerate of building and trade subsidiaries, with 16,300 employees in 1981 of whom 12,800 worked in the Netherlands. Unwise purchases, including a trading company with skeletons in the cupboard and a practically bankrupt German builder, together with disappointing results from large overseas building projects, resulted in heavy losses. Management had insufficient grip on the unwieldy conglomerate.37 To solve OGEM’s problems a new financial construction was introduced in 1981, the so-called ‘house of mourning’ construction. This was a judicial construct splitting up the concern into viable and non-viable subsidiaries. Normally, a holding company would sell off the non-viable subsidiaries and keep the viable ones. In the case of a ‘house of mourning’ construction, the viable activities were sold to a newly established holding, while the doubtful and nonviable activities were left behind in the old holding. The motivation for this construction was saving as many viable subsidiaries and as much employment as possible by freeing the good businesses from the burden of negative results from the holding. Indeed, a large number of subsidiaries, employing 8,000 people, could be saved by bringing them together in a new holding company. Two trading subsidiaries with about 6,000 employees were sold off, and 2,500 workers remained in the old holding. Not all of these subsidiaries were lost, however, so at the end of the day an estimated 90 per cent of employment could be rescued. The split up left the shareholders to pick up the pieces, but they had already lost their money from the moment the holding had consumed its own capital. This construction quickly became a popular instrument for disentangling insolvent conglomerates.38 The downfall of OGEM came as a shock because during most of the 1970s it was seen as a successful example of the diversification policy. The insolvency of the RSV shipbuilding conglomerate in 1983 came as a shock too, but for a different reason. This company was created and for many years heavily supported by the government. Despite this substantial support it ran into insurmountable financial troubles. The demise of RSV led to an official parliamentary inquiry, the first since 1946, which was broadcast on television and as a consequence received huge public attention. The public got the impression of persistent management failings and insufficient ministerial grip on the generous subsidies the state provided for more than ten years. The Parliamentary Commission concluded in 1985 that external factors, including the world-wide recession since the first oil shock in 1973 and the failure to reach international agreements for an orderly capacity reduction in shipbuilding and harmonisation of

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subsidy policies, explained at least part of the decline. However, the Commission sought and found the other part of the explanation in the combined result of inadequate government policies and the managerial and organisational weakness of the RSV. They wrote scathingly: ‘RSV management – not exactly famous for decisive action in earlier years – found it increasingly expedient to shift the blame to the government.’ They blamed management for complete lack of corporate control over individual production units and production costs, and added: ‘Acceptable risks’ could turn into crippling losses overnight, estimated losses could double or triple in a few years, warning signals came too late or were unheeded – in short, management lost control and began to sense defeat. The social unrest surrounding the plans to reduce capacity caused a severe drop in labour productivity. An atmosphere of despair, disillusion, discouragement and doom settled over the industry.39 Later research came to a somewhat milder judgement, placing more weight on the external factors, such as the shift of shipbuilding to lowwage countries, which made it extremely difficult for management to find profitable alternatives. Comparison of developments in Dutch shipbuilding with those in other Western European countries revealed that elsewhere the unavoidable reduction of capacity came about equally belatedly and insufficiently structured.40 In contrast to the OGEM collapse, the bankruptcy of the RSV led to a considerable loss in employment. At its heyday the company had employed more than 30,000 people in more than 30 subsidiaries. By 1983 this number had fallen to 17,000. In the reconstruction following the insolvency another 5,000 workers lost their jobs. About 12,000 jobs could be saved out of the wreckage.41 This was a disappointing result after years of government support, and for this reason the demise of the RSV also started a process of rethinking the relationship between government and business. These failures also led to a rethinking of the wisdom and effectiveness of diversification strategies in general. The diversification strategy raised a number of problems. First, the ‘portfolio’ strategy, concerned with the right mix of businesses in a company’s portfolio, had advised entrepreneurs to spread their risks by combining products in different stages of their product life cycle. However, that did not necessarily mean that these products would react differently in an economic crisis. In fact, the crisis of the late 1970s and early 1980s affected many sectors at the same time. Also, problems of overcapacity could have been made worse by the fact that many firms had invested in the same ‘star’ products. Therefore a spread in activities did not diminish exposure to an economic downturn as much as managers had expected from a diversification policy. Second, large organisations

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were more complicated to manage than small ones, which led to higher transaction costs. In various markets they felt the competitive pressure of smaller and more specialised companies. The question was whether the synergy benefits of the combination were large enough to overcome the rise in transaction costs. One way of tackling this problem was giving business units profit responsibility. Last, the top management of diversified companies could not possibly possess the specific knowledge of their many and varied subsidiaries. Therefore, they faced a difficulty when they had to assess the value and future prospects of firms they were taking over. This led frequently to rude awakenings after acquisitions. This problem was made worse by the fact that managers find it difficult to determine when industries are in decline and at what point they should withdraw. The conglomerate with less detailed knowledge of the various businesses, therefore, runs the risk of entering industries the specialists are already exiting. The American management principles of the 1960s and 1970s came under severe criticism in the 1980s. Once again, the US management thinkers themselves took the lead. Under the telling title ‘Managing our way to economic decline’, Hayes and Abernathy argued that the American management principles had led to short-term cost reduction and analytical detachment rather than insight that comes from ‘hands on’ experiences. The American managers had failed to keep their companies technologically competitive over the long run: What has developed, in the business community as in academia, is a preoccupation with a false and shallow concept of the professional manager, a ‘pseudo-professional’ really – an individual having no special expertise in any particular industry or technology who nevertheless can step into an unfamiliar company and run it successfully through strict application of financial controls, portfolio concepts, and market-driven strategy.42 Not only had American managers failed to keep their firms technologically competitive compared with countries like Japan or Germany, but also the great bulk of merger activity appeared to have been absolutely wasted in terms of generating economic benefits for stockholders. To achieve long-term success the companies needed not just controllers, market analysts and portfolio managers, but leaders. How the new leader was going to look, the authors did not state, but they probably were thinking of a Schumpeterian entrepreneur who brings innovation by accepting risks. This article of Hayes and Abernathy is characteristic of the tone of the 1980s.

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A new appreciation of entrepreneurship and the small firm During the 1980s opinions on entrepreneurship took a more benevolent aspect once more, quite a change from their regular vilification as capitalist exploiters in the 1970s. After all, the creation of economic growth and employment depended on enterprising businessmen. Moreover, it had become evident that continuity in business was not a matter of course; even large and well-known companies could still go under. Thus entrepreneurship was an achievement, and consequently the person behind the office and the individual style of leadership merited closer attention. The study of Peters and Waterman from 1982, In search of excellence, in which the secrets behind successful entrepreneurs were unravelled, found its way to Dutch readers, both in English and Dutch translation.43 The journal Business Week found that most of the successful companies of Peters and Waterman were already in decline two years later. This showed that easy recipes were not available, but this finding did not diminish interest in the personal contribution of leaders to their firms. Journalists went in search of Dutch examples of inspiring leadership and portrayed them. On the basis of 11 interviews with top managers, the psychologist and journalist Susanne Piët concluded that careers and leadership styles differed widely, as might have been expected, but that all entrepreneurs wanted to have control over others and the situations they were in. The entrepreneurs themselves did not speak of power, but saw their own role as motivating, stimulating, giving direction and communicating. Half of them, including the leaders of ABN, Aegon and Schiphol underlined that decisions were always taken with consensus. Many found emotions and intuition essential in critical moments.44 How highly society began to value the qualities of entrepreneurs emerged when the government asked them to chair various governmental committees. G.A. Wagner, retired president of Royal Dutch Petroleum Company, chaired an advisory committee set up to draft a report with suggestions for the government on how to bring a new dynamic into the manufacturing sector in 1981.45 His counterpart at Philips, Wisse Dekker, chaired a group studying a new design for the health sector. The economic recession also stimulated interest in the family firm and its business culture. Professional managers were not always as capable or as rational as theory had supposed, and expansion of the company had not always been the best choice. Among the positive aspects of family business, flexibility with regard to time and money spent on the company and willingness to accept losses during prolonged periods in order to maintain the firm for future generations were particularly noted. Family culture was also considered mainly positive in so far as it furthered relationships between the family and its customers, suppliers and employees.46 Research in 1993 on the 5,000 largest companies in the Netherlands showed that 46.5 per cent of the companies were family firms. A family firm was broadly defined as a company which met at least one of three criteria:

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more than 50 per cent of the shares was in the hands of one family; one family had a considerable influence over decision-making; or an important number of the top managers belonged to one family.47 Of all companies in the Netherlands in 1990 an estimated 80–90 per cent were family firms.48 The number of small firms that moved from one to the next generation had even increased between 1950 and 1980.49 Some large companies, for instance SHV, were still in family hands, while in others the family influence continued. The Heineken family kept a large number of shares in the family and consequently still had an important say in the company. Despite the serious doubts voiced in the 1950s and the 1960s, the family firm showed a remarkable resilience. Together with family firms, small firms received considerable attention because they seemed to have weathered the recession better than large companies, and were considered to be centres of innovation. What these potential winners lacked, however, was money, or so it seemed. This led to governmental measures to create a venture capital industry in the Netherlands. These included certain loss guarantees for private venture capital firms, the creation of a parallel market for shares of small companies and more room for banks to participate in the financing of companies. Banks have indeed become more active investors in small and medium-sized firms. However, the contribution of the private capital firms to riskbearing capital reached a peak between 1981 and 1988.50 The number of companies increased by 51 per cent between 1985 and 2000, but interestingly this was not only true for smaller companies. While those with 0 to 9 employees and those with 10 to 99 both grew by 51 per cent, those with more than 100 employees increased even more, by 74 per cent.51 The growing number of firms was not only caused by the foundation of new firms, but also by the breaking up of existing enterprises or, more likely, the separation of certain business units from the parent company. As will be shown in the next section, the creation of smaller firms or business units was welcomed as a contribution to a greater flexibility and higher economic performance.

4.2 Flexibility in post-industrial society The year 1982 was the turning point of the economic slump. Economic performance regained its upward trend from 1983, though growth slowed temporarily around 1991–1992. During the economic crisis of the early 1980s manufacturing had performed particularly badly, while the agricultural sector had weathered the storm relatively well and the service sector had held its own. Was the Netherlands becoming a post-industrial society? In fact, as a source of employment, manufacturing had been declining from the 1960s onwards. Instead, the number of people employed in trade and services as a percentage of total employment grew steadily. The share of manufacturing in employment declined from 33 per cent in 1960

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to no more than 16 per cent in 1997. The share of manufacturing in GDP, however, remained higher than its share in national employment. In 1963 the share of manufacturing in GDP had been 35 per cent and in 1997 it was still 22.5 per cent.52 Part of these increases in trade and services, including the civil service, mirrored a real change in activity, but part of it was the result of a change in company organisation, because often servicerelated activities were the ones to be outsourced. This is not to suggest, however, that service companies were necessarily smaller. The 1980s and 1990s also saw the rise of the large service sector companies. The crisis of the 1980s also signalled the end to further increases in large, integrated manufacturing enterprises in the Netherlands. Managers looked for strategies to make their companies more flexible in order to adapt quickly and continuously to changing circumstances at home and abroad. Nevertheless, mergers and takeovers remained an important instrument in implementing new strategies. After the heavy losses of the early 1980s, shareholders began to raise their voices and step up their demands for financial gains. The high unemployment of the early 1980s, on the other hand, made workers more malleable in negotiations over pay and working hours. Employers tried hard to create a flexible work force. Meanwhile, the government assumed a more modest role in economic life. Flexible organisation of the enterprise The main concern of companies during the 1980s and 1990s was flexibility: how to keep the organisation mean and lean, how to respond quickly to new demands and new challenges in the light of increasing international competition and the rise of information technologies. During the 1980s in particular, competition from Japan and more generally companies from the South-East Asian region (the so-called Asian Tigers) was feared. American management consultants paid close attention to the management methods of Japanese companies in order to learn their secret weapons. Their success seemed to rest in constant pressure on highquality products, flexible production systems and long-term relationships with suppliers framed in network structures. Western companies tried to learn from the Japanese success by taking over some elements of the Japanese management style. Concepts such as ‘co-makership’ and ‘just in time’ delivery found their way to the Netherlands.53 Daf Trucks, for instance, sent its managers on visits to Japanese factories, where they learned about stock management, recruiting and how workers could be motivated by giving them greater responsibility for the planning of their own work. These ideas were implemented, which led to the upgrading of workers and greater creativity and flexibility.54 During the 1990s the possibilities of information technology for increasing internal efficiency as well as shaping new supplier and client relationships were eagerly explored. In the 1980s, the large, integrated, bureaucratic company gave way to

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the ideal of a flexible organisation with a wide range of relationships with third parties. The disintegration of business conglomerates led to a rising trend towards outsourcing, that is contracting out non-core business. For instance, printing units, internal advisers or central purchasing departments were turned into independent companies, while local production plants were given more scope to buy their own supplies or contract their own external advice where these were offered cheapest. In some cases, even vital supplies were outsourced but at the same time kept nearby via a co-makership relationship. The ideal of co-makership offered a positive exchange of know-how and technology, but the more specialised the product of the co-maker, the more dependent he could become on one or two big clients. The flexibility of one party, therefore, could seriously diminish the flexibility of the other party. The strategy of ‘just in time’ delivery presupposed long-term relationships between manufacturers and their suppliers. However, it also led to lower stocks and the option to change suppliers frequently. Both the co-makership and the ‘just in time’ concept could be applied with increasing efficiency thanks to the constantly improving technologies of computers, intranet and internet. Another way in which companies could boost developments in new products, technologies or markets was through forging strategic alliances with their main competitors in specific areas. This became a much discussed management tool during the late 1980s.55 A number of developments underlined the need to seek strategic alliances rather than follow a stand-alone policy. The rising costs of R&D and for the commercialisation of innovative products and processes made it hard for even the largest companies to act entirely on their own. This problem was made worse by shorter product life cycles, which diminished the time in which expenses could be recouped. Furthermore, the drive for multilateral agreements to deregulate key markets and remove some of the non-tariff barriers to trade and investment made it impossible for companies to hide themselves in lucrative home markets. Even the world’s largest companies had to be more selective in their specialisation. Mergers and acquisitions were a way of establishing growth. However, collaboration in selected areas with competitors could be an attractive and flexible alternative. In the fields of car production, electronics, semiconductors and pharmaceuticals, alliances became one of the many business tools. As alliances were more loose forms of co-operation than mergers, it was to be expected that they would be frequently dissolved again, as indeed happened. Outsourcing, co-makership and strategic alliances all contributed to a greater flexibility of companies in their contacts with third parties. At the same time, companies also worked to create greater internal flexibility. The rise of the IT business demonstrated how small firms took the lead in breakthrough innovations, acted as first movers, while the large established companies lagged behind. This lesson was not lost on the big companies, which wished to encourage a greater entrepreneurial spirit within

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their own organisation. From the success of small companies in introducing innovations, large companies learned the advantages of quick decisionmaking at lower levels. The idea of relatively independent business units within the context of a holding company received renewed interest. In the Netherlands J.G. Wissema promoted the concept of business unit management with decentralisation of decision-making and responsibility for product marketing to the level of the business unit. This concept tried to combine the best of two worlds, the versatility of the small firm with the power of the large company.56 The creation of independent business units raised the question of how the head office should encourage and monitor the units. By making business units into profit centres, financial monitoring became possible. The trading company Hagemeyer, for instance, introduced a stringent budget system to get a better grip on its subsidiaries in 1985. Managers of the subsidiaries were made entirely accountable for their budgets. They were summoned to headquarters to defend their proposed budgets, and they had to account for any deviations at the end of the accounting period. Moreover, modern information technology enabled head office to follow turnover and performance and to discuss them with the managers more or less on a daily basis. As a consequence, the board could take action much quicker than in the past when business flagged. The board did not hesitate to take action, convinced of the commercial wisdom that taking losses early kept them small. This monitoring system worked satisfactorily for a number of years in that the company could show rising profits and share prices. The question, however, arose of whether head office had more to offer its subsidiaries than financial services, and whether financial figures were enough to monitor the subsidiaries. This question became even more pressing when companies started to cut down staff numbers in their head offices. What was the advantage of belonging to a large concern? Had the head office more to offer than any investment trust? The supervisory directors of Hagemeyer, for instance, raised this question repeatedly. The answer of the CEO of Hagemeyer was that the head office had to lay down an overall strategy, to draft standards of administrative and financial management, and to monitor the subsidiary’s performance closely and supportively. His successor, however, was of the opinion that the head office should also possess inside knowledge of the business of the subsidiaries in order to create synergy between the various activities and intervene in a more timely fashion. If the head office, in monitoring the subsidiaries, had to rely on financial data only, it would always act too late, because the real changes in a business take hold long before they become apparent in its financial figures. In his view it was important for the holding to have expert knowledge. For that reason he preferred the company to specialise in a limited number of activities in order to build up and sustain that knowledge.57 The history of the holding company Pakhoed, active in distribution and logistic services for the chemical and

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oil industry, also makes clear that it was difficult for the holding company to make the right decisions in situations where it had to rely entirely on financial data. If board members possessed no in-depth knowledge about developments in the sector nor insights into the details of its operations, they could easily come to the wrong decisions. This problem remained hidden in prosperous years but resurfaced during hard times.58 Changing views on the best strategies The interest in building up diversified companies waned in the Netherlands after the failures of the early 1980s, though there still remained successful diversified companies.59 The business philosophy of ‘back to the core business’, or ‘stick to the knitting’, originated from the US, but also spread in the Netherlands. Companies were supposed to concentrate on their core activities, on what they had traditionally been good at. Initially this strategy involved selling off unrelated (loss-making) activities. From the mid-1980s new scope for expansion appeared, but the central concern remained the internal coherence of the various activities. This meant that selective de-mergers frequently accompanied takeovers. Under these circumstances even profit-making activities could be divested if they no longer seemed to fit with the present company strategy. Instead of following a strategy of diversification, the companies focused on the opposite, a policy of ‘inversification’. A study of the four most important Dutch manufacturing companies, Shell, Unilever, Philips and Akzo revealed that all followed a strategy of inversification from the mid-1980s onwards. Acquisitions and de-concentration were the main instruments for this policy, and most of these were achieved on international markets. Furthermore, most of the acquisitions were horizontal, while business units were sold off to companies for whom the acquisition was a horizontal takeover. Both processes contributed to the general trend of less diversified companies.60 In the 1960s management consultants had introduced the distinction between the strategic decision-making at the top and the operational, daily management at the level of the divisions. With the trend to further decentralisation the divisions too were required to develop their strategy. In thinking about the entire business the distinction of Michael Porter between the corporate strategy of the whole business (where to compete) and the competitive strategy of the business units (how to compete) was instructive.61 The sugar and food company CSM, for instance, invited Porter to help them determine their corporate and competitive strategy. At the level of the business units, Porter suggested a choice should be made between overall cost leadership or a differentiation strategy, achieving uniqueness in the market. If neither was possible, there was a third alternative, the focused strategy, which involved the seeking of niche markets. Dutch companies found this third alternative attractive because they often operated as small firms on large international markets and

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therefore had to find suitable niches.62 While Porter helped find the competitive strategy that fitted the specific business unit, his competitors in management advice, G. Hamel and C.K. Prahalad, underlined the need to identify, cultivate and exploit the core competence of the corporation. From focusing on core business, the companies should move to consider their core capabilities and broaden their activities again, building up new capabilities and being the first to change the rules for the industry.63 The above-mentioned strategies were predominantly based on and meant for manufacturing enterprises. The service companies developed differently in that they started on a spate of diversification in the 1980s. Auditors joined forces with tax consultants and management consultants, forming large partnerships which included those three specialist fields. Banks aligned with insurers and investment companies, turning themselves into financial supermarkets. Publishers diversified into the related electronic publishing but also into commercial television. However, as will be discussed further on, the service providers followed their manufacturing counterparts in their international strategies. During the 1990s the strategies of the big companies moved from discussions on core products and core capabilities to dominance on international markets. One could argue that they moved from the supply to the demand side of the economy, pandering to consumer preferences in order to please the shareholders. Reaching a leading position, being number one, two or perhaps three, was considered necessary in order to create sufficient strength to counterbalance suppliers, customers and competitors. Subsidiaries had the choice between accelerating growth to reach a top position in their market, or to be closed down or sold off. The leading example of this strategy was the US company General Electric with the slogan: ‘fix, close or sell’.64 Needless to say, this strategy led to endless de-mergers. Some smaller firms went from hand to hand, sometimes with a phase of management buyout in between. The history of Stokvis demonstrates how some companies wandered from one holding to the next, now being stripped, now being rebuilt in the process. At the beginning of the twentieth century Stokvis was a proud technical wholesaler with international prestige, quoted on the stock exchange and possessing its own production plants. When taken over by OGEM in 1972, the company was taken apart and added to different divisions. After OGEM collapsed, the trading part of Stokvis survived. Via another holding company, an investment company and a private investor it finally ended up in Borsumij Wehry in 1988. When this trading house merged with Hagemeyer, Stokvis was combined with the Hagemeyer subsidiary ARM, a car dealer and official importer for Saab in 1995.65 This was not the end, because in 2000 Hagemeyer sold ARM-Stokvis off again to the trading company Kroymans, importer to top car brands such as Ferrari, Jaguar and Aston Martin. Indeed, it seems to make up a logical combination. The role of the CEO in formulating and executing ambitious strategies

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became increasingly important. He was supposed to develop a vision as to which businesses were sufficiently promising to keep and let grow, and which would be better abandoned. In the Netherlands it was customary that the board of managing directors presented its report collectively. However, during the 1990s it happened more frequently that the president of the board wrote a foreword in which he explained his personal views and strategies. From a newly appointed CEO it was increasingly expected that he would formulate a new strategy to bring the company to greater heights shortly after taking up his office. As many CEOs stayed in office for a few years only, this resulted in frequent changes in strategy, further increasing the variability of the company and its activities. A study from 1960 on the origin and societal position of (managing) directors of Dutch limited companies and family firms concluded that directors were very seldom dismissed if performance was disappointing. This was equally true for directors of limited companies and for family firms.66 By 2000, however, the situation had changed entirely. A survey on the career of managing directors from 2001 showed that the average time in office for a managing director was 6.3 years, and two out of five were forced to leave. Another study made clear that Dutch management was held accountable for disappointing results in the same way as managers from Germany, Japan and the US. Turnover of management was at the same level as in the other three countries and the same criteria for replacement were used.67 The position of managing directors of foreign subsidiaries in the Netherlands was even more precarious, according to yet another recent study. The risk of dismissal for this group was 40 per cent higher than for managing directors of Dutch companies. One of the main problems was lack of understanding by the parent company for the different working environment in the Netherlands. In some cases, managing directors left willingly because they were discontent with their level of autonomy.68 The results of the three surveys underline the increasing flexibility in business life. Mergers and acquisitions Managers had to shape the various strategies discussed above and in practice this happened most of the time through mergers, acquisitions and demergers. Figure 4.1 gives a long-term indication of the Dutch merger movement over the years 1970–2000. The graph is based on figures collected by the SER.69 From 1970 onwards, companies had to inform a SER committee of all mergers and acquisitions involving firms with more than 100 employees. The figures represent the number of announced mergers and acquisitions, and as such give only a very incomplete picture, because the size of the companies involved is not measured. Furthermore, in a small number of cases the announced mergers never materialised. On the other hand, small takeovers are not included. Also, foreign takeovers may

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1200 mergers and acquisitions 1000

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Figure 4.1 Dutch merger movement, 1970–2000 (source: J.B.A. Hoyinck and A.J.C. Geeve, Gelet op artikel 2. Cijfers over fusies 1970–1996, Den Haag, SER, 1997).

not all be included because the SER committee was not concerned with what happened abroad. Therefore the total number of mergers and acquisitions is certainly understated. However, the figures have the big advantage of long-term consistency. Therefore, one may assume that the graph gives a fair indication of the ups and downs of the merger movement in the Netherlands, which by and large followed the trend of international movement. During the late 1970s and early 1980 there was a slow down in the merger movement, followed by a rise in the second half of the 1980s, the fourth merger wave.70 The early 1990s showed a dip once more, after which the fifth merger wave set it, demonstrating a strong rise in mergers during the closing years of the twentieth century. The mergers took place in all sectors of industry, in manufacturing, trade, banks, insurance and transport. The motives behind the mergers as given by the managers include efficiency gains from economies of scale, cost savings, synergy benefits and strategic considerations, all seen from the perspective of gathering strength to face growing international competition. New for the Netherlands was the phenomenon of the hostile takeover. It had happened in the past, but was very unusual in the Dutch consensus culture. A takeover battle that received international media attention was the fight between two publishing houses. In 1986 there had been friendly talks between top managers of Kluwer and Elsevier, which

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led Kluwer to conclude that their respective business cultures were too different for a merger. Elsevier, however, had come to an entirely different conclusion and the board went ahead with a formal bid for Kluwer’s shares. Though Kluwer had several takeover defences, it decided to invite the publisher Wolters Samson to come with a friendly takeover bid, which it did with a substantially higher offer. Elsevier did not give up, however. In the ensuing bidding war, share prices of the three publishers went up. Elsevier ended up with 49 per cent of the Kluwer shares, some of them bought for very high prices, but not enough to take over Kluwer, which subsequently merged with Wolters Samson to form Wolters Kluwer.71 Surprisingly, ten years later Elsevier, now Reed Elsevier, and Wolters Kluwer once again discussed a merger, this time a friendly one. However, their joint position on the European market would have become so dominant that the European Commission required extensive divestments before permitting them to go ahead. The merger, therefore, did not take place. Another example is the battle over the office supplier Ahrend in 1989. The paper wholesaler Bührmann-Tetterode (BT) had acquired a majority of its shares, but Ahrend possessed a voting trust which effectively protected the company against takeover. Though initially Ahrend was prepared to consider some form of co-operation with BT, it was against a straight takeover. Both parties used the media to convince shareholders of the validity of their point of view. Public sympathy was clearly on the hand of the smaller company Ahrend. During the battle that followed, Ahrend remained unconvinced of the benefit of the combination. BT gave up its fight in 1994.72 In the previous chapter we mentioned the dynamic market theory of H.W. de Jong, who argues that mergers take place when competition becomes tougher while at the same time prospects are still sufficiently favourable to invest in other companies. During periods of economic recession, companies would prefer collaboration to mergers. H.W. de Jong developed his theory during the 1970s, but his arguments continue to make sense in understanding the developments of the 1980s and 1990s as companies felt increasing international pressure but were still optimistic about the future.73 However, not all economists are convinced of the economic logic behind the merger waves. H. Schenk, for instance, seeks an explanation for the merger movement in the strategic choices of managers, which are to a large extent determined by copycat behaviour. His model, based on the ‘minimax-regret game’, is in particular developed to explain the behaviour of the managers of large companies, the major players in the field. The managers are not sure whether mergers are the best strategy, but they notice that others use this instrument all the time. If the others happen to be right about their choice, it would be stupid not to follow them and be the only one with the wrong tactic. If the others happen to be wrong, then the manager is excused for making the same mistake as the others. Managers prefer to be wrong collectively than

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to be right in isolation. Even if managers do not play the ‘minimax-regret game’, they may still want to merge because of fear of being taken over in the general cascade of mergers.74 Were the mergers and acquisitions sensible decisions? Did the mergers actually add value? The results of the third merger wave are generally considered mixed at best, but perhaps the fourth and fifth merger waves fared better. So far, this doesn’t seem to have been the case. On the basis of international publications between 1987 and 1997, Hans Schenk concluded that: ‘the most common result of merger performance studies in such industries as diverse as manufacturing, advertising, and banking is that profitability and/or productivity, variously measured, do not improve as a result of merger, or improve less than could have been the case without a merger’. Mergers appeared to have negative effects on market share growth, R&D investment and R&D output (with the exception of the chemical industry). Innovative small and medium-sized enterprises experienced a negative impact from being taken over, which only ended if and when they were de-merged again.75 Studies which take short-term movements in share value as their starting point, generally conclude that the shareholders of acquired firms tended to benefit, while those of the acquiring firms lost.76 So, there seem to have been some short-term winners, but the long-term benefits of the merger waves are in serious doubt. Newly merged companies often performed badly, because efficiency gains proved elusive and integration problems all too concrete. There may have been some economic rationality behind the merger movement at least for some, and probably, as usual, for first movers. But the imitative behaviour made good results increasingly difficult to achieve, because the prices of target companies rose when other companies chimed in. As a consequence it became harder to create added value. Furthermore, the number of suitable takeover candidates (targets) diminished. When the financial results of the newly merged companies began to go down, the money for new acquisitions became short and the merger wave halted. The elusive benefits of mergers cast some serious doubts on the wisdom of all these eagerly pursued acquisitions and mergers. This question was all the more urgent as Dutch companies invested much more money in cross-border mergers than in R&D or durable producer goods, such as buildings and machinery. Measured as a percentage of GDP, the Netherlands invested 14 per cent (1999) in cross-border mergers, 2 per cent in R&D (1996) and 10 per cent in durable producer goods (1997).77 One may argue that in taking over or merging with other firms, the Dutch companies also bought durable producer goods and R&D. Particularly with the purchase of US firms this may have been the case. Another related discussion is whether large companies are more profitable than smaller ones. The answer obviously depends on the measure taken. From the societal point of view the creation of net added value is an interesting measuring

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stick because it includes profits as well as the creation of employment. A study of the net added value of the hundred largest Dutch companies over the period 1987–1993 revealed that medium-sized companies performed better than the largest companies. This result mirrored the policy of restructuring the large multinationals, which led to permanent redundancies over the 1990s. It also showed that apparently medium-sized companies were well able to compete with large companies, and this was true for companies from quite different industries.78 Revolt of the capital market The question of whether mergers added value was all the more relevant during the 1990s, because all the energy of managers was focused on the creation of value, more particularly on creating shareholder value. As was the case with so many managerial fashions, this focus on shareholder value was imported from the US, though there were some local pressures as well. In the 1970s companies had prided themselves on the rise in their sales and number of employees, but during the recession years it became clear that profits after all were crucial to the survival of enterprises. During the 1970s the shareholders had to be content with modest dividends because profits were generally low and anyway management preferred to keep profits in the business to finance expansion. The disappointment of shareholders reached a climax in the early 1980s when several large companies went bankrupt and their shares became worthless. Understandably, the shareholders were not content with management performance and looked for ways of making their voice heard. The rise of corporate control, therefore, can be seen as the ‘revolt of the capital market’.79 Another factor in stronger pressure from shareholders was that shareholders were no longer powerless individuals but large institutional investors. To realise more shareholder influence was not easy in the Dutch situation. The company law introduced in 1971 established a special government structure for limited liability companies with paid-up capital over 25 million guilders and more than 100 employees. This government structure included an obligatory two-tier governance system with a separate board of supervisory directors. As mentioned in the previous chapter, the members of the supervisory board were chosen by co-option, but the general assembly of shareholders and the works council had the right to advise and raise objections to nominations. Two important stakeholders in the company, the shareholders and workers, received equal rights with regard to the board of supervisory directors. This board received the exclusive power to nominate and dismiss the managing directors. It also presented the annual accounts, submitting them for approval to the general assembly of shareholders, and ratified important management decisions such as mergers and new share issues. The strong position of the board of supervisory directors limited the power and influence of the

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shareholder. Compared with corporate governance abroad, particularly in the Anglo-American world, the power of the shareholder was very restricted. The role of the shareholder was further curbed by a number of legal takeover defences. Dutch companies often used several defences at the same time, including shares with privileged voting rights and the issuing of ‘certificates’ with no voting rights at all. In the latter system the shares with voting rights were in the hands of a foundation, which in turn issued ‘certificates of shares’ that entitled the owners to the dividend but not to the voting rights. The foundation, with a close and friendly relationship to the company, exercised the voting rights. The government established a Corporate Governance Committee to come forward with proposals to give shareholders a greater influence over the management of the company. Around the turn of the century the matter was still under discussion.80 The reaction of Dutch companies to these proposals was mixed. By and large, management was reluctant to discard structures protecting against hostile takeovers. But in annual reports the importance of creating shareholder value was underlined more forcefully, though it has to be said that the other stakeholders, such as employees, customers and suppliers, received equal attention in Dutch annual reports. Also, management was more forthcoming with financial and strategic information for the many financial analysts than it had been in the 1970s, hoping to improve share prices further. There was a good reason to treasure high share prices. The more substantial mergers were often effected by the purchaser bidding for the equity of the company to be taken over, and paid for by the purchaser issuing new shares. Share price thus became a key factor for companies wishing to expand. Showing a regular increase in the profit per share was the best way of keeping shareholders and business analysts sweet. Therefore, in this more indirect way, the influence of shareholders increased. This resulted in a higher payout ratio.81 An important argument behind the drive for creating shareholder value is the idea that it is a reliable measure of successful entrepreneurship and of economic efficiency more generally. However, the downside is that it can easily lead to short-term policies. The system tends to encourage managers to create short-term profits at the costs of long-term investment, for instance in modernising production capacity, in R&D and new technologies, and in the exploration of new markets, all of which cost money in the short term and will only deliver profits in the long run, and only if the right choices are made. The practice of measuring and rewarding managers on the basis of shareholder value provided another stimulus to think short term. Share options abounded in the late 1990s. Did the focus on shareholder value indeed lead to short-term policies? It seems very likely. Certainly the growth in investment lagged behind the growth in gross national product during these years, this in contrast to the situation during the period before 1973.82 Investment in research and devel-

