Standing on the shoulders of science
09 Dec 2009
New Zealand’s innovation ecosystem offers economic benefits, overlooked by the 2025 Taskforce
The New Zealand Institute has released a discussion paper titled ‘Standing on the shoulders of science: Getting more value from the innovation ecosystem’.
New Zealand will miss a valuable opportunity to lift economic performance if it does not improve its innovation ecosystem warns a new report by the New Zealand Institute. “Just doing more of the same will not be sufficient” says Rick Boven, the report’s author. “Innovation drives economic success and it’s time to get serious”.
New Zealand needs a world class innovation ecosystem to maintain relative productivity in our areas of strength, like agriculture. In addition to protecting areas of strength, New Zealand needs to establish additional sources of economic growth, especially exports. Technology-based internationally-focussed businesses built on innovation are already making an important contribution; they are growing and there is further potential. Distance from world markets and a small economy make it difficult to develop ‘go-global’ firms from New Zealand, but there has been sufficient success to demonstrate it can be done.
Research from the World Economic Forum and the OECD shows that innovation performance is the key driver of the productivity of advanced economies. The New Zealand Institute research is relevant to two conversations under way in New Zealand: how best to improve the innovation ecosystem, and how New Zealand can achieve higher levels of productivity.
There are three government reviews under way on the innovation ecosystem focused on setting priorities, business R&D, and the CRIs. The discussion paper provides conclusions relevant to all three of those efforts. The paper concludes that the innovation ecosystem and efforts to improve it should be managed as whole, and that realising benefits from substantial increases in R&D investment requires parallel efforts to increase the availability of talent and capital for commercialisation.
There is also the ongoing conversation about how to achieve higher productivity in New Zealand, with a recent contribution contained in the first report from the 2025 Taskforce. While the Institute supports calls to consider the merits of each recommendation in the report rather than treating the lot collectively, the Institute’s research indicates that the 2025 Taskforce has overlooked opportunities in the innovation ecosystem. The Institute’s conclusion is shared by leaders in many of OECD countries we compete with.
Standing on the Shoulders of Science contributes several key concepts to the discussion of how to realise increased benefits from New Zealand’s innovation ecosystem. In addition to the recommendations mentioned above - develop go-global firms and manage the ecosystem as a whole - there are several issues identified in the past which persist. These include sub-scale organisations, late consideration of commercial and market potential, a culture which does not value commercial success, lack of experienced and skilled staff, and a scarcity of capital for expansion.
Addressing these issues will enable increased investment to generate further benefits, and much of that investment should come from businesses. To achieve this, tax structures and incentives must be amended to encourage investment in productive assets and R&D. But just increasing investment without improving innovation ecosystem performance would not provide the economic results New Zealand needs.
Many innovation ecosystem issues in New Zealand have been identified previously but remain unaddressed. Assigning accountability for overall innovation ecosystem performance to a single agency or public-private council will help to remedy this situation, ensure that appropriate measures are defined and monitored, and achieve improvement by closing identified gaps in performance. Rick Boven observes that “substantial benefits can be realised through a collection of initiatives to address long-identified issues, effectively implemented and managed together.”
Pursuit of a strictly agricultural strategy may be seen by some as an alternative to developing a high performing innovation ecosystem. But the size of the economic performance gap is too large to be overcome by any feasible improvement in agricultural output or value-added – the gap is equal to several Fonterras. A step change in agriculture would require innovation, and an innovation system that can deliver well for agriculture could also be leveraged to make gains in sectors beyond agriculture. Thus an agricultural strategy complements an innovation strategy.
New Zealand has an opportunity to improve innovation ecosystem performance and increase R&D effort. The scale of the change required is illustrated by the low R&D spend in New Zealand, which at 1.5% of GDP is only half of the targets set in Denmark and Singapore.
Although the need for improvement is urgent, it is important to be patient. It takes a long time to grow a scientific innovation into a successful global business and it takes a long time to establish an effective innovation ecosystem. To ensure success New Zealand needs to take action, measure results, monitor progress, and adjust where needed.
-ENDS -
For information please contact:
Dr Rick Boven, Director, The New Zealand Institute, Ph: (09) 309 6230, Email: , Web site: http://www.nzinstitute.org
Notes to editors:
This report builds on an essay and presentation released in November that provided emerging conclusions on how to improve New Zealand’s innovation ecosystem and highlighted priorities for improving commercial and economic outcomes from New Zealand’s science investment.
These materials are available on the Institute’s website at http://www.nzinstitute.org