R&D needs injection of skilled direction

By Rod Oram

The ability to fix a problem using only the scarce resources to hand is deeply embedded in New Zealand culture.

But in many ways, this "number eight fencing wire" mentality is actually more damaging than helpful when it comes to making companies and their products world competitive.

Number eight solutions are, by nature, ad hoc. At best, they are innovation on the fly.

What a company really needs are processes and a culture which make innovation a vital and constant activity in its business.

Underpinning them are management skills to effectively gather, then use, the human and financial resources for research and development.

Such skills, and the resources to apply them to, are in short supply in New Zealand.

One international comparison is the number of patents per country filed in the United States, measured on a per capita basis. New Zealand ranks 17th, at the bottom of the developed world.

Yet New Zealand's public sector funding for R&D is the third highest on a per capita basis in the OECD group of developed countries.

Much of that comes through the Public Good Science Fund.

Up to now, the lion's share of that money has gone to Crown Research Institutes. But with a change of Government policy, that funding is being opened up to consortia of companies and researchers.

So far the majority of those funds have gone into research related to primary producers in the agricultural and forestry sectors. But those producers have chipped in a smaller proportion of their own funds to R&D compared with other sectors.

Meanwhile, new industries such as electronics have been largely funding themselves.

Private funding of R&D in New Zealand is very light by international standards.

Danish companies top the OECD, spending on average 16 per cent of their sales. Spending by New Zealand companies appears to average about 0.5 per cent of sales.

A fast way to stimulate R&D spending is to allow companies to deduct the expenses from their tax bills, many foreign countries have found.

Here, the incumbent Government opposes allowing any such special treatment creep into the tax system.