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opment as a percentage of GNP rose steeply between 1980 and 1987 but fell back to its 1984 level by 1993.83 The popularity of restructuring and downsizing initiatives during the 1990s seems to confirm the focus on short-term gains. The management consultants Hamel and Prahalad already warned against the restructuring rage in the US in 1994: ‘Downsizing belatedly attempts to correct the mistakes of the past; it is not about creating the markets of the future. The simple point is that getting smaller is not enough. Downsizing, the equivalent of corporate anorexia, can make a company thinner; it doesn’t necessarily make it healthier.’84 Van Witteloostuijn further elaborated this theme in his book on the anorexia strategy and the consequence of downsizing. He argued that the fashionable management tool of Business Process Re-engineering had robbed the companies of their creative powers and left the employees, the most important asset of the companies, stressful and discouraged. The restructuring bug even exhausted the macho managers themselves who began to retire as early as their midfifties. Typically the restructuring of the 1990s took place while the companies were still making huge profits, which seemed to suggest that the measures were unnecessary or exaggerated.85 On the other hand, restructuring itself is a costly process and can only be undertaken as long as the companies are making profits. Time will tell whether the companies in their focus on downsizing built up the efficiency and strength to weather the storm of the next economic cycle, or whether they wasted opportunities for real innovation by their focus on short-term profits mindful of the French saying: ‘Après nous le déluge’, as Van Witteloostuijn suggests.86 The high incomes which share option schemes generated for top management received much criticism in the Netherlands because they didn’t seem to fit into the egalitarian Dutch business system. In 1997 the prime minister raised his concern about the increasing divergence in income as the result of option schemes. Even the president of the Dutch employers association VNO-NCW urged his members to moderate the option schemes as these threatened to undermine the traditionally balanced spread of incomes.87 The collapse of the dotcom shares in 1999 sounded the end of rising share prices and profitable option arrangements. The family firm Baan, active in the field of package software, experienced the mixed blessings of the active capital market. In 1997 McKinsey praised the company in its report ‘Boosting Dutch Economic Performance’: ‘Baan proves that it is possible to create a highly successful packages software in the Netherlands’, they wrote. They attributed this success to a number of factors, including access to the US market and financing expertise: ‘In the early 1990s, General Atlantic (a US venture capital firm) invested in Baan, providing the company with critical knowledge and resources, and assisting it in capturing the US market.’ They also mentioned the firm’s entrepreneurial spirit as a factor in its success, including the use of stock options as an incentive to attract key personnel, particularly in the US.88

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The American partner had helped to get a listing for a part of the Baan group of companies (Jan Baan liked complicated financial structures) on the Nasdaq as well as the Amsterdam Stock Exchange in 1995. Share prices rocketed in the general optimistic mood about the IT sector. Expectations rose to irrational levels. Soon it became impossible to realise growth figures matching the expectations. To prop up the share price, the Baan company boosted sales figures by selling products to privately owned Baan firms. When it became clear that many of these products were still on the shelves, confidence in Baan collapsed in 1998. Top management began to leave. The disappointed shareholders heavily criticised the diffuse structure of related Baan companies, many of them still privately owned. Incidentally, this structure was set up with the help of advisers from McKinsey. After the collapse of its share prices, the Baan company was an obvious candidate for a takeover.89 In 2000 the English company Invensys took Baan under its wing. In sharp contrast, the family firm Van Oord, active in dredging, could overcome dips in their volatile business thanks to their patient family shareholders, who were willing to look at the long-term perspective rather than the quarterly figures. Far from looking for a listing on the stock exchange, this company has strengthened the position of the family shareholders in the mid-1990s out of conviction that third and fourth generations in the family firm can continue to play a meaningful role in the management of their company.90 Wage moderation and flexibility in labour relations In the same way as the crisis of 1982 brought a new appreciation of entrepreneurship and the entrepreneur, it framed a new collaboration between business and workers. Soaring unemployment created a sense of urgency in which unpopular measures such as wage moderation could be taken. Also, the labour unions were losing members. They were in danger of losing influence, all the more as unionisation, which was around 40 per cent in the 1950s and 1960s, began to decline. It reached a low of 25 per cent in the mid-1980s and only picked up in the 1990s.91 A consensus surfaced that the country could only achieve a high level of investment, necessary for the creation of new jobs, by a higher level of profitability and therefore a lowering of labour costs. At the nadir of the post-war economic recession, in 1982, the national organisations of employers and employees reached a wage agreement (Central Accord) in the town of Wassenaar. They agreed to get rid of the automatic payment of cost-ofliving adjustments, which had considerably added to inflation in the 1970s. Further wage moderation was traded against a modest reduction in annual and weekly working hours. In later years, this Accord of Wassenaar was hailed as the beginning of a new period of constructive collaboration between the trade unions and the employers’ associations. In contrast to the agreements negotiated during the 1950s and 1960s, the Accord was no

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central agreement but only a recommendation from the central organisations to their respective industry organisations. The recommendation, however, carried strong moral weight. The final details had to be negotiated at local and sector level through a decentralised yet highly coordinated system of bargaining. The Accord was followed by a series of guidelines, joint reports and recommendations on a large number of issues, including pensions, jobs for ethnic minorities and long-term unemployed, rights of part-timers, youth unemployment, training and, of course, wages. These recommendations from the central organisations of employers and employees strongly influenced the local bargaining process, but they did not dictate the outcome.92 One might expect that this elaborate system of wage bargaining would seriously hinder the downward correction of wages in a situation of economic recession. However, this was not the case. According to a 1999 Oeso research report, it took 1.5 years to adjust half the wages in the Netherlands, just as long as it took the US. By comparison, a similar adjustment in France or Germany took 4 and 3.5 years respectively.93 The agreed wage moderation could be sustained in later years because of governmental measures to lower taxes and social charges to compensate for the wage restraint. Initially the labour unions expected the small reduction in working hours to lead to an increase in employment. This effect did not materialise immediately, even though profits and investment began to rise. Nonetheless, the trade unions had sufficient trust and belief in the goodwill of employers to continue their strategy. Members of the trade unions as well as public servants showed a remarkable solidarity, being willing to accept a cut in their wages in order to create work for the unemployed. From 1984 onwards, the number of people employed did indeed increase through an extraordinary growth in part-time jobs as the result of the massive entry of women into the labour force. Also, older workers were replaced by younger, cheaper and possibly more flexible and skilled workers.94 Apparently, the workers appreciated the return to more corporatist structures, because after 1986 the membership of trade unions began to rise again. By 1997 it was higher than ever before in absolute numbers.95 Pressure for higher wages resurfaced in the late 1990s. As profits and share prices boomed, and higher management received high remunerations increased further by bonuses and share options, the average worker began to wonder about his slice of the cake. The preaching for wage moderation lost credibility. After the wage moderation, reform efforts concentrated on social security in the 1980s. The cuts in welfare programmes required cumbersome renegotiations over established social rights. Initial measures to reform the system of social security included a freeze of social benefits and the lowering of maximum entitlements of earnings-related benefits from 80 to 70 per cent. These measures did bring down costs, but the savings were partially undone by collective bargaining and the rising number of

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claimants. In the 1990s nearly one million people, one-sixth of the employed labour force, received disability benefits. Despite massive protests by the unions, harsh measures were introduced to bring down the number of claimants through the blocking of the two main exit routes from the labour market: disability insurance and sickness leave. The Dutch social security system featured a considerable organisational involvement of employers’ associations and trade unions in the administration of social policy. Both parties had benefited from an easy exit route from the labour market. In 1993 a parliamentary inquiry concluded that the Dutch social security system had been abused by claimants and mismanaged by the social partners. These conclusions led to the introduction of reforms intended to strenghten control of the public purse and to limit the direct administrative involvement of unions and employers.96 While the organisation of the social security system was changed and the level of benefits somewhat diminished, the welfare state remained a strong pillar of Dutch society. The number of people on disability benefits diminished after the first round of restrictive measures, but gradually the figure crept up to reach the level of one million people once again. In the 1990s policy makers came to the conclusion that the best way to sustain the achievements of the welfare state would be to combat the low level of labour market participation. The government launched special programmes to stimulate unskilled and lowly paid workers as well as longterm unemployed to find their way to the labour market. It reformed the state employment service several times. More importantly private employment agencies such as Randstad understood the new opportunities for temporary job placement services. Companies found it attractive to hire people through these agencies. After the long struggle to restructure their companies and diminish employee numbers during the economic crisis, they were reluctant to engage anew in long-term commitments. To motivate their employees while keeping the policy of wage moderation in place, companies turned to programmes of boosting the company spirit. Business culture seemed an important factor in explaining the success of companies, as the management literature analysing the success of Japanese companies argued. Care for quality was considered one of the key elements to success. The Japanese-inspired ‘Quality Circles’ found their way to Dutch companies. A first early evaluation of experiments with quality circles concluded that strong support from the top was absolutely essential, that top management should take the output of the circles seriously, and that careful coaching was necessary.97 In 1984 Royal Dutch Airlines (KLM) launched a motivation campaign under the code name KICK, which stood for ‘KLM is continue kwaliteit’ (KLM is continuous quality) in 1984. With mass meetings, internal courses, information and communication programmes, employees were encouraged to come forward with ideas to increase the quality of the service. Some elements from the history of the company, for instance the fact that KLM was the

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oldest airline still operating, were used to underline the image of the company as a reliable airline. Following the example of KLM, the accountancy firm Moret & Limperg, the later Moret, Ernst & Young, introduced the campaign ‘Samen Beter’ (Better together) to improve internal communication, cross-selling and assistance in 1988. The internal campaign went together with the external advertising campaign for staff with the motto: people determine the face of Moret. Here, too, the history of the company served as a positive point of reference. Pictures of the founders of the oldest partnerships figured prominently on advertisements. The campaign received a mixed reception, as some of the partners had some difficulty in taking it seriously. However, it underlined the importance of internal co-operation.98 Work on the business culture included a mission statement, intended to communicate the message of the company inside as well as outside. There is room for doubt about the effectiveness of these motivation programmes, because in many cases action plans underlining the importance of ‘human capital’ for the company went hand in hand with continuous downsizing. Employees were told that they were the firm’s most valuable assets, but often they found that they were the most expendable assets too. The Japanese style mass projects disappeared again to be replaced by Human Resources Management focused on ‘employability’: a word made up of the combination of employment and adaptability. Companies had to offer their employees learning opportunities so that the workers would be able to adapt themselves to new tasks or even to new employers. Employees were supposed to behave flexibly in the labour market, that is to leave the company if necessary and find new work elsewhere. And in order to further this labour flexibility the company had to improve the capabilities of their staff.99 No longer were employees encouraged through social welfare programmes to stay a lifetime at one company as they had been in the 1950s. In fact companies such as Philips and Hoogovens began to reconsider and slim down their social welfare policies at the same time as the welfare state came under pressure.100 How flexible has the labour market really become? The public perception about the 1990s is that jobs were no longer for life, work became increasingly temporary and more people were going freelance. Did the revolution of the workplace really happen? The statistics cast some doubt on this general picture. The proportion of workers with permanent jobs, either full-time or part-time, hardly diminished over time. Their share in employment was 80 per cent in 1970 and 77 per cent in 1998. This hardly looks like a dramatic change. A ‘permanent position’ in this context is defined as a permanent job, or a temporary job intended to be turned into a permanent job and a contract for longer than a year. The number of workers with flexible jobs, however, did rise from 5 per cent in 1970 to 11 per cent in 1998, mostly because the self-employed turned to flexible jobs. The number of self-employed slightly diminished from 16 per cent in

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1970 to 13 per cent in 1998. What happened to the job for life? For the 1990s figures are available about the length of employment at one company. In 1992 employees stayed on average for 8.4 years with the same employer, in 1999 this number had risen to 8.9 years.101 Interestingly, statistics in the UK showed a similar picture of stability in the workplace, leading to the critical comment that: ‘management consultants writing on the changing nature of work are in effect writing about themselves and those in their clique’.102 However, what did change in the Dutch case was the predominance of the full-time job. The number of traditional fulltime, permanent, jobs diminished from two-thirds (68 per cent) in 1970 to a little over a half (51 per cent) in 1998. While in 1970 less than one in six workers had a part-time or flexible job, in 1998 this was one in three (37 per cent). However, most of the part-time workers (81 per cent) had permanent jobs.103 The change, apparently, was not so much in the permanency of the job as in the fact that many more jobs were part-time. And most of these part-time jobs were filled by women, who combined their work with household chores (either from pure choice or dire necessity). In fact, no country in Europe has such a large percentage of the labour force working part-time as the Netherlands. In yet another way, too, labour relations became more flexible, in the length of the working day. From the 1980s onwards, labour unions bargained for shorter working hours. In the early 1980s the aim was redistribution of work. The unions succeeded in getting the working week down from 40 hours per week to 38 hours in the first round of their negotiations, but then the process stopped because employers were unwilling to reduce working hours further. The issue was taken up again in the early 1990s. This time the employees’ wishes for shorter working days coincided with the employers’ demands for flexible working hours in response to the trend towards the ‘24 hour economy’. In some sectors with close customer relationships, such as banks, this trade-off worked. The introduction of the 36-hour working week was included in the collective labour agreements of the banking sector. The option was also opened in the collective labour agreements for civil servants, teachers and hospital staff. The large multinationals, in particular Philips, set themselves against a further shortening of the working week on account of international competition.104 Whether the formal shortening of the working day did indeed diminish actual working time is another matter. The perception of many workers is that the pressure and workload have increased, leading to stress in the workplace. What keeps the workers on tenterhooks is the need to compete. In 1992 the Hagemeyer staff magazine published a fable summarising their corporate culture, entitled the competitor’s creed: Every morning when the sun comes up, the gazelle wakes, and he knows that he will have to outrun the fastest lion, or he will be eaten. When the sun comes up, the lion also awakes. He knows that he must

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outrun the slowest gazelle or he will starve. In the end it does not really matter whether you are a lion or gazelle. When the sun comes up, you’d better be running.105 All the hard work and stress, however, did not lead to a substantial rise in labour productivity. In fact, it showed a steady decline over the 1990s. The increase in labour productivity diminished from an average 3.6 per cent annually in 1960–1970 to 2.7 per cent in 1970–1980, and further down to 1.2 per cent in 1990–1999. The transition from manufacturing to services can only partially explain this downward trend in the rise in labour productivity.106 Why then do we seem to work harder and produce increasingly less? In his book on labour in the post-industrial society, P.T. de Beer suggests that as society we work harder because jobs have become luxury goods. Thanks to technological developments, the working hours needed to produce the goods to live comfortably have gone down dramatically. However, because jobs are seen as luxury goods rather than an economic necessity, the time freed from direct production has been filled with other kinds of work, including indirect production. In fact, the further people are removed from the direct production, the more important their work is considered to be. People at the very top only have to talk and to listen, or so it seems. Their productivity is very hard to measure. Furthermore, they may well have their worth for the individual company, yet contribute little to the macro-economic production. For instance, two highly paid lawyers involved in a patent battle between two companies are of utmost importance to the individual companies, which are both determined to win. Therefore the money spent on their expenses is fully justified. However, for society as a whole it does not really matter who wins the right to exploit the patent, and therefore the conflict could have ended by a throw of the dice, which would have required considerably less effort from highly paid people. As the 1990s saw a marked rise in the deployment of lawyers, management consultants and other advisers, this challenging explanation for the modest rise in labour productivity may well hold some truth.107 A more modest role for government The economic recession of the 1970s had cast some doubt on the role of governments in managing the economy. Also, the high costs of upholding the welfare state were thought to threaten the competitive position of Dutch business. For these reasons the business community looked for a more modest role for the government in economic life. Over the years business people undeniably showed some inconsistency in their attitudes towards government. In times of need they expected support from the government, even for individual companies, but in general they preferred as much freedom as possible to transact their own businesses as they saw

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fit. The employers’ associations were somewhat more consistent in that they were opposed to government subsidies to individual companies because these undermined mutual competitiveness, but they welcomed more general measures. In the early 1980s the business community expected government support in boosting the international competitive position of Dutch companies through diminishing the budget deficit, cutting down on taxes and lowering social expenditures. Government responded with a ‘no-nonsense’ policy. The budget deficit was brought down, business taxes were lowered and social expenditure was cut back. These measures, it was thought, should help Dutch business to compete abroad and create new jobs for the many unemployed, as indeed they did, though only gradually. The government also published reports on how to strengthen manufacturing and encourage innovation, resuming the industrial policy of the 1950s, which the government had abandoned in the 1960s. Historians started a debate on whether the present policy makers could learn from the industrial policy of the 1950s.108 At the same time the government, together with the business community, published a number of ambitious reports with titles such as ‘The position and future of Dutch manufacturing’, ‘Towards a new industrial elan’, ‘Re-industrialisation and technology’, ‘A choice for manufacturing’.109 Technology was seen as the key factor in creating a new industrial dynamism and at the same time as the weak point in Dutch industry. One might have expected government investment in research and development to rise after 1982. Measured in percentage of GNP it rose somewhat between 1981 and 1982, but remained broadly the same after that. Investment by companies in research and development as a percentage of GNP rose steeply between 1980 and 1987, but fell back to its 1984 level in 1993.110 No wonder the IMD frequently gave the Netherlands a much lower ranking in ‘Science and Technology’ than in its ‘Overall Performance’. The opposite was true for the ‘Internationalisation’ ranking.111 The relative decline in company expenditure on research and development mirrored a change of policy within companies. During the 1950s and 1960s Dutch companies had invested heavily in fundamental research, waiting patiently for benefits to surface in due course. During the recession of the 1970s companies became more impatient and critical towards their research expenditure. They wished to shorten the time between research and marketable products. The same can be said of government policy, which changed in the early 1980s from investment in fundamental research to efforts to stimulate innovations.112 One of the practical results of this effort was the establishment of regional ‘innovation centres’ intended to enhance the innovation performance of small and medium-sized enterprises. The government-financed centres were set up to make technological knowledge accessible and applicable for small and medium-sized firms. A study from 1995 revealed that the centres had

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facilitated more than they had transferred technological knowledge to small and medium-sized firms. Their added value lay in their capacity to reach local small entrepreneurs and to convince and support them in making use of relevant external knowledge to solve their problems. They played a linking rather than a transfer role, and this had everything to do with the fact that innovation is not a simply linear but a complex social process.113 Inspired by the publication of Michael Porter, The competitive advantage of nations, the government commissioned researchers to trace and measure competitive advantages of the Netherlands. The first results, published in the same year, 1990, were very sobering. The Netherlands had its greatest competitive advantage in cut flowers. More generally, the economy’s strength lay in agriculture and the food industry and not in manufacturing.114 However, as researchers soon pointed out, Porter used export figures to measure competitiveness and these figures gave only part of the picture. For instance, non-exporting industries were automatically seen as non-competitive. Alternative measures of competitiveness could result in quite different performances. More fundamental was the question of whether it is countries that are competitive, or companies within countries. Also, the link between national conditions and business performance was far from evident. Furthermore, firms from small countries like the Netherlands heavily depended on larger neighbouring countries. Porter drew attention to the importance of regional and national networks between firms, but he did not discuss the international networks, while these are particularly relevant for Dutch firms.115 Nonetheless, his work inspired the Ministry of Economic Affairs to think about the competitiveness of the Netherlands and of ways in which the government could improve it. His book also encouraged benchmarking. In 1995 the Ministry published its first ‘Test of Competitiveness’. In its effort to slash the budget deficit, the government explored the possibilities of privatising state-owned companies in order to raise extra income. This strategy conformed to the general ideology of more market economy and less government intervention. From the introduction of the company law in 1912 onwards, the Netherlands had a long tradition of managing semi-public firms such as the state mines, the railways and utilities as private enterprises, following general commercial principles with largely independent management and a financial administration made independent of government finances. During the 1950s and 1960s state influence and state participation were already diminished in companies like KLM, State Mines (the later DSM) and Hoogovens. During the 1980s the state withdrew even further by selling most of its shares. As a source of income, privatisation played a modest role because the state-owned sector was never large in any case.116 The largest operation was the privatisation of the postal bank and the post and telecommunications company (PTT). The PTT displayed the same inconsistency towards the government as we

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noticed in business people more generally. It was only too pleased with its monopoly position on the Dutch market, but battled against the disadvantages of its position as a state enterprise, including the lack of access to the capital market and its inability to pay high wages to scarce IT experts. International pressure for deregulation played an important role in the privatisation process, as did technological developments.117 Plans to privatise the national railways, however, have been put on hold. The liberalisation movement did not stop at privatisation of stateowned enterprises. In the mid-1990s, a new competition authority was set up to sweep away the remaining cartels. Shop hours were largely deregulated. Company governance was put on the agenda, and plans were drawn up to make unfriendly takeovers easier. The liberalisation process, however, ran out of steam in the late 1990s. Doubts returned about the true efficiency of free markets and about their ability to distribute results fairly. In 1997 the McKinsey management consultants presented a report on the Netherlands, titled ‘Boosting Dutch Economic Performance’, in which they identified a number of possible reforms that would significantly increase economic performance and benefit society at large. Not surprisingly, the recommendations were based on the American business model. All reforms related to more reliance on the market: more competition in retailing and personal financial services, less labour market regulation including simpler procedures for laying off workers, removing obstacles to new business creation, changes in corporate governance, including rewarding managers on the basis of created shareholder value. To stimulate growth of less-skilled employment, the advice was given to reform the system of minimum wages, welfare benefits and social security taxes, because the lack of incentives to create and seek jobs was seen as an important factor holding back employment growth.118 Not everybody was convinced, however, that these recommendations would bring the greatest happiness to the greatest number of people.119

4.3 International business and national boundaries In the 1980s and 1990s business in general became more international, and Dutch business fully shared in this trend. The Dutch import and export of manufactured goods in relation to gross domestic product (GDP) was traditionally high, and increased further, thought not to the levels reached in the period before 1914.120 The figures for foreign direct investment (FDI) showed an even stronger upward trend, particularly in the second half of the 1990s. Figure 4.2 gives the flow of inward and outward investment as a percentage of GDP between 1975 and 2002. The figures for the first two years of the twenty-first century are included to underpin the exceptional character of the huge streams of foreign direct investment in the second half of the 1990s. Both flows showed a strong rise with outward investment remaining

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Figure 4.2 Dutch inward and outward direct foreign investment, 1975–2002 (source: M. van Nieuwkerk and R.P. Sparling, De betalingsbalans van Nederland: methoden, begrippen en gegevens (1946–1985), Monetaire monografieën, nr. 7 (Deventer: Kluwer, 1987); Annual Reports De Nederlandsche Bank, 1985–2002; CBS, Tweehonderd jaar statistiek in tijdreeksen, 1800–1999 (Voorburg: CBS, 2001)).

in percentage GDP

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consistently higher than inward. While the flow of outward investment grew from 2 per cent of GDP in 1975 to 20 per cent in 2000, inward rose from 1 per cent in 1975 to 16 per cent in 2000. The FDI stock rose from 24 per cent of GDP in 1975 to 34 per cent in 1990. During the 1990s, the stock in foreign direct investment increased sharply, reaching a level of 83 per cent of GDP in 2000. Despite the huge increase, the Netherlands had to be content with sixth place in the 1999 world list of foreign direct investor countries, behind the US, UK, Germany, France and Hong Kong.121 During the 1950s and 1960s, the large manufacturing (and oil) companies had dominated the national business scene. At the end of the century Royal Dutch/Shell, Unilever, Philips and Akzo (merged with Nobel in 1994) remained the leading multinational companies from the Netherlands. Unilever, Shell and Philips are amongst the 30 most internationalised firms in the world. In 1996, Unilever and Philips had the largest number of employees abroad of any firm in the world, together employing about half a million people outside their home countries.122 In the World Investment Report 1999, Unilever and Philips were among the world’s top 10 transnational companies in terms of degree of transnationality. In this list, companies from small countries dominate for obvious reasons.123 From the 1970s onwards companies in the service sector, particularly banks and insurance companies such as ABN AMRO, ING Group and Aegon, began to internationalise their activities. The share of the service sector in total Dutch FDI stock went up from 12 per cent in 1973 to 57 per cent in 2000.124 This rise shows that the Dutch companies participated in the general trend in internationalisation of services in response to the liberalisation of markets on a global scale. This liberalisation concerned in particular the financial and insurance markets, but gradually began to include real estate markets, retailing and utilities. In 1995 the journal Fortune published for the first time an integrated list of the 500 largest companies world-wide in manufacturing as well as services, ranked by revenue. Table 4.1 highlights the Dutch (and mixedDutch) companies on this list and their ranking. In 1994 Royal Dutch/Shell, Unilever and Philips were still ahead of the service companies, but this was no longer true in 2000. Only Royal Dutch/Shell remained among the top 10 world players. The insurance and banking enterprise ING Group and the retailer Ahold surpassed Unilever in the 2000 list. The Dutch–Belgian Fortis and the Dutch ABN AMRO ranked higher than Philips. The rankings on these lists, however, also became more volatile as a consequence of divestment policies or large mergers. Dutch companies showed a great eagerness to invest in the US during the early 1980s, when the Netherlands and Europe were in the thrall of recession. After mid-1985, however, interest waned somewhat and the stock of FDI in the US diminished from 41 per cent in 1985 to 26 per cent in 2000. However, it remained the single most important country for

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Table 4.1 Dutch (or mixed Dutch) companies in Fortune’s list of world’s largest corporations, ranked in revenues 1994

2000

10 Royal Dutch/Shell 21 Unilever 58 Philips Electronics 88 ING Group 121 ABN AMRO 190 Ahold 244 SHV Holdings 286 AKZO Nobel 323 Aegon 341 Rabobank 384 KNP

6 Royal Dutch/Shell 24 ING Group 58 Ahold 72 Unilever 73 Fortis 74 ABN AMRO 107 Philips Electronics 151 Aegon 242 Rabobank 402 AKZO Nobel 426 KNP

Source: Fortune, August 1995 and July 2001.

Dutch FDI. Dutch companies considered their presence in the US market of great importance, not only because it represented a huge, uniform market, but also because it was technologically so advanced. One had to be present in this exciting market to know what the future would hold. Even if the results for the US subsidiaries were disappointing, as was for instance the case for several Dutch trading houses, the companies kept returning to the US because they wished to stay in touch with the latest developments.125 Nor were Dutch service providers generally unlucky with their investments in the US, quite the contrary; the banks, insurers and retailers found their US subsidiaries very profitable, at least during the 1990s. In the early 2000s, several Dutch companies, which took over relatively large companies in the US during the late 1990s, notably Getronics and Ahold, ran into trouble over their large US acquisitions. After 1985 the main focus of Dutch FDI shifted back to Europe. Its share increased from 34 per cent in 1985 to 50 per cent in 2000.126 The manufacturing companies began to restructure their European activities in order to profit from the economies of scale that came within reach when the integration of the European Union really began to take off with the plans for, and ultimate introduction of, the internal market in 1992. In fact, the benefits of this process of restructuring had already been considered in the 1970s, but the process did not materialise until the 1980s. The stiff competition from Japanese and other Asian companies undoubtedly helped European companies focus on this issue. The service sector showed an even greater eagerness than manufacturing companies to invest in the European Union. Trading companies, insurance companies, banks, transport and communication companies found their way to European countries, including Eastern Europe. In the 1970s it was expected that multinational companies would transfer employment to low-wage countries. This indeed happened in a

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number of cases. The textile industry in the Netherlands was largely wiped out through competition from low-wage countries and Philips, for instance, moved production units to Asia. Nevertheless, there was not the big runaway movement that trade unions in the Netherlands feared. Often, lower wage costs did not sufficiently compensate for drawbacks such as higher costs in transport, lack of flexibility in production, greater distance from consumer preferences, problems with hiring senior staff and all kinds of trade barriers. Part of the fashionable textile clothing industry even returned to Europe. Investment in developing countries, therefore, remained modest. Investment in Africa and South America together made up 4 per cent of FDI stock in 2000. The stock of Dutch FDI in South-East Asia rose from 3 per cent in 1984 to 5 per cent in 2000, but even this rise was at least part motivated by the wish to produce close to promising markets. Initially, Dutch investors played a wait and see game after the fall of the communist regimes in Eastern Europe. However, in the second half of the 1990s Dutch companies began to show a marked interest in this region. Their 3 per cent share of FDI stock in 2000 is still modest, but as it was acquired in such a short period it certainly means a promising start.127 Though internationalisation has been a feature of the Netherlands from the beginning of the twentieth century, it became even more marked during the last two decades of that century. At the same time its relationship with the economies of the European Union became closer. The two general trends of globalisation and regionalism are therefore visible in the Netherlands. Internationalisation was also visible in the distribution of share ownership. In 1993 no less than 54.8 per cent of the shares in the Netherlands were in foreign hands, compared with 16.3 per cent in the UK, 12.2 per cent in Germany and 5.4 in the US.128 Global strategies of manufacturing companies Which company strategies were behind these global figures? First of all, international activities were predominantly shaped through mergers and takeovers. In Chapter 3 we concluded that during the 1960s manufacturing companies began to prefer acquisitions to starting from scratch. This preference continued during the subsequent decades. For instance, during the period 1986–1992 only 30–35 per cent of foreign direct investment focused on start-ups. By the mid-1990s, the proportion of start-up investment had even decreased to 10–15 per cent of all international investment, the rest being mergers and takeovers.129 The internationalisation strategy of most companies was very much part of their general company strategy. As we have seen, this moved from the focus on ‘back to core business’ to growth in related areas and further to dominant market positions. Strategic alliances, co-makership and outsourcing were elements in these general strategies, whose ultimate aim was the creation of

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‘shareholder value’. All business activities were constantly scrutinised and if performance was disappointing or growth perspectives were considered modest, then it was time for a sell-off. Personnel should be eager, innovative, flexible and adaptable, proud of the company yet prepared to leave happily the moment the grand strategy should demand restructuring. The striving after market dominance world-wide implied a global strategy in brands. For a long time the Dutch multinationals had followed a strategy of promoting local brands in different countries, appealing to national pride. In this sense they were truly ‘multinational’. In the 1990s managerial wisdom dictated a global strategy with global brands and production divorced from consumption in the most cost-effective location. Typically, the second edition of the book Multinational marketing management, published in 1992, was renamed: Global market management. The authors explained the reason behind the change: We have tried to broaden our scope to include marketing management concerns in settings that are not strictly ‘multinational’. These include competitive challenges that arise in firms that serve national markets but that are faced with increasingly ‘global’ market forces, especially global competition.130 The idea of global markets markedly influenced the strategies of Philips, Unilever and Akzo Nobel. The situation for Royal Dutch/Shell was somewhat different. This enterprise had been a global player from the start of the century. Far from becoming even more global, the oil sector was affected by rising nationalist aspirations in producing as well as consuming countries. In 1960 a group of oil-exporting countries with a base in the Middle East formed the oil producers’ cartel OPEC. These countries were gradually trying to get a larger stake in the benefits of oil production. The confrontation between Israel and the Arab world triggered the first ‘oil shock’ in 1973, which led to rising oil prices and greater participation in the industry by governments of oil-exporting countries. The demands quickly rose to the level of 50 per cent host government participation and further, to a share of 90 per cent or even total nationalisation. This led to an enormous reduction in the oil and gas reserves and oil production of the Royal Dutch/Shell Group. Nationalisation of oil assets brought a partial end to the integration of the major oil companies. Instead, trading and the spot market began to play an important role in running the business. While the oil majors remained active in all stages of the supply chain, the stream of oil was no longer necessarily integrated within the companies. Ownership structures became far more complex, with a mix of joint ventures between the major oil companies and between the national companies of producing countries and the private oil companies as well. Governments in the oil-consuming countries, too, participated in oil

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production and distribution. The use of contractors and outsourcing further reduced integration. OPEC policy formed one of the main motives for Royal Dutch/Shell to start a process of diversification during the late 1960s and early 1970s. It diversified into nuclear energy, metals and coal, but none of these activities provided a real alternative for oil. The nuclear ventures, which turned out to be a costly experience, were started in 1973 and given up in 1980. The diversification in the metals business – the Dutch company Billiton was taken over in 1970 – lasted till 1994. The coal business was finally divested in 2000. The chemical business, already entered in 1928, remained part of the enterprise because of its close link with the oil refineries. During the 1970s it turned into a mature industry, increasingly sensitive to investment cycles. For that reason, the Shell Group reshuffled its chemical activities through divestment and joint ventures. By contrast, it stepped up its investment in the gas sector, which developed into its second core business. It took a leading role in liquefied natural gas (LNG). In the 1990s it showed an increasing interest in renewable energy such as wind and solar energy. The geographical spread of the activities of the Shell Group widened. Even Russia was re-entered. At the same time, the integration of activities across borders was stepped up. To put an end to the isolated position of the US affiliate Shell Oil, the minority shareholders were bought out in the face of a legal challenge in 1984/5. In the 1990s the internal organisation was changed in such a way that the five business units became the focal point in leading the operating companies, while the national organisations were left with a more modest co-ordinating role.131 The strategy of competing globally influenced Unilever in two ways. To create a successful global strategy it needed fewer but stronger brands and it needed strong co-ordination at the level of business units rather than national organisations. From the mid-1970s Unilever reasserted control over its failing US businesses. Loss-making activities were divested and entirely new ventures, sometimes with exactly the same activity, were bought. The company no longer hesitated to send in European managers to sort out problems in the US. At the same time the global company obtained better access to innovation and knowledge available in the US. In this process of restructuring, the US businesses became fully integrated in Unilever’s world-wide structures.132 In Europe the many fragmented production units were reorganised in order to achieve a more favourable scale. At the end of the 1990s the company announced that it would dramatically reduce the number of brands from about 1,600 to 400 in order to create greater efficiency and concentrate its advertising and marketing efforts. This policy formed a drastic departure from the traditional ‘local for local’ philosophy and not all consumers were happy to replace what they considered their local brand for a global one, nor were employees happy with the closure of smaller production units. However, Unilever

