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The level of private R&D expenditure in NZ is source of ongoing policy and academic
debate. The predominant theme being that that public funding of R&D in New Zealand is
close to the western world average, but private sector funding is closer to a quarter or
a third of the western world average and this has been quantified as the "missing
billion" that the private sector isn't spending.
Those of us who work in R&D in the private sector have first hand experience of a much
more vibrant sector than these numbers portray. Why is there this discrepancy?
Statistics NZ have started to shed some light on this debate with the publication of
"Innovation in NZ 2001".
The survey suggests that the level of innovative activity carried out by New Zealand
enterprises is at least equal, if not higher, than that indicated in an equivalent survey
of European Union (EU) countries. The level of innovation in the New Zealand
manufacturing and services sectors (the EU survey excluded the primary sector) was higher
than that of all EU countries. The differences were most pronounced in the primary product
processing industries such as food, beverages and tobacco; textiles and leather; and wood,
pulp and printing. The gap in knowledge industries such as machinery and equipment;
electrical and optical equipment; and computer activities was smaller.
In summary
- Sixty-eight percent of New Zealand private sector enterprises introduced an
innovation in the three years ended June 2001. Forty-two percent of firms introduced
both product and process innovations, while a 19% introduced product-only innovations,
and 7% process-only innovations.
- The proportion of New Zealand firms that introduced an innovation increased with
business size. Eighty percent of large firms (those with 50 or more full-time employees)
introduced an innovation, compared with 66 percent of small firms (6 to 19.5 full-time
employees).
- The manufacturing sector had the highest rate of innovation in the economy (79
percent of firms). In particular, 87 percent of firms in the petroleum, coal and
chemical manufacturing industry introduced an innovation. Fifty-six percent of firms in
the primary sector introduced an innovation, and 67 percent of firms in the services
sector introduced an innovation.
The definition used in the report considered an innovation to be the result of new or
recent developments or applications in science, technology or other knowledge areas, or
the result of new combinations of existing technology. For the purposes of the report,
an innovation does not have to be new to the market, but rather new to a firm.
This definition varies from the more formal OECD definition often used. This sees R&D
as an activity characterised by originality; it should have investigation as a primary
objective, the outcome of which is new knowledge or new improved methods, products,
devices, processes or services.
The Statistics NZ report found that only 43% of innovative businesses were also
consistent with the definition of R&D. This indicates that NZ businesses are very active
in innovation - the creative deployment of knowledge, but less active in the actual
creation of knowledge as defined by the OECD definition.
The report found that 32% of New Zealand businesses do not innovate at all and also
identified the cost of not innovating.
According to the report innovative businesses are more likely to record an increase in
market share, profitability and total sales than non-innovative businesses. Sixty percent
of innovative businesses recorded an increase in market share compared with 45% of
non-innovative businesses.
While the report did not find the "missing billion" it points to the fact that reports
of private sector "under-investment" may underestimate the real state of innovation
and R&D in the private sector.
The Statistics
NZ report is available from their website or we can forward you a copy directly.
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