21/08/2007 - New Zealand should strengthen its support for research and innovation to boost economic growth, according to a new OECD report.
New Zealand - OECD Review of Innovation Policy reviews the strengths and weaknesses of New Zealand's innovation system and recommends steps the government could take to increase the impact of innovation on the country's future prosperity and social well-being.
Two decades of economic reform have laid the foundations for entrepreneurship and innovation, the report notes. Product markets work well, the labour market is flexible and the economy is open. Public research organisations are world-class in many areas, notably in agriculture and health.
But many challenges remain. GDP per head still lags the OECD average and growth has been mainly driven by increased labour utilisation. New Zealand has also not yet fully seized the opportunities of globalisation. Its geographical isolation and the small size of many of its firms have made it difficult for New Zealand to compete in many of the fast growing areas of the global economy, such as services and technology. Investment in business research and development (R&D) is low, less than a third of the OECD average.
Looking ahead, the OECD advises New Zealand to focus on four key areas:
Promote innovation in the business sector. There are currently 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. Rationalising support to innovation will also require better coordination between policy agencies, notably the Ministry of Research, Science and Technology (MoRST) and the Ministry for Economic Development (MED). The introduction of a well-designed tax credit for R&D, as announced in the Budget 2007, could improve the range of government support instruments, which could also be more cost-effective.
Improve the business environment for innovation. The government should continue to improve the supply of seed and venture capital in New Zealand. The Venture Capital Investment Fund (VIF) and Seed Co-investment Fund are commendable initiatives whose operations warrant some further fine tuning. The government should also make high-speed broadband Internet access more widely available and at lower cost. This would help increase business productivity and boost the development of creative industries.
Improve the effectiveness of competitive research funding. Given the weight of competitive funding in public research, the agencies responsible for allocating funds and promoting links between business and higher education, such as the Foundation for Research, Science and Technology and the Marsden Fund, have a vital role to play in boosting innovation. The division of labour of these agencies needs to be clarified and their performance further improved.
Improve the governance of the innovation system. Creating an Advisory Council on Innovation Policy could help produce a clear, concrete national policy towards innovation. The way public research organisations, including Crown Research Institutes (CRIs) and universities, get funding could also be improved. CRIs, for example, should get more core funding of, say, one-third or one-half of their budget based on five-to-seven year timeframes. At the same time, the evaluation of the CRI's funding should be strengthened, the report concludes.
For further information, journalists are invited to contact Dirk Pilat of the OECD's Science, Technology and Industry Directorate. New Zealand - OECD Review of Innovation Policy is available to journalists on request from OECD's Media Division.
For further information about the report.