Economic Development Minister Steven Joyce went instead for a wider amalgamation of innovation assets, including a role for New Zealand Trade and Enterprise, with whom the new entity shares a head office in central Wellington.
Callaghan Innovation, named after the late scientist Sir Paul Callaghan, brings together the current operations of IRL, the Ministry of Business, Innovation and Employment's business investments team and the Auckland Foodbowl.
The government has set aside $166 million of funding over four years for the organisation charged with converting great ideas into successful businesses.
Auckland Transport director Paul Lockey and Australian company director Dr Michele Allan are moving from the establishment board to the new board.
"I am confident this board will successfully set up Callaghan Innovation as an organisation that is fully in tune with businesses' needs and will help them grow through science and innovation," Joyce said in a statement.
"It will deliver fresh thinking and offer a diversity of perspective and experience that Callaghan Innovation will benefit from."
IRL chief executive Shaun Coffey did not move to the new organisation and a new chief executive appointment is imminent.
The new institute has been described as a "one stop shop" for high value, innovative businesses with high growth potential.