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considered the focusing on a limited number of brands essential in its struggle for world dominance with arch-rivals such as Procter and Gamble in soap and personal care products and Nestlé in food products. The vast restructuring programme under the name of ‘Path to Growth’ met with considerable success in overhauling the brand portfolio and rationalising the supply chain.133 The artificial fibres multinational, Akzo, did not return to its core business, but shed it altogether, though only after a prolonged struggle to make chemical fibres profitable through cutting excess capacity, modernising production equipment and concentrating on innovative industrial fibres. Despite these efforts, Akzo gradually pulled out of its traditional artificial fibres and focused on chemicals, pharmaceuticals and industrial coatings. In 1982 the company published its business strategy in the annual report for the first time. In the same year it acquired all the remaining shares of its US subsidiary Akzona in order to integrate its activities in the pharmaceutical and speciality chemical fields world-wide. Though the company was still mostly active in Western Europe and the US, the rapidly expanding economies of South-East Asia and Japan were pointed out as opportunities for new industrial activities. The presence in South-East Asia, however, remained small. In an effort to diminish overhead costs, Akzo took the drastic step of shedding one entire organisational layer by dissolving the divisional structure in 1992. Instead the 35 business units had to report directly to the board of managing directors. The merger in 1994 with the Swedish firm Nobel Industries, which was basically a takeover of the Swedish firm by the Dutch company, increased the European basis of the company. In 1998 Akzo Nobel took over its famous English competitor Courtaulds. This was not done with the intention of moving back into textiles but in order to acquire the chemical part of the company, particularly the coatings division. The two textile divisions of Akzo and Courtaulds were merged into a separate company, Acordis, and then sold to investment bankers in 2001.134 The strategies of the fourth Dutch major multinational, Philips, showed remarkable similarities with the other three. It also ended the special position of its US affiliate, reinforced its business units at the expense of the national organisations and focused its portfolio of activities. Whatever value the strategies of the four manufacturing multinationals created, they certainly did not result in rising employment. The combined number of people employed world-wide decreased from 1,029,000 in 1973 to 677,000 in 2000.135 Nevertheless, the four were still in the Dutch top 10 in terms of employees, sales and profitability. Growth strategies, however, were to be found in a number of other multinational companies. The brewery Heineken, for instance, followed a consistent policy of expansion through the acquisition of a large number of breweries abroad. In this way it rose to the top 15 of Dutch companies in terms of sales and number of employees, and became one of the world’s leading breweries.136

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The retailer Ahold also enjoyed a spectacular rise as a consequence of its internationalisation strategy. In 2000 it ranked second in the list of top Dutch companies measured in sales as well as in employees.137 However, this fast growth through takeovers made the company more exposed to failing results in its newly acquired businesses. In earlier chapters it was noted that not only large enterprises but also medium-sized firms had activities abroad. For instance, a firm in steel construction on land and offshore, set up by the Jaap de Groot in 1948, evolved into the holding company Grootint with 16 operating companies, of which six operated abroad. It employed nearly 4,000 workers by 1983. The combination of personal leadership and foreign activities could also be found in the company Indivers of B.M.W. Twaalfhoven. This company, specialising in repair and maintenance of aircraft turbines with 850 employees, had 23 operating companies in the Netherlands and abroad in 1983.138 These are just two examples of many medium-sized companies with international activities outside their home country, contributing to the vast Dutch stock of foreign direct investment. The rise of the service multinationals The companies in the service sector chose their own route towards internationalisation. In his study of the evolution of international business, Geoffrey Jones argued that multinational service investment played a strategic role in the creation of the world-wide economy that developed by the late nineteenth century. Yet, as multinational companies, these service firms were less visible than industrial companies because they organised their activities through collaboration or network arrangements rather than through hierarchies. Generalising about the service sector is difficult, because the sector is highly diffuse and organisational structures, ownership structures and modes of internationalisation varied greatly.139 This becomes clear when we compare the internationalisation strategies of Dutch bankers with those of Dutch accountants. Both sectors started their internationalisation with a combination of start-ups and networking, but they ultimately developed in different directions. At the beginning of the 1970s there were four major players in the Dutch banking market, three commercial banks and one co-operative bank. Of those four, only one, ABN, had offices abroad. One important obstacle to the extension of banking across borders was the nationalism expressed in national banking legislation, which protected national banking institutions from foreign competition, especially in the retail sector. However, the Dutch banks had several strong motives for going abroad and overcoming this obstacle. First, internationalisation offered the opportunity for expansion, which the home market no longer did. Second, the banks wanted to protect their relationships with their clients by offering them abroad the same services they were used to at home. Such services consisted of company

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lending, the financing of international trade flows and related exchange operations. But there were other factors furthering international banking. During the 1960s an integrated international money and capital market (re)emerged. From the middle of the 1950s the Eurodollar market developed, unregulated by any government, with no liquidity rations, but with freedom of entry and exit. With the growth of Eurodollar markets came new lending instruments such as floating rate loans and syndicated credit. Multinational banks became the dominant players in these new financial markets. The US banks led the way and some of the European banks followed.140 While US banks entered the European market with foreign subsidiaries of their own and British banks also had a long tradition in multinational banking, the continental European banks hesitated to take this course. They experimented with intensified co-operation through partner banks in Europe and the formation of joint bases outside Europe. The four major Dutch banks, Rabobank, ABN, AMRO and NMB, all became partners in European banking networks in the late 1960s and 1970s, even though ABN already had 136 foreign offices and 5,200 staff members abroad in 1972.141 The European banking networks, such as the EBIC-Group, the ABECORGroup and the Inter Alpha Group, however, did not work out as expected. First, they were undermined by the international expansion of the partners under their own names. Second, management was complicated and as a result did not function smoothly. Perhaps management hesitated to place their best personnel in the network. The joint ventures, more specifically, tended to behave too autonomously and the benefits for the partners were often unclear. Lending to developing countries, one of the objectives of the joint banks, caused heavy losses during the international debt crisis in the early 1980s, making the benefits recede even further.142 Therefore, European banks, including the Dutch banks, decided to give up on the banking groups and instead gather strength through mergers in order to shape an international presence of their own. ABN merged with AMRO into ABN AMRO in 1991, becoming the largest bank in the Dutch market and reaching sixteenth position on the world list of banks in that year. The newly merged bank, in the Netherlands arrogantly advertised as ‘De Bank’ (The Bank), formed a second home base for retail banking in the US, followed by the acquisition of a large bank in Brazil in 1998 with the intention of creating a third home base. The NMB merged with the formerly state-owned Postbank in 1989. The NMB-Postbank, making use of the changed regulations with regard to the combination of banking and insurance activities, merged with Nationale Nederlanden, the largest insurer in the Netherlands in 1990, forming the Internationale Nederlanden Group (ING). The banking section, under the name ING Bank, heightened its effort to become a global player. The acquisition of the troubled British merchant bank Barings in 1995 formed a spectacular example of its ambition. The

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ING Group expanded through foreign acquisitions in the banking and in the insurance sector as well. The co-operative Rabobank was the only one of the four major Dutch banks that maintained an interest in some international networking construction. The Rabobank was part of the network of co-operative banks, the Unico Banking Group, formed in 1977. This Group experienced the same difficulties as the other banking groups, but as a co-operative it was prepared to wait and see a bit longer. The Rabobank followed two strategies in its activities abroad. On the one hand, it tried to create partnerships with co-operative banks from the Unico Banking Group in other European countries to offer its clients retail services abroad. On the other hand, it built up a series of fully owned foreign subsidiaries, relying on its strength in the agrarian sector. In comparison with ABN AMRO and the ING Bank, its foreign exposure remained modest.143 The internationalisation of the Dutch insurance companies showed a similar pattern. Concentration in the home market went hand in hand with international ambitions. The saturated home market formed a motivation for international expansion, while the financial burden of the international expansion led to further mergers at home to create financially stronger companies. Three leading insurance companies were active abroad: Nationale Nederlanden (since 1990 ING), Amev (since 1991 Fortis) and Aegon. (Both ING and Fortis combined insurance with banking activities, while Fortis was also a Belgium/Dutch merger.) Following the client was another important motive for internationalisation. The insurer Nationale Nederlanden even used the petrol stations of Showa Shell in Japan to create an entrance to the Japanese insurance market, an interesting example of how the traditional manufacturing multinationals stimulated the international expansion of the service companies.144 There was also an element of ‘following the leader’. In both the banking and insurance sectors a single company, respectively the bank ABN and the insurer Nationale Nederlanden, acted as first movers. Both had a long experience in working abroad. As far as the target countries were concerned, both banks and insurers were active in Europe, built up an impressive presence in the US and in the late 1980s cast their eyes on the South Asian market. Over time, minority shareholding and networking became less important, while acquisitions and majority shareholding were the preferred mode. Interestingly, the insurers frequently took the long way of starting from scratch throughout the 1970s and 1980s, relying on their expertise in the insurance business.145 Another group of Dutch service providers to go international were the accountants, but they followed a different route from that chosen by the banks. Until the beginning of the 1970s, internationalisation of Dutch auditing firms was very limited, partly as a consequence of professional rules. In the 1960s US companies entered Europe with their subsidiaries, and their auditors soon followed. Several continental European account-

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ing firms felt threatened and therefore worked on creating European networks to function as an alternative to the big US accounting firms. In the 1970s various ways to build up international contacts were discussed and considered by the larger Dutch auditing firms. The primary motive for the internationalisation of auditing firms was to protect relationships with clients. A second was growth, because the audits of the listed Dutch companies were already divided among the five leading Dutch auditing firms. Economies of scale in capitalising on R&D results also became a serious consideration in the early 1980s. The top two Dutch accounting firms, Kleynveld Kraayenhof & Co (later KPMG Kleynveld) and Moret & Limperg (later Moret, Ernst & Young) felt strong enough to set up a series of foreign branches, but at the same time they explored the pros and cons of forming cross-border federations. Not completely satisfied with the impact of its own foreign branches, Kleynveld tried to build up a European combination of accounting firms. During the 1970s, Moret felt unsure about the best way to organise its foreign activities and resorted to several strategies. The number of foreign service locations was increased. Co-operation with European firms was sought. Foreign firms were taken over. This last strategy had the great disadvantage that only smaller and less prestigious foreign auditing firms were prepared to be taken over and work under the Moret label. At the end of the 1970s Moret came to the conclusion that it had succeeded in serving the foreign subsidiaries of its own multinational clients satisfactorily, but that its foreign subsidiaries had failed to attract sufficient local clients. Nor had it been able to employ the most qualified national auditors, because the well-established national firms had a very strong position. Without local clients the foreign offices would remain too expensive. Moret’s dilemma was not just characteristic of a firm from a small country like the Netherlands. Even the US auditing firms found the European market hard to penetrate on their own. All big US auditing firms, impressive though they were on a world scale, had but a modest presence in the Dutch market as long as they worked on their own. During the 1980s the accounting firms found a solution to this problem in forming federations of strong national firms, linking up with the important US accounting firms. The formation of international federations went hand in hand with a merger movement, which in 1989 led to six, and in 1998 to five, major international accounting federations. One may wonder how international the Dutch auditors have become in the context of these federations. The establishment of foreign branches of their own has become rare. Therefore, little direct investment is involved in their foreign activities. However, becoming part of an international network has influenced the Dutch accounting firms enormously. All decisions, ranging from choice of writing paper, house style, marketing and computer software to new consultancy products and auditing standards are decided upon within the international federations. The

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increasing US influence on international as well as national auditing in the 1990s is undeniable. The national firms, however, remained autonomous bodies and separate profit centres. In the case of merger talks, each of the national firms had the option to join or remain independent. Staying independent was a very real option and in that sense the international federations of accountants continued to be different in their organisational structures from the multinational enterprise.146 A Dutch service sector which one might not immediately associate with internationalisation owing to the limited spread of the Dutch language, is publishing. Nevertheless, by 1985 a quarter of the turnover of the largest publishing houses in the Netherlands was generated outside the country and three Dutch houses, Reed Elsevier, Wolters Kluwer and VNU were included in the top 10 European publishers measured by revenues in 1997. Of these three, Reed Elsevier and Wolters Kluwer were the most internationalised. Elsevier was already active in publishing English language reference books and it had an important position in scientific journals when it acquired two Dutch scientific publishers, including Excerpta Medica in the late 1960s. These acquisitions greatly stimulated Elsevier’s international ambitions. The world of science was of itself internationally oriented, with the English language as the accepted means of communication. Elsevier also took over publishers in professional information, both at home and abroad. During the recession of the early 1980s, with the market for encyclopaedias and general books in the doldrums, Elsevier further concentrated on scientific publishing, which remained profitable. With specialisation came a more centralised management structure. The focus on the English-language market was greatly strengthened when Elsevier merged with Reed International in 1993. Together they moved further into the US and the scientific market, while disposing of consumer books. By contrast, Kluwer remained more European. This was a logical consequence of the fact that it had a strong position in law periodicals, which by their very nature are nationally oriented. Kluwer built up its international presence by acquiring European publishing houses. Their range of publications was brought in line with those of Kluwer, but otherwise the subsidiaries were allowed to run their own business according to local traditions. Many of its publications were in local languages. Like Elsevier, Kluwer increasingly focused on the more profitable market of scientific publications while divesting printing firms, general magazines, books and bookshops. As mentioned in the last section, Elsevier and Kluwer twice attempted to merge, but so far that hasn’t happened. However, in the process Kluwer merged with Wolters to become Wolters Kluwer in 1987. One of the motives for banks and accountants to internationalise was their wish to follow their manufacturing clients. This argument did not apply to the publishers. However, it may be argued that the publishers followed their example, helped by the fact that managers from the manufacturing multinationals came to hold leading positions in

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publishing houses, bringing with them international orientation and experience.147 A study following the internationalisation strategies of nine leading companies in publishing, banking and insurance during the 1970s and 1980s showed that during the 1970s joint ventures and shareholdings were used most frequently to enter foreign markets, while start-ups came second and acquisitions came third. During the 1980s, however, start-ups came first, followed by acquisitions, with joint ventures and participations in third position.148 This shift from joint ventures and participations towards start-ups and acquisitions seems to indicate a greater confidence of the companies in their capabilities of managing foreign subsidiaries. The study did not include the 1990s, but it seems highly likely that during the 1990s the preference for acquisitions continued. Equally, the process of concentration went on. Of the nine companies of this study, two banks (ABN and AMRO) merged with each other, while the third bank merged with an insurance company (NMB-Bank with Nationale Nederlanden). Two companies merged across borders: Elsevier with the British company Reed, and the insurer Amev with the Belgian insurance company AGGroup into Fortis. All in all, service companies became as internationally oriented as manufacturing companies. Foreign masters Not only did direct outward investment show a spectacular rise in the 1980s and 1990s. The same was true for direct inward investment, though outward investment consistently exceeded it. Even throughout the difficult second half of the 1970s, the stock of inward investment steadily increased. In 1980 the Netherlands ranked seventh world-wide on the list of countries receiving foreign direct investment and in 1999 its position was sixth, after the US, UK, China, Germany and France.149 This fact underlines the remarkable openness of the Dutch economy. According to Tulder, the Netherlands is the only important small economy that has a large number of sizeable home-based as well as sizeable foreign-owned multinationals represented in the country.150 The US remained the single most important investor in the Netherlands, though its dominance shrank. Its share in the stock of inward investment was more than a third (37 per cent) in 1973, and remained at that level until 1985 (35 per cent). From the mid-1980s, its share slowly diminished to 23 per cent in 2000, though it rose considerably in millions of Euros. The leading role of the US was taken over by the joint countries of the European Union. Their willingness to invest in the Netherlands had lagged during the 1970s, but it rose again in the 1980s and even more in the 1990s, from a share of 35 per cent in 1985 to 60 per cent in 2000. The creation of the internal market and the introduction of the euro undoubtedly contributed to the greater involvement of the European countries in

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each other’s economies. During the 1980s many economists predicted the rise of Japan and the region of South-East Asia as the third economic power. Japanese investment in the Netherlands did indeed rise quickly during the 1980s from a very modest 1.5 per cent in 1980 to 4 per cent in 1990, but during the 1990s its share did not expand further. Japanese direct investment, therefore, did not begin to approach the amount the US and the European Union invested in the Netherlands.151 The selling points of the Netherlands traditionally have been its favourable location as a gateway to Europe, including the rivers, the harbours of Rotterdam and Amsterdam and Schiphol airport. Other factors are the high education level of the population and their knowledge of foreign languages, the presence of moderate trade unions, a stable political climate, and last but not least a favourable fiscal policy toward foreign investment. These local advantages seem to point in the direction of trade, transport and distribution as attractive sectors for foreign investment in the Netherlands. The growth sectors of the 1950s, oil and chemicals, remained important ones for foreign direct investment, particularly from the US, while the European countries showed a renewed interest in the Dutch metal industry and electronics during the 1990s. However, most foreign investment went to the service sector. While in 1973 only 25 per cent of inward investment was related to the service sector, it rose to 40 per cent in 1983 and further to 65 per cent in 2000.152 The preference of foreign companies for trade and distribution over production was also demonstrated by a survey in 1984, covering 1,851 establishments with a foreign company as majority owner. Of these 1,851 establishments, only 29 per cent consisted of manufacturing companies against 51 per cent trade and 20 per cent distribution. However, the manufacturing companies looked after 59 per cent of employment, against trade 24 per cent and distribution 17 per cent. Most of the foreign establishments belonged to the small and medium-sized enterprises, with an average of 110 employees.153 This survey revealed an interesting difference in motives between the manufacturing and trading establishments. The foreign manufacturers used the Netherlands as a gateway to Europe, while the sales agencies predominantly served the Dutch market.154 The reason for this difference is that sales agencies can easily be set up in many different countries, while production units are bound to be more concentrated. That foreign entrepreneurs turn to the Netherlands for headquarters and distributing activities became clear from a study by Buck Consultants International comparing foreign direct investment in seven West European countries during the early 1990s. American and Japanese companies preferred the Netherlands as the location for their headquarters and distribution centres. The Dutch share in the emerging business of call centres was high, with nine of the 22 US call centres established between 1991 and 1994. However, for production purposes, the Netherlands did not rank particularly high with the US and Japanese companies. Other

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European countries, in particular the UK, were considered more attractive. For companies from other European countries, the Netherlands were obviously less interesting as a distribution centre or headquarters than for distant countries such as the US and Japan. For the Scandinavian manufacturers, the Netherlands came second as a business location after France, though the number of workers in their foreign establishments was much smaller in the Netherlands than in France or Germany.155 Earlier we mentioned that Dutch multinationals preferred mergers and acquisitions to starting from scratch (green-field investment) during the 1980s and 1990s. Did the foreign companies that invested in the Netherlands show a similar preference? The answer seems to be a cautious yes, in as far as manufacturing is involved. The above-mentioned 1984 survey showed that 71 per cent of the foreign establishments were green-field investments, 24 per cent were acquisitions and only 5 per cent joint ventures. (The number of joint ventures may well be low in this database, because the establishments were selected on the basis of foreign majority ownership.) Interestingly, the proportion of employees in the green-field establishments was 54 per cent, compared to 40 per cent in the acquired companies and 6 per cent in the joint ventures.156 This outcome suggests that trading and distribution companies were often newly established and manufacturing companies (which had larger numbers of employees) were more often taken over. A similar survey for 1994, only covering the US and Japanese companies, indeed made clear that more than two-thirds of the trade and distribution companies, which were often small, were greenfield investments. On the other hand, production companies were increasingly acquired or set up in joint ventures. Of the establishments that first entered the database between 1984 and 1994, a minority (39 per cent) were green-field investments, 43 per cent were acquisitions and the remaining 18 per cent were joint ventures.157 The consequence of takeover strategies could be that Dutch manufacturing would become increasingly foreign owned. This happened with the one Dutch car and truck maker DAF. The company started in 1928 as a family firm making trailers. It began the production of trucks in 1950. When it also started producing cars in 1961 it began to capture the imagination of the country. The selling point of the DAF cars was a technical innovation: the continuous variable transmission. This, however, was not enough to achieve the expansion the company was looking for. Therefore the car activities were set apart from the truck production and a foreign partner, AB Volvo, became majority shareholder of the car division in 1975. In the meantime DAF Trucks followed an expansion strategy, which included the takeover of Leyland Trucks in 1986. From one of the midrange players it wanted to enter the top league of truck producers. Disappointing sales in the UK and management problems led to heavy losses that forced the company to look for a partner. Negotiations with Daimler Benz led to serious public concern about the future of Dutch industry in

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1992, all the more as at the same time the aircraft-maker Fokker was also negotiating with Daimler Benz. However, DAF Trucks couldn’t find a partner in time and went bankrupt. After dismissing large numbers of workers, leaving behind huge debts, and shedding Leyland Trucks, the company restarted on a smaller scale. Instead of becoming one of the major players, as it had hoped it would in the 1980s, it was taken over by the American truck manufacturer Paccar in 1996. Two years later Paccar also bought Leyland Trucks, thus bringing the two former partners together again under a new parent.158 As motor vehicle manufacturing had never been one of the key areas of Dutch manufacturing, this development was not really surprising. However the same thing happened with a sector in which the Netherlands traditionally had a strong position: the paper and board industry. During the 1980s the paper industry followed a strategy of horizontal concentration to combine increasing economies of scale with specialisation at the factory level. Characteristic of the paper industry was the continuous urge to build larger and faster production machines, even though these demanded high investment and predictably led to overproduction every six or seven years. In periods of overproduction a close link with the paper wholesalers also seemed highly attractive. With the arrival of the European internal market in 1992, the paper manufacturers needed European-wide strategies. The largest Dutch paper manufacturer KNP and the paper wholesaler and board producer Bührmann-Tetterode, looked abroad for acquisition targets, but at same time foreign paper manufacturers, such as SCA, Scott Page Continental and Jefferson Smurfit, began to buy Dutch companies. Most of the smaller companies either joined foreign producers or the two leading Dutch companies. In 1993 the largest merger in the Dutch paper and board industry took place when KNP, Bührmann-Tetterode and the paper wholesaler VRG, merged to form KNP-BT, a company with 28,000 workers and 160 production units spread over 30 countries. With this concentration of Dutch interests a foreign takeover of the paper industry seemed less than likely. However, the combination of paper, board and wholesale activities did not create the strength and synergy that was hoped for. In 1997 KNP-BT sold its paper manufacturing activities to the South African pulp and paper industry Sappi, while the wholesale activities were continued under the new name Bührmann. This large transaction marked the end of the independent Dutch paper industry. Nearly the whole industry became foreign owned. Though a number of factors contributed to this outcome, one factor played a key role: access to raw materials. Most Dutch companies were taken over by large foreign enterprises with a strong base in the production of pulp and located close to timber plantations.159 While in the paper industry the logic behind foreign ownership could be found in better access to raw materials, in other sectors inward and outward investment seem to go hand in hand. This is particularly

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true for the grocery retailers. The Dutch leading supermarket chain Ahold vigorously expanded abroad, but at the same time the second largest chain, Laurus, fell into French hands. Both developments underline the increasing internationalisation of business at the end of the twentieth century. Cross-border mergers and national cultures In the expansion of inward as well as outward investment, mergers and acquisitions played a key role during the 1990s. This raises a number of interesting questions. One is whether the motives for internationalisation are different depending on the chosen path to internationalisation. Companies possessing strong technological advantages will probably shape their foreign expansion by starting from scratch: green-field investment. However, companies striving for market power will most likely opt for acquisitions if they possess sufficient financial means. In fact, acquisitions can be used to buy technological or marketing knowledge. The motive for internationalisation through acquisitions, therefore, can be quite opposite from the motives behind greenfield investment. This brings us to the second question, very relevant for all countries involved, concerning whether international mergers and acquisitions created value. Economists are highly divided about this issue. Ideally, companies buy other companies that in one way or another enhance their own activities through the creation of synergies. At a minimum the acquired companies are supposed to contribute to sales and profitability. Some acquisitions and mergers were clearly a success, others equally clearly a deep disappointment. The big question was, and will be, how much of both sorts did the Netherlands have, and was there a change over time in the success rate? Schenk argues that there is no reason to suppose that international mergers would have a higher success rate than national ones, while there is every reason to suppose the opposite because of the problem of differences in national cultures.160 This hypothesis applied even more to cross-border mergers of whole companies. Dutch experiences with these kinds of mergers were mixed. The Netherlands had two hugely successful Anglo–Dutch mergers, one during the first merger wave (Royal Dutch/Shell) and one during the second (Unilever). The German–Dutch merger AKU was riddled by recession and war. The actual integration of activities did not occur until the 1970s and then once again was caught in an economic recession. Previously we mentioned two other German–Dutch mergers, one between the aircraft constructors Fokker and VFW (Vereinigte Flugtechnische Werke) from 1969, the other between the steel producers Hoogovens and Hoesch to form Estel, which took place in 1972. Neither brought lasting success. The Fokker-VFW combination failed in 1980 and Estel was dissolved in 1982. In the first case, the merger failed because the supposed

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strategic fit did not materialise. Fokker, though concentrated on civil aviation, did not succeed in creating a market for VFW’s civil programme, while the VFW’s strong position in the military sector evaporated after the merger, partly because the company was no longer exclusively German.161 In the second case, the distribution of production between the two companies from a joint perspective turned out to be difficult from the start. The problem became worse when the steel crisis smothered hopes of expansion. The subsidies of national governments elsewhere in Europe added to the negative influence of the steel crisis. Once again, it demonstrated the strong influence of government policies on the competitiveness of industry. However, the two companies also conceded that their managerial integration had not been sufficiently effective. Differences in cultural values played an important role in the failure of the merger.162 This brings us to the important subject of differences in national cultures. The sociologist Hofstede was one of the first to place the issue of national cultural differences on the research agenda. He reacted against the mainstream in management literature, which tried to deduce the one best way to manage organisations from technical-economic logic. Hofstede argued there is no ‘one best way’, because managers have to reckon with differences in national culture, which he defined as the ‘collective programming of the mind’.163 With regard to international co-operation Hofstede surmised that countries with the same sets of values could work together more easily than countries with different values. Examining three international mergers (Royal Dutch/Shell, Unilever and Agfa/Gevaert) he also concluded that some combinations of countries work better than others. The US, UK and Germany scored more or less the same as the Netherlands on individuality and power distance (the inequality in power between bosses and their subordinates). All three scored high on masculinity, while the Dutch culture was seen as more feminine. In regard to uncertainty avoidance, the Netherlands scored in the middle between the low uncertainty avoidance of the US and the UK and the somewhat higher uncertainty avoidance of the Germans. The French and Belgian scores were mutually comparable, but quite divergent from the Netherlands except for individuality. The countries culturally most similar to the Netherlands were Norway and Sweden. With regard to cross-border mergers, Hofstede argued that Anglo– Dutch mergers should function well because they represented a marriage between the masculine English culture and the feminine Dutch culture.164 However, not all Anglo–Dutch ventures were as successful as Shell and Unilever, which have preserved their dual nationality over a long period of time. The combination of DAF with Leyland trucks was an unhappy interlude in both company histories. The merger between Hoogovens and British Steel in 1999, which resulted in the new company Corus, had a bumpy ride from the beginning. This is not to say that the problems in

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these mergers were necessarily related to their dual nationalities, certainly the sectors in which they functioned experienced difficult times. But success in an Anglo–Dutch merger is clearly not self-evident. The combination in the publishing industry between Reed and Elsevier in 1993 seems to fare better, but the Dutch contribution to the joint company is becoming less pronounced. The second effort of Fokker to merge with a German company, in this case DASA, ended even more disastrously than the first. Fokker was finally dissolved in 1996, but bits and pieces survived under new legal arrangements. Though they are neighbouring countries, Belgian–Dutch mergers have been rare. A recent example, mentioned above, was the creation of Fortis by the Dutch insurer Amev and the Belgian insurance company AG-Group in 1991. Further takeovers strengthened the Belgium element in Fortis, which nowadays is categorised as Belgian in company listings. One may wonder whether in future companies of mixed nationality will take the colours of one of the two nations, or whether they will turn into truly global companies, footloose and without national strings attached.

Conclusion History never fully repeats itself but in some respects the developments in the Netherlands during the last quarter of the twentieth century meant a return to the pre-1914 period. Most obvious was the return to intense international exchange of goods, capital and to a lesser extent people. Business people from the Netherlands eagerly participated in and contributed to the internationalisation process through exports as well as direct foreign investment. They showed a marked trust in and reliance on international markets. This applied to small as well as large firms. The large-scale companies became less dominant and less integrated after 1975. Small-scale and specialised business reappeared and this meant another return to the pre-1914 period. In many cases, these small firms did not act in isolation, but were part of a network. Flexible relationships between companies developed in the form of co-makership, outsourcing and strategic alliances. Companies participated in regional and national as well as international networks. In shaping their business, international management theories, and more particularly those from the US, played a prominent role, though in the field of labour relations Dutch collaborative traditions remained strong. The Netherlands were late to industrialise and early in their retreat from manufacturing. The recession of the 1970s speeded up the transformation process from a manufacturing to a service economy. In the 1980s the government and the business community tried to revitalise Dutch manufacturing. In the1990s a new realism surfaced about the Netherlands as essentially a trading and transport nation, with a lingering strength in agriculture, on its way to join the league of postindustrial countries with their dominant service sectors. With so many

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Dutch companies working abroad and so much foreign business active in the Netherlands, one might wonder to what extent Dutch business is still defined by the Netherlands as a country or to what extent the national economy is shaped by the Dutch themselves. For better or worse, the country has become part of a global economy.

Conclusion

Having reached the end of the study, what can we say about the business strategies of Dutch enterprises during the twentieth century? Is it possible to summarise the strategies of so many different firms and individuals? Seemingly, the more you try to summarise, the more you overlook the finer details and disregard the many exceptions. Does it make sense to try and identify some general patterns? There are two reasons to answer this question in the affirmative. First, though companies make decisions on an individual basis, they share their external circumstances and the business system in which they operate. Market development often gives cause for changes in the strategy, as do changes in political and social circumstances or the introduction of new technologies. Second, business people exchange their ideas, look to each other, discuss their views, share their visions. Journalists, business economists and management consultants reinforce this process of sharing through their publications and advice. The interplay between management ideas, planned strategies and actual company policies in the Netherlands can be traced from the 1960s. It seems to me that management consultants played an important role in affirming new trends. At an early stage they picked up new developments that required new strategies, often through watching the leading companies. By describing new developments they made them more explicit and by turning them into recipes for their clients they contributed to the spread of new strategies. Though the world of business experts and advisers didn’t exist in the same way at the beginning of the century as it did at the end, this doesn’t mean that entrepreneurs didn’t consult each other and discuss their problems, thus reaching a common view. For these reasons the study of business strategies over a long period of time offers important insights into the development of enterprises and economic growth more generally. We will evaluate the business strategies explored in this study according to the five themes we distinguished in the introduction.

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Internal organisation of firms In the period before the First World War the family firm was still the most common way of organising business enterprises. Manufacturing grew in importance compared with agriculture and services, but many firms were small or medium sized. The country had a broad base of industries but a clear absence of heavy industry. As yet there was little vertical integration. Families seemed to prefer to set up separate new production units, held together by family relations. In a way, the family itself was acting as a holding company, spreading risks by investing in different ventures set up as separate partnerships or joint stock companies whose shares were held by family members. The members did not necessarily limit their investment to their original sector, but sometimes invested in entirely new industries. The personal influence of business leaders, who were often also the owners, was marked. Management was informal. Broadly speaking, the service sector had a similar organisational structure. Companies working in colonial Indonesia were on average larger and more often possessed the structure of a limited company. Out of the activities in Indonesia rose one major company, the Royal Dutch Petroleum Company, which challenged the US first mover in this field, the Standard Oil Company. The First World War brought a marked change in the organisational structure of companies. The interruption of trade flows made Dutch business leaders aware of the vulnerability of their position. Therefore, the policy of placing trust in international trade and informal structures gave way to strategies of vertical and horizontal integration. In the 1920s four large-scale managerial enterprises, active in petroleum, food, artificial fibres and electronics, began to dominate the economy. In a small economy such as the Netherlands, these large-scale companies were at the same time multinational enterprises. The rise of the managerial firm did not imply that the older forms of business disappeared, nor that these other forms could not be equally successful, but only that an alternative to the traditional family firm had emerged. During the Second World War the Netherlands came under German domination. The German rulers wanted to reorganise Dutch business by creating closer links with Germany and making business more efficient through the concentration of production in large production units with modern technology. Dutch entrepreneurs, however, were more inclined to wait and see and postpone all real changes until after the end of the war. After the Second World War the managerial company spread widely in the Netherlands. This rise was closely related to the new managerial wisdom coming from the US. The first example of US influence in managerial matters was the post-war productivity drive. Management consultants, in particular, warmed to the American ideas. Ironically, the best pupils of the class, the book binding companies, the textile, leather and

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shoe industry and the small metal industry, were also the sectors that faced the most serious problems in the late 1960s. In the 1950s the family firm had to struggle against a negative image as an outdated institution. The poor performance of the textile industry, a sector in which family firms dominated, added to this impression, though the causes for their troubles lay elsewhere. By contrast, the large managerial companies flourished, stimulated by an increase in mergers and takeovers. The takeovers often concerned family firms that decided to give up their independence. In the trend towards mergers and takeovers the Netherlands followed the example from abroad, in the US as well as in Europe. Each merger had its own history, but frequently mentioned motives were the supposed advantages of economies of scale, the expected integration of the European market and the introduction of computer technology with expensive and large-scale mainframes. While initially most mergers and takeovers were either horizontal or vertical, in the 1970s the ideology of diversification made its entrance. Mergers and takeovers became increasingly popular to solve the problems of struggling companies. However, these mergers seldom led to viable new combinations. Between 1979 and 1982 many manufacturing companies failed, including several big conglomerates. These failures resulted in sharply rising unemployment figures. Worries about this unemployment contributed to a greater appreciation of the entrepreneur in society, i.e. those who created jobs. While the large bureaucratic manufacturing companies obviously had failed to sustain full employment, better performance was expected from the small and medium-sized firms with their greater flexibility. The recession of the 1970s also speeded up the transformation process from a manufacturing to a service economy, because the manufacturing companies in particular suffered from the international recession. The turning point was 1982. The international economy picked up, which helped Dutch business to recover. However, the new expansion took place on the basis of different organisational principles. Business people responded to the volatility of the economy by making their organisations more flexible through strategies of outsourcing, co-makership and alliances. The new information technologies made new ways of organising possible. Diversification strategies lost their attraction for manufacturing companies. Instead business leaders tried to make their companies more coherent, limiting expansion to related areas, relying on in-house qualities and seeking strong market positions. For implementing these strategies, they took over new ventures and divested old ones. Large bureaucratic headquarters were scaled down and business units made more independent. To monitor and measure their performance business leaders introduced a set of financial criteria, often with the creation of shareholders’ value as the ultimate goal. Companies in the service sector showed a different dynamic because they built up large, international, diversified enterprises at the very moment that the manufacturing companies tried

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hard to become less diversified and smaller. For companies in both sectors, however, mergers remained a popular instrument for realising the company strategy, even though economists remained sceptical about the benefits of mergers, in particular mega-mergers. At the beginning of the twentieth century the entrepreneur as an individual was clearly visible. Often he was the founder of the company that still carried his name. He was the one who made an important invention or created the expansion, and he was with the company for most of his life. For that reason alone, he had a real chance to become a well-known figure. Also in managerial companies, top managers tended to stay in office much longer than they do now. Some famous names from the start of the twentieth century, such as Gerard and Anton Philips, Henry Deterding and Tony Fokker are still well known today. Invariably business leaders were men, not women, and that remained the case for most of the century. With the rise of the managerial company, however, entrepreneurship became more diffuse. Leadership was often located in the board of managing directors as a whole. Also, in the Netherlands the members of the board of managing directors usually had a joint responsibility for leadership in the firm, with the chairman as no more than primus inter pares. Decisions were taken on the basis of consensus. In the 1980s the position of the chairperson changed somewhat, or at least the perception of that person. Following American tradition, the chairperson became the figurehead of the company, the one who formulated and propagated the company strategy, the one in whom the entrepreneurial qualities were supposed to be lodged. In contrast to their counterparts from the start of the century, however, the CEOs stayed in the highest office only for a short period of time. They now come and go and their names quickly disappear from the financial pages.

