The current review of the science sector could be a once-in-a-generation chance to transform NZ's research and development, says BusinessNZ. Photo / Getty Images
The current review of the science sector could be a once-in-a-generation chance to transform NZ's research and development, says BusinessNZ. Photo / Getty Images
We’re losing ground against other countries that are growing faster, and can pay higher salaries and offerbetter lifestyles - other countries are tempting away our educated, talented young people. While we’ve seen overall record net migration into New Zealand, the outflow of our young talent overseas is at an all-time high and becoming alarming.
How do we right the ship and get back in the game?
It will be no surprise that increasing our productivity is the key to success - and the best way to achieve that is through innovation and research and development.
New Zealand invests far less in innovation (1.47% of GDP in 2021) than all the rest of the OECD (2.74%). While business expenditure on R&D has increased by 29% between 2021-2023, both business and the Government invest less than the OECD average, and we need to do something about it.
This is why BusinessNZ is pleased that under the chairmanship of Sir Peter Gluckman, a review of our science system and the university sector is taking place. It’s long overdue, and we need to have a good hard look at getting the incentives in both systems right, so we can marry the magic of R&D and innovation with commercialisation.
That is currently not happening and despite the Government spending $2 billion on R&D a year in various pots of funding, it’s hard to measure the return on that investment and identify the impact.
Of the $2.4b that business spends on R&D they only spend 1.9% of their budget in the higher education sector and only 5.1% in the Government sector. Most of it is spent in the business sector itself (78%), with 12% spent on overseas R&D suppliers, according to last year’s StatsNZ R&D survey.
So, clearly, the business sector finds the university sector and the Crown Research Institutes hard to deal with when it comes to partnering on R&D.
The feedback we get is that the CRIs that have a specific sector focus and work closely with the sector, get better results. That would apply to the land, sea and food-based CRIs and the productivity results for those sectors have certainly outperformed the rest of the economy.
For example, annual multifactor productivity for the last 45 years was 1.7% in the primary industries, nothing in goods-producing industries and 0.6% in the services industries, according to Stats NZ productivity statistics in 2023.
So, our frontier firms (large exporting manufacturing firms and tech firms) are not getting much benefit from Government investment in R&D. They are faced with a complex system to navigate - across various pots of money - where CRIs compete for funding on a project-by-project basis, which is wasteful and doesn’t give longer-term scientific focus or job security.
There doesn’t seem to be a focus on commercial objectives in many areas of research. Ideas coming out of universities are often not commercially focused and academics are incentivised (by the funding model) to publish in academic journals - which is the opposite of how to commercialise and protect your intellectual property.
If a business does identify an expert in a university they want to work with, they get sent to the university commercialisation office. There, the research often sits on a shelf because the value of the IP has been overestimated by the university.
The big firms doing most of our R&D tell us that if intellectual property costs $1 to develop, the cost to commercialise it is more like $100.
Professor Sir Peter Gluckman chairs the new Science System Advisory Group. Photo / Brett Phibbs
Businesses would rather take their R&D idea to an expert and say let’s work on this, instead of having the university say here is a great idea, partner on this (”researcher push” rather than “customer pull”).
If we could get the incentives right for academics with a commercial focus to be able to partner directly with businesses, that could work a lot better.
Businesses tell us there is a gap in effective R&D support from the Government. The large companies doing the most R&D appreciate the R&D tax credit, but for smaller and digital companies, the cost of accessing the R&D tax credit outweighs the benefits.
So, there is definitely a gap in support at the smaller end of town, which Callaghan Innovation has struggled to bridge since the demise of the previous Growth Grant.
This is why businesses are pleased the science system is being reviewed. It could be a once-in-a-generation chance to transform our R&D and innovation system (including the universities) into something that could help supercharge our economy.
Other countries have done it, and it is good to know that Sir Peter Gluckman is aware of these international examples and can bring that experience to bear. We need a reset in our science and university systems, and we need it reasonably quickly.
