He said the impending closure of NextWindow was part of a "continuous story" of New Zealand technology companies being sold to overseas buyers and then wound down.
Data from the Technology Investment Network show more than 30 of New Zealand's most innovative companies have been acquired by overseas buyers in the past decade.
"If you take away the enthusiasms of entrepreneurship of a New Zealand entrepreneur and you allow logical, rational decisions to be made elsewhere in the world, New Zealand doesn't compete," Pellett said.
He said R&D grants that didn't force ownership of companies to stay in New Zealand would result in "a continual waste of money".
Smart expects Next Window to be wound down by the end of its 2015 financial year, it said in its third-quarter results. Chief executive Neil Gaydon told a conference call the decision was because NextWindow hadn't met earnings expectations, and wasn't a part of Smart's core business.
"We're working closely with employees, customers and suppliers to manage our commitments during the wind-down period," Gaydon said.
Prior to the Smart Technologies purchase, NextWindow was a poster-child for New Zealand-based technological innovation and had high hopes that its technology would be a leader in the then emerging market for touch-screen devices.
Smart Technologies' quarterly accounts show NextWindow began restructuring in the three months ended December 31, incurring US$2.9 million in employee termination costs, and a further US$281,000 in other restructuring costs.
Chief financial officer Kelly Schmitt told the call the exit will impact the parent company's earnings by between US$30 million and US$35 million, of which US$14 million was booked in the third quarter and the balance will be recognised in the fourth quarter.
The Canadian company bought NextWindow in 2010, having filed suit for unspecified damages against the local firm a year earlier, when it accused the kiwi company of violating its Digital Vision Touch patent technology.
The local NextWindow office didn't immediately respond to BusinessDesk inquiries.
Smart Technologies NW Holdings, the NextWindow holding company, widened its annual loss to almost US$39 million in the 12 months ended March 31, 2013 from US$13.9 million a year earlier, according to financial statements lodged with the Companies Office.
That included an impairment of US$32.2 million and US$9.5 million amortisation of intangible assets arising from the acquisition, writing off the remaining goodwill in the company. It had US$1.2 million of intangible assets as at March 31, relating to software and patents deemed to still have future economic benefits, the accounts said.
NextWindow reported an operating loss of US$7.2 million in the 2013 year, compared to a profit of US$478,000 a year earlier, as revenue slumped 40 per cent to US$22.2 million, including a government grant of US$1 million. The touch-screen display developer won a three-year, NZ$5.9 million government research and development grant in 2011.