External organisation of firms At the turn of the twentieth century, when family firms still dominated, not surprisingly the relationships between firms relied to a large extent on personal connections. Suppliers and customers were often long standing and known personally. Bankers frequently acted as advisers and may have been friends of the family. Sons were sent out to learn the trade with befriended colleagues at home or abroad. Just as Dutch manufacturing was characterised by regional networks and networks of families and friends rather than by integrated companies, the Dutch firms active in the Dutch East Indies were embedded in a colonial network of close business relationships and interlocking directorships. Business knew many local and national informal arrangements to limit competition but few true cartels before the First World War. The First World War, in which the Netherlands remained neutral and unoccupied, brought business people closer together, partly because

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government wanted to discuss issues of scarcity and prices with the various trade associations. Banks became active as providers of risk capital. The disruption of trade channels created new chances for businesses serving the home market, and banks helped to provide the necessary capital for investment. These new business opportunities, however, turned out to be short-lived. The post-war boom and crisis created havoc, in particular among traders and banks. As a result the banks quickly withdrew from investment banking. Collaboration between companies seemed less urgent during the prosperous second half of the 1920s. However, the depression during the 1930s caused widespread concern about falling prices and diminishing export opportunities. Under these circumstances cartels seemed fully justified to keep businesses alive and save employment. Parliament even accepted a law that opened the possibility of making cartel agreements obligatory for outsiders. Collaboration between firms was considered even more justified during the Second World War. The German occupation of the country placed companies in a precarious situation. The first question management had to face was whether or not to continue production under enemy rule. In many cases business leaders compromised in order to safeguard the company, to keep their employees at work, or to forestall even worse measures. Well aware of walking a tight-rope, many entrepreneurs sought closer collaboration with each other and with representatives of the Dutch government. All kinds of cartels and gentlemen’s agreements were popular with business and quite acceptable to government and the general public as long as they didn’t negatively affect the general interest, in particular consumer interests. In the 1960s the cartels lost much of their significance. Also, the EU regulations were much tougher towards cartels, though little was done to actually trace and forbid them. In the mid-1980s the Netherlands was still called a ‘cartel paradise’. More active detection of cartels took place during the 1990s in the general context of deregulation and increasing reliance on market forces. During the late 1960s and 1970s, business leaders considered mergers a much more appropriate way for concentration than cartels. In the merger process banks took an active part through helping to create combinations as well as through advancing long-term loans. The above-mentioned policy of divestment and ‘sticking to the knitting’ during the 1980s stimulated the development of long-term contractual relationships between otherwise independent companies, such as comakership contracts and outsourcing. Though the number of small, independent firms increased, efforts to create a market for venture capital met with modest results. During the 1970s, companies had increasingly relied on bank loans for their long-term financial needs. The high interest rates in those years, however, made these loans a real burden. For that reason, many companies returned to the traditional way of financing

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through the issuing of shares. Though companies faithfully mentioned their intention to increase shareholder value, the shareholders themselves could hardly influence company strategy. The Dutch company structure was such that a hostile takeover was extremely difficult. Also, members of the board of supervisory directors were nominated through co-optation. As shareholders were no longer individual members of the public but increasingly institutional investors such as pension funds, pressure mounted to give shareholders a greater say in Dutch companies, so far with meagre results.

International orientation A long tradition of trading and the possession of a colonial empire both contributed to the international orientation of Dutch business people. In particularly the Dutch colony in Asia, the present Republic of Indonesia, offered great opportunities for enterprising people. The country was rich in raw materials and fertile land, while the colonial government was basically encouraging to business. At the end of the nineteenth century a whole section of Dutch business became involved with economic activities in the colony, not only plantations and mining companies, but also banks, trading houses and shipping companies. The international activities in the Dutch Indies, including those in the oil industry, furthered the general international attitude of Dutch entrepreneurs. They relied on imports of raw materials and intermediate products and tried to find foreign markets for their final products. In a number of cases foreign production units were set up. The First World War disrupted international trade. As contact between the Netherlands and its colony in Asia became increasingly difficult, business people in colonial Indonesia began to forge new trading links, for instance with the US and Japan. Some of these continued after the war. In the Netherlands entrepreneurs fought an uphill battle to keep goods flowing. Also, import substitution became an attractive option, as long as it was possible to get the necessary raw materials. The end of the war brought a quick boom and then a deep fall in prices that particularly affected banks and traders. From 1924 onwards it seemed as though the world economy was back on track, with a return to the gold standard and resumption of international trade. Despite the fact that the disruption of the First World War was still fresh in their minds, Dutch business people responded eagerly to the return to normality by increasing foreign direct investment. As we mentioned earlier, four multinational companies rose to prominence and would dominate the Dutch economy for the rest of the century. Interestingly, three of the four enterprises were the result of cross-border mergers. Smaller companies, including family firms, also set up foreign subsidiaries or took over firms abroad. When the world crisis set in and protectionism resurfaced, the strategies of expansion at home

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and abroad had to make way for survival strategies. For some companies this meant less foreign exposure because they had to close foreign subsidiaries. Others, however, increased their foreign exposure by setting up foreign production units in order to jump tariff barriers. In May 1940 German forces occupied the Netherlands. Once again business people were confronted with an overnight change in their business environment. Overseas markets became mainly out of reach. The enemy ruled the country. In the meantime, Dutch business outside the Netherlands struggled to survive and support the war effort. In colonial Indonesia the Japanese occupation in 1942 ended most of Dutch business activities there. The Second World War once again seriously disrupted the entire international trading network. After the war, the ambition to rebuild Dutch business abroad suggested that the centuries-old relationship with colonial Indonesia was vital. Yet, in 1949 the Republic of Indonesia became independent and political links were severed. Less than ten years later those Dutch companies still working in Indonesia were nationalised. Though many Dutch business people had recognised the inevitability of political decolonisation, few had expected to be expelled from Indonesia, because they supposed the country would continue to need their managerial expertise. Nevertheless, they had tried to spread their activities to other areas, initially looking for investment opportunities in developing countries where working conditions seemed to resemble those in Indonesia with which they were familiar. Commercial successes in those countries, however, were mixed, partly because circumstances outside Indonesia were very different, partly because the problems of decolonisation repeated themselves elsewhere, including in Africa. In the 1960s, therefore, Dutch multinationals focused their attention on politically safe regions, Europe and the US, which also happened to be the regions with high economic growth. One might argue that working in the colony is somewhat comparable with working in the home market, because the national government gives a certain measure of protection. Certainly we noticed in colonial Indonesia the existence of a network of related companies that created added value for its members. It might therefore be expected that the loss of this colony after 1949 would seriously diminish the international activities of Dutch firms. This, however, was not what happened. In the 1960s the Netherlands occupied third position in the world’s stock of foreign direct investment, after the US and UK. The country owed its strong position as foreign direct investor to the fact that it was home to at least four large multinationals, two of which had a mixed Anglo–Dutch nationality. Most multinationals belonged to the manufacturing sector. In the 1950s Dutch companies often went abroad through greenfield investment or joint ventures, while in the 1960s they began to prefer acquisitions. Characteristic of nearly all Dutch multinationals in these years was a decentralised

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organisational structure. Subsidiaries in the various countries were given a great deal of local autonomy as well as a great measure of local identity. While Dutch capital was flowing out of the country, at the same time foreign capital was flowing back. However, outward direct investment nearly always exceeded inward direct investment, apart from the early post-war years and the late 1960s. US firms were the most important foreign investors in the Netherlands. The already extensive internationalisation of the Dutch economy increased even further during the 1980s and 1990s. Both inward and outward investment rose, as did imports and exports. In manufacturing the leading four multinationals remained on top, though their combined numbers of employees world-wide decreased by a third between 1973 and 2000. Growth strategies, however, were to be found in a number of smaller manufacturing companies, as well as in the service sector. Banks, insurance companies and accountants went abroad, either forming integrated companies or federations. Though Dutch business was active in nearly all countries of the world, its foreign direct investment was primarily directed to Europe and the US. At the same time, companies from Europe and the US were the main investors in the Netherlands. It is not surprising that the Netherlands invested heavily in Europe because the distance between the Netherlands and most European countries was modest. Therefore these direct investments followed the normal pattern of behaviour. The persistent large interest in the US, however, is remarkable. It is even more remarkable in the light of the often disappointing results. Very likely, these investments were inspired by the wish to learn from America in combination with a trader’s sense of optimism.

Management and labour relations At the start of the twentieth century Dutch firms were on average small scale, with simple organisational structures, informal divisions of tasks between the owners/top managers, and perhaps only the overseers and foremen standing between the factory owner and his workers. In labour relations employers insisted on having the only say in their factories. Even those who recognised the need to make provisions for their workers were of the opinion that these provisions should be voluntary. The government’s labour regulations were only grudgingly accepted. Labour unions, and particularly the socialist unions with aspirations to create an entirely new society, were kept at a distance, though some employers recognised the value of informally consulting their workers. However, the trade union movement gradually gained strength and could no longer be denied. By 1914 more than 400 collective labour agreements between employers and employees had been concluded. During the First World War the trade unions gave up their revolutionary ambitions in exchange for recognition as the representatives of the

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workers’ interests and for state support of unemployment funds. The state encouraged collaboration between business and workers in the same way as it encouraged collaboration between companies themselves. Business people responded because they hoped that collective strategies would overcome the difficulties created by the war and help them take advantage of opportunities on the national market created by the same war. Impressed by the Russian Revolution, the employers even accepted a 45-hour working week in 1918. The post-war crisis, with its increased international competition, put pressure upon the newly wrought collaboration between employers and employees. Notorious in this respect was the strike and lock out in the textile industry in 1923–1924, which was as much about wages as about power in the factory. In 1922 working hours were lengthened again, but the principle of regulation of working hours remained in place. Also, the collective labour agreement as an institution was there to stay. The number of agreements rose fourfold during the inter-war years. Still, employers successfully resisted pressure to make their companies more democratic. The most workers could hope for was the installation of a works council on a voluntary basis. The rise of the managerial company in the 1920s offered an alternative to the traditional family firm in industrial organisation and in employment relations. Instead of setting up a business on one’s own, one could apply for a managerial position in one of the large enterprises. The labour force became more varied, ranging from factory hands to the highest managerial positions. The increase in scale and complexity of Dutch companies required new ways of organising. The scientific management movement found its advocates in the Netherlands. Initially, the trade unions were very sceptical about Taylorism, but soon they were prepared to accept rationalisation measures if these went hand in hand with higher wages and better employment prospects. Less welcome, however, were rationalisation measures that led to redundancies, as happened in the 1930s. The inter-war years showed a remarkable rise in labour productivity. Entrepreneurs invested in capital-intensive production during the 1920s to tackle the problem of rising wages, and during the 1930s to survive tough international competition. In sectors where employers entertained good relationships with trade unions, they were able to convince the workers to accept lower wages, no doubt to safeguard employment. The Second World War initially brought rising job opportunities because of high German demand for Dutch goods. From the autumn of 1941 onwards, however, the scarcity of raw materials led to diminished production. At the same time, the Germans started to round up workers for employment in Germany. This policy was hugely resented and both employers and employees did their best to keep as many workers in the Netherlands as possible, even if there was less and less real work for them to do.

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After the Second World War the close collaboration between employers and employees continued. It was generally accepted that the duty of business was to create jobs for a growing population just as it was the duty of the population to work hard and accept a sober living in order to reconstruct the country. The task of the government was to further this process of positive co-operation. As the economy began to pick up, wages could gradually be increased, until labour shortages in the sixties pushed wages above the rise in labour productivity. With enterprises expanding, the question arose: who owns the companies we are all so eagerly supporting? There were demands for greater worker influence via works councils, for equal power on the board of supervisory directors for workers and shareholders, and for better disclosure of the financial situation of companies and the division of profits. Indeed, these demands led to improvements in financial reporting and to a stronger position of employees on works councils. From then on, employers had to consult their employees on important matters such as mergers, reorganisations and staff lay-offs. Once the affluent society had been achieved its attractiveness began to lessen. It seemed high time to think of the quality of life instead of economic growth. The consensus to jointly create a prosperous country out of the ruins of the war, which had reigned for two decades, disappeared. Worse, the economic cycle reappeared to challenge the achievements and preconceptions of the third quarter of the twentieth century. Companies experienced strong pressure to keep their employees at work even if this meant lower profits. This led to postponement of reorganisations and endless negotiations to safeguard as many jobs as seemed possible. However, the tide turned when companies actually started to go bankrupt. The high unemployment of the early 1980s made labour less critical of employers and more willing to negotiate. In the hope of creating more jobs, labour unions were willing to forgo pay rises in exchange for shorter working hours. Though working hours became shorter, unemployment rates remained high during the 1980s and early 1990s. The process of national wage negotiations as developed in the 1950s more or less returned, but the attitude of employers towards their employees became more detached. Companies no longer offered welfare programmes or jobs for life, and the creation of employment was not in itself considered a task of the company. Employees were welcome as long as they contributed to the increase of shareholders’ value. Despite rising profits during the 1990s, large companies continued to restructure their organisations with constant redundancies as a result. Flexibility became the central notion in labour relations, though some of the flexibility turned out to be more myth than reality.

Attitudes towards the state Dutch business people liked their freedom of enterprise but generally were more practically than ideologically inspired. With regard to protec-

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tive tariffs their opinions were divided, but the advocates of free trade had the upper hand. In the period before 1914 free trade remained official government policy. Interference from government was generally resented, but the support of the government in specific instances was greatly welcomed. The abolition of the inadequate patent law in 1869 was initially welcomed, but by 1900 the majority of manufacturers preferred to arrange Dutch patent matters in ways similar to other industrial countries. The government’s labour regulations were grudgingly accepted, too. The First World War brought an enhanced role for the state in economic affairs. To safeguard home consumption at affordable prices the state took measures to regulate imports, exports and prices. In this process, it encouraged collaboration between business and workers and between the various industry sectors. The business community enlisted the support of the government in setting up steel works to make the metal industry less dependent on foreign producers. The steel works did indeed materialise, but only after the war had ended. Otherwise, the state quickly ended its involvement with the economy, supposing that all would turn back to normal once peace returned. However, the international world remained far more fragmented that it had been before 1914. In international trade negotiations, the Dutch government had only a modest bargaining position. During the depression of the 1930s government assumed a more active role in the Netherlands as well as in the Dutch Indies. The business community by and large supported this change of attitude. Initially the colonial business community was inclined to weather the storm so that the most efficient enterprises would survive. When prices of primary products continued to fall relentlessly, business leaders welcomed both cooperation and government measures to stem the tide. Likewise in the Netherlands itself, the depression encouraged business leaders to accept the protection of the government through its trade policy and its support of cartel agreements. Increasingly, being a successful entrepreneur meant being a good mediator, negotiating with competitors, the labour unions and the government. The German occupation added an element of coercion to this collaboration. After the end of the war government involvement with the economy remained strong. It kept a firm grip on prices and wages. The government also furthered the expansion of manufacturing. There were only a few cases of direct government involvement. Most measures were indirect and intended to foster a favourable investment climate. With hindsight, the most important effect of the promotion of manufacturing was to refocus the self-image of the Dutch people: from a country based on trade and the possession of colonies to a modern, progressive industrial nation. State, employers and employees also worked harmoniously together to set up a system of social care based on the solidarity of workers with non-workers that seemed both humanely justified and economically sustainable. As the

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costs of the welfare system began to rise, business became more critical of government measures, in particular rising taxes. On the other hand, the government dominated by social democrats wanted to spread income more evenly, and therefore found profits and high incomes suspicious. Also, business was attacked for its negative impact on the environment, which led to tougher rules. The business community had the feeling that demands from society were rising just at a time when profitable business opportunities diminished. High inflation and high taxes together with decreasing export opportunities placed many companies in a precarious position. As unemployment began to rise, the government became deeply concerned about the upkeep of full employment. This led to government support for failing businesses, a policy that found a mixed reception with the business community as it distorted competition between companies. Worse, the policy turned out to be a failure. Thereafter the government withdrew to a certain extent from economic life. The budget deficit was brought down, business taxes were lowered and social expenditures were cut back. During the 1980s the government commissioned reports to study the problem of reviving manufacturing and encouraging innovation. These studies didn’t result in the revitalisation of manufacturing. In fact, the service sector was the motor behind the growth of the 1990s. The government followed the general trend of privatisation. The largest operation in this respect was the privatisation of the postal bank and the post, telegraph and telephone company. The liberalisation movement did not stop at privatisation, however, but included deregulation and tougher competition rules. In the mid-1990s the belief in the efficiency of the market economy was at its highpoint. Yet, by the end of the 1990s, doubts were beginning to set in with regard to the fairness as well as the efficiency of the free market.

Dutch business system Considering the debates among business historians one might wonder how the country can be positioned with regard to the three types of capitalism Chandler distinguished for the late nineteenth and early twentieth century. Did Dutch capitalism resemble American managerial capitalism, British personal capitalism or German co-operative managerial capitalism?1 It is unlikely that a small country like the Netherlands would have much in common with the US, and therefore comparison with Britain and Germany is more to the point. Nonetheless, we can see elements of all three forms of capitalism in the Dutch experience. The country developed four large companies comparable with American big business before the Second World War, two of which were Anglo–Dutch, Royal Dutch/Shell and Unilever, one Dutch–German, AKU, and one fully Dutch owned, Philips. Three were in sectors of the Second Industrial Revolution, oil, chemicals and electrical engineering. Measured in sales,

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Royal Dutch/Shell, Unilever and Philips figured high for many decades on the Fortune lists of the largest industrial companies outside the US. Yet, family firms remained important in the Netherlands, as in many other European countries. Two of the four largest industrial companies originated as family firms, and in the case of Philips, family members remained in leading management positions until 1977. Many medium-sized companies, also in the sectors of the Second Industrial Revolution, were originally family led, but nonetheless successful in niche markets. In its adherence to personal management structures, Dutch capitalism could be compared with British personal capitalism. Similarities between the two countries are not surprising, seeing their long-term shared tradition in trading, colonial empires and free trade. In the European context British business was certainly no failure, even if its capitalism differed from that of the US and Germany, as Cassis concluded.2 The same was true for the Netherlands. Some elements of German co-operative capitalism could also be found in the Netherlands. Germany was far more protectionist than the Netherlands, and its banks were far more active in financing industry, so in this respect the two countries were different. But what they had in common was formal and informal collaboration between businessmen. Cartels, including participation in international cartels, became increasingly important in the Netherlands during the inter-war years. This was also true for many other small European countries such as Belgium, Denmark, Sweden and Switzerland, as well as larger ones like Britain.3 As it is not easy to place the Netherlands firmly in one of Chandler’s three categories, one can pose the question, as Harm Schröter did, whether there might be a fourth type of capitalism, distinctive to the small developed states. He concluded that this was not the case and that therefore the limitation of the national market was not a factor in the development of big business.4 Judging from the Dutch example, I would suggest another interpretation. Creating a big enterprise on the basis of a large home market was different from doing the same on the basis of working in several national markets. For small countries large companies were at the same time multinational companies. They could only create large enterprises if they were prepared to work internationally and that had important consequences for the kind of organisational capabilities they had to develop in order to be successful. As long as protectionism was an important fact of business life, which was the case for much of the twentieth century, multinational companies had to devise special strategies to enter foreign markets and adjust to local business systems. Under these circumstances the multidivisional organisational structure was less relevant than a country-based structure, which could address issues of national diversity and protectionism. Typically its higher management would be located as expatriates in many different countries and speak many different languages. But even in this international network, personal relationships would remain important. These country-based organisational

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structures were more complicated to run than purely national structures, but the international network offered possibilities for the exchange of new ideas and ways of learning from national diversity. If there is indeed a fourth type of capitalism for small, open economies, it might, on the basis of Dutch experiences, be coined ‘personal international capitalism’. The Chandlerian debate is focused on the role of big business. National economies, however, are not exclusively made up of large companies, important though they may be. Other elements form part of a country’s business system. In the Introduction we discussed the ‘Varieties of Capitalism approach’ of Hall and Soskice, in which they try to unravel how firm strategies follow institutional structure. How can we position the Dutch business system between the two ideal types of the liberal market economy represented by the US and to a certain extent Britain on the one hand, and the co-ordinated market economy of which Germany is the ideal type? Further study is needed (and planned)5 to answer this question, but from this study the following picture emerges. Again, we find the Netherlands balancing between the systems of its two most important neighbouring countries, Britain and Germany. For most of the twentieth century the Dutch business system closely resembled the German ideal type, but at the beginning of the twentieth century and again at the end of that century, liberal market forces as seen in the US and Britain were more marked. However, doubts about further moves in a more liberal market direction are already surfacing in the Netherlands. In the light of the strong influence of American management ideas on Dutch business during the last half century, it seems surprising that the country remained for so long in the camp of the co-ordinated market economy. Apparently, national business systems do change over time, but the changes are slow. Designing their strategies, companies can count on slow-moving institutional changes. If one thing has become clear from this overview of Dutch business during the twentieth century, it is the simple fact that long-term strategies, however well thought out, were frequently overturned and frustrated by unexpected events, both in the political and economic realms. And this was all the more true for companies working from a small country like the Netherlands, with little political power to influence the course of history or bargain for its own business interests. Though there is no doubt about the importance of thinking about the future and formulating the best strategies to cope with external circumstances, at the time companies have to be aware that the circumstances in which they work can change dramatically in a relatively short time frame and that they have to try hard to keep as many options open as possible, hanging on to some measure of flexibility. Doing well today is no guarantee that things will be right tomorrow. The other remarkable thing about Dutch business strategies is the following paradox. At home business leaders preferred to work in a cosy atmosphere of networks, collaboration and agreements rather than leave

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outcomes entirely to market forces. At the same time they were not afraid to go out into the world, rely on imports and exports and set up business in foreign markets. It was this constant interaction with the international world that kept Dutch business competitive, even if it tried to diminish competition at home. Also, one may argue that the trust generated by networks and collaboration may well enhance economic efficiency to a greater degree than reliance on ruthless market forces.6 The exposure to the world abroad seems to have served the country well. Undeniably, it was deeply affected by downturns in the international economy, as was the case during the 1930s, and the late 1970s and early 1980s, but on the other hand it fully profited from the upswing periods, in the pre-1914 period, the 1950s and 1960s and again in the 1990s. As highlighted in the Introduction the average annual growth in gross national product during the twentieth century was higher in the Netherlands than in North-West Europe, though on a per capita basis the growth rate approximated to the European average because of the rapid population growth. Not only was the Netherlands among the world’s richest countries, but its wealth was also distributed in a fairly egalitarian manner for most of the century, enabling large groups of people to profit from its economic success.7 On the whole, the Netherlands was among the world’s most successful economies during the twentieth century and business strategies played a leading role in these achievements.

Notes

Introduction 1 P. de Wit, ed., Royal Dutch Petroleum Company 1890–1990 (Rotterdam: Shell Nederland, 1990), p. 4. 2 K.E. Sluyterman, ‘Nederlandse bedrijfsgeschiedenis: de oogst van vijftien jaar’, Neha-jaarboek voor economische, bedrijfs- en techniekgeschiedenis 62 (1999): 351–387; F. de Goey, ‘Ondernemersgeschiedenis in Amerika, Nederland en België (1940–1995). Trends in vraagstellingen, onderzoekmethoden en thema’s: een overzicht’, Neha-jaarboek voor economische, bedrijfs- en techniekgeschiedenis 59 (1996): 21–65. 3 E. Hobsbawm, The age of extremes: the short twentieth century, 1914–1991 (London: Michael Joseph, 1994). 4 For an economic history of the Netherlands see: J. L. van Zanden, The economic history of the Netherlands 1914–1995. A small open economy in the ‘long’ twentieth century (London and New York: Routledge, 1998). 5 A.D. Chandler jr., Strategy and structure. Chapters in the history of the industrial enterprise (Cambridge, 1962); A.D. Chandler jr., Scale and scope. The dynamics of industrial capitalism (Cambridge (Mass.): Harvard University Press, 1990). 6 H.I. Ansoff, Corporate strategy: an analytical approach to business policy for growth and expansion (New York: McGraw-Hill, 1965). 7 H. Mintzberg and J. Waters, ‘Of strategies, deliberate and emergent’, Strategic Management Journal, July/September (1985). 8 J.G. van Oord, Een gedurfde onderneming. De geschiedenis van Van Oord Groep NV 1948–1998 (Zutphen: Walburg Pers, 2001), p. 181. 9 For a survey of the development of the strategy concept, see: H. Mintzberg and J.B. Quin, The strategy process; concepts and contexts (New York: Prentice Hall, 1992); D. de Wit and R. Meyer, Strategy: process, content, context – an international perspective (St. Paul, Maine: West Publishing Company, 1994). 10 H. Schenk, ‘Fusies als economisch en strategisch verschijnsel; reële of ogenschijnlijke paradoxen?’ in: Fusies en acquisities, ed. H. Schenk (Houten: 1994), pp. 33–97. 11 K. Davids and J. Lucassen, eds, A miracle mirrored. The Dutch Republic in European Perspective (Cambridge: Cambridge University Press, 1995). 12 R. Griffiths, ‘Backward, late or different?’ in: The economic development of the Netherlands since 1870, ed. J.L. van Zanden (Cheltenham: 1996), pp. 1–22. 13 J.L. van Zanden and A. van Riel, Nederland 1780–1914. Staat, instituties en economische ontwikkeling (Uitgeverij Balans, 2000). 14 B. van Ark and H.J. de Jong, Accounting for economic growth in the Netherlands since 1913, vol. Research Memorandum GD-26, Groningen Growth and Development Centre (Groningen: University of Groningen, 1996), table 10, p. 32.

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15 P. Katzenstein, Small states in world markets: industrial policy in Europe (Ithaca, 1985), p. 22. 16 Katzenstein, Small states in world markets, pp. 17–37. 17 M.D. Bordo, B. Eichengreen and D.A. Irwin, ‘Is globalization today really different than globalization a hundred years ago?’ NBER working paper series (1999): 1–73, p. 59. 18 Chandler jr., Scale and scope ; M.G. Blackford, The rise of modern business in Great Britain, the United States and Japan, second ed. (Chapel Hill and London: University of North Carolina Press, 1998); J.F. Wilson, British business history, 1920–1994 (Manchester: Manchester University Press, 1995); Y. Cassis, Big business. The European experience in the twentieth century (Oxford: Oxford University Press, 1997). 19 Chandler jr., Scale and scope. 20 Alfred D. Chandler jr., Franco Amatori and Takashi Hikino, eds., Big business and the wealth of nations (Cambridge: Cambridge University Press, 1997), chapter 1, p. 12. 21 A.D. Chandler jr. and H. Daems, eds, Managerial hierarchies; comparative perspectives on the rise of modern industrial enterprise (Cambridge, Mass.: 1980), pp. 13–14. 22 Chandler jr., Scale and scope, p. 12: ‘As a result of this continuing commitment to personal management, Britain became a late industrializer in many of the new industries of the Second Industrial Revolution.’ 23 Cassis, Big business, pp. 231–237. 24 Roy Church, ‘The family firm in industrial capitalism: international perspectives on hypotheses and history’, in: Family Capitalism, ed. G. Jones and Mary B. Rose (London: Frank Cass, 1993), pp. 17–43. 25 G. Jones and Mary B. Rose, ‘Family capitalism’, in: Family Capitalism, ed. G. Jones and Mary B. Rose (London: Frank Cass, 1993), pp. 1–16. 26 Andrea Colli and Mary B. Rose, ‘Family firms in comparative perspective’, in: Business History around the World, ed. Franco Amatori and Geoffrey Jones (Cambridge: Cambridge University Press, 2003), pp. 339–352. 27 Andrea Colli, Paloma Fernández Pérez and Mary B. Rose, ‘National determinants of family firm development? Family firms in Britain, Spain, and Italy in the nineteenth and twentieth centuries’, Enterprise & Society 4 (2003): 28–64. 28 M. Wilkins, The emergence of multinational enterprise (Cambridge, Mass.: Harvard University Press, 1970); M. Wilkins, The maturing of multinational enterprise (Cambridge, Mass.: Harvard University Press, 1974); M. Wilkins, The history of foreign investment in the United States before 1914 (Cambridge, Mass.: Harvard University Press, 1989). 29 J.H. Dunning, Explaining international production (London, 1988), p. 74. 30 Ann M. Carlos and S. Nicholas, ‘Giants in an earlier capitalism: the chartered trading companies as modern multinationals’, Business History Review (1988). 31 To name just three: A. Teichova, M. Levy-Leboyer and H. Nussbaum, eds, Multinational enterprise in historical perspective (Cambridge: Cambridge University Press, 1986); G. Jones, ed., Banks as multinationals (London and New York: Routledge, 1990); M. Wilkins, ed., The growth of multinationals (Aldershot: Edward Elgar, 1991). 32 G. Jones, The evolution of international business. An introduction (London and New York: Routledge, 1996), pp. 304–310. 33 Jones, Evolution, p. 4. 34 G. Jones and H. Schröter, ‘Continental European multinationals, 1850–1992’, in: The rise of multinationals in continental Europe, ed. G. Jones and H. Schröter (Aldershot: Edward Elgar, 1993), pp. 3–27. 35 M. Wilkins, ‘The free-standing company revisited’, in: The free-standing company

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in the world economy, 1830–1996, ed. M. Wilkins and H. Schröter (Oxford: Oxford University Press, 1998), pp. 3–64. H. Bonin et al., eds, Transnational companies (nineteenth-twentieth centuries) (Paris: P.L.A.G.E., 2002). One of the first efforts to bring historians and economists together was: Peter Hertner and Geoffrey Jones, eds, Multinationals: theory and history (Aldershot: Gower, 1987) J.H. Dunning, The globalization of business. The challenge of the 1990s (London and New York: Routledge, 1993). Jones, Evolution, p. 310. M. Casson, Economics of international business, a new research agenda (Cheltenham: Edward Elgar, 2000), pp. 284–306. M. Albert, Capitalisme contre capitalism (Paris: Editions du Seuil, 1991). R. Whitley, ed., European business systems. Firms and markets in their national contexts (London: Saga Publications, 1992). Peter A. Hall and David Soskice, ‘An introduction to varieties of capitalism’, in: Varieties of capitalism. The institutional foundations of comparative advantage, ed. David Soskice (Oxford: Oxford University Press, 2001), pp. 1–68. H.W. de Jong, Monopoliseren of rivaliseren? Opstellen over concurrentie, kartelvorming en economische machtsposities (Weteringbrug: Edclusa, 1997).

1 Family-based management in an international context, 1895–1914 1 A. Maddison, Monitoring the world economy 1820–1992 (OECD, 1995), pp. 61–65. 2 G. Jones, The evolution of international business. An introduction (London and New York: Routledge, 1996), pp. 21–41. 3 Ch. Freeman, ed., Long wave theory, The international library of critical writings in economics (Cheltenham, UK; Brookfield, US: Edward Elgar, 1996). 4 J. Fedder, ‘Springvloed. Beschouwingen over industrieele ontwikkeling en prijsbeweging’, De Nieuwe Tijd 18 (1913): 253–277, 369–384, 445–464: Fedder was the alias for the marxist economist Prof. J. van Gelderen. 5 A.D. Chandler jr., Scale and scope. The dynamics of industrial capitalism (Cambridge (Mass.): Harvard University Press, 1990). 6 Chandler jr., Scale and scope, pp. 3–13. 7 Y. Cassis, Big business. The European experience in the twentieth century (Oxford: Oxford University Press, 1997), pp. 3–8. 8 C.F. Sabel and J. Zeitlin, World of possibilities: flexibility and mass production in Western industrialization (Cambridge: Cambridge University Press, 1997); P. Scranton, Endless novelty: specialty production and American industrialization, 1865–1929 (Princeton, N.J.: Princeton University Press, 1997). 9 M.G. Blackford, The rise of modern business in Great Britain, the United States and Japan, second ed. (Chapel Hill and London: University of North Carolina Press, 1998), p. 90. 10 J. Bank and M. van Buuren, Nederlandse cultuur in Europese context; 1900 Hoogtij van burgerlijke cultuur (Den Haag: SDU, 2000), pp. 13–15, 91–95. 11 A. Heerding, Het ontstaan van de Nederlandse gloeilampenindustrie, vol. 1, Geschiedenis van de NV Philips’ Gloeilampenfabrieken (Den Haag: Nijhoff, 1980), pp. 75–104; 293–334. 12 A. Heerding, Een onderneming van vele markten thuis, 1891–1922, vol. 2, Geschiedenis van de NV Philips’ Gloeilampenfabrieken (Leiden: Nijhoff, 1986), pp. 49–66, 257. 13 Heerding, Van vele markten thuis, pp. 233–236, 320–357; A. van Drenth, De zorg om het Philipsmeisje. Fabrieksmeisjes in de elektrotechnische industrie in Eindhoven 1900–1960 (Zutphen: Walburg Pers, 1991).

