KEY POINTS:
New Zealand's sci-tech growth is suffering due to shortcomings in physical and "virtual" infrastructure, according to a new report released by Economic Development Minister Trevor Mallard last night.
Deterioration in the longterm capabilities of public research institutions also poses a threat to the research and innovation needed to boost New Zealand's economic growth.
But there was a mismatch between the supply of and demand for complementary technical services, training and advice to help small and medium-sized enterprises (SMEs) satisfy their needs.
The relatively limited availability, compared to Australia, of broadband internet access at reasonable cost was a significant deterrent to the economy-wide diffusion of new technologies and knowledge. the Organisation for Economic Co-operation and Development (OECD) report.
Broadband costs also impacted the efficient networking of geographically dispersed research and innovation activities; and the development of creative industries.
Remoteness from major markets and knowledge centres posed great challenges.
The report also noted that competitive funding of Crown Research Institutes (CRIs) and universities, if carried too far for too long, could have drawbacks in building long-term capabilities, financing research infrastructure, transferring research results to business and offering internationally competitive wages to research.
The OECD said the CRIs and tertiary education institutions were undertaking industry-relevant applied research.
Over time, some CRIs and universities had developed world-class competencies in many areas, especially in agricultural and health research.
There was also a lack of investment in business research and a lack of management resources and appropriate personnel may also limit investment opportunities in research, the report said.
Barriers about which the government could do something included capital market failures, tax disincentives to offshore expansion and the lack of sufficient public support to innovation-related investment, including financial incentives for research.
There was also insufficient policy co-ordination regarding foreign direct investment.
A fragmented system of government support to research and development and innovation, combined with a "lack of coherence" across the full range of innovation-related policies was also a problem.
"This reflects some defects in the policy governance of the innovation system," the report said. "These defects make it difficult to allocate public resources in a strategic manner and can result in wasteful duplication."
It also criticised excessive reliance on a few policy principles - the "automatic steering syndrome" and reliance on a market-oriented approach to policy formulation.
The OECD said investment in business research and development was low, less than a third of the OECD average.
Reviewing the strengths and weaknesses of New Zealand's innovation system, the OECD recommended steps the Government could take to increase the impact of innovation on the country's future prosperity and social well-being.
It advised New Zealand to focus on four key areas:
* Promote innovation in the business sector;
* Improve the business environment for innovation;
* Improve the effectiveness of competitive research funding; and,
* Improve the governance of the innovation system.
The OECD said there were too many small innovation support programmes for business, with too many rules and objectives.
"Fewer, better funded programmes would produce better results, improving the quality of support and giving firms more time to deliver," it said.
"Rationalising" support to innovation would require the Ministry of Research, Science and Technology and the Economic Development Ministry to better work together.
The OECD also called for the Government to create an advisory council on innovation policy to produce a "clear, concrete national policy" toward innovation.
"The way public research organisations, including Crown Research Institutes and universities, get funding could also be improved," it said.
The CRIs should get more core funding of one-third or one-half of their budget based on five-to-seven year timeframes, and the evaluation of their funding should be strengthened, the report said.
Business NZ chief executive Phil O'Reilly said the report was a valuable insight into New Zealand's strengths and weaknesses in research, science and technology.
"It confirms those areas where we do well, including competent public administration and strong institutional capabilities," he said.
"It also points to areas requiring improvement, such as lack of investment in business R&D and issues with the funding of Crown Research Institutes."
- NZPA
