Explaining Recent Firm Growth in Dutch Horticulture

Evert Los*, Cornelis Gardebroek, Ruud Huirne

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Dutch horticultural firms have expanded rapidly in recent decades, both in terms of their production area as well as in number of employees. In particular in the production of fresh fruits and vegetables, a number of very large horticultural firms emerged with often more than 100 employees, operating on tens of hectares of greenhouses. A standard explanation for firm growth is that firms want to benefit from economies of scale, where the increased scale of production would ensure lower average (fixed) production costs. This article however shows that cost reduction due to economies of scale is not the main driver behind the growth in horticultural firm size. In fact, our empirical evaluation shows that larger horticultural firms face higher average production costs compared to smaller firms. However, these higher production costs are compensated by the on average higher and more stable output prices obtained by larger firms. This positive effect of firm size on firm revenues therefore provides a different rationale for the recent growth in average size of Dutch horticultural firms. As a result, our findings demonstrate that revenue-related aspects are becoming more important in understanding firm growth of primary producers in the horticultural sector.

Original languageEnglish
Pages (from-to)38-43
JournalEuroChoices
Volume18
Issue number3
Early online date18 Dec 2018
DOIs
Publication statusPublished - Dec 2019

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horticulture
firm
production cost
production costs
firm size
economy of scale
revenue
employee
cost reduction
economy
vegetable
vegetables
fruit
producer

Cite this

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title = "Explaining Recent Firm Growth in Dutch Horticulture",
abstract = "Dutch horticultural firms have expanded rapidly in recent decades, both in terms of their production area as well as in number of employees. In particular in the production of fresh fruits and vegetables, a number of very large horticultural firms emerged with often more than 100 employees, operating on tens of hectares of greenhouses. A standard explanation for firm growth is that firms want to benefit from economies of scale, where the increased scale of production would ensure lower average (fixed) production costs. This article however shows that cost reduction due to economies of scale is not the main driver behind the growth in horticultural firm size. In fact, our empirical evaluation shows that larger horticultural firms face higher average production costs compared to smaller firms. However, these higher production costs are compensated by the on average higher and more stable output prices obtained by larger firms. This positive effect of firm size on firm revenues therefore provides a different rationale for the recent growth in average size of Dutch horticultural firms. As a result, our findings demonstrate that revenue-related aspects are becoming more important in understanding firm growth of primary producers in the horticultural sector.",
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Explaining Recent Firm Growth in Dutch Horticulture. / Los, Evert; Gardebroek, Cornelis; Huirne, Ruud.

In: EuroChoices, Vol. 18, No. 3, 12.2019, p. 38-43.

Research output: Contribution to journalArticleAcademicpeer-review

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AU - Los, Evert

AU - Gardebroek, Cornelis

AU - Huirne, Ruud

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AB - Dutch horticultural firms have expanded rapidly in recent decades, both in terms of their production area as well as in number of employees. In particular in the production of fresh fruits and vegetables, a number of very large horticultural firms emerged with often more than 100 employees, operating on tens of hectares of greenhouses. A standard explanation for firm growth is that firms want to benefit from economies of scale, where the increased scale of production would ensure lower average (fixed) production costs. This article however shows that cost reduction due to economies of scale is not the main driver behind the growth in horticultural firm size. In fact, our empirical evaluation shows that larger horticultural firms face higher average production costs compared to smaller firms. However, these higher production costs are compensated by the on average higher and more stable output prices obtained by larger firms. This positive effect of firm size on firm revenues therefore provides a different rationale for the recent growth in average size of Dutch horticultural firms. As a result, our findings demonstrate that revenue-related aspects are becoming more important in understanding firm growth of primary producers in the horticultural sector.

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