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14 Heerding, Ontstaan Nederlandse gloeilampenindustrie, pp. 286–298; Heerding, Van vele markten thuis, pp. 83–145. 15 Heerding, Van vele markten thuis, pp. 83–145, 147–148. 16 Heerding, Van vele markten thuis, pp. 204–225, 372–383. 17 Heerding, Van vele markten thuis, pp. 386–391. 18 Heerding, Van vele markten thuis, pp. 359–369; E. Bloemen, J. Kok, and J.L. van Zanden, De top 100 van industriële bedrijven in Nederland 1913–1990, Adviesraad voor het wetenschaps- en technologiebeleid (Den Haag, 1993). 19 J.L. van Zanden and A. van Riel, Nederland 1780–1914. Staat, instituties en economische ontwikkeling (Uitgeverij Balans, 2000), pp. 346–350, 377–379. 20 Van Zanden and Van Riel, Nederland 1780–1914, pp. 386–387; Harry Lintsen pointed out that in the use of steam power the Dutch manufacturers had consistently shown a clear preference for smaller steam engines, which is in line with the fast introduction of the electric motor: H.W. Lintsen, Een revolutie naar eigen aard. Technische ontwikkeling en maatschappelijke verandering in Nederland, rede uitgesproken bij de aanvaarding van het ambt van hoogleraar in de geschiedenis van de techniek,Technische Universiteit Delft, 26 september 1990 (Delft: TU Delft, 1990), pp. 28–29. 21 J.P. Smits, E. Horlings and J.L. van Zanden, Dutch GNP and its components, 1800–1913, Groningen growth and development centre monograph series no. 5 (Groningen, 2000), p. 19. 22 J.A. de Jonge, De industrialisatie in Nederland tussen 1850 en 1914, reprint 1978 ed. (Nijmegen: SUN, 1968), p. 232. 23 In this respect, my timing is somewhat different from that of Van Zanden and Van Riel, who place the start of the Dutch managerial revolution in the decades after 1880. I think that, one or two companies excepted, this process took place in the 1920s, and even then only to a certain extent. See: Van Zanden and Van Riel, Nederland 1780–1914, p. 381. 24 Cassis, Big business, 11. 25 CBS, Ongevallenstatistiek, vol. 1903 and 1913. 26 Cassis, Big business, pp. 9–10. 27 Bloemen, Kok and Van Zanden, Top 100 van industriële bedrijven. 28 Van Oss’ Effectenboek, 1915/16. 29 Cassis, Big business, pp. 10–11. In this comparison I have only compared the manufacturing companies, because the finance and service companies are excluded from the Dutch list. 30 Smits, Horlings and Van Zanden, Dutch GNP, table H.1 (pp. 181–182) and table I.2 (p. 219). 31 M.B. Rose, Firms, networks and business values. The British and American Cotton Industries since 1750 (Cambridge: Cambridge University Press, 2000), pp. 58–98, 168–179. 32 De Jonge, Industrialisatie in Nederland, pp. 82–129. 33 De Jonge, Industrialisatie in Nederland, p. 329. 34 J.C.A. Everwijn, Beschrijving van handel en nijverheid (Den Haag, 1912), pp. 287–295. 35 G.P.J. Verbong, Technische innovaties in de katoendrukkerij en- ververij in Nederland 1835–1920 (Amsterdam: Neha, 1988), pp. 155–184. 36 E.J. Fischer, J.L.J.M. van Gerwen and H.J.M. Winkelman, Bestemming Semarang. Geschiedenis van de textielfabrikanten Gelderman in Oldenzaal 1817–1970 (Amsterdam, 1991), pp. 65–77, 98–112. 37 H.H. Vleesenbeek, De eerste grote industriële fusie in Nederland na de Tweede Wereldoorlog. Het ontstaan van Nijverdal-ten Cate -een bedrijfshistorische analyse(Rotterdam, 1981), pp. 35–38. 38 A.L. van Schelven, Onderneming en familisme. Opkomst, bloei en neergang van de

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Notes textielonderneming Van Heek & Co te Enschede (Leiden: Martinus Nijhoff, 1984), pp. 32–43, 51–59, 216–217. T. Hammer-Stroeve, Familiezoet. Vrouwen in een ondernemerselite, Enschede 1800–1940 (Zutphen: Walburg Pers, 2001), pp. 249–255. W.H.P.M. van Hooff, In het rijk van de Nederlandse Vulcanus. De Nederlandse machinenijverheid 1825–1914. Een historische bedrijfstakverkenning (Amsterdam: NEHA, 1990), pp. 115, 357–360. Van Hooff, In het rijk van Vulcanus, pp. 357–360. Van Hooff, In het rijk van Vulcanus, p. 110. J.C. Westermann, Kagen, clippers, werven en motoren; geschiedenis van een geslacht van schippers, reeders, scheepsbouwmeesters en motorfabrikanten te Amsterdam (Amsterdam: J.H. de Bussy, 1942), pp. 216–239. Tachtig jaar Stork; machinefabriek gebr. Stork & Co NV (Hengelo-O., 1948). H.M.M. van Goor, Banken en industriefinanciering in de 19e eeuw (Amsterdam: Tinbergen Institute Research Series, 2000). Tachtig jaar Stork, 29,15. For other financial interests of the Stork family see: van Hooff, In het rijk van Vulcanus, pp. 108–109. E. Homburg, ‘Chemie’, in: Techniek in Nederland in de twintigste eeuw, vol. II, delfstoffen, energie, chemie, ed. J.W. Schot et al. (Zutphen: Walburg Pers, 2000), 269–408, p. 317. De ontwikkeling der onderneming in zestig jaren 1870–1930; Nederlandsche Gist- & Spiritusfabriek Delft (Delft 1930), pp. 5–19. H.C. Kleij, Sociaal ondernemerschap. Een rechtssociologische studie van de antwoorden van J.C. van Marken jr. op de Sociale Kwestie (dissertation Utrecht, 1986), pp. 86–89. W. de Vries Wzn, ‘Export-experiment rond 1900. De Vereeniging van Nederlandsche Fabrikanten (1898–1902)’, Maandschrift Economie 31 (1967). Homburg, ‘Chemie’, pp. 281. Homburg, ‘Chemie’, pp. 271–277, 317–334. Van Zanden and Van Riel, Nederland 1780–1914, p. 378. Ch. Vancoppenolle, Tussen paternalistische zorg en zakelijk management. C.J. Honig als eindpunt van persoonsgericht sociaal ondernemersgedrag in een Zaans familiebedrijf (1930–1957) (Amsterdam: Neha, 1993), pp. 22–26. D. Arnoldus, Family, family firm and strategy. Six Dutch family firms in the food industry 1880–1970 (Amsterdam: Aksant, 2002). K.E. Sluyterman and H.H. Vleesenbeek, Three centuries of De Kuyper. A history of geneva and liqueurs, 1695–1995 (Schiedam, 1995), pp. 29–31, 43. M. Schrover, Het vette, het zoete en het wederzijdse profijt; arbeidsverhoudingen in de margarine-industrie en in de cacao- en chocolade-industrie in Nederland 1870–1960 (Hilversum: Verloren, 1991), p. 182. D.A. Knaap, ‘Het W.A. Scholtenconcern (1840–1900): first mover in the Nederlandse aardappelmeelindustrie?’ Neha-jaarboek voor economische, bedrijfsen techniekgeschiedenis 63 (2000): 8–41. W. Wennekes, De aartsvaders. Grondleggers van het Nederlandse bedrijfsleven (Amsterdam/Antwerpen: Uitgeverij Atlas, 1993), pp. 79–106. J.L. van Zanden, De economische ontwikkeling van de Nederlandse landbouw in de negentiende eeuw, 1800–1914, vol. 25, A.A.G. Bijdragen (Wageningen, 1985), pp. 263–281. K.E. Sluyterman, Ondernemerschap en overheid. De geschiedenis van de bietsuikerfabriek Van Loon (De Ram) & Co 1871–1919 (Breda: Van Loon & Co, 1996), p. 55. K. Woudt, De geschiedenis van een Zaanse familie-onderneming (Krommenie, 1987), p. 143. For more information on the lives of Dutch business leaders see: Wennekes, Aartsvaders.

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64 M. Schrover, ‘ “De affaire wordt gecontinueerd door de weduwe.” Handelende vrouwen in de negentiende eeuw’, Jaarboek voor Vrouwengeschiedenis (1997): 55–74. 65 P. Dehing, ‘Eene soort van dynastie van spoorwegbeambten.’ Arbeidsmarkt en spoorwegen in Nederland, 1875–1914 (Hilversum: Verloren, 1989), pp. 19–24, and conclusion. 66 F. de Haan, Sekse op kantoor. Over vrouwelijkheid, mannelijkheid en macht, Nederland 1860–1940 (Hilversum, 1992), appendix 1.1. 67 J. Giele, ed., Een kwaad leven. Heruitgave van de ‘Enquête betreffende werking en uitbreiding der wet van 19 September 1874 (Staatsblad No. 130) en naar den toestand van fabrieken en werkplaatsen’ (Sneek 1887), vol. 1 Amsterdam, Vol. 2 Maastricht, Vol. 3 Flax Industry, Tilburg (Nijmegen: Uitgeverij Link, 1981). 68 E.S.A. Bloemen, Scientific management in Nederland, 1900–1930 (Amsterdam: Neha, 1988), pp. 69–90. 69 H.A.M. van Asten, ‘De Spyker van de weg gereden’, Economisch- en SociaalHistorisch Jaarboek 1970 (1970): 67–118. 70 J.F. Wilson, British business history, 1920–1994 (Manchester: Manchester University Press, 1995). 71 J.Th. Lindblad, ‘The economic relationship between the Netherlands and colonial Indonesia, 1870–1940’, in: The economic development of the Netherlands since 1870, ed. J.L. van Zanden (Cheltenham: Edward Elgar, 1996), pp. 109–119. 72 H. Schijf, Netwerken van een financieel-economische elite. Personele verbindingen in het Nederlandse bedrijfsleven aan het einde van de negentiende eeuw (Amsterdam, 1993). Schijf studied the appearance of interlocking directorates among the most important incorporated companies in 1886 in the Netherlands. He selected 142 companies, which together had 771 directors and managing directors. Of these 771 persons 197 had more than one function in the selected companies. In this group traders and bankers dominated. Manufacturers had only a modest presence. This reflected in part the fact that the manufacturing firms were still relatively small. Furthermore, most manufacturing companies were organised as family firms, which were not included in the sample based on incorporated companies. 73 Handboek voor Cultuur- en Handelsondernemingen in Nederlandsch-Indië. 74 J.N.F.M. à Campo, ‘The rise of corporate enterprise in colonial Indonesia, 1893–1913’, in: Historical foundations of a national economy in Indonesia, 1890s1990s, ed. J.Th. Lindblad (Amsterdam/Oxford/New York/Tokyo: NorthHolland, 1996), pp. 71–94. 75 B.P.A. Gales and K.E. Sluyterman, ‘Outward bound. The rise of Dutch multinationals’, in: The rise of multinationals in continental Europe, ed. G. Jones and H. Schröter (Aldershot: Edward Elgar, 1993), 65–98, pp. 65–66. 76 M. Wilkins, ‘The free-standing company revisited’, in: The free-standing company in the world economy, 1830–1996, ed. M. Wilkins and H. Schröter (Oxford: Oxford University Press, 1998), pp. 3–64. 77 B.P.A. Gales and K.E. Sluyterman, ‘Dutch free-standing companies, 1870–1940’, in: The free-standing company in the world economy, 1830–1996, ed. M. Wilkins and H. Schröter (Oxford: Oxford University Press, 1998), pp. 293–322. 78 Schijf, Netwerken, pp. 6–11, 37–55: Schijf used the source Van Nierop & Baak’s Naamlooze Vennootschappen. His choice of companies is based on a selection of largest companies in 1886; he also created a network of directors in 1902, but based it again on his selection of 1886; M. Bossenbroek, Holland op zijn breedst. Indie en Zuid-Afrika in de Nederlandse cultuur omstreeks 1900 (Amsterdam: Uitgeverij Bert Bakker, 1996), pp. 85–115: he too used Van Nierop & Baak, but

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83 84 85 86 87 88 89 90

91 92 93 94

Notes made a selection for 1900; A. Taselaar, De Nederlandse koloniale lobby. Ondernemers en de Indische politiek, 1914–1940 (Leiden: Research School CNWS, 1998), pp. 49–57. Taselaar made a network on the basis of Dutch companies working in colonial Indonesia. He used the Handboek voor Cultuur- en Handelsondernemingen in Nederlandsch-Indië. This similarity is all the more striking as Schijf concentrated on the Dutch companies in the Netherlands and Bossenbroek and Taselaar on the Dutch companies working in colonial Indonesia. In the analyses of 1886 and 1900, made by Schijf and Bossenbroek, the trading companies also had a prominent place, while in the analysis of Taselaar, covering the 1913–1940 period, the directors of plantations took second place. This difference can partially be explained by the fact that some trading companies evolved into banks or managers of estate companies, and partially by the fact that many plantation companies indeed grew in size and influence. Manufacturers had only a modest presence in all network analyses, though in Taselaar’s overview mining, including the oil sector, had made its entrance. N.C. van Gheel Gildemeester, Gedenkboek van de suikeronderneming ‘Poerwodadi’, 1833–1933 (Poerwodadi, 1933); Landbouw Maatschappij ‘Ketanen’, 1898–1938, typed ed. (1938); Javasche Cultuur Maatschappij, 1890–1940 (Amsterdam: De Bussy, 1940); Senembah Maatschappij, 1889–1939 (Amsterdam, 1939); W.J.P. van den Bosch, Cultuur-Maatschappij Pondok-Gedeh, 1887–1912 (Den Haag, 1912). Eisfeld, Das Niederländische Bankwesen (Den Haag: Nijhoff, 1916), p. 203; J.F. Haccoû, Management of direct investments in less developed countries (Leiden, 1957), pp. 192–195. J. Jonker and K. Sluyterman, At home on the world markets. Dutch international trading companies from the 16th century until the present (Montreal: McGillQueen’s University Press, 2000), pp. 211–213. J. van den Zwaag, Verloren tropische zaken. De opkomst en ondergang van de Nederlandse handel- & cultuurmaatschappijen in het voormalige Nederlands-Indië (Meppel, 1991); W. Brand, 1879 HVA 1979. Honderd jaar geschiedenis der Verenigde HVA Maatschappijen NV (Amsterdam: HVA, 1979), pp. 13–16, 47. A.C. Mees, NV Internationale Crediet- en Handels-Vereeniging ‘Rotterdam’. Gedenkboek uitgegeven bij het vijf- en zeventig jarig bestaan op 28 augustus 1938 (Rotterdam, 1938), pp. 8–31. G.H. Crone, H.G.Th. Crone, 1790–1940. Gedenkboek uitgegeven ter gelegenheid van het 150-jarig bestaan der firma op 2 juni 1940 (Amsterdam, 1940), p. 93. J.N.F.M. à Campo, Koninklijke Paketvaart Maatschappij. Stoomvaart en staatsvorming in de Indische archipel, 1888–1914 (Hilversum: Verloren, 1992), pp. 55–73, 528–532. À Campo, Koninklijke Paketvaart Maatschappij, pp. 478–480. Gales and Sluyterman, ‘Dutch free-standing companies’, p. 311. Haccoû, Management, pp. 192–195. K.E. Sluyterman, Driekwart eeuw CSM: cash flow, strategie en mensen (Diemen: CSM, 1995), pp. 12–44. The Rotterdam firm Van Nelle tried, not very successfully, to cultivate tobacco in colonial Indonesia in the nineteenth century. At that moment the firm was more a trading than an industrial company as it became in later years. H.F.W. Bantje, Twee eeuwen met de weduwe. Geschiedenis van De Erven de Wed. J. van Nelle NV, 1782–1982 (Rotterdam: Van Nelle, 1981), pp. 58–62. Van Oss’ Effectenboek, vol. 1915/16. Hoynck van Papendrecht, Tabak Maatschappij Arendsburg, 1877–1927 (Rotterdam, 1927). De Jonge, Industrialisatie in Nederland, p. 186. Haccoû, Management, p. 197.

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95 The Twente textile manufacturers were among the main shareholders of Internatio, while the engineering company Stork and the distillers Blankenheym & Nolet were main shareholders of the HVA. Borsumij, too, had a textile manufacturer, Van Heek, among its shareholders: Jonker and Sluyterman, At home on the world markets, pp. 202–208. 96 J.Th. Lindblad, ‘De handel tussen Nederland en Nederlands-Indië, 1874–1939’, Economisch- en Sociaal-Historisch Jaarboek 51 (1988): 240–298, p. 257. 97 Lindblad, ‘Handel Nederland en Nederlands-Indië’, 280–281. I have recalculated the export figures of Lindblad with the help of the recent estimates of Dutch total exports given in: Smits, Horlings and Van Zanden, Dutch GNP, pp. 181–182. 98 À Campo, Koninklijke Paketvaart Maatschappij, pp. 479–481 99 Jonker and Sluyterman, At home on the world markets, p. 208. 100 F.C. Gerretson, History of the Royal Dutch (Leiden: E.J. Brill, 1953), vol. I, p. 131. 101 Gerretson, History Royal Dutch, vol. I, pp. 58–67, 93–102. 102 H. van Voorst Vader-Duyckinck Sander, Leven en laten leven, een biografie van ir. Adriaan Stoop 1856–1935 (Haarlem: Schuyt & Co, 1994), pp. 66–86; Gerretson, History Royal Dutch, vol. II, pp. 202–229, vol. IV, pp. 82–84. 103 Gerretson, History Royal Dutch, vol. II, pp. 60–61, vol. IV, 229–257, pp. 1–2, 56–58. 104 Gerretson, History Royal Dutch, vol. I, p. 114, vol. II, p. 278. 105 Bloemen, Kok and Van Zanden, Top 100 van industriële bedrijven, pp. 10–11. 106 F. de Goey, ‘Dutch overseas investments in the very long run (c.1600–1990)’, in: Multinational enterprises from the Netherlands, ed. R. van Hoesel and R. Narula (London and New York: Routledge, 1999), pp. 32–60. 107 Gales and Sluyterman, ‘Outward bound’, p. 65. 108 Gales and Sluyterman, ‘Outward bound’, p. 68. 109 H.G. Schröter, Aufstieg der Kleinen. Multinationale Unternehmen aus fünf kleinen Staaten vor 1914 (Berlin: Duncker & Humbolt, 1993), pp. 94–100, 335–336. 110 Gales and Sluyterman, ‘Outward bound’, pp. 68–71. 111 I.J. Brugmans, Paardenkracht en mensenmacht. Sociaal-economische geschiedenis van Nederland, 1795–1940, reprint 1960 ed. (Den Haag: Nijhoff, 1976), p. 268. 112 W. Blom, 100 jaar zinkproduktie in Nederland (Eindhoven: Lecturis, 1992), pp. 9–17. 113 M.S.C. Bakker, Ondernemerschap en vernieuwing. De Nederlandse bietsuikerindustrie 1858–1919 (Amsterdam: Neha, 1989), p. 39. 114 G.D. Taylor and P.A. Baskerville, A concise history of business in Canada (Toronto/Oxford/New York: Oxford University Press, 1994), pp. 326–332. 115 Taselaar, Nederlandse koloniale lobby, pp. 37–49. 116 De Jonge, Industrialisatie in Nederland, p. 323. 117 For a summary of the debates see: Van Zanden and Van Riel, Nederland 1780–1914, pp. 311–322; M. Wintle, An economic and social history of the Netherlands, 1800–1920; demographic, economic and social transition (Cambridge: Cambridge University Press, 2000), pp. 258–266. 118 De Jonge, Industrialisatie in Nederland, pp. 320–329. 119 B. Bouwens, Alcohol company on the move. One hundred years of Nedalco (The Hague: SDU, 1999), pp. 17–22. 120 T. Freyer, Regulating big business. Anti-trust in Great Britain and America, 1880–1990 (Cambridge: Cambridge University Press, 1992), pp. 1–10. 121 F. van Waarden, ‘Regulering en belangenorganisatie van ondernemers’, in: De Nederlandse samenleving sinds 1815; wording en samenhang, ed. F.L. van Holthoon (Assen/Maastricht: Van Gorcum, 1985), pp. 227–260, 232–235.

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122 For the sugar industry see: Sluyterman, Driekwart eeuw CSM, pp. 33–35; for potato starch: Knaap, ‘Het W.A. Scholtenconcern’. 123 H. Veldman, E. van Royen and F. Veraart, Een machtige schakel in de Nederlandse land- en tuinbouw. De geschiedenis van Cebeco-Handelsraad, 1899–1999 (Rotterdam: Cebeco Groep, 1999), pp. 22–33. 124 F.M. Wibaut, Trusts en kartellen (Amsterdam: A.B.Soep, 1903), pp. 85–118; J. d’ Aulnis de Bourouill, ‘Review of F.M. Wibaut, Trusts en kartellen’, The Economist (1904): 152–157. 125 J. Dankers and J. van der Linden, Samensmeltend glas. Honderd jaar N.V. Vereenigde Glasfabrieken, 1899–1999 (Boom, 2001), pp. 27–31. 126 Wilson, British business history, p. 102; Chandler jr., Scale and scope, pp. 71–78; H.W. de Jong, ‘De concentratiebeweging in de Amerikaanse economie’, ESB (1988): 202–207; L. Hannah, The rise of the corporate economy (London: Methuen & Co, 1976), pp. 21–24. 127 A.D. Wentholt, Brug over den oceaan. Een eeuw geschiedenis van de Holland Amerika Lijn (Rotterdam/Den Haag: Nijgh & van Ditmar, 1973), pp. 117–120. 128 I.J. Brugmans, Tachtig jaar varen met de Nederland (Amsterdam, 1950), p. 29. 129 Gerretson, History Royal Dutch, vol. IV, pp. 92–98. 130 E. Schiff, Industrialization without patents (Princeton: Princeton University Press, 1971). 131 F. Gerzon, Nederland, een volk van struikrovers? De herinvoering van de Nederlandse octrooiwet (1869–1912) (Den Haag, 1986), pp. 36–49. 132 Gerzon, Volk van struikrovers, pp. 49–54, 64. 133 The Nederlandsche Maatschappij ter Bevordering van de Nijverheid (Dutch Association for the Promotion of Industry) addressed its departments in 1882 with this question and their answers were so inconclusive that the association decided there was insufficient evidence to ask the government to reintroduce the patent law. Gerzon, Volk van struikrovers, pp. 53–54; Schiff, Industrialization without patents, pp. 39–41. 134 Schiff, Industrialization without patents, pp. 71–72. 135 Lintsen, Een revolutie naar eigen aard. 136 Gerzon, Volk van struikrovers, p. 73. 137 A. Smeets, 90 Jaren zinkwitindustrie in Nederland, 1870–1960 (Eÿsden, 1960), pp. 50–52. 138 N.H.W. Verbeek, ‘Margarine’, in: Techniek in Nederland. De wording van een moderne samenleving, 1800–1890, vol.1, Techniek en modernisering. Landbouw en voeding, ed. H.W. Lintsen et al. (Zutphen: Walburg Pers, 1992), 135–169, p. 153. 139 Verbeek, ‘Margarine’, pp. 150–153. 140 Gerzon, Volk van struikrovers, p. 71. 141 Van Hooff, In het rijk van Vulcanus, pp. 357–360. 142 Schiff, Industrialization without patents, pp. 69–82; Gerzon, Volk van struikrovers, pp. 70–113. 143 Schiff, Industrialization without patents, pp. 42–51. Schiff also argues that his findings make it appear likely that industrial progress in the Netherlands during the patentless period was, in fact, based in a lesser proportion on domestic (as distinct from foreign) inventions than would have been the case under a patent system. 144 Giele, ed., Een kwaad leven, vol. 2, pp. 115–132, 205–215. 145 Giele, ed., Een kwaad leven, passim. 146 Van Zanden and Van Riel, Nederland 1780–1914, p. 324. 147 P. Hek, ‘The CBSA and social entrepreneurship, 1899–1923’, in: Business and society. Entrepreneurs, politics and networks in a historical perspective. Proceedings of the Third European Business History Association (EBHA), September 1999, Rotter-

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148 149 150 151 152 153 154 155 156 157 158 159

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dam, The Netherlands, ed. A.-M. Kuijlaars, K. Prudon and J. Visser (Rotterdam: CBG, 2000), pp. 443–454. J. van Genabeek, Met vereende kracht risico’s verzacht. De plaats van onderlinge hulp binnen de negentiende-eeuwse particuliere regelingen van sociale zekerheid (Amsterdam: IISG, 1999), pp. 213–246. J. Muntendam, Loon naar werken. Enkele sociale aspecten van het werk van J.C. van Marken (Deventer, 1971), pp. 24–30; Ontwikkeling der onderneming, p. 14. Kleij, Sociaal ondernemerschap. Een rechtssociologische studie van de antwoorden van J.C. van Marken jr. op de Sociale Kwestie, pp. 117–130, 157–192. P. Tjeenk Willink, Winstdeling in Nederland. Rapport uitgebracht in het Derde Internationaal Cooperatief Congres (1897). L.C.W.J.M. ten Horn-van Nispen, Jan B.M. van Besouw, een sociaal geïnspireerd ondernemer rond 1900 (Tilburg: Stichting Zuidelijk Historisch Contact, 1971), pp. 117–118. R.J.S. Schwitters, De risico’s van de arbeid. Het ontstaan van de Ongevallenwet van 1901 in sociologisch perspectief (Groningen: Wolters-Noordhoff, 1991), pp. 158–165. De Jonge, Industrialisatie in Nederland, p. 333. Schwitters, Risico’s van de arbeid, pp. 277–289; A. de Swaan, In care of the state. Health care, education and welfare in Europe and the USA in the modern era (Cambridge: Polity Press, 1988), pp. 210–212. Van Zanden and Van Riel, Nederland 1780–1914, pp. 354–356. J.M. Peet, L.J. Altena and C.H. Wiedijk, eds, Honderd jaar sociaal. Teksten uit honderd jaar sociale beweging en sociaal denken in Nederland, 1891–1991 (The Hague: SDU, 1998), pp. 700–726. Van Waarden, ‘Regulering en belangenorganisatie’, pp. 234–235. Schrover, Het vette, het zoete, pp. 17, 273.

2 A small country in an era of war and protectionism, 1914–1945 1 A.K. Riemsdijk, The Netherlands Chamber of Commerce in London, 1891–1951. A record of sixty years of trade promotion (1951), p. 54. 2 Ch. Wrigley, ‘The War and the international economy’, in: The First World War and the international economy, ed. Ch. Wrigley (Cheltenham: Edward Elgar, 2000), pp. 1–33; Paul Kennedy, The rise and fall of the great powers (London: Fontana Press, 1989), pp. 330–354. 3 H. James, The end of globalization. Lessons from the Great Depression (Cambridge, Mass.: Harvard University Press, 2001), p. 105. 4 Wrigley, ‘War and international economy’, pp. 10–12. 5 Y. Cassis, Big business. The European experience in the twentieth century (Oxford: Oxford University Press, 1997), p. 35. 6 James, End of globalization, p. 29. 7 Ch. Freeman and Carlota Perez, ‘Structural crises of adjustment, business cycles and investment behaviour’, in: Technical change and economic theory, ed. G. Dosi et al. (London: Pinter, 1988), pp. 38–66 8 Ch. Freeman and F. Louçã, As time goes by. From the Industrial Revolution to the Information Technology (Oxford: Oxford University Press, 2002), pp. 257–300. 9 J. L. van Zanden, The economic history of the Netherlands 1914–1995. A small open economy in the ‘long’ twentieth century (London and New York: Routledge, 1998), pp. 1–7. 10 A. Heerding, Het ontstaan van de Nederlandse gloeilampenindustrie, vol. 1, Geschiedenis van de NV Philips’ Gloeilampenfabrieken (Den Haag: Nijhoff, 1980), p. 46.

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11 Heerding, Een onderneming van vele markten thuis, 1891–1922, vol. 2, Geschiedenis van de NV Philips’ Gloeilampenfabrieken (Leiden: Nijhoff, 1986), pp. 391–414. 12 Heerding, Van vele markten thuis, p. 410; Van Oss’ Effectenboek, 1960. 13 I.J. Blanken, De ontwikkeling van de N.V. Philips’ Gloeilampenfabrieken tot elektrotechnisch concern, vol. 3, Geschiedenis van Philips Electronics N.V. (Leiden: Nijhoff, 1992), pp. 79–142. 14 F.K. Boersma, Inventing structures for industrial research. A history of the Philips Natlab 1914–1946 (Amsterdam: Aksant, 2002), pp. 31–74. 15 A. van Drenth, De zorg om het Philipsmeisje. Fabrieksmeisjes in de elektrotechnische industrie in Eindhoven 1900–1960 (Zutphen: Walburg Pers, 1991), pp. 80–85. 16 Blanken, Ontwikkeling tot elektrotechnisch concern, pp. 29–55, 116–121. 17 Blanken, Ontwikkeling tot elektrotechnisch concern, p. 290. 18 J. Bruggeman and A. Camijn, Ondernemers verbonden; 100 jaar ondernemersorganisaties in Nederland (Wormer: Immerc, 1999) p. 105. 19 Blanken, Ontwikkeling tot elektrotechnisch concern, pp. 381–433. 20 I.J. Blanken, Onder Duits beheer, vol. 4, Geschiedenis van Philips Electronics N.V. (Zaltbommel: Europese Bibliotheek, 1997), pp. 25–73; Annual accounts Philips 1938/1939. 21 Blanken, Onder Duits beheer, p. 150. 22 Blanken, Onder Duits beheer, pp. 160–176, 337–351. 23 Blanken, Onder Duits beheer, pp. 191–249. 24 Van Zanden, Economic history of the Netherlands, pp. 93–100; Joh. de Vries, Geschiedenis van de Nederlandsche Bank, vol. 5, De Nederlandsche Bank van 1914 tot 1948, part 1: Visserings tijdvak 1914–1931, NIBE-bankhistorische reeks, no. 7 (Amsterdam, 1989), pp. 61–70. 25 C.A. van Manen, De Nederlandsche Overzee Trustmaatschappij (’s-Gravenhage: Nijhoff, 1935), vol. I, pp. 75–76; C. Smit, Tien studiën betreffende Nederland in de Eerste Wereldoorlog (Groningen, 1975), pp. 40, 89–98; De Vries, Visserings tijdvak, pp. 73–74. 26 Economisch-Statistische Berichten (ESB), 26 April 1916. 27 M. Frey, ‘Trade, ships and the neutrality of the Netherlands in the First World War’, International history review 19 (1997): 541–562, p. 559. 28 R.J. van der Bie, ‘Eene doorlopende groote roes’. De economische ontwikkeling van Nederland, 1913–1921, vol. 98, Tinbergen Institute Research Series (1995), pp. 86–88; the other countries were: the UK, France, Germany, Belgium, Denmark, Norway, Sweden, Finland and Switzerland. 29 K.E. Sluyterman, Driekwart eeuw CSM: cash flow, strategie en mensen (Diemen: CSM, 1995), pp. 12–41, 48–49. 30 B.P.A. Gales and J.P. Smits, ‘Een Nederlands scheppingsverhaal’, in: Techniek in Nederland in de twintigste eeuw, vol. II, delfstoffen, energie, chemie, ed. J.W. Schot et al. (Zutphen: Walburg Pers, 2000), pp. 29–43. 31 F.V. van der Most, J.W. Schot and B.P.A. Gales, ‘Zout’, in: Techniek in Nederland in de twintigste eeuw, vol. II, delfstoffen, energie, chemie, ed. J.W. Schot et al. (Zutphen: Walburg pers, 2000), 91–102, pp. 91–96; W. Wennekes, De aartsvaders. Grondleggers van het Nederlandse bedrijfsleven (Amsterdam/Antwerpen: Uitgeverij Atlas, 1993), pp. 455–477. 32 J.C. Westermann, Geschiedenis van de ijzer- en staalgieterij in Nederland, in het bijzonder van het bedrijf van de Nederlandsche staalfabrieken v/h J.M. de Muinck Keizer NV te Utrecht (Utrecht, 1948), pp. 261–292. 33 Joh. de Vries, Hoogovens IJmuiden 1918–1968. Ontstaan en groei van een basisindustrie (IJmuiden, 1968), pp. 96–169, 195–197, 216–237, 347–365; M. Kipping, R. Ranieri and J. Dankers, ‘Creating competitive advantage in the steel industry: Italy and the Netherlands, 1945–1965’, Business History 43 (2001).

