Helping hand for R&D

Since that first batch of grants, another 19 firms have been awarded $59 million. Photo / Thinkstock

Research and development doesn't always happen in the obvious places. Anthony Doesburg profiles some of the companies getting taxpayer help to boost their innovation efforts.

You don't have to be in the high-tech sector to qualify for one of the Government's research and development growth grants - but it might help.

At the start of this year 31 companies were awarded grants totalling $140 million. More than half of those have a significant ICT component to their business. They include names such as Wynyard Group, Rakon, Endace Technology and Jade Software.

However there are plenty of others in industries that wouldn't typically be thought of as hotbeds of research and development, including a metal rollforming business, a furniture maker and a plant breeder.

According to Science and Innovation Minister Steven Joyce, all are proven R&D performers with the potential to grow "further and faster" through innovation fostered by the grants.

Since that first batch of grants, another 19 firms have been awarded $59 million.

For a broader picture of the R&D taxpayers are helping to pay for, here are five grant recipients that aren't exactly household names - one only a decade old, others that have been around for much longer.

Pass test to win up to $25m

With the Government offering research and development grants of as much as $25 million over five years, what business wouldn't want one? More to the point, how do you get one?

To be in line for a grant, a business needs to commit to spending at least $300,000 a year - 1.5 per cent or more of revenue - on R&D in New Zealand. Providing other criteria are met, grants of as much as 20 per cent of a firm's R&D spending, to a maximum of $5 million a year, will be provided for up to five years.

The online application process puts hopefuls through fewer hoops than if they were seeking private funding, says Ross Baker, grants group acting manager at Callaghan Innovation, which doles out the money.

Which isn't to say taxpayer cash is handed out with no strings attached. For an applicant to get over the line it must meet International Accounting Standard 38's definition of R&D. Callaghan Innovation then subjects the hopefuls to a business risk analysis.

The accounting standard defines "research" and "development" separately. Research must be "original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding".

Development is "the application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices, products, processes, systems or services" before the start of commercial production or use.

Further guidance is provided by NZ Financial Reporting Standard 13, which says R&D is distinguished from non-R&D by the presence or absence of "an appreciable element of innovation".

Some spending doesn't qualify for grants, including overseas costs and routine improvements to existing products or processes. Payments are contingent on audited reports of recipients' R&D spending, and the grants decrease or increase according to actual expenditure.

The R&D growth grants are designed to help lift business R&D spending from the present low rate of 0.5 per cent of GDP to 1 per cent.