Research stinginess holds back innovation

Many industries are missing golden opportunities because of their reluctance to pitch in money to create new technologies. Yoke Har Lee reports.

New Zealand has a dismal record in creating new technologies due largely to manufacturers' unwillingness to take on research funding, says John Manning, the head of Technology New Zealand, a Government funding agency.

Funds for research and development have also been cornered by large and long-established sectors such as the dairy, meat and wool industries, according to a survey released last year.

With the exception of the software and electronics industries and to some extent the food-processing industry, manufacturers have not shown much initiative in creating technologies, Mr Manning says.

"We are not bad at buying turnkey systems which can immediately bring benefits. But in terms of investing in innovation, we are not very good at all.

"These industries are not good at using technology to create an advantage for themselves. They tend to be followers, copying and catching up. And even with the electronics and software industries, it is the 30 per cent at the top who lead the way with technology."

Tech NZ gets its funding from the Public Good Science Fund to help build technological capability among New Zealand industries. This is executed through various mechanisms.

Two examples are providing companies with 50:50 funding to employ graduates to undertake specific research work identified by a company, and grants to help a firm to employ a technology consultant to identify its technological needs.

This year, Tech NZ expects to handle 1500 applications for grants, out of which about 1000 are expected to be from small companies with turnovers of around $1 million to $2 million, Mr Manning says.

Because manufacturers hold the key to New Zealand's future prosperity, they have to stand up and make a collective pitch to get more Government help for industries' research needs.

"Manufacturers probably need to be more politically active. They need to recognise that if New Zealand is going to regain some wealth or even stop from slowly sliding into poverty, it is going to be the manufacturing and processing sectors that do it.

"We're using all the farm land we've got that's economic to use but it is becoming less and less economic to use. So it is people who can create products, who can use knowledge to build value into products, who will regain New Zealand's wealth."

Because the Government is the dominant research funder in New Zealand, it has the responsibility of focusing its limited resources well.

"It would be good if Government insists industry has to invest to the same level that the Government has in order to get assistance," Mr Manning says. "That would quickly pressure the private sector into coughing up more of its own money for research."

An in-house survey by the Foundation for Research, Science and Technology found that the primary industries are the greatest consumers of public research funds. The public funded 85 per cent of the primary industries' R&D while the sectors paid for only 15 per cent. In contrast, the high-growth industries put in 40 per cent.

While the Government's total R&D expenditure is not high, Mr Manning says, the emphasis should move towards the manufacturing and processing sectors and away from primary industries.

"We are too small to have a thin spread of industries and research and technology stuff going on. We are going to have to focus on opportunities that are most likely going to be economically of value to New Zealand."

Based on Tech NZ figures, between 1993 and 1998 technology gains for companies receiving grants averaged around 77 per cent and commercial gains from the technology averaged 52 per cent.

That means that about 50 per cent of the technology employed was successful. Mr Manning describes the rate as high, compared to those achieved by venture capitalists.

Tech NZ is not an investor. Its main function is to raise companies' level of technology and R&D. But measuring the gains or spinoffs from Tech NZ funding remains a tricky business. Mr Manning points to Glidepath, a West Auckland firm working on an airport luggage transport and sorting system, as an example.

Tech NZ provided $287,000 to the company in 1992 but the project did not take off. But the firm later applied the technology to a different purpose, thereby generating sales of $10 million.

When projects funded by Tech NZ fail, there are usually two reasons: one is related to the technology and the other is market-related and more difficult to unravel, Mr Manning says.

"With very innovative products, you have to teach the customer the benefit that you believe is in the product and you have to know your customer to get that right."

Does Tech NZ pick winners by deciding who gets grants? Mr Manning says: "We don't pick the winning technology because it is proposed to us by the business party. We are merely reacting to the selections that other people make.

"The project also has to meet the objective of the Tech NZ scheme, which is the ability to expand the capability of the business."