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34 D.C. Renooij, De Nederlandse emissiemarkt van 1904 tot 1939 (Amsterdam: J.H. de Bussy, 1951), pp. 115–118. Issues of the banks, transport companies, Dutch East Indies companies and the Royal Dutch are not included in these figures. 35 J. Jonker, ‘Sinecures or sinews of power? Interlocking directorships and bank–industry relations in the Netherlands, 1910–1940’, Economic and social history in the Netherlands 3 (1991): 119–131. 36 Van Oss’ Effectenboek, 1922: Vereenigde Hollandsche Sigarenfabrieken, Algemeene Papiermaatschappij, Vereenigde Chemische Fabrieken, Vereenigde Rubberfabrieken, Vereenigde Nederlandsche Chamotte Fabrieken, Vereenigde Touwfabrieken. 37 Van Oss’ Effectenboek, 1922, p. 510. 38 E. Bloembergen, 75 Jaar superfosfaat; Gedenkboek ter gelegenheid van het vijfenzeventigjarig bestaan van het superfosfaatbedrijf in Nederland (Utrecht, 1953), pp. 78–81. 39 Van Oss’ Effectenboek, 1922. 40 W.T. Kroese, Vormen van samenwerking in de Nederlandsche katoenindustrie (1929–1939) (Leiden: H.E. Stenfert Kroese, 1945), pp. 45–61. 41 E. Homburg, ‘Chemie’, in: Techniek in Nederland in de twintigste eeuw, vol. II, delfstoffen, energie, chemie, ed. J.W. Schot et al. (Zutphen: Walburg Pers, 2000), pp. 269–408, 318–327. 42 Ch. Wilson, The history of Unilever. A study in economic growth and social change, 2 vols. (1954), vol. 2, pp. 158–192. 43 K. van den Oord, De Gruyter. Geschiedenis van een kruideniersimperium (Zwolle: Waanders, 2000), pp. 12–13. 44 J.L. de Jager, Arm en rijk kunnen bij mij hun inkopen doen. De geschiedenis van Albert Heijn en Koninklijke Ahold (Baarn: Tirion, 1995), pp. 54–56. 45 Wilson, History of Unilever, vol. 2, appendix 17. 46 Gedenkboek SHV (Utrecht, 1996). 47 J.M. Peet, L.J. Altena and C.H. Wiedijk, eds, Honderd jaar sociaal. Teksten uit honderd jaar sociale beweging en sociaal denken in Nederland, 1891–1991 (The Hague: SDU, 1998), pp. 784–788; van Zanden, Economic history of the Netherlands, pp. 74–78. 48 ‘Instellingen in het belang der werklieden. Fabriekscommissie (zgn. kernen)’, Centraal verslag der arbeidsinspectie in het Koninkrijk der Nederlanden over 1922 (1924). 49 ‘Instellingen in het belang der werklieden’; G. van den Bergh, De medezeggenschap der arbeiders in de particuliere onderneming (Amsterdam: Boekhandel en uitgeversmaatschappij ‘Ontwikkeling’, 1924), pp. 171–178. 50 Bedrijfsorganisatie en medezeggenschap. Rapport uitgebracht door de kommissie ingesteld door NVV en SDAP (Amsterdam: Boekhandel en uitgeversmaatschappij ‘Ontwikkeling’, 1923); Bruggeman and Camijn, Ondernemers verbonden, p. 197. 51 W.J. Wieringa, Ten dienste van bedrijf en gemeenschap. Vijftig jaar boekdrukkersorganisatie uitgegeven door de federatie der werkgeversorganisatiën in het boekdrukkersbedrijf in het jaar 1959 (Amsterdam, 1959), pp. 73–76. 52 K.E. Sluyterman, ‘De drukkerij-uitgeverij Misset en de opkomst van vakbladen, 1900–1940’, Jaarboek voor de geschiedenis van bedrijf en techniek 3 (1986): 205–229. 53 Wieringa, Ten dienste van bedrijf en gemeenschap, pp. 76–83. 54 ESB, 30 July 1919 and 29 October 1919; Economist, 1919, pp. 636–654. 55 Naamlooze Vennootschap: maandblad voor den ondernemingsvorm en het bedrijfswezen, 15 November 1922. 56 J. van Os, Bedrijfsorganisatie (Leiden, 1920), pp. 16–32; T.J. Verschuur, Bedrijfsorganisatie. Enkele hoofdlijnen gezien van katholiek standpunt (Den Haag).

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57 ‘Weldra zouden de fonteinen van den haat alom hoog opspuiten uit zwarte, brokkelige gaten in ons gelijkgeschoren, glanzige gras. Maar nog dronken wij thee en tennisten en reden in auto’s en werden onderdanig gegroet’: Nescio, Boven het dal en andere verhalen (Amsterdam: C.A. van Oorschot, 1964), p. 31. 58 M. Dierikx, Dwarswind. Een biografie van Anthony Fokker (The Hague: SDU, 1997), pp. 68–77. In early 1919, Fokker, making use of the chaotic situation in Germany, succeeded in moving large parts of his machinery, stocks and unsold aeroplanes by train to the Netherlands, where he set up a new factory. 59 L. Karsten, De achturendag. Arbeidstijdverkorting in historisch perspectief, 1817–1919 (Groningen, 1989), pp. 279–292; I.M. Kuijpers, Een stille revolutie. De Nederlandse arbeidersbeweging en de overheid, 1914–1920 (Utrecht, 1996), pp. 391–399. 60 A.F. Heerma van Voss, De doodsklok voor den goeden ouden tijd. De achturendag in de jaren twintig (Amsterdam: Stichting Beheer IISG, 1994), pp. 285–302. 61 J. Jonker and K. Sluyterman, At home on the world markets. Dutch international trading companies from the 16th century until the present (Montreal: McGillQueen’s University Press, 2000), pp. 227–229. 62 Van Oss’ Effectenboek, 1927. 63 K.E. Sluyterman, Ondernemen in sigaren. Analyse van bedrijfsbeleid in vijf Nederlandse sigarenfabrieken in de perioden 1856–1865 en 1925–1934 (Tilburg: Stichting Zuidelijk Historisch Contact, 1983), p. 214. 64 Homburg, ‘Chemie’, pp. 327–329. 65 Wilson, History of Unilever, vol. 2, pp. 195–209. 66 Van Oss’ Effectenboek, 1927, p. 919 (Zefa), p. 631 (Gouda). The candle factory Gouda only survived by writing off most of its share capital and by returning to its core business: Honderd jaar kaarslicht; van kaarsenfabriek tot chemisch bedrijf. NV Koninklijke stearinekaarsenfabrieken Gouda-Apollo (Gouda, 1958). 67 Wilson, History of Unilever, vol. 2, p. 209. 68 De Vries, Visserings tijdvak, pp. 227–266; J. Jonker, ‘Between private responsibility and public duty. The origins of bank monitoring in the Netherlands, 1860–1930’, Financial History Review 3 (1996): 139–153; Jonker, ‘Sinecures or sinews of power?’. 69 Van der Bie, Eene doorlopende groote roes, p. 158. 70 Van Zanden, Economic history of the Netherlands, pp. 91–93; B. van Ark, J. de Haan and H.J. de Jong, ‘Characteristics of economic growth in the Netherlands during the postwar period’, in: Economic growth in Europe since 1945, eds N. Crafts and G. Toniolo (Cambridge: Cambridge University Press, 1996), pp. 290–327. 71 Van Zanden, Economic history of the Netherlands, pp. 100–105. 72 H.J. de Jong, De Nederlandse industrie 1913–1965. Een vergelijkende analyse op basis van de productiestatistieken (Amsterdam: Neha, 1999), pp. 4–5, 335. 73 H. Klemann, Tussen Reich en Empire. De economische betrekkingen van Nederland met zijn belangrijkste handelspartners: Duitsland, Groot-Brittannië en België en de Nederlandse handelspolitiek, 1929–1936 (Amsterdam: Neha, 1990), pp. 71–100. 74 Van Zanden, Economic history of the Netherlands, pp. 109–118. 75 B.P.A. Gales and K.E. Sluyterman, ‘Outward bound. The rise of Dutch multinationals’, in: The rise of multinationals in continental Europe, ed. G. Jones and H. Schröter (Aldershot: Edward Elgar, 1993), 65–98 pp. 65. 76 A.M.C.M. Bouwens and M.L.J. Dierikx, Tachtig jaar Schiphol. Op de drempel van de lucht (Den Haag: SDU, 1996); M. Dierikx, Blauw in de lucht. Koninklijke Luchtvaart Maatschappij, 1919–1999 (The Hague: SDU, 1999), pp. 11–48. 77 Dierikx, Dwarswind, pp. 115–117 78 Gerretson, Geschiedenis der ‘Koninklijke’, IV (Baarn: Bosch & Keuning, 1973),

Notes

79 80 81 82 83 84 85 86 87 88

89 90 91 92 93 94 95 96

97 98 99 100 101 102 103 104

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105 A.F. Kamp, De standvastige tinnen soldaat, 1860–1960, NV Billiton Maatschappij ’s-Gravenhage (1960), pp. 30, 194, 282–283. 106 J.Th. Lindblad, ‘Business strategies in late colonial Indonesia’, in: Historical foundations of a national economy in Indonesia, 1890s-1990s, ed. J.Th. Lindblad (Amsterdam/Oxford/New York/Tokyo: North-Holland, 1996), 207–227, pp. 223–224. 107 Jonker and Sluyterman, At home on the world markets, p. 244. 108 Taselaar, Nederlandse koloniale lobby, pp. 366–371. 109 B.G.J. de Graaff, ‘Kalm temidden van woedende golven’. Het ministerie van Koloniën en zijn taakomgeving, 1912–1940 (Den-Haag: SDV, 1997), pp. 494–549; Taselaar, Nederlandse koloniale lobby, pp. 149–156, 380–394. 110 Gales and Sluyterman, ‘Dutch free-standing companies’, p. 316. 111 Taselaar, Nederlandse koloniale lobby, pp. 423–462. 112 W.A.I.M. Segers, Manufacturing industry 1870–1942, ed. P. Boomgaard, Changing economy in Indonesia. A selection of statistical sources material from the early nineteenth century up to 1940 (Amsterdam, 1987), pp. 27–38; Taselaar, Nederlandse koloniale lobby, pp. 472–484; Jonker and Sluyterman, At home on the world markets, pp. 243–247. 113 Gales and Sluyterman, ‘Outward bound’, p. 65. 114 J.Th. Lindblad, ‘The economic relationship between the Netherlands and colonial Indonesia, 1870–1940’, in: The economic development of the Netherlands since 1870, ed. J. L. van Zanden (Cheltenham: Edward Elgar, 1996), 109–119, pp. 110–113. 115 Baudet and M. Fennema, Het Nederlands belang bij Indië (Utrecht/Antwerpen: Het Spectrum, 1983), pp. 33–35. 116 Van Zanden, Economic history of the Netherlands, pp. 21–25. 117 K.E. Sluyterman and H.J.M. Winkelman, ‘The Dutch family firm confronted with Chandler’s dynamics of industrial capitalism, 1890–1940’, Business History 35 (1993): 152–183. 118 Annual Report Royal Dutch, 1937; Annual Reports Philips, 1938/39. 119 Sluyterman and Winkelman, ‘Dutch family firm’, pp. 153–156. 120 D. Arnoldus, Family, family firm and strategy. Six Dutch family firms in the food industry 1880–1970 (Amsterdam: Aksant, 2002), pp. 120–122. 121 De Jong, Nederlandse industrie 1913–1965, pp. 228–237. 122 Sluyterman, Ondernemen in sigaren, pp. 119–129. 123 E.S.A. Bloemen, Scientific management in Nederland, 1900–1930 (Amsterdam: Neha, 1988), pp. 69–90 124 R. Vermij, ‘Gedwongen tempo. De lopende band in Nederland tot de Tweede Wereldoorlog’, Neha-jaarboek voor economische, bedrijfs- en techniekgeschiedenis 64 (2001): 227–257. 125 P. Hellema and J. Marsman, De organisatie-adviseur. Opkomst en groei van een nieuw vak in Nederland 1920–1960 (Meppel: Boom, 1997), pp. 69–111. 126 Bloemen, Scientific management, pp. 113–141. 127 E.S.A. Bloemen, ‘Bedrijfsadviseurs in het interbellum; het Adviesbureau voor Bedrijfsorganisatie van ir. J.M. Louwerse, 1925–1938’, Jaarboek voor de geschiedenis van bedrijf en techniek 7 (1990): 191–218. 128 CBS, Bedrijfstelling 31 December 1930, vol. 3 (The Hague: Algemeene Landsdrukkerij, 1936/37), pp. 42–45. 129 Hellema and Marsman, Organisatie-adviseur, pp. 72 and 16. 130 K.E. Sluyterman, Moret 110 jaar. Van accountancy naar multiprofessionele dienstverlening (Hilversum: Verloren, 1993), pp. 15–25. 131 Joh. de Vries, Geschiedenis der accountancy in Nederland. Aanvang en ontplooiing, 1895–1935 (Assen/Maastricht: Van Gorcum, 1885), p. 179.

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132 Bloemen, Scientific management, pp. 165–181; Hellema and Marsman, Organisatie-adviseur, pp. 182–186. 133 Bloemen, Scientific management, pp. 74–75. 134 O. de Wit and J. van den Ende, ‘Het gemechaniseerde kantoor 1914–1940’, in: Techniek in Nederland in de twintigste eeuw, vol. 1, ed. J.W. Schot et al. (Zutphen: Walburg pers, 1998), 237–269, IBM citation, p. 251. 135 Sluyterman and Winkelman, ‘Dutch family firm’, pp. 154–155. 136 Kroese, Vormen van samenwerking, pp. 523–524; D. Arnoldus, ‘Nederlandse kartelvorming in de oliën- en vettenindustrie in de jaren dertig’, Neha-jaarboek voor economische, bedrijfs- en techniekgeschiedenis 60 (1997): 226–257; M. Schrover, ‘De Fiva als een bijzondere variant van collectieve verticale prijsbinding, 1928–1975’, Neha-jaarboek voor economische, bedrijfs- en techniekgeschiedenis 59 (1996): 292–329. 137 Bruggeman and Camijn, Ondernemers verbonden, pp. 166–167. 138 P.E. de Hen, Actieve en re-actieve industriepolitiek. De overheid en de ontwikkeling van de Nederlandse industrie in de jaren dertig en tussen 1945 en 1950 (Amsterdam, 1980), p. 206. 139 A. van Schaik, Crisis en protectie onder Colijn. Over economische doelmatigheid en maatschappelijke aanvaardbaarheid van de Nederlandse handelspolitiek in de jaren dertig (Alblasserdam, 1986), pp. 394–397. 140 Van Zanden, Economic history of the Netherlands, pp. 74–79. 141 Bruggeman and Camijn, Ondernemers verbonden, pp. 198–199. 142 H.A.M. Klemann, Nederland 1938–1948. Economie en samenleving in jaren van oorlog en bezetting (Amsterdam: Boom, 2002), pp. 41–46; Jonker and Sluyterman, At home on the world markets, pp. 253–254. 143 Sluyterman and Vleesenbeek, Three centuries of De Kuyper, pp. 51–54. 144 H.A.M. Klemann, ‘Economy and industry during the German occupation. The Netherlands 1940–1945’, in: Deindustrialization and reindustrialization in twentieth-century Europe, ed. F. Amatori, A. Colli and N. Crepas (Milan: Franco Angeli, 1999), pp. 417–435. 145 K.E. Sluyterman, Winnen met papier. Vijftig jaar uit de 250-jarige geschiedenis van Proost en Brandt, 1942–1992 (Diemen, 1992), pp. 50–60; K.E. Sluyterman, ‘Uitvinden en verdienen’, in: Van boterkleursel naar kopieersystemen. De ontstaansgeschiedenis van Océ-van der Grinten, 1877–1956, ed. H.F.J.M. van den Eerenbeemt (Leiden: Nijhoff, 1992), 171–264, pp. 229–233. 146 L. de Jong, Het Koninkrijk der Nederlanden in de Tweede Wereldoorlog, vol. 4, first part (The Hague: SDU, 1972), pp. 174–180. 147 L. de Jong, Het Koninkrijk der Nederlanden in de Tweede Wereldoorlog, vol. 7, first part (The Hague: SDU, 1976), pp. 117–119. 148 De Jong, Koninkrijk, vol. 7, first part, pp. 5–14; De Jong, Koninkrijk, vol. 4, first part, pp. 159–174. 149 De Vries, Hoogovens IJmuiden, pp. 470–473. 150 De Jong, Koninkrijk, vol. 7, first part, pp. 30–33. 151 J.L.J.M. van Gerwen, De Centrale Centraal. Geschiedenis van de Centrale arbeiders-, verzekerings- en depositobank opgericht in 1904 tot aan de fusie in de Reaal Groep in 1990 (Amsterdam: IISG/Neha, 1993), pp. 197–230. 152 Klemann, ‘Economy and industry’, pp. 426–427. 153 H.A.M. Klemann, ‘ “Belangrijke gebeurtenissen vonden niet plaats . . . ”. De Nederlandse industrie, 1938–1948’, Bijdragen en mededelingen betreffende de geschiedenis der Nederlanden 114 (1999): 506–552. 154 De Jager, Arm en rijk, pp. 89–91. 155 A.S. Milward, War, economy and society 1939–1949 (London: Allen Lane, 1977), pp. 153–165. 156 De Jong, Koninkrijk, vol. 4, first part, pp. 344–348.

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157 Blanken, Onder Duits beheer, p. 174. 158 W.E. Wicht, Glanzstoff. Zur Geschichte der Chemiefaser, eines Unternehmens und seiner Arbeiterschaft (Neustadt/Aisch: Verlagsdruckerei Schmidt, 1992), pp. 74–78; Klemann, Nederland 1938–1948, pp. 107, 240–241. 159 De Vries, Hoogovens IJmuiden, pp. 474–518. 160 C.J.H. Wevers, Terugblikken. Impressies uit de geschiedenis van de N.V. Thomassen & Drijver (Deventer: Arko Uitgeverij, 1992), pp. 49–56. 161 D. Barnouw and J. Nekkers, ‘The Netherlands: state corporatism against the state’, in: Organising business for war. Corporatist economic organisation during the Second World War, ed. W. Grant, J. Nekkers, and F. van Waarden (Oxford: 1991); De Jong, Koninkrijk, vol. 7, first part, pp. 19–29; G. Hirschfeld, Bezetting en collaboratie. Nederland tijdens de oorlogsjaren 1940–1945 (Haarlem, 1991), pp. 185–199. 162 Klemann, ‘Nederlandse industrie 1938–1948’; Klemann, Nederland 1938–1948, pp. 271–272. 163 Klemann, Nederland 1938–1948, p. 275. 164 R.J. Overy, War and economy in the Third Reich (Oxford: Clarendon Press, 1994), p. 341. 165 T. Langenhuyzen, Van concurrentie naar eenheid. Aspecten van de geschiedenis van Hartog’s en Zwanenberg’s Fabrieken en de Unilever Vleesgroep Nederland te Oss (Oss, 1988), pp. 97–110. 166 D. Barnouw, ‘N.V. Grijpmans Kleermakerij en Kleedingbedrijf, of de oorlog en zijn winstmogelijkheden’, Jaarboek voor de geschiedenis van bedrijf en techniek 6 (1989): 257–277. In 1942 21,000 were registered of which 10,000 were liquidated. Measured in capital the proportion between German and Dutch buyers was 5:1, as the NSB leaders noticed to their regret. 167 M. van Tielhof, Banken in bezettingstijd. De voorgangers van ABN AMRO tijdens de Tweede Wereldoorlog en de periode van rechtsherstel (Amsterdam/Antwerpen: Contact, 2003). 168 L. de Jong, Het Koninkrijk der Nederlanden in de Tweede Wereldoorlog, vol. 5, first part (The Hague: SDU, 1974), pp. 516–585; G. Aalders, Roof. De ontvreemding van joods bezit tijdens de Tweede Wereldoorlog (The Hague: SDU, 1999), pp. 171–210. 169 Blanken, Onder Duits beheer, pp. 275–301. Philips even let prisoners in the concentration camp of Vught do work for the company. The Germans pressed the company, and Philips accepted because it would improve the circumstances of the prisoners. By trying to help, however, Philips also became part of the system. Their behaviour received a mixed appreciation after the war. Some blamed the company for trying to increase its profits, though this activity was certainly loss making. Others underlined that the prisoners were supported by these daily contacts with the outside world and by the food Philips provided for the workers. 170 B. Bouwens, Focus op formaat; strategie, schaalvergroting en concentratie in de Nederlandse papier- en kartonindustrie, 1945–1993 (Utrecht, 2003); Sluyterman, Driekwart eeuw CSM, pp. 90–103. 171 Klemann, ‘Economy and industry’, p. 426; Klemann, Nederland 1938–1948, pp. 278–302. 172 Klemann, Nederland 1938–1948, pp. 293–302. 173 Jonker and Sluyterman, At home on the world markets, pp. 256–258. 174 Klemann, Nederland 1938–1948, pp. 341–343. 175 Klemann, Nederland 1938–1948, pp. 305–323. 176 Klemann, Nederland 1938–1948, pp. 383–399. 177 Blanken, Onder Duits beheer. 178 Graaff, ‘Kalm temidden van woedende golven’, pp. 520–547.

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179 L. de Jong, Het Koninkrijk der Nederlanden in de Tweede Wereldoorlog., vol. 11b, first part (The Hague: SDU, 1985), pp. 316–321. 180 Hitita Yasuyuki, ‘Japanese companies’ inroads into Indonesia under Japanese military domination’, in: Japan, Indonesia and the war, myths and realities, ed. P. Post and E. Touwen-Bouwsma (Leiden: KITLV Press, 1997), pp. 134–176. 181 van den Zwaag, Verloren tropische zaken. De opkomst en ondergang van de Nederlandse handel- & cultuurmaatschappijen in het voormalige Nederlands-Indië (Meppel, 1991), pp. 253–262. 3 Following the American lead, 1945–1975 1 A. Maddison, Monitoring the world economy 1829–1992 (OECD, 1995), pp. 71–75. 2 Ch. Freeman, ed., Long wave theory, The international library of critical writings in economics (Cheltenham UK, Brookfield US: Edward Elgar, 1996). 3 Ch. Freeman and Carlota Perez, ‘Structural crisis of adjustment, business cycles and investment behaviour’, in: Technical change and economic theory, ed. G. Dosi et al. (London: Pinter, 1988), pp. 38–66. 4 M. Roholl, ‘Uncle Sam: an example for all? The Dutch orientation towards America in the social and cultural field, 1945–1965’, in: Dutch–American relations 1945–1969, a partnership, illusions and facts, ed. H. Loeber (Assen/Maastricht: Van Gorcum, 1992), pp. 105–152; M. Roholl, ‘“A full and fair picture”, American foreign cultural policy vis-à-vis the Netherlands, 1945–1960’, in: American culture in the Netherlands, eds D. Bosscher, M. Roholl and M. van Elteren (Amsterdam: VU University Press, 1996), pp. 165–196. 5 Started as an economic assistance programme, the Marshall Plan became increasingly part of the Cold War waged against the communist Soviet Union. A prosperous Western Europe would prevent the spread of communism. In this context the US urged Europe to increase military production and make greater efforts to improve labour productivity by using American-style practices in labour relations, industrial organisation and workplace routines: J. McGlade, ‘From business reform programme to production drive. The transformation of US technical assistance to Western Europe’, in: The Americanisation of European business. The Marshall Plan and the transfer of US management models, eds M. Kipping and O. Bjarnar (London and New York: Routledge, 1998), pp. 18–34. 6 T.R. Gourvish and N. Tiratsoo, eds, Missionaries and managers: American influences on European management education, 1945–60 (Manchester: Manchester University Press, 1998), introduction, p. 2. 7 See also: D. Barjot, ed., Catching up with America: productivity missions and the diffusion of American economic and technological influence after the Second World War, (Paris: Presses de l’Université de Paris-Sorbonne, 2002), introduction. 8 O. Bjarnar and M. Kipping, ‘The Marshall Plan and the transfer of US management models to Europe: an introductory framework’, in: The Americanisation of European business. The Marshall Plan and the transfer of US management models, eds M. Kipping and O. Bjarnar (London and New York: Routledge, 1998), pp. 1–17. 9 J. Zeitlin, Americanization and its limits: reworking US technology and management in postwar Europe and Japan, EUI working paper RSC no. 99/33 (European University Institute, 1999). 10 J. Tomlinson and N. Tiratsoo, ‘Americanisation beyond the mass production paradigm. The case of British industry’, in: The Americanisation of European business. The Marshall Plan and the transfer of US management models, eds M. Kipping and O. Bjarnar (London and New York: Routledge, 1998), pp. 115–132.

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11 Maddison, Monitoring the world economy, p. 47. 12 Peter F. Drucker, The practice of management (New York, 1954). 13 H.I. Ansoff, Corporate strategy: an analytical approach to business policy for growth and expansion (New York: McGraw-Hill, 1965). 14 D. Bosscher, M. Roholl and M. van Elteren, eds, American culture in the Netherlands (Amsterdam: VU University Press, 1996), introduction; Roholl, ‘Uncle Sam, an example for all?’; Roholl, ‘“Full and fair picture”’. 15 ‘Hoe morgen hier?’ (How tomorrow here?), was the telling title of one of the reports on US human relations in industry: Hoe morgen hier? Mens en bedrijf in de nieuwe wereld (Den Haag: C.O.P, 1957). 16 B. van Ark, J. de Haan and H.J. de Jong, ‘Characteristics of economic growth in the Netherlands during the postwar period’, in: Economic growth in Europe since 1945, eds N. Crafts and G. Toniolo (Cambridge: Cambridge University Press, 1996), 290–327, p. 291. North-western Europe includes Austria, Belgium, Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden, Switzerland and the UK. 17 I.J. Blanken, Een industriële wereldfederatie, vol. 5, Geschiedenis van Philips Electronics N.V. (Zaltbommel: Europese Bibliotheek, 2002), p. 173. 18 Blanken, Industriële wereldfederatie, pp. 167–185. 19 A. Teulings, Philips. Geschiedenis en praktijk van een wereldconcern (Amsterdam: Van Gennep, 1977), p. 181. 20 I.J. Blanken, Onder Duits beheer, vol. 4, Geschiedenis van Philips Electronics N.V. (Zaltbommel: Europese Bibliotheek, 1997), p. 359; Blanken, Industriële wereldfederatie, pp. 7–15. 21 S. Stoop, De sociale fabriek. Sociale politiek bij Philips Eindhoven, Bayer Leverkusen en Hoogovens IJmuiden (dissertatie Utrecht: Stenfert Kroese, 1992), pp. 76–95, 141–164. 22 F. Inklaar, Van Amerika geleerd. Marshall-hulp en kennisimport in Nederland (Den Haag: SDU, 1997) pp. 187–195. 23 Blanken, Industriële wereldfederatie, pp. 15–19, 199–222. 24 Blanken, Industriële wereldfederatie, pp. 305–343. 25 K. Matsushita, Quest for prosperity. The life of a Japanese industrialist (Kyoto: PHP Institute, 1988), p. 262. 26 Blanken, Industriële wereldfederatie, pp. 185–199. 27 Blanken, Industriële wereldfederatie, pp. 259–262, 300–303. 28 Blanken, Industriële wereldfederatie, pp. 345–389. 29 Blanken, Industriële wereldfederatie, pp. 429–442. 30 M. van Bottenburg, Aan den arbeid. In de wandelgangen van de Stichting van de Arbeid (Amsterdam, 1995), p. 15. 31 John P. Windmuller and C. de Galan, Arbeidsverhoudingen in Nederland (Utrecht/Antwerpen: Het Spectrum, 1977), vol. 2, chapters VII and VIII. 32 J.L. van Zanden, The economic history of the Netherlands 1914–1995. A small open economy in the ‘long’ twentieth century (London and New York: Routledge, 1998), pp. 79–82. 33 J. Bruggeman and A. Camijn, Ondernemers verbonden; 100 jaar ondernemersorganisaties in Nederland (Wormer: Immerc, 1999), pp. 217–228. 34 Sj. van der Velden, Stakingen in Nederland; Arbeidersstrijd 1830–1995 (Amsterdam: Stichting Beheer IISG/NIWI, 2000), pp. 305–325. 35 Stoop, Sociale fabriek, pp. 18–24. 36 Stoop, Sociale fabriek, pp. 76–95, 141–164. 37 H.M.C.M. van Elteren, Staal en arbeid. Een sociaal-historische studie naar industriële accomodatieprocessen onder arbeiders en het desbetreffend bedrijfsbeleid bij Hoogovens IJmuiden, 1924–1966 (Leiden, 1986), pp. 206–221; F. Inklaar, ‘De Marshall-hulp: oorsprong, inhoud en uitwerking’, in: Het Marshall plan in

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40 41 42 43 44

45 46 47 48

49 50 51 52 53 54 55 56 57

58 59 60

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hedendaags perspectief, Atlantisch onderwijs paper, 17 (Altantisch onderwijs paper 17, 1997), pp. 54–65, 199–222. M.G. Blackford, The rise of modern business in Great Britain, the United States and Japan, second ed. (Chapel Hill and London: University of North Carolina Press, 1998), pp. 179–180. The 1950 works council could be termed a ‘paternalistic’ council in the characterisation of Rogers and Streeck, its task being: ‘to contribute, with due recognition of the autonomous function of the employer, to the best functioning of the enterprise’: J. Visser, ‘The Netherlands: from paternalism to representation’, in: Works councils: consultation, representation, and cooperation in industrial relations, ed. J. Rogers and W. Streeck (Chicago: Chicago University Press, 1995), 79–114, pp. 89. Windmuller and De Galan, Arbeidsverhoudingen, pp. 118–122. Windmuller and De Galan, Arbeidsverhoudingen, p. 123. Visser, ‘From paternalism to representation’, pp. 89–92. Windmuller and De Galan, Arbeidsverhoudingen, pp. 125–128; K.E. Sluyterman, Winnen met papier. Vijftig jaar uit de 250-jarige geschiedenis van Proost en Brandt, 1942–1992 (Diemen, 1992), pp. 128, 152–153. M.C.M. van Elteren, ‘Tussen verlicht paternalisme en functioneel-zakelijk management’, in: Van boterkleursel naar kopieersystemen. De ontstaansgeschiedenis van Océ-van der Grinten, 1877–1956, ed. H.F.J.M. van den Eerenbeemt (Leiden: Nijhoff, 1992), pp. 268–342, 326. Windmuller and De Galan, Arbeidsverhoudingen, pp. 188–190. P.E. de Hen, Actieve en re-actieve industriepolitiek. De overheid en de ontwikkeling van de Nederlandse industrie in de jaren dertig en tussen 1945 en 1950 (Amsterdam, 1980), pp. 259–267. Bruggeman and Camijn, Ondernemers verbonden, pp. 206–210. W.C.L. van der Grinten, ‘De Sociaal-Economische Raad. Verleden, heden en toekomst’, in: Economische orde en beleid. Twintig jaren sociaal-economisch beleid. Bundel ter gelegenheid van het aftreden van dr. J.W. de Pous als voorzitter van de Sociaal-Economische Raad (1964–1984) (Den Haag: Kluwer, 1985), pp. 141–158. H. de Liagre Böhl, J. Nekkers and L. Slot, eds, Nederland industrialiseert! Politieke en ideologiese strijd rondom het naoorlogse industrialisatiebeleid, 1945–1955 (Nijmegen: SUN, 1981), pp. 179–217. McGlade, ‘From business reform programme to production drive’, pp. 18–34. P. van der Eng, De Marshall-hulp, een perspectief voor Nederland 1947–1953 (Houten: De Haan/Unieboek, 1987), pp. 113–115. J. Pen, ‘De mirakels en de trend. Economische geschiedenis van de periode 1945–1963’, ESB (1989): 1446–1454. Inklaar, Van Amerika geleerd, p. 185. K.E. Sluyterman, Driekwart eeuw CSM: cash flow, strategie en mensen (Diemen: CSM, 1995), p. 121. Van der Eng, Marshall-hulp, p. 178. Van der Eng, Marshall-hulp, pp. 200–202. Het Marshall Plan in hedendaags perspectief (Atlantisch Onderwijs Paper, 17, 1997): articles of R. Griffiths, ‘Institutionele aspecten van het Marshall Plan’, H. Klemann,’Economische aspecten van het Marshall Plan’, and F. Inklaar, ‘Het Marshall Plan. Oorsprong, inhoud en uitwerking’. Van der Eng, Marshall-hulp, p. 173. Van der Eng, Marshall-hulp, pp. 180–181. Van der Eng suggests that the US assistance for this project was inspired by its wish to obstruct French plans to cartelise the European steel industry. W.J. Dercksen, Industrialisatiepolitiek rondom de jaren vijftig; Een sociologischeconomische beleidsstudie (Assen/Maastricht: Van Gorcum, 1986), pp. 145–154.

