Research a luxury for NZ's small businesses

By BRIAN FALLOW

WELLINGTON - Nearly a third of manufacturers are doing more research and development than they were three years ago.

A survey by Decision Research for the Employers and Manufacturers Association drew responses from 132 manufacturers in the lower North Island. It was completed last November.

Mark Erwin, of the association, said firms in the survey's top quartile (with revenues of $26 million or more) were taking advantage of new technology and increasing their R&D expenditure.

"The problem is with smaller companies, with up to $8 million revenue.

"They do not keep themselves informed about new developments overseas. Many find it hard to find out about [technological] changes and don't known where to turn to for information.

"Many of them thought they were too small to benefit from the latest technology and don't cooperate within their industries to develop leading-edge technologies."

Fewer than one in five respondents considered their businesses had good links with scientists in Crown Research Institutes and universities. But 35 per cent said they had a project a graduate student would be able to help with.

Seventy-eight per cent of respondents said they had received no financial assistance from the Government for R&D. Less than a quarter thought they were eligible for Government R&D assistance, while nearly half were not sure.

One of the people who conducted the survey, Kesten Green, said the results were in line with earlier work the company had done for the Ministry of Commerce, which found quite a lot of ignorance about what help was available.

"I kept fielding calls along the lines, 'this Technology New Zealand outfit, who are they and what's their phone number?'"

A third of respondents said their businesses needed to increase export sales before more R&D expenditure was justified.

Very few considered they were too small to spend money on R&D.

"On the other hand, nearly half of respondents, of all sizes, believed they had lost business opportunities through an inability to fund the development costs."

Nearly a third of respondents said they were able to deduct all their R&D spending in the year it occurred.

Just over half (52 per cent) said they would do more R&D if such spending was deductible when it was incurred.

That response was especially strong (two-thirds agreeing) among firms in the second-lowest quartile, with turnovers between $2.5 and $8 million.

If 125 per cent of the spending was deductible it would go up by $8 million or 17 per cent from the current $46 million, lifting staff numbers by 580, or 3.6 per cent.

The $46 million figure for current spending is based on a broad definition of R&D spending, which includes investigating opportunities or solving any kind of non-routine problems, such as developing products, processes or services, market research and software development.

On a narrower definition - spending on research and the development of new or improved products, services or processes - the respondent firms spent $26 million.

Thirty-one per cent of respondents said they were spending a lot more on R&D than three years ago, 42 per cent said about the same and 19 per cent said there was no valid comparison. Only 5 per cent said they were spending a lot less.

Nearly 70 per cent of firms said they did not record their R&D spending against a specific budget.

More than a third did not know where to turn to for advice on technology or were unsure whether they would know where to turn to. More than 30 per cent did not keep themselves informed about technical developments overseas and more than 25 per cent said they found it hard to find out about changes in technology outside New Zealand.