This comment first appeared as an op-ed article in the Dominion Post newspaper.
We hear the word
innovation a lot lately. Key
multi-lateral economic agencies such as the International Monetary Fund or the
OECD are telling policymakers, particularly in the major developed economies,
that innovation is the key to solving the woes of weak economic growth in the
wake of the global financial crisis (GFC). But any Government intervention in
the innovation system must fix the bit that’s broken. The recent launch of the
new Crown Entity, Callaghan Innovation is a step in the right direction.
Post GFC, economic growth in developed economies is subdued. In some
countries, central banks have done most of the heavy lifting in terms of
supporting demand. But moving to a
structurally higher level of growth is not just about monetary policy. It is about structural reform including the
regulatory environment, labour market, goods markets and access to trade.
It’s also about being more innovative.
That’s because in some countries the traditional sources of growth, such
as exports in China and consumption in the US, need to change. In fact they need to reverse: The US needs to increase its exports and China
needs to increase domestic consumption.
will typically talk about a country's national innovation system to describe
constituent parts of the system and, just as importantly, the linkages between
the parts of that system. In New Zealand,
our national innovation system is made up of our universities, research institutions
(including Crown Research Institutions or CRIs), the providers of skills, the stock
of skills (or human capital) available in the economy at any given time, firms
it in this ways means we can start to think about where our strengths and
weaknesses lie. It also means that,
assuming we agree we need more innovation, it helps us decide what we should do
about it, and who should do it.
the Government is going to invest in innovation, it needs to fix the right problem
and contribute to higher economic growth, especially given the higher stakes in
these straitened fiscal times. We also
need to ensure the fix better enables us to take advantage of the opportunities
that are currently staring us in the face like our burgeoning economic
relationship with China.
think our universities, CRIs and a number of our firms do great research. Think about biotechnology. New Zealand is a
world leader and agriculture has been the driving force of productivity gains
within the New Zealand economy.
agriculture I think we have had only limited success in innovation, particularly
in the commercialisation of innovation.
We've tended to always think of ourselves as being quite entrepreneurial. I disagree.
Entrepreneurship goes beyond just simply having a great idea: it means
having the capability to take that bright idea to market, thus turning it into
a viable commercial enterprise.
me, the link between research and firms, particularly entrepreneurs who can
commercialise that research, is the greatest weakness in our innovation system. To put it simply, it’s not the Research in
R&D that’s the problem, it’s the Development. That’s why I have always been against R&D
tax credits. They are expensive and aimed
at research. That doesn’t fix the
Government’s new Crown Entity, Callaghan Innovation, was launched to little
fanfare, yet in my opinion, it could prove to be the most important economic
development initiative in New Zealand in many years. It has three areas of focus: to Motivate, to
Connect and to Deliver. It’s the
building of connections between ideas, science and commercialisation that will
create the greatest opportunity for a step-change in New Zealand’s economic
performance. Should it prove successful, it will also prove that economic
development is not just about how much money you spend on it.
challenge now is for business to get in behind it. Too often we look for Government to fix the
problems of low growth, poor productivity growth and low wages. The pathway to higher growth and higher wages
requires a partnership between individuals with skills, businesses with
aspirations and Government which creates the right environment for those
aspirations to be fulfilled. In
launching Callaghan Innovation I think the Government has just taken a giant
leap forward in creating a stronger environment for the commercialisation of
is important because the commercialisation of innovation is critical to achieving
higher economic growth. And higher economic growth is important in achieving better
social services we expect the Government to provide us and the quality of life
we aspire to, including our ability to afford the sorts of houses we want to
live in and a comfortable retirement.