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61 J. Faber, Kennisverwerving in de Nederlandse industrie 1870–1970 (Amsterdam: Aksant, 2001), pp. 37–58. 62 G.J. Wijers, Industriepolitiek. Een onderzoek naar de vormgeving van het overheidsbeleid gericht op industriële sectoren (Leiden, 1982), pp. 414–430. 63 Van Zanden, Economic history of the Netherlands, p. 144. 64 G.J. Borghuis, Veertig jaar NAM. De geschiedenis van de Nederlandse Aardolie Maatschappij 1947–1987 (Assen: Van Gorcum & Comp., 1988), pp. 48–60. 65 J.L Schippers and G.P.J. Verbong, ‘De revolutie van Slochteren’, in: Techniek in Nederland in de twintigste eeuw, vol. II, delfstoffen, energie, chemie, ed. J.W. Schot et al. (Zutphen: Walburg Pers, 2000), pp. 203–219. 66 Van Zanden, Economic history of the Netherlands, pp. 58–62, 141–148. 67 J.L. de Jager, Arm en rijk kunnen bij mij hun inkopen doen. De geschiedenis van Albert Heijn en Koninklijke Ahold (Baarn: Tirion, 1995), pp. 118–128, 152–158; K. van den Oord, De Gruyter. Geschiedenis van een kruideniersimperium (Zwolle: Waanders, 2000), pp. 24–26; Inklaar, ‘Marshall-hulp’, pp. 223–227. 68 De hervorming van de onderneming. Herziening van het vennootschapsrecht in verband met medezeggenschap in en toezicht op de onderneming (Amsterdam: Arbeiderspers, 1959); W.A.A.M. de Roos, De economische machtspositie. Aspecten van de integratie van kartels en concerns in het welzijnsstreven van een groter geheel (Leiden: Stenfert Kroese, 1969), p. 106: the policy of firms, particularly big concerns, should be directed towards a harmony between the interests of the company and the interests of the society in which it works. 69 G.H.A. Schut, ‘De ontwikkeling van het ondernemingsrecht in Nederland’, in: Economische orde en beleid. Twintig jaren sociaal-economisch beleid. Bundel ter gelegenheid van het aftreden van dr. J.W. de Pous als voorzitter van de Sociaal-Economische Raad (1964–1984) (Den Haag: Kluwer, SER, 1985), 65–84, pp. 65–66. 70 Windmuller and De Galan, Arbeidsverhoudingen, pp. 183–184. 71 Schut, ‘Ontwikkeling ondernemingsrecht’, pp. 65–84. 72 Schut, ‘Ontwikkeling ondernemingsrecht’, pp. 65–84. 73 Bruggeman and Camijn, Ondernemers verbonden, p. 247. 74 H. Vrolijk, ‘Opkomst en neergang van de Nederlandse Herstructureringsmaatschappij’, in: Interventie en vrije markt. Overheidsbeleid ten aanzien van de struktuur van de Nederlandse ekonomie, ed. H. Vrolijk and R. Hengeveld (Amsterdam: Uitgeverij SUA, 1982), pp. 49–92. 75 R.H. Cox, The development of the Dutch welfare state. From workers’ insurance to universal entitlement (Pittsburgh and London: University of Pittsburgh Press, 1993), pp. 3–26. 76 Bruggeman and Camijn, Ondernemers verbonden, 229–239; A. de Swaan, In care of the state. Health care, education and welfare in Europe and the USA in the modern era (Cambridge: Polity Press, 1988), pp. 210–216. 77 Bruggeman and Camijn, Ondernemers verbonden, p. 230. The other five European countries were Great Britain, Germany, Italy, Belgium and Switzerland. 78 K. Schuyt and E. Taverne, 1950 Welvaart in zwart-wit (Den Haag: SDU, 2000), pp. 274–282. 79 H.J. de Jong, De Nederlandse industrie 1913–1965. Een vergelijkende analyse op basis van de productiestatistieken (Amsterdam: Neha, 1999), pp. 291–300. 80 E. Bloemen and R.T. Griffiths, ‘Resisting revolution in the Netherlands’, in: Catching up with America: productivity missions and the diffusion of American economic and technological influence after the Second World War, ed. D. Barjot (Paris: Presses de l’Université de Paris-Sorbonne, 2002); E. Bloemen, ‘Geestelijke Marshall-hulp: de productiviteitskwestie’, in: Van strohalm tot strategie. Het Marshall-plan in perspectief, ed. R.T. Griffiths et al. (Van Gorcum, 1997), pp. 78–87. 81 Inklaar, Van Amerika geleerd, pp. 51–82. 82 Inklaar, Van Amerika geleerd, pp. 423–431, citation 429.

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83 Inklaar, Van Amerika geleerd, pp. 343–344. 84 P. Hellema and J. Marsman, De organisatie-adviseur. Opkomst en groei van een nieuw vak in Nederland 1920–1960 (Meppel: Boom, 1997), p. 282. Dutch business complained about the endless introduction of new management fads as early as 1955. 85 H. Gabriëls, Koninklijke Olie: de eerste honderd jaar 1890–1990 (Den Haag, 1990), pp. 154–163. 86 H. de Man and L. Karsten, ‘Academic management education in the Netherlands’, in: Management studies in an academic context, eds L. Engwall and E. Gunnarsson (Uppsala: 1994), pp. 84–115; P. van Baalen, Management en hoger onderwijs (Delft: Eburon, 1995), pp. 237–238. 87 K.E. Sluyterman, ‘Following the American lead: Dutch firms, 1945–1965’, in: Americanisation in twentieth century Europe: business, culture, politics, ed. M. Kipping and N. Tiratsoo (Lille: Centre de Recherche sur Histoire de l’Europe du Nord-Ouest Université Charles-de-Gaulle-Lille 3, 2002), pp. 207–223. 88 Inklaar, Van Amerika geleerd, pp. 143–177. 89 M. Dierikx, De vrijheid in beeld. Nederland en Amerika, 1945-nu (The Hague: SDU, 1997), p. 29. 90 Tomlinson and Tiratsoo, ‘Beyond mass production’, p. 116. 91 Dercksen, Industrialisatiepolitiek rondom de jaren vijftig; Een sociologisch-economische beleidsstudie, pp. 182–190. 92 Zeitlin, Americanization and its limits, EUI paper 1999, pp. 30–36. 93 This trip resulted in one of the first Dutch books on Japanese management: J.H. Enters, Japans management: bedreiging of stimulans (Alphen aan den Rijn: Samsom, 1970). 94 S. Cambien, Kracht en zwakheid van de familie-vennootschappen (Verbond van Nederlandsche Werkgevers, 1961); K.E. Sluyterman, ‘Three centuries of De Kuyper: strength and weakness of a family firm’, in: European enterprise: strategies of adaptation and renewal in the twentieth century, ed. M. Dritsas and T.R. Gourvish (Athens: 1997), pp. 105–122. 95 Hervorming van de onderneming; I.A.C. van Haren, Personeelsbeleid en ondernemingsstructuur. Een sociaal-juridisch onderzoek naar de wijzigingen die in de rechtsvorm van de onderneming moeten worden aangebracht (Assen, 1961). 96 R.G. Donnelley, ‘The family business’, Harvard Business Review 42 (1964): 93–105. 97 Horringa, Leiderschap en organisatie in de Nederlandse onderneming (Assen: Van Gorcum & Comp., 1959), pp. 5–9, 53–65. 98 P. Vinke, De maatschappelijke plaats en herkomst der directeuren en commissarissen van de open en daarmede vergelijkbare besloten naamloze vennootschappen. Een sociologisch onderzoek (Leiden: Stenfert Kroese, 1961), pp. 143–173, 248. 99 Horringa, Leiderschap en organisatie, pp. 63–65. 100 Familieproblemen in het bedrijf (Amsterdam: J.H. de Bussy, 1966), pp. 21–24. 101 De Jager, Arm en rijk, pp. 108–109. 102 Sluyterman, Winnen met papier, pp. 66–74. 103 K.E. Sluyterman, ‘Uitvinden en verdienen’, in: Van boterkleursel naar kopieersystemen. De ontstaansgeschiedenis van Océ-van der Grinten, 1877–1956, ed. H.F.J.M. van den Eerenbeemt (Leiden: Nijhoff, 1992), 171–264, pp. 253–255. 104 D. Arnoldus, Family, family firm and strategy. Six Dutch family firms in the food industry 1880–1970 (Amsterdam: Aksant, 2002), chapter 5. 105 E.J. Fischer, J.L.J.M. van Gerwen and H.J.M. Winkelman, Bestemming Semarang. Geschiedenis van de textielfabrikanten Gelderman in Oldenzaal 1817–1970 (Amsterdam, 1991), pp. 272–274. 106 A.L. van Schelven, Onderneming en familisme. Opkomst, bloei en neergang van de

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Notes textielonderneming Van Heek & Co te Enschede (Leiden: Martinus Nijhoff, 1984), pp. 3–4, 196–204. S.W. Verstegen, Innovatie in de Nederlandse katoenindustrie. Een historische analyse van twee diffusieprocessen (Den Haag: Economische Zaken, 1990), pp. 21–36. H.H. Vleesenbeek, De eerste grote industriële fusie in Nederland na de Tweede Wereldoorlog. Het ontstaan van Nijverdal-ten Cate- een bedrijfshistorische analyse(Rotterdam, 1981), pp. 58–68. H.A. Muntjewerff, De spil waar alles om draaide. Opkomst, bloei en neergang van de Tilburgse familie-onderneming Wolspinnerij Pieter van Dooren 1825–1975 (Tilburg, 1993), pp. 270–274. Van Schelven, Onderneming en familisme, pp. 104–148; Fischer, Van Gerwen and Winkelman, Bestemming Semarang, pp. 249–312. J.L.J.M. van Gerwen, Elke dag een draadje . . . 150 jaar jute en linnenweverij S.I. Zwartz te Oldenzaal, 1835–1985 (Oldenzaal, 1985), pp. 119–123. J.L. de Jager, De draad van de toekomst. Opkomst, tegenslag en voorspoed van Koninklijke Nijverdal-Ten Cate (Zutphen, 1991). K. Davids, ‘Familiebedrijven, familisme en individualisering in Nederland, ca. 1880–1990. Een bijdrage aan de theorievorming’, Amsterdams Sociologisch Tijdschrift 24 (1997): 527–554, pp. 530–531. T. Zwaan, ‘Recente transities in huwelijk, gezin en levenscyclus’, in: Familie, huwelijk en gezin in West-Europa. Van Middeleeuwen tot moderne tijd, ed. T. Zwaan (Amsterdam/Heerlen: 1993), pp. 240–264. M.G.P.A. Jacobs and W.H.G. Maas, Heineken 1949–1988 (Amsterdam: Heineken, 1991), pp. 23–31, 59–60. Roos, Economische machtspositie, pp. 14–16. Sluyterman, Winnen met papier, pp. 74–75, 107. W. Asbeek Brusse and R. Griffiths, ‘The management of markets: business, government and cartels in post-war Europe’, in: Business and European integration since 1800. Regional, National and International perspectives, ed. U. Olsson (Göteborg: 1997), 162–188, pp. 165–166. H.W. de Jong, Ondernemingsconcentratie. De ontwikkelingen in Europa, Amerika en Japan (Leiden: Stenfert Kroese, 1971), p. 144; H.W. de Jong, ‘Fusiegolven: theorie en empirie’, Tijdschrift voor bedrijfsadministratie (TBA) 102 (1998): 446–451. H.W. de Jong, Dynamische markttheorie, fourth revised ed. (Weteringbrug: Edclusa, 1998), pp. 275–308. J.F. Wilson, British business history, 1920–1994 (Manchester: Manchester University Press, 1995), pp. 204–208; G.D. Taylor and P.A. Baskerville, A concise history of business in Canada (Toronto/Oxford/New York: Oxford University Press, 1994), pp. 442–446. J.B.A. Hoyinck and A.J.C. Geeve, Gelet op artikel 2. Cijfers over fusies 1970–1996, revised ed. (Den Haag: SER, 1997), p. 24. De Jong, Ondernemingsconcentratie, p. 150. C. de Voogd, De neergang van de scheepsbouw en andere industriële bedrijfstakken (Vlissingen, 1993), pp. 12–90. D.C.J. van der Werf, Banken, bankiers en hun fusies. Het ontstaan van de Algemene Bank Nederland en de Amsterdam-Rotterdam Bank, een studie in fusiegedrag over de periode 1950–1964, NIBE-Bankhistorische reeks, nr. 23 (Amsterdam, 1999). K. Sluyterman et al., Het coöperatieve alternatief. Honderd jaar Rabobank 1898–1998 (Den Haag: SDU, 1998), pp. 196–202. Jacobs and Maas, Heineken, pp. 32–40. J. Jonker and K. Sluyterman, At home on the world markets. Dutch international trading companies from the 16th century until the present (Montreal: McGillQueen’s University Press, 2000), pp. 293–294, 303–314.

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129 J.J. Dankers and J Verheul, Hoogovens 1945–1993. Van staalbedrijf tot twee-metalenconcern. Een studie in industriële strategie (The Hague: SDU, 1993), p. 388. 130 M. Dendermonde, OGEM. Blik op een groei (Rotterdam: OGEM, 1972). 131 R.L. Olie, European transnational mergers (Maastricht, 1996); Dankers and Verheul, Hoogovens 1945–1993, pp. 348–365. 132 H.I. Ansoff, Corporate strategy (1965); Sluyterman, Driekwart eeuw CSM, p. 155. 133 L. Karsten and K. van Veen, Managementconcepten in beweging: tussen feit en vluchtigheid (Assen: Van Gorcum, 1998), pp. 23–24. 134 A. Huys, ‘Portfoliomanagement: overleven zonder cash cows’, Management Totaal (1981): 6–16. 135 H.W. de Jong, Dynamische markttheorie, fourth ed. (Leiden/Antwerpen: Stenfert Kroese, 1989), p. 304. 136 H. Schenk, ‘Fusies als economisch en strategisch verschijnsel, reële of ogenschijnlijke paradoxen?’ in: Management report series no. 156 (Rotterdam: Erasmus Universiteit, 1993), 1–60, pp. 25–26; D.C. Mueller, The determinants and effects of mergers. An international comparison (Cambridge, M.A.: Oelgeschlager, Gunn & Hain, 1980). 137 Van Zanden, Economic history of the Netherlands, pp. 35–42. The numbers of employees of the top 100 companies can not easily be measured before 1970. However, with the help of detailed research and some estimates Van Zanden concluded that the number of employees of the top 100 manufacturing companies showed a steady rise from 667,000 in 1950 to 1,647,000 in 1973. Then it dropped to 1,404,000 in 1993. In these figures the employment abroad is included. 138 H.M. Helmers et al., Graven naar macht. Op zoek naar de kern van de Nederlandse economie (Amsterdam: Van Gennep, 1975), pp. 377–404. 139 F.N. Stokman, R. Ziegler and J. Scott, eds, Networks of corporate power. A comparative analysis of ten countries (Cambridge: Polity, 1985), chapter 2 and chapter 6. 140 D. Hellema, Buitenlandse politiek van Nederland (Utrecht: Spectrum, 1995), pp. 106–107. 141 R.T. Griffiths, ‘The stranglehold of bilateralism’, in: The Netherlands and the integration of Europe 1945–1957, ed. R.T. Griffiths (Amsterdam: Neha, 1990), pp. 1–26. 142 R.T. Griffiths, ‘The Common Market’, in: The Netherlands and the integration of Europe 1945–1957, ed. R.T. Griffiths (Amsterdam: Neha, 1990), pp. 183–208. 143 Van Zanden, Economic history of the Netherlands, pp. 178–179. 144 Jacobs and Maas, Heineken, pp. 218–221. 145 J. van den Zwaag, Verloren tropische zaken. De opkomst en ondergang van de Nederlandse handel- & cultuurmaatschappijen in het voormalige Nederlands-Indië (Meppel, 1991), pp. 280–286. 146 H. Baudet and M. Fennema, Het Nederlands belang bij Indië (Utrecht/Antwerpen: Het Spectrum, 1983), pp. 136–143. 147 Van der Eng, Marshall-hulp, pp. 203–227. 148 Van den Zwaag, Verloren tropische jaren, pp. 288–294. 149 A. Booth, The Indonesian economy in the nineteenth and twentieth centuries. A history of missed opportunities (Basingstoke, 1998), pp. 53–63. 150 Thee Kian Wie, ‘Economic policies in Indonesia during the period 1950–1965, in particular with respect to foreign investment’, in: Historical foundations of a national economy in Indonesia, 1890s-1990s, ed. J.Th. Lindblad (Amsterdam: 1996), pp. 315–329. 151 Ch. Wilson, Unilever 1945–1965; challenge & response in the post-war industrial revolution (London: Cassell, 1968), pp. 244–245. 152 Jonker and Sluyterman, At home on the world markets, pp. 266–269.

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153 Van den Zwaag, Verloren tropische jaren, p. 296. 154 Wilson, Unilever 1945–1965, p. 245. 155 Gabriëls, Koninklijke Olie, p.171; J. Rhijnsburger and M. Fennema, ‘Nederland, Indië en de wereldmarkt’, in: Nederlands kapitaal over de grenzen. Verplaatsing van produktie en gevolgen voor de nationale economie, eds F. Crone and H. Overbeek (Amsterdam: Uitgeverij SUA, 1981), 72–93, p. 91. 156 Jacobs and Maas, Heineken, pp. 220–225. 157 J.Th. Lindblad, ‘The economic relationship between the Netherlands and colonial Indonesia, 1870–1940’, in: The economic development of the Netherlands since 1870, ed. J. L. van Zanden (Cheltenham: Edward Elgar, 1996), 109–119, p. 117. 158 Baudet and Fennema, Nederlands belang, pp. 181–199. 159 Van den Zwaag, Verloren tropische jaren, p. 299. 160 Dendermonde, OGEM, pp. 6–7, 90. 161 Van der Werf, Banken, bankiers en hun fusies, pp. 72–76. 162 W. Brand, 1879 HVA 1979. Honderd jaar geschiedenis der Verenigde HVA Maatschappijen NV (Amsterdam: HVA, 1979), pp. 81–84. 163 Baudet and Fennema, Nederlands belang, pp. 156. 164 Jonker and Sluyterman, At home on the world markets, pp. 271–288, 295 (table). 165 B.P.A. Gales and K.E. Sluyterman, ‘Outward bound. The rise of Dutch multinationals’, in: The rise of multinationals in continental Europe, ed. G. Jones and H. Schröter (Aldershot: Edward Elgar, 1993), 65–98, pp. 65–66, 79. 166 E. Homburg, ‘Chemie’, in: Techniek in Nederland in de twintigste eeuw, vol. II, delfstoffen, energie, chemie, ed. J.W. Schot et al. (Zutphen: Walburg Pers, 2000), 269–408, pp. 385–401. 167 Borghuis, Veertig jaar NAM, pp. 9–16, 45–48, 57–60; Schippers and Verbong, ‘Revolutie van Slochteren’, pp. 203–219. 168 Gabriëls, Koninklijke Olie, pp. 158–161. 169 S. Howarth, A century in oil. The ‘Shell’ Transport and Trading Company, 1897–1997 (London: Weidenfeld & Nicolson, 1997), pp. 223–225, 265; D. Yergin, The Prize: the epic quest for oil, money & power (New York: Simon & Schuster, 1991), pp. 407–422. 170 Howarth, Century in oil, pp. 258–261; Gabriëls, Koninklijke Olie, pp. 154–163. 171 T. Priest, ‘The ‘Americanization’ of Shell Oil’, in: Foreign multinationals in the United States, management and performance, ed. G. Jones and Gálvez-Muñoz (London and New York: Routledge, 2002), pp. 188–205. 172 Annual Report Royal Dutch, 1959. 173 Howarth, Century in oil, p. 284. 174 Wilson, Unilever 1945–1965, p. 4. 175 G. Jones, ‘Control, performance, and knowledge transfers in large multinationals: Unilever in the United States, 1945–1980’, Business History Review 76 (2002): 435–478. 176 Wilson, Unilever 1945–1965, pp. 37–41; D.K. Fieldhouse, Unilever Overseas. The anatomy of a multinational 1895–1965 (London, 1978), pp. 563–565. 177 M. Dendermonde, Nieuwe tijden, nieuwe schakels: de eerste vijftig jaren van de A.K.U. (Arnhem, 1961), pp. 136–155; B. Klaverstijn, Samentwijnen. Via fusie naar integratie (Arnhem, 1986), pp. 33–52. 178 Jb. Kalker, Van Leer Spirit and Style, 1919–1998; With drums beating and colours flying (Amstelveen, 1992), pp. 93–99. 179 H.G. Franks, Beeld van een bedrijf 1905–1965 (Naarden, 1965). 180 D. de Wit, Windmill, wieken naar de wind gekeerd. Van boerencoöperatie naar internationale organisatie (Vlaardingen, 1990), pp. 48–57. 181 De Liagre Böhl, Nekkers and Slot, eds, Nederland industrialiseert, p. 188.

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182 Franko remarked that during 1946–1958 the largest Continental enterprises established almost the same number of manufacturing subsidiaries in less developed countries as they did in developed countries, yet in 1971 only onefifth of the foreign subsidiaries were in the less developed countries. L.G. Franko, The European multinationals. A renewed challenge to American and British big business (London/New York, 1976), pp. 107–109. 183 Gales and Sluyterman, ‘Outward bound’, pp. 79–81; R. van Hoesel and Rajneesh Narula, eds, Multinational enterprises from the Netherlands (London and New York: Routledge, 1999), chapter 1, pp. 10–16. 184 M. Prinsen, 100 Jaar geschiedenis IFF-Nederland, Photocopies from the staff magazine of International Flavors & Fragrances (Nederland) B.V. (1989). 185 Franko, European multinationals, pp. 134–144. 186 This certainly was true for Shell Oil, Philips North America and Unilever in the US: Blanken, Onder Duits beheer, pp. 253–358; M. Metze, Kortsluiting: hoe Philips zijn talenten verspilde (Nijmegen: Sun, 1991), pp. 36–54; see further on foreign investment in the US: G. Jones and Gálvez-Muñoz, eds, Foreign multinationals in the United States, management and performance (London and New York: Routledge, 2002). 187 Van der Eng, Marshall-hulp, 186: US direct investment in the Netherlands in 1938 was estimated at about 110 million guilders compared with an estimated Dutch investment in the US of 1.8 billion guilders. 188 Gales and Sluyterman, ‘Outward bound’, p. 65. 189 Van der Eng, Marshall-hulp, p. 183. 190 Van der Eng, Marshall-hulp, pp. 86–188. 191 L. Bak, ‘Buitenlandse industrievestigingen in Nederland na de Tweede Wereldoorlog’, ESB (1962): 116–118. 192 M. de Smidt, ‘Foreign industrial establishments located in the Netherlands’, Tijdschrift voor economische en sociale geografie 57 (1966): 1–19. 193 Bak, ‘Buitenlandse industrievestigingen’, p. 117. 194 D.W. Joekes, ‘Nederland als vestigingsplaats voor buitenlandse industrieën’, ESB (1960): 637–640. 195 Smidt, ‘Foreign industrial establishments’, pp. 12–14. 196 Between 1957 and 1969 US direct investments in the Netherlands increased sixfold. In 1971, 42 per cent of the foreign establishments were from the US and 28 per cent of the foreign joint ventures and participations. F.W. Botzen, ‘De omvang, het belang en de voor- en nadelen van de Amerikaanse vestigingen in Nederland’, TVVS 5 (1971): 145–152, p. 146. 197 Smidt, ‘Foreign industrial establishments’, pp. 1–5. 198 F. Stubenitsky, American direct investment in the Netherlands industry. A survey of the year 1966 (Rotterdam: Rotterdam University Press, 1970), pp. 3–77. 199 Y. Cassis, Big business. The European experience in the twentieth century (Oxford: Oxford University Press, 1997), p. 64.

4 Competing in the global economy, 1975–2000 1 M. Piore and C.F. Sabel, The second industrial divide. Possibilities for prosperity (New York: Basic Books, 1984). 2 Ch. Freeman and Carlota Perez, ‘Structural crises of adjustment, business cycles and investment behaviour’, in: Technical change and economic theory, eds G. Dosi et al. (London: Pinter, 1988), pp. 38–66. 3 K. Ohmae, Triad Power. The coming shape of global competition (London: The Free Press, 1985). 4 J. Jonker and K. Sluyterman, At home on the world markets. Dutch international

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Notes trading companies from the 16th century until the present (Montreal: McGillQueen’s University Press, 2000), pp. 330–332. In April 2003 the decision was taken that in May 2004 the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia, Cyprus and Malta will join the European Union, following the ratification by all current EU Member States. The entrance of Turkey has still to be decided. Th. Levitt, ‘The globalization of markets’, Harvard Business Review (1983). UNCTAD, World Investment Report (Geneva: United Nations, 1997), overview, annex table B.6. M.D. Bordo, B. Eichengreen and D.A. Irwin, ‘Is globalization today really different than globalization a hundred years ago?’ NBER working paper series (1999): 1–73; A. Kleinknecht and J. ter Wengel, ‘Feiten over globalisering’, ESB (1996): 831–833. A. Rugman, The end of globalization (London: Random House, 2000). W. Ruigrok and R. van Tulder, ‘De hardnekkige mythe van de “globale” company’, Holland Management Review (1996): 17–25; W. Ruigrok and R. van Tulder, The logic of international restructuring (London and New York: Routledge, 1995). John Huey, ‘Waking up to the New Economy’, Fortune (1994): 18–23. ‘How mergers go wrong’, The Economist (2000): 17. IMD (Institute for Management Development), World Competitiveness Report, 1994–1995; IMD (Institute for Management Development), World Competitiveness Yearbook, 1996–2001. Until 1993 there is a separate ranking for OECD (22 countries) and non-OECD members (15 economies), but from 1994 there is one global ranking (48 economies). The 2000 yearbook gave the Netherlands a fourth ranking, but in 2001 the ranking given for 2000 was third. J. Paulussen, De plaats van multinationale ondernemingen in de Nederlandse samenleving (1970–2000), vol. 21, 3, Utrecht Historische Cahiers (Utrecht, 2000), pp. 26–29. M. Metze, Kortsluiting: hoe Philips zijn talenten verspilde (Nijmegen: Sun, 1991), p. 125. S. Stoop, De sociale fabriek. Sociale politiek bij Philips Eindhoven, Bayer Leverkusen en Hoogovens IJmuiden (dissertatie Utrecht: Stenfert Kroese, 1992), pp. 95–104. Metze, Kortsluiting, p. 242. E. van Royen, Philips en zijn toeleveranciers; uitbesteden en toeleveren in de regio Brabant, 1945–1991 (Eindhoven, 1991), pp. 171–180. Paulussen, De plaats van multinationale ondernemingen, pp. 26–27. Metze, Kortsluiting, pp. 240–241. Annual Reports Philips, 1980–2001. Metze, Kortsluiting, pp. 36–54. G. Bekooy, Honderd jaar Philips (1991), pp. 183–203. Metze, Kortsluiting, pp. 285–294. In 2001 A.D. Chandler concluded that the sale of Polygram signalled the ‘final passing of Philips as a producer of consumer electronics’. A.D. Chandler jr., Inventing the electronic century. The epic story of the consumer electronics and computer industries (New York etc.: The Free Press, 2001), pp. 72–77 (quotation 77); 221. Chandler’s obituary for Philips seems somewhat premature, because the company is still very much alive as a producer of consumer electronics as well as of lighting, chips and medical instruments, with a workforce worldwide of 219,000 people in 2000. Though Philips has indeed a small presence in the US, it made huge investments in Asia, in particular China. Annual Reports Philips, 1990–2001. J.L. van Zanden, The economic history of the Netherlands 1914–1995. A small open

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286

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52 O.A.L.C. Atzema and E. Wever, De Nederlandse industrie. Vernieuwing, verwevenheid en spreiding (Assen: Van Gorcum, 1999), 27–28; CBS, Tweehonderd jaar statistiek in tijdreeksen, 1800–1999 (Voorburg: CBS, 2001). 53 L. Karsten and K. van Veen, Managementconcepten in beweging: tussen feit en vluchtigheid (Assen: Van Gorcum, 1998), pp. 34, 40. 54 J. van Oorschot, Dossier Daf (n.p., n.d.), pp. 130–132. 55 P. O’Brien and M. Tullis, ‘Strategic alliances: the shifting boundaries between collaboration and competition’, Multinational business (1989): 10–17; G. Hamel, Y.L. Doz and C.K. Prahalad, ‘Profiteren van samenwerking met de concurrent’, Harvard Holland Review 21 (1989): 28–35; K. Ohmae, ‘De noodzaak van strategische bondgenootschappen’, Harvard Holland Review 20 (1989): 67–78. 56 Karsten and Van Veen, Managementconcepten, 44; J.G Wissema, Unit management: het decentraliseren van ondernemerschap (Assen: Van Gorcum, 1987). 57 Jonker and Sluyterman, At home on the world markets, pp. 358–365, 370. 58 S. Eikelboom, Bedrijven die blijven. De betekenis van het historisch inzicht voor het strategisch handelen. Een casestudy van 400 jaar continuïteit in Pakhoed (Deventer: Kluwer, 2002), pp. 187–193. 59 A recent study of the diversification strategies of 67 Dutch companies revealed that companies with related or unrelated diversification could both be financially successful as long as they achieved the right fit between the internal organisation and the diversification strategy: A.A.C.J. van Oijen and S.W. Douma, ‘Diversificatiestrategie, besturing door het hoofdkantoor en ondernemingsprestaties’, MAB (1999): 684–695. 60 J.G.L.M. Willems, De strategie van inversificatie. Een economische theorie omtrent enkele aspecten van het actuele gedrag van multinationale ondernemingen (Tilburg: Tilburg University Press, 1991), pp. 19–55. 61 M.E. Porter, Competitive advantage (New York: Free Press, 1985); M.E. Porter, ‘From competitive advantage to corporate strategy’, Harvard Business Review (1987). 62 K.E. Sluyterman, Driekwart eeuw CSM: cash flow, strategie en mensen (Diemen: CSM, 1995), pp. 193–195. 63 C.K. Prahalad and G. Hamel, ‘The core competence of the corporation’, Harvard Business Review (1990): 79–91. 64 Paulussen, De plaats van multinationale ondernemingen, p. 30. 65 Jonker and Sluyterman, At home on the world markets, pp. 367–368. 66 P. Vinke, De maatschappelijke plaats en herkomst der directeuren en commissarissen van de open en daarmede vergelijkbare besloten naamloze vennootschappen. Een sociologisch onderzoek (Leiden: Stenfert Kroese, 1961), p. 234. 67 R. Buitenhuis, ‘Directeuren zijn tevreden maar worden vaak ontslagen’, Elan, Magazine voor directeuren en commissarissen (2001): 28–31; P. van Oijen and C.H.S. Bouwman, ‘Managementverloop en bedrijfsprestaties: Nederland in internationaal perspectief’, MAB (1999): 384–392. 68 M. van Zanten, ‘Moederskindjes’, Elan, Magazine voor directeuren en commissarissen (2002): 22–25. 69 J.B.A. Hoyinck and A.J.C. Geeve, Gelet op artikel 2. Cijfers over fusies 1970–1996, revised ed. (Den Haag: SER, 1997), pp. 11–14. 70 Using a different source, Vogelzang and Dotsch, studying the years 1971–1988, showed the same movement. P.J Vogelzang and S.J. Dotsch, ‘Fusies en overnames in Nederland, 1971–1988’, ESB (1988): 859–861. 71 Joh. de Vries, Four windows of opportunity. A study in publishing (Amsterdam: Wolters Kluwer, 1995), pp. 175–222. 72 D. de Wit, 60 + 40 is waarschijnlijk honderd. Ahrend, passers, pennen, potloden en projecten (Zwolle: Waanders Uitgevers, 1996), pp. 274–281.

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73 H.W. de Jong, ‘Fusiegolven: theorie en empirie’, Tijdschrift voor bedrijfsadministratie (TBA) 102 (1998): 446–451. 74 H. Schenk, ‘Fusies als economisch en strategisch verschijnsel; reële of ogenschijnlijke paradoxen?’ in: Fusies en acquisities, ed. J.C.K.W. Bartel et al. (Houten: Stenfert Kroese, 1994), pp. 33–97. 75 H. Schenk, ‘Are international acquisitions a matter of strategy rather than wealth creation?’ in Management report series no. 42–1999 (Rotterdam: Erasmus Universiteit, 1999), 1–15, pp. 4–7. 76 Schenk, ‘Fusies als economisch en strategisch verschijnsel’, incidentally, none of the mentioned studies were based on Dutch figures. 77 H. Schenk, ‘Herpositionering van ondernemingen: inleiding’, in: Herpositionering van ondernemingen, ed. H. Schenk, Koninklijke Vereniging voor de Staathuishoudkunde. Preadviezen 2001 (Utrecht: Lemma, 2001), I–XVII, pp. VI–VII. 78 H.W. de Jong, ‘Prestaties van grote ondernemingen’, ESB (1995): 276–280. 79 I.W. Wildenberg, De revolte van de kapitaalmarkt, over fusies, overnames en de terugkeer van de eigenaar-ondernemer, Bedrijfskundige signalementen (Schoonhoven: Academic Service, 1990). 80 A.W.A. Boot, ‘Corporate governance: hoe nu verder?’ MAB (1999): 533–544. 81 Van Zanden, Economic history of the Netherlands, p. 43. 82 Van Zanden, Economic history of the Netherlands, p. 177. 83 A. van Witteloostuijn, De anorexiastrategie. Over de gevolgen van saneren (Amsterdam/Antwerpen: Uitgeverij De Arbeiderspers, 1999), pp. 64–67. 84 G. Hamel and C.K. Prahalad, Competing for the future (Boston, Mass.: Harvard Business School Press, 1994), p. 11. 85 Van Witteloostuijn, Anorexiastrategie, pp. 135–157. 86 A. van Witteloostuijn, ‘Après nous le déluge. De economie van egocentrische hebzucht’, in: Herpositionering van ondernemingen, ed. H. Schenk, Koninklijke Vereniging voor de Staathuishoudkunde. Preadviezen 2001 (Utrecht: Lemma, 2001), pp. 1–29. 87 Financieele Dagblad, 16 April 1997, 29 May 1998. 88 McKinsey Global Institute, ‘Boosting Dutch economic performance’ (Amsterdam, 1997), pp. 9–10. 89 M. Houben and J. Wester, Baan. Opkomst en ondergang van een softwarebedrijf (Amsterdam/Antwerpen: Business Contact, 2001). 90 J.G. van Oord, Een gedurfde onderneming. De geschiedenis van Van Oord Groep NV 1948–1998 (Zutphen: Walburg Pers, 2001), pp. 253–267. 91 J. Visser and A. Hemerijck, ‘A Dutch miracle’. Job growth, welfare reform and corporatism in the Netherlands (Amsterdam: Amsterdam University Press, 1997), pp. 84–85. 92 J.P. van de Toren, De collectieve arbeidsovereenkomst: sleutel tussen belang en beleid (Amsterdam: Welboom, 1998), pp. 13–18. 93 M. Metze, ‘Dreiging van poldermodel komt van Euro en Europa’, Het Financieele Dagblad 16 January 2002. 94 P.T. de Beer, Over werken in de postindustriële samenleving (Den Haag: Sociaal en Cultureel Planbureau, 2001), pp. 44–67. 95 A. van den Berg, ‘De vakbeweging, 1907–1997’, in: Nationaal goed. Feiten en cijfers over onze samenleving (ca.) 1800–1999, eds R. van der Bie and P. Dehing (Amsterdam: IISG, 1999), 127–138, p. 130. 96 Visser and Hemerijck, Dutch miracle, pp. 16–22. 97 A.J. Cozijnsen and G.C. Ezerman, eds, Kwaliteit en creativiteit, Topmanagers over management (Deventer: Kluwer, 1985), pp. 1–14. 98 K.E. Sluyterman, Moret 110 jaar. Van accountancy naar multiprofessionele dienstverlening (Hilversum: Verloren, 1993), pp. 129–132.

