Why an industry will develop differently in one country than in another can provide insights into the necessary and sufficient conditions for growth of a sector. For example, 10 years ago, biotechnology in the U.K. and the Netherlands appeared to be on a par. Each had a few biotech companies, both had good universities, and the Dutch also were benefitting from inward investment from U.S. companies such as Centocor Inc. and Cetus Corp.

A decade later, the U.K. has pulled far ahead, with a large and thriving healthcare-focused biotech industry, and numerous publicly traded companies. In contrast, the relatively few Dutch biotech companies are mainly focused on agricultural biotech rather than human therapeutics, and few are publicly held.

Without a big cap pharma sector, the Netherlands has few companies whose needs could be served by small biotech startups, nor is there a pool of Dutch pharmaceutical executives that could provide managerial expertise. Rather, some of the major Dutch companies, such as Royal Gist-Brocades and Unilever, are active in agri-foods, and seed companies comprise an important economic sector.

The Dutch government estimates that there are 43 biotech health care companies, 11 companies using biotech for veterinary applications, 40 companies using biotech for agriculture, 22 in horticulture, 6 in floriculture and 5 in animal production.

Missing: Entrepreneurs

The industrial development issues in the Netherlands don't lie in the incentive structure: the country's rules on capital gains, taxes, employment and stock options are highly favorable to business.