Innovation continues despite global financial challenges


Innovation continues despite global financial challenges

The 2013 IBM Innovation Index of New Zealand has been released.

The index is a multi-indicator study tracking the shape and rate of local innovation from 2007 to 2011. New Zealand’s overall innovation rate increased three percent in the four years to 2011, bolstered by increased spending on R&D during the global financial crisis. This investment balanced static business innovation results and a fall in intellectual property registrations.

The IBM Innovation Index combines official data on R&D, business innovation and intellectual property to present a detailed view of innovation performance by industry.

The index shows local R&D expenditure grew at an average rate of 7.6 percent per annum between 2007 and 2011, largely driven by the public sector. The equivalent of 4600 full-time R&D jobs were created during this period. However, when the economy started to recover during 2011-12, the growth in R&D expenditure slowed to an average of 3.7 percent per annum. As a result, New Zealand’s R&D intensity –the proportion of Gross Domestic Product spent on R&D – remains low compared to other OECD economies.

“Increasing investment in R&D during the global recession buoyed our overall innovation rate, but we are yet to catch up to comparable nations’ innovation intensity. Seeing business spend more on R&D is a positive sign, and extra collaboration across New Zealand’s domestic and international innovation ecosystems is required to take this research to market,” says IBM New Zealand chief technology officer Dougal Watt.

Although private sector R&D spending increased after 2010, the overall rate of business innovation reported by companies remains flat. Business innovation reflects improvements in goods and services, business operations, organisational strategy and marketing. Of these, only the marketing measure showed a positive change as more companies introduced new and improved methods to increase the appeal of goods and services.

“Overall business innovation remained consistent, however it would be preferable for this to also increase as transforming areas like supply chain processes, or creating new goods and services are necessary to commercialise the results of R&D,” concluded Mr Watt.

By using the IBM Innovation Index data visualisation tool available on the company’s website organisations can drill down into 18 industries to see what is driving changes in innovation over time.

For example, in financial and Insurance Services, overall innovation fell one percent from 2007 to 2011 despite a five-fold increase in R&D in between 2008-2011. This is because intellectual property registrations, a more significant contributor to innovation in this industry, also fell.

"The 2013 IBM Innovation Index data visualisation tool lets you clearly see how much and in what areas New Zealanders are innovating. And as innovation is a key driver of long term economic growth, the Index gives us a glimpse into our economic future,"says Professor Shaun Hendy from Callaghan Innovation.

Key findings from the 2013 IBM Innovation Index of New Zealand include:

R&D employs 50,000 New Zealanders

  • R&D created the equivalent of 4600 full-time jobs between 2007-10, when the equivalent of 12,600 full-time jobs were lost across the economy as a whole
  • By 2012, nearly 50,000 New Zealanders were employed to conduct R&D, 35,000 in research roles and the remainder in support roles

Private sector R&D on the increase

  • Public sector investment drove R&D growth during the global financial crisis but since 2010 most of the growth is due to private sector spending, especially from manufacturing companies
  • Nearly a third of private sector R&D expenditure is directed towards improving manufacturing, followed by ICT second and primary industries third
  • R&D expenditure for improving primary industries grew by $60 million from 2010-12, which is almost on par with information, communications and technology

Applied R&D is thriving

  • Applied R&D expenditure grew by 46 percent between 2008-12; much faster than either experimental R&D (14 percent growth) or basic R&D (3.4 percent growth)
  • Growth in applied R&D is driven by strong investments from the private sector (44 percent growth) and from higher education (82 percent growth)

Business Innovation has remained steady

  • 46 percent of businesses reporting new or improved goods and services, or improved methods for marketing, organisational or operational processes
  • Marketing Innovation is the only one of four measures that has grown during this period, from 25 percent in 2007 to 27 percent in 2010
  • The Education and Arts industries reported the most Business Innovation with 62 percent, followed by the finance and insurance industry at 61 percent
  • Agriculture, forestry and fishing was the least innovative industry, with only 26 percent reporting any business innovation

Overall, intellectual property registrations fell

  • Intellectual property registrations per business in each industry fell 5 percent between 2007 and 2011
  • Some industries experienced a one-off spike in types of intellectual property, for example agriculture, forestry and fishing, and healthcare and social assistance

The 2013 IBM Innovation Index uses a weighted composite of Statistics New Zealand and Intellectual Property Office of New Zealand data to illustrate the relative importance of 12 kinds of innovation across 18 different industries, including public and private sectors. See website below for the full methodology.