At Catalyst, we have been tracking New Zealand innovation data since the early 2000s and reporting on it in our newsletters. Having a good understanding of innovation means we can work effectively for our clients. Where are we up to in 2018?

The latest scored card tells us is that measures of R&D spend as a % of Gross Domestic Product (GDP) have been relatively constant over the last 10 years or so, as the figure below demonstrates.

Research, Science and Innovation System Performance Report 2018 MBIE.

Other OECD economies also show similar steadiness, but with higher % investment in R&D compared to New Zealand.

Overall R&D spend in New Zealand is about $3 billion, about 1% of GDP. The biggest contributor is business R&D spend, with lesser amounts of government R&D spend on Crown Research Institutes (CRIs) and Universities. Because GDP has been growing steadily, in absolute terms R&D spend has been increasing.

Over the years, various commentators have put forward factors responsible for New Zealand’s low business R&D spend, including:

1) Industry structure, i.e. R&D-intensive industries make up a smaller share of the economy

2) Low R&D intensity across all industries

3) Low levels of competition

4) A small domestic market and geographical isolation, which may reduce returns to innovation

5) Lack of connectivity across research and industry networks to provide necessary scientific or technical input

6) Lower relevance and depth of research capability in research organisations manifested as a lack of available researchers to develop technologies needed by firms.

However, the report has some additional good information about the New Zealand R&D scene:

• Start-ups are a tiny part of the New Zealand economy, but have grown in % GDP terms, from 0.02% to 0.05% and in absolute amounts.
• The majority of business R&D investment is funded by New Zealand business itself. The manufacturing sector (including food & beverage) contributes most at 42%, with computer services at 27%.
• New Zealand has high international collaboration rates – 62% vs 29% for OECD, but academic-business collaboration remains low, at 2.3% vs 4.6%.

The figure below shows how relatively siloed the three main R&D sources of business, CRIs and Universities are. Most government funding goes to Universities and CRIs.

• Research productivity and quality are good. New Zealand has a similar proportion of researchers in the workforce to the OECD average. New Zealand continues to perform very well on research publications per research dollar, at around three times the OECD average. This is due to a combination of higher productivity per researcher and lower costs per researcher. New Zealand’s overall performance on citation-based indicators of research quality remains ahead of the OECD, but largely behind the other Small Advanced Economies and Australia. Agricultural and Biological Science remains our largest research speciality.

However, of major concern is that we don’t produce enough Science, Technology, Engineering and Mathematics (STEM) graduates in New Zealand, and migrants are an important source of these skills for the country. About 50% of STEM arrivals are engineers, with about 33% in IT-related occupations and 17% in natural science professions.

Our point of view

Do whatever you can to encourage school children to take STEM subjects, for the long-term benefit of our country. Meanwhile, we need to keep New Zealand an attractive and open country to immigrants with STEM skills, as we cannot grow our R&D without them.

It’s a long process to change the fundamentals of an economy, as the data shows. Business-friendly policies and practices are essential, such as the new R&D tax break will hopefully prove to be.