288 99 100 101 102 103 104 105 106 107

108 109 110 111 112 113 114

115 116

117 118 119 120 121

122 123

124

Notes Karsten and Van Veen, Managementconcepten, p. 50. Stoop, Sociale fabriek, p. 341. De Beer, Over werken, pp. 45–48. Financial Times, 22 May 2002. De Beer, Over werken, pp. 45–48. Van de Toren, Collectieve arbeidsovereenkomst, pp. 21–24. Jonker and Sluyterman, At home on the world markets, pp. 365–366. De Beer, Over werken, p. 83. De Beer, Over werken, pp. 331–342. In setting out his argument De Beer refers, among others, to: R.B. Reich, The work of nations. Preparing ourselves for 21stcentury capitalism (New York: Vintage Books, 1992) and R.H. Frank and P.J. Cook, The winner-take-all society (New York: Penguin, 1996). W.J. Dercksen, Industrialisatiepolitiek rondom de jaren vijftig; Een sociologischeconomische beleidsstudie (Assen/Maastricht: Van Gorcum, 1986). Karsten and Van Veen, Managementconcepten, p. 38. See for instance: Adviescommissie inzake het industriebeleid, ‘Een nieuw industrieel elan’. Van Witteloostuijn, Anorexiastrategie, pp. 64–67. IMD (Institute for Management Development), World Competitiveness Report, 1994–1995; IMD (Institute for Management Development), World Competitiveness Yearbook, 1996–2001. J. Faber, Kennisverwerving in de Nederlandse industrie 1870–1970 (Amsterdam: Aksant, 2001), pp. 58–59. C.A. Coehoorn, The Dutch Innovation Centres: implementation of technology policy or facilitation of small enterprises? (Capelle a/d IJssel: Labyrinth Publication, 1995), pp. 203–208. M.E. Porter, The competitive advantage of nations (London: Macmillan, 1990); D. Jacobs, P. Boekholt and W. Zegveld, De economische kracht van Nederland. Een toepassing van Porters benadering van de concurrentiekracht van landen (Den Haag: SMO, 1990). P.R. Beije and N.O. Nuys, eds, The Dutch diamond. The usefulness of Porter in analyzing small countries (Leuven-Apeldoorn: Garant, 1995), pp. 257–274. M. Davids and J.L. van Zanden, ‘The rise and fall of state-owned enterprise in the Western World: state-owned enterprises in the Netherlands in the “long” twentieth century’, in: The rise and fall of state-owned enterprise in the Western World, ed. P.A. Toninelli (Cambridge: Cambridge University Press, 2000), pp. 253–272. M. Davids, De weg naar zelfstandigheid. De voorgeschiedenis van de verzelfstandiging van de PTT in 1989 (Hilversum: Verloren, 1993). McKinsey Global Institute, ‘Boosting Dutch economic performance’, pp. 1–9. Van Witteloostuijn, Anorexiastrategie, pp. 184–185. See Figure I.1, in the Introduction; CBS, Tweehonderd jaar statistiek. M. van Nieuwkerk and R.P. Sparling, De internationale investeringspositie van Nederland, Monetaire monografieën, no. 4 (Deventer, 1985); R.P. Sparling, Het externe vermogen van Nederland, Statistisch Bulletin, Themanummer Februari 2002 (De Nederlandsche Bank, 2002), pp. 14–15, 93. R. van Hoesel and Rajneesh Narula, eds, Multinational enterprises from the Netherlands (London and New York: Routledge, 1999), p. 20. World Investment Report 1999. Foreign direct investment and the challenge of development (New York and Geneva: United Nations, 1999), p. 83. Transnationality is measured by looking at the company’s foreign assets compared with total assets, sales abroad compared with total sales and employees abroad compared with total workforce. Van Nieuwkerk and Sparling, Internationale investeringspositie, p. 116; Sparling, Extern vermogen, p. 93.

Notes 125 126 127 128 129

130 131 132 133 134 135 136 137 138 139 140 141 142

143 144 145 146 147 148 149 150 151 152 153

289

Jonker and Sluyterman, At home on the world markets, p. 355. Sparling, Extern vermogen, p. 81. Sparling, Extern vermogen, pp. 69–93. CPB, Challenging neighbours. Rethinking German and Dutch economic institutions (Berlin: Springer, 1997), p. 357. R. van Tulder, ‘Small, smart and sustainable? Policy of challenges to the Dutch model of governance (together) with multinationals’, in: Multinational enterprises from the Netherlands, ed. R. van Hoesel and R. Narula (London and New York: Routledge, 1999), 282–301, p. 289. R.D. Buzzell, J.A. Quelch and C. A. Bartlet, Global marketing management. Cases and readings, second ed. (New York etc.: Addison-Wesley Publishing Company, 1992), pp. v, 11. Annual reports Royal Dutch Shell, 1970–2000; S. Howarth, A century in oil. The ‘Shell’ Transport and Trading Company, 1897–1997 (London: Weidenfeld & Nicolson, 1997), pp. 307–397. G. Jones, ‘Control, performance, and knowledge transfers in large multinationals: Unilever in the United States, 1945–1980’, Business History Review 76 (2002): 435–478, pp. 472–476. Annual reports Unilever, 1990–2001. Annual reports Akzo and Akzo-Nobel, 1970–2000. Annual reports Royal Dutch Shell, Unilever, Akzo-Nobel and Philips, 1973 and 2000. Het Financieele Dagblad, Compendium Nederlands Bedrijfsleven (Amsterdam, 2001). Financieele Dagblad, Compendium. P. van Dijk, J. Kamp and R. Rensen, De stijl van de leider. Op zoek naar de ondernemer van de jaren tachtig (Amsterdam: Bert Bakker, 1985), pp. 16–23. Grootint was taken over by Heerema Fabrication Group in 1990. G. Jones, The evolution of international business. An introduction (London and New York: Routledge, 1996), pp. 147–193. Jones, Evolution, pp. 187–193. P.K. Jagersma, Multinationalisatie van Nederlandse dienstenondernemingen (Tilburg, 1994), pp. 290–365. G. Jones, British mutinational banking, 1830–1990 (Oxford, 1993), pp. 330–331; H.E. Büschgen, ‘Allgemeine Entwicklungslinien’, in: Europaïsche Bankengeschichte, ed. H. Pohl (Frankfurt am Main: 1993), pp. 480–484; H. van der Wee and M. Verbreyt, Mensen maken geschiedenis. De kredietbank en de economische opgang van Vlaanderen, 1935–1985 (Brussels, 1985), pp. 286–290. K. Sluyterman et al., Het coöperatieve alternatief. Honderd jaar Rabobank 1898–1998 (Den Haag: SDU, 1998), pp. 246–255. J. Barendregt and T. Langenhuyzen, Ondernemend in risico. Bedrijfsgeschiedenis van Nationale-Nederlanden 1845–1995 (Amsterdam: Neha, 1995), p. 398. Jagersma, Multinationalisatie dienstenondernemingen, pp. 168–256. K.E. Sluyterman, ‘Internationalisation of Dutch accounting firms’, Business History 40 (1998): 1–21. D. van Lente, ‘Nederlandse uitgevers op de internationale markt, 1960–1990’, Neha-jaarboek voor economische, bedrijfs- en techniekgeschiedenis 66 (2003); Jagersma, Multinationalisatie dienstenondernemingen, pp. 66–156. Jagersma, Multinationalisatie dienstenondernemingen, p. 397. Sparling, Extern vermogen, p. 22; Van Tulder, ‘Small, smart and sustainable?’. Van Tulder, ‘Small, smart and sustainable?’, p. 292. Figures based on: Van Nieuwkerk and Sparling, Internationale investeringspositie, pp. 127–137; Sparling, Extern vermogen, pp. 69–93. Sparling, Extern vermogen, pp. 22–27, 93. Loeve, Buitenlandse ondernemingen in regionaal perspectief. Vestigingsstrategieën en

290

154 155 156 157 158 159 160 161 162 163 164

Notes regionale effecten van buitenlandse bedrijven in Nederland (Utrecht, 1989), pp. 38–42, 107–112. A. Loeve, Buitenlandse ondernemingen, pp. 183–187. Buck Consultants International, ‘Buitenlandse investeringen in West-Europa, marktanalyse’ (Nijmegen, 1995). Loeve, Buitenlandse ondernemingen, p. 41. R. Wintjes, Regionaal-economische effecten van buitenlandse bedrijven. Een onderzoek naar verankering van Amerikaanse en Japanse bedrijven in Nederlandse regio’s, Nederlandse geografische studies (Utrecht, 2001), pp. 54–84, 177. www.nedcar.nl: NedCar, 40 jaar autogeschiedenis; Oorschot, Dossier Daf, pp. 11–48; 132–153. Bouwens, Focus op formaat, pp. 265–303, quotation 171ff. Schenk, ‘International acquisitions’, pp. 4–7. R.L. Olie, European transnational mergers (Maastricht, 1996), pp. 216–219. J.J. Dankers and J. Verheul, Hoogovens 1945–1993. Van staalbedrijf tot tweemetalenconcern. Een studie in industriële strategie (The Hague: SDU, 1993), pp. 490–493. G. Hofstede, Culture’s consequences, international differences in work-related values (London: Sage Publications, 1984). Hofstede, Culture’s consequences, pp. 273–276.

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Index

Aalberse, P.J.M. 88 Abernathy, W.J. 199 ABN AMRO 162, 200, 224, 230–1, 232, 235 accounting firms 232–3 acquisitions: Anglo-American policy 160; cross-border 239–41; mergers and 207–11, 237 AEG (Allgemeine ElektricitätsGesellschaft) 21–3, 188 Aegon 200, 224, 232 Agfa/Gevaert 140 agriculture 23, 36 Ahold 224, 225, 230, 230; see also Heijn family Ahrend 209 aircraft industry 93, 163, 239–40 AKU (Enka): foreign direct investment 93; history 97–8; industrial relations 136; management 107; management consultants 108; mergers 98, 107, 117, 159, 160, 177, 239; multinational 176–7; Second World War 117–18; size 105; see also AKZO AKZO: global strategies 227, 229; inversification 205; investment decisions 164; mergers 160, 163, 177, 229; restructuring policy 194; size 177, 224 AMRO see ABN AMRO Algemeene Papiermaatschappij 82, 89 alliances 203, 226 Amatori, Franco 10 Amstel brewery 157–8, 162 Amsterdam Stock Exchange: freestanding companies in Dutch East Indies 104, 171; interwar years 99; number of industrial companies

(1914–1920) 82; Second World War 120; share issues 101, 154 Anglo-American business system 13 Ansoff, H. Igor 3, 163 anti-market forces 71 artificial silk 93, 97–8 ASF (Amsterdamse Superfosfaat Fabriek) 33, 82 assembly lines 73, 108, 136 assets: of top 100 manufacturing companies as percentage of GNP 164–5 Baan family and company 213–14 banking: colonial network 41–2; credit facilities 82, 90; financial crisis 90; Indonesian independence 171; internationalisation 230–2; Jewish customers 120; mergers 161–2, 231; multinationals 50; role in economy 165 bankruptcies 196 Baskerville, P.A. 51 Beaton, K. 94, 95 Beer, P.T. de 219 Belgium, entrepreneurs 51 Bensdorp & Co 50, 90 Berenschot, B.W. 150, 151 Bergh, Van den 50, 79, 83, 93, 95–6; see also Unilever Besouw, J.B.M. van 63, 64 big business 19, 69, 71 Billiton Maatschappij 102, 228 Blackford, Mansel G. 8, 136 Bloemen, Erik 38 Boissevain, G.M. 33 Boldingh, Gerrit Hondius 83, 89 Borsumij and Borsumij Wehry 170, 206 book binding 114, 150–2

Index Boston portfolio analysis 164 bottle-making 55 BPM (Bataafsche Petroleum Maatschappij) 83; see also Royal Dutch/Shell breweries 157–8, 162, 229 brick making 88 Britain: big businesses 19, 69; devaluation 91; Dutch exports to 35; economic performance 20, 23, 70; First World War 76, 77; imperial preferences 104, 105; influence 256; investment in Netherlands 51; liberal market economy 14–15; mergers 55, 69 Bührmann-Tetterode 164, 238; see also KNP-BT builders 114 business and government: close alliance of 78–81 business history, debates in 8–13 business strategy 2–4; long-term perspective 15–17 business system(s): Dutch 254–7; national 13–15 businessmen and the spirit of free enterprise 52 buyers’ co-operatives 64 Caltex 102, 143 capital and labour: collaboration between 84–8 capital market, revolt of 211–14 cartels: legislation 158; light bulb producers 22, 55; in Netherlands 54–5, 111, 148, 157–9, 247 Cassis, Youssef 8, 11, 20, 24, 25, 255 Casson, Mark 13 Catholics 52, 66, 87, 133, 138 CBK (Centrale Brouwerij Kantoor) 157 Cebeco 54 CEO, role of 206–7, 246 Chandler, Alfred D. Jr: categories 255; comparisons between national countries 8, 10–11; on First Movers 47; generalisations 19, 24, 39, 256; on managerial company 3, 10, 19, 106; on strategy 3, 14 chemical industry: expansion 143; family influence 31, 34; First World War 83; history 31–4; labour relations 194; mergers 177; rising prices 192; Royal Dutch/Shell 94, 228; Second World War 105

313

chocolate manufacturers 99, 109 chronology 16–17 cigar manufacturers 44, 66, 82, 89 civil servants 114–15 clothing industry 108, 151, 192 coal 79–80, 84, 117, 143, 163, 228 coffee 117 Cold War, end of 185, 186 College van Rijksbemiddelaars 134 Colli, Andrea 11 colonial power 20 co-makership 202–3, 226 competitiveness 221 computer technology 132–3 co-operative movement 36–7, 54 co-ordinated market economies 14–15 copra 83, 100–1 corporate governance 211–12 cotton industry 26–8, 82–3, 104, 155 Courtaulds 97–8, 229 CSM (Centrale Suiker Maatschappij) 79, 106, 114, 140, 164, 205 DAF 142, 202, 237–8, 240 Dekker, Wisse 200 Deli Maatschappij 101, 171–2 Depression 1930s 70, 74, 91–2, 111–13 Deterding, H.W.A. 37, 47–8, 94–5, 246 distilleries 99 diversification 157–65, 198–9, 205, 228 Dooren, Pieter van 156 Dordtsche Petroleum Maatschappij 47 downsizing 213 DSM 164, 221; see also State Mines Dunning, John 12, 13 Dutch East Indies 39–40; air communications 93; colonial network 41–5, 246; companies 40–1; copra supplies 83, 100–1; economic exploitation 23; fluctuating business 100–5; foreign direct investment 92, 105; Japanese occupation 116, 123–4, 166; loss of 167–72; managing from a distance 45–6; multinationals 49–52; petroleum industry 47–9; protective measures 112; Second World War 121–2, 123–4 dye industry 83, 89 economic difficulties (1920s) 88–91 economic recession (1970s) 191–2, 196, 245 economy (1924–1940) 91–2 Eindhoven 21, 74, 75, 136

314

Index

electricity 23 Elsevier 209–10, 234, 235, 241 employers’ associations 66, 213 employment 23–4; breakdown of by major economic sectors 6 (Table I.1) ENCK (Eerste Nederlandse Coöperatieve Kunstmestfabriek) 82 engineering 29–31, 108 Enka see AKU Enschede, textile families 28 entrepreneurs, entrepreneurship: attitudes to small firms 200–1; aviation 93; Belgian 51; club of entrepreneurs 32–3; investment in production 251; leadership 246; trade organisations 157 Estel 163, 239; see also Hoogovens euro currency 185, 188, 235 European Economic Community (EEC) 167 European Payments Union 166 European Union 156, 225, 235, 247 family firms: attitudes to 200–1; Baan 213–14; contrasted with managerial firm 148, 200; dominance 67; family management 37–9, 200–1; internal organisation 244–5; international orientation 248–9; under pressure 152–7 firestone producers 82, 89 firms: external organisation of 246–8 firms: internal organisation of 244–6 First World War: aftermath 69, 77–8, 88, 248; effect on imports 34, 69; effect on insurance sector 50; effects on Dutch enterprises 71–2, 75–8, 88, 91, 93–4, 244, 246–7; outbreak 68–9; Philips 72; trade unions 250–1 flexible jobs 217–18 flexibility in post-industrial society 201–5 Fokker, Antony 87, 93, 246 Fokker aircraft 87, 142, 163, 239–40, 241 food sector 34–7, 82, 108 Fordist mass production 126 Ford Motor Company 39, 108, 179 foreign direct investment 235–9, 250; AKU (Enka) 93; in colonial investment 41, 105; Dutch inward and outward (1948–1975) 173 (Figure 3.1), (1975–2002) 222–4 (Figure 4.2); expansion (1914–1938)

92, (1960s) 249, (1980s and 1990s) 222–6; Indonesian independence 171; Philips 93; policy shift 178; Royal Dutch/Shell 49, 93; Unilever 93 Fortis 224, 232, 235, 241 France: business size 69; imperial preferences 104; investment in Netherlands 51; Mediterranean economy 15; rise of big business 19 free enterprise, spirit of 52 free-standing companies 12, 41, 100, 104, 171 Freeman, Ch. 70, 126, 183–4 Freyer, Tony, 53 gas: LNG 228; natural 143, 163 Gasunie 143 GATT 127, 184–5 GDP: import and export as percentage of (1815–1998) 7 (Figure I.1), 23–6; and population (1913–1990) 17 (Table I.3), (1947–1973) 129 Gelder Zonen, Van 33, 109, 196–7 Gelderman & Zonen, H.P. 27, 31, 155 General Electric Company 22–3, 72–3, 130–1, 188 Germany: business size 69; chemical industry 34; co-ordinated market economy 14, 15; currency 91, 117; economic performance 20, 23, 70; exchange control 91–2; First World War 76, 77; influence 256; investment in Netherlands 51; Nazism 114–15, 117; rise of big business 19; Second Industrial Revolution 16; Second World War 113, 114–15, 244, 247, 249, 251; socialist revolution 78, 87; trade relations 166 Getronics 225 glass and pottery industry 24–5 globalisation 185–6, 226 government: alliance between business and 78–81; attitudes towards the state 252–4; more modest role 219–22; promotion of manufacturing industry 138–44; relations 56 grocery retailers 84, 122, 144, 154, 239 Groot, Jaap de 230 Group of X 158 Gruyter, De 84, 144 guilds 53 Hagemeyer: acquisitions 162, 192–3;

Index corporate culture 218–19; merger 206; organisation 204; Second World War 114, 121 HAL (Holland Amerika Lijn) 56 Hall, Peter A. 14, 15, 256 Hamel, G. 206, 213 Hartog 35 Hartogs, J.C. 97 Hayes, R.H. 199 Heek, family van 27–8, 155 Heijn family 84, 117, 144, 154; see also Ahold Heineken 157–8, 162, 168, 170, 201, 229 Hikino, Takashi 10 HKI (Hollandsche Kunstzijde Industrie) 97 Hobsbawm, Eric 2 Hofstede, G. 240 Hoogovens: creation 31, 79, 80–1; diversification 94; German involvement 118; mergers 163, 239, 240; state participation 79, 141, 221; welfare policies 136, 217 host for multinational companies 179–81 household goods 147–8 Houten en Zoon, Van 33, 35, 109 HVA (Handelsvereeniging Amsterdam) 42, 102, 171–2 IBM 111, 132 IG Farben 90, 98 Indivers 230 Indonesia: colonial network 45; Dutch companies 40–1, 44, 67, 168–72; independence 129, 168; Japanese occupation 249; Second World War 167–8 industrial relations see labour relations Industrial Revolution: First 23, 26; Second 16, 18, 19, 23, 26, 254–5 inflation 69 ING Group 224, 231–2 Inklaar, Frank 149–50, 151 insurance: industry 50, 232; Jewish customers 120; unemployment 147; workmen’s compensation 64–5 integration: vertical and horizontal Internatio 27, 46, 103, 163, 169, 193 international: business and national boundaries 222–6; orientation 248–50 internationalisation of Dutch

315

enterprise 92–100; losses and gains 165–7; trend 226 inversification 205 James, Harold 70 Japan: exports 184; influence 202, 216, 217; investment in Netherlands 236; occupation of Dutch East Indies 116, 123–4, 166, 249; production methods 152; shipyards 161 Jews 35, 119–21 Jones, Geoffrey 12, 13, 176, 230 Jong, Herman de 91 Jong, H.W. de 160, 164, 210 Jurgens’ Vereenigde Fabrieken 50, 58–9, 79, 83–4, 90, 93, 95, 101; see also Unilever Kessler, J.B. Aug. 47 Keynes, John Maynard 128, 142 Klemann, H. 119 Kleynveld Kraayenhof & Co 233 KLM (Royal Dutch Airlines) 93, 140, 142, 216–17, 221 Kluwer 209–10, 234 KNP-BT 238 KNZ (Koninklijke Nederlandse Zout) 79, 80; see also AKZO Kolff & Vis 80 Kondratieff waves 18, 70, 126, 184 Koolhoven, Frits 93 KPM (Koninklijke Pakketvaart Maatschappij) 43, 46, 56 Kuyper, De 35, 99, 114 KZO (Koninklijke Zout Organon) 160, 177; see also AKZO labour movement 65 labour relations: centrally directed wage policy 134–8, 252; collaboration between capital and labour 84–8, 251–2; government role 112–13, 250–1; labour movement 65–6, 67, 250; management and 250–2; nineteenth-century 60–5; 1970s 194–6; wage moderation and flexibility 214–19, 252 leather industry 119, 150, 152, 162, 192 Leer Packaging, Van 177 legislation 112–13, 145–6, 147, 195, 211 Levitt, Theodore 185 liberal market economies 14–15 Limperg, Th. 109 Lindblad, Thomas 101, 102

316

Index

Liro (Lippmann-Rosenthal & Co) bank 120 Maddison, A. 126 managed economy between socialism and capitalism 133 management: American principles 149–50, 199, 244; business unit 204; conglomerates in 1970s 193–4; consultants 108–10, 150–1, 244; dismissals 207; family 37–9; Japanese 202; and labour relations 250–2; organisation and rationalisation 105–11; professional managers 106–7; small firms in 1970s 194; spread of managerial enterprise 148 managerial company 3, 10, 148, 244–5, 251 manufacturing: company size in (1906–1939) 106 (Table 2.1) margarine industry 58–9, 79, 83, 90, 95–7 Marken, J.C. van 32–3, 62, 63, 64 Marshall Plan 127, 128, 139–41, 168, 179–80 mass production 24, 136, 152 Matsushita, Konosuke 131 McKinsey & Company 150, 174, 184, 213–214, 222 Mees bankers 32, 33 mergers: and acquisitions 207–11; banking 235; cross-border 239–41; Dutch multinationals 237; horizontal and vertical 82–3, 245; international 93, 98; movements (1890–1905) 55–6, (1920s) 69, (1950s, 1960s, 1970s), 148, 157–65, 187, 245 metal industries 24, 150, 162, 228 mining 79–80, 102 Mintzberg, Henry 3 Moret & Limperg and Moret, Ernst & Young 217, 233 motor industry 39, 108, 237–8 Mueller, Dennis 164 Muinck Keizer, De 80–1 multinationals 49–52; Dutch, in fragmented markets 173–9; employment in low wage countries 225–6; Netherlands as host for 179–81; service 230–5 NAM (Nederlandse Aardolie Maatschappij) 143 national business systems 13–15

Nederlandsche Bank, De 90, 116, 178 Nederlandsche Kleurstoffen Fabriek 83, 89 Nederlandsche Oost Compagnie 122 Nederlandsche Scheepvaart Unie 56 Nederlandse Gasunie 143 Nederlandse Herstructureringsmaatschappij 146 NG&SF 32, 50 NHM (Nederlandsche Handel Maatschappij) 50, 83, 162, 171 Nieuwenhuizen 33 Nijverdal-ten Cate 156 NIVE (Dutch Institute for Efficiency) 110 NMB and NMB-Postbank 231, 235; see also ING NOT (Nederlandsche Overzee Trustmaatschappij) 76–7, 81 nuclear energy 228 OAB (Organisatie Advies Bureau) 108 Océ van der Grinten 114, 137, 154–5, 164 office technology 110–11 OGEM 163, 171, 193, 196, 197, 206 Ohmae, Kenichi 184 oil industry see petroleum industry Oliefabrieken Insulinde 100, 101 Oord, J.G. van, 3 Oord Groep, Van 3, 214 OPEC 227–8 Organisation for European Economic Cooperation 166 outsourcing 203, 226 Owens European Bottle Machine Company 55 Pakhoed 204–5 paper industry 82, 109, 114, 151, 196–7, 238 patents 21, 22, 55, 56–60, 73 Perez, Carlota 70, 126, 183–4 Pérez, Paloma Fernández 11 Peters, W. 200 petroleum industry 47–9, 94–5, 102, 174–5, 227–8 pharmaceutical companies 34 Philips (Koninklijke Philips Electronics NV): computer technology 132–3; employees 24, 25; expansion in consumer mass markets 129–33; factories in Dutch East Indies 124; family firm 20–2, 25, 37, 39, 72–3,

Index 246; financial engineering 131; financing 21, 37; First World War 72; foreign direct investment 93; global strategies 227, 229; history 15, 20–3, 72–5, 129–33, 188–91; incandescent lamps 20–3, 55, 73; in Indonesia 172; industrial democratic world federation 130–1; industrial relations 136; inversification 205; Japanese market 131; Jewish department 120–1; limited company 22–3; management consultants 108; managing directors 130; multinational company 72–5, 130, 176, 224; patents 21, 22, 58, 73; production units in Asia 226; radio sets 73, 74; Second World War 75, 120–1, 122–3; size 79, 105, 224, 254–5; social welfare policies 217; status 142; technologies 15; under pressure in global markets 188–91; working hours 218; world-wide enterprise 131–2 Philips, Anton 21–2, 37, 74–5, 107, 130, 246 Philips, Gerard 20–2, 37 Piët, Susanne 200 Piore, M, 183 Polak and Schwarz 178–9 Porter, Michael 205–6, 221 post-industrial society 201–2 Prahalad, C.K. 206, 213 Priest, Tyler 175 printing industry 85–6 privatisation 221–2 productivity 149–52, 219 profit sharing schemes 63 Proost en Brandt 114, 151, 154 Protestants 65–6, 133 PTT 24, 221–2 public service companies 24 publishing 234–5 R&D 203, 210, 212–13 Rabobank 162, 165, 231, 232 radio sets 73, 74, 108 railway companies 24 ranking of Dutch companies (1962–1975) 177 (Table 3.1), (1994, 2000), 225 (Table 4.1) rationalisation 69 Reed Elsevier see Elsevier Regout family 33, 61 religion 52

317

restructuring 194, 213 Rhineland system 13 Riel, A. van 23 Rijkens, P. 166 Robaver 110 rope works 82, 89 Rose, Mary B. 11 Rost van Tonningen, M.M. 116, 122 Rotterdam harbour 143 Rotterdamsche Lloyd (RL) 43 Royal Dutch/Shell: alliance (1907) 48, 56; cartel agreements 94–5; centenary 1; diversification 228; expansion 94–5, 174; First World War 93–4; foreign direct investment 49, 93; global strategies 227–8; government relations 56; influence 48–9, 67; inversification 205; management 107; management consultants 150; merger 239, 240; multinational 12, 107, 174–5, 224; oil concessions 43; organisational structure 174–5; position in Dutch East Indies 102, 123; position in Indonesia 170, 172; refineries 46, 143; Russian connections 48, 92, 94; Second World War 113–14; share issues 173; size 49, 79, 105, 106, 254–5; supplies 47–8 RSV (Rijn-Schelde-Verolme) shipyards 161, 196, 197–8 rubber industry 82, 102, 103–4, 123 Ruigrok, W. 186 Russian Revolution 69, 77–8, 87, 92, 251 Sabel, C.F. 20, 183 Salomonson, M.H. 33 salt works 79–80 Sampson, Antony 175 Schenk, Hans 209, 210 Schicht AG 95–6; see also Unilever Schiff, E. 59–60 Schimmel, G.W. 58 Scholten family and firm 33, 35–6, 49 Schreiber, Servan 181 Schröter, Harm 50, 255 Schumpeter, J.A. 70, 199 Scranton, P. 20 Second World War: adapting to new circumstances 114–16; aftermath 126, 165–6; a cog in the German war machine 117–22; Dutch business outside the Netherlands 122–4;

318

Index

Second World War continued effects on Dutch East Indies 105; effects on Dutch enterprises 71–2, 247, 249, 251–2; FDI 173; German occupation 75, 113–15, 244, 247, 249; Philips 75, 120–1, 122–3 self-employment 217–18 self-service stores 144 SER (Social Economic Council) 139, 144, 145, 152, 207–8 share option schemes 213 shareholders 145, 211–12, 227 Shell see Royal Dutch/Shell shipbuilding 24–5, 29–31, 88, 161, 192 shipping 43, 56 shoe industry 108, 119, 150, 152 SHV (Steenkolen Handels-Vereeniging) 54, 84, 163, 164, 193, 201 Sijpesteijn, P.H. Kaars 37 small firms 23–6, 194, 200–1, 203–4, 210–11 Smit family and firm 30 SMN (Stoomvaart Maatschappij Nederland) 43 soap industry 83–4, 96, 97 social funds 62–3, 64 Soskice, David 14, 15, 256 Spyker 39 state: attitudes towards the 252–4 State Mines 136, 141, 143, 221; see also DSM steel 79, 80–1, 163, 230, 239–40 Stikker, D.U. 134 Stokvis 206 Stoop family 47 Stork family: club of entrepreneurs 33; Dutch East Indies machinery 45; financing 29, 32; history 30–1; labour relations 62, 63, 64–5; machine manufacture 29, 30–1; oil industry 49; productivity 110; shipbuilding 29; spinning mill 27, 31 strikes 65, 66, 135, 194 sugar industry: government relations 78–9, 103–4; production 102; response to tariffs 53; Second World War 114; strategies 163 superphosphate 33–4, 82 Tabaks-Unie 84, 89 takeovers 148, 237–8, 245 tariffs 70, 104, 112, 166 Taselaar, Arjen 104 Taylor, Frederick W. 38–9, 108, 251

Taylor, G.D. 51 technology 15, 70–1, 110–11 textile industry: decline 148, 155–6, 192, 226; failure of NKF 89–90; free trade 52; management consultants 108–9; mergers 156, 161; productivity movement 150, 151; size 24–5; Twente cotton industry 26–7; working hours 88 tin 102, 104, 123 Tiratsoo, N. 128 tobacco industry 44, 84, 89, 101–2, 103 Tomlinson, J. 128 trade, restrictive trade practices, trusts and cartels 52–6 trade unions: Catholic attitude to 66; First World War 71, 250–1; membership 85, 214; national wage negotiations 252; nation-wide 65; productivity 108; Protestant 65–6; strikes 194; wage negotiations 85, 112, 214–15 trading companies 42, 192–3 Troelstra, Pieter Jelles 87 Tulder, R. van 186, 235 Twentsche Bank 50, 162, 171; see also ABN AMRO Twente cotton industry 26–7, 28, 52–3, 57, 82, 104 Unilever: global strategies 227, 228–9; in Indonesia 169, 170, 172; industrial relations 136; inversification 205; management consultants 108; merger 93, 96–7, 159, 239, 240; multinational 12, 107, 176, 224; Second World War 114; size 12, 105, 106, 224, 254–5 United States (US): accounting firms 233; anti-trust policy 53; business size 20; Dutch investment 250; economic performance 20; FDI 224–5; First World War 77; influence 16, 149–50, 181–2, 199, 211, 234, 244–5; investment in Netherlands 235; liberal market economy 14, 15; management principles 149–50, 199; Marshall Plan 127, 128, 139–41, 168, 179–80; mass production 126; mergers 55, 160; NAPC 131; oil industry 94, 95; postwar influence 127; protectionism 54; rise of big business 19; Second Industrial Revolution 16; tariffs 70

Index Veraart, J.A. 86 Vereenigde Chemische Fabrieken (VCF) 82 Vereenigde Conservenfabrieken 82 Vereenigde Nederlandsche Chamotte Fabrieken 82 Visser, Jelle 195 VGF (Vereinigte Glanzstoff Fabriken), see AKU VNU 234 Vondelingenplaat, Fabriek van Chemische Producten 89 Vos, Hein 138 VRG 238 Wachem, Lo van 1 wages 112, 134–8, 214–19, 225–6, 253 Wagner, G.A. 200 Wall Street Crash 70 Waller, F.G. 32 Wassenaar, Accord of 214–15 Waterman, R. 200 welfare: programmes 136, 215–16, 217; state 71, 146–8 Werkspoor 136 Wester Sugar Refinery 78–9; see also CSM

319

Whitley, Richard, 14 Wibaut, F.M. 54–5 Wilkins, Mira 12, 41 Wilson, John F. 8 Winkelman, H.G. 115 Wissema, J.G. 204 Witteloostuijn, A. van 213 Wolters Kluwer 209, 234 women workers 73, 87 workers, qualified 64 working: conditions 38–9, 60–1; hours 87–8, 194, 218 works councils 63, 85, 136–8, 145, 195–6 world economy 16–17, 18 World Trade Organization 184–5 Uyl, J.M. den 148 Zaan region 35 Zanden, Jan Luiten van 23, 71, 105, 112 Zeitlin, J. 20, 127, 152 Zijlker, A.J. 47 Zwanenberg 35 Zwartz 156