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NZ businesses spend more on R&D but the number of companies doing so shows little change

Thursday 7th April 2016

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New Zealand businesses spent more on research and development in 2015 but the number of firms doing so has been static for some years and R&D spend as a percentage of overall innovation actually fell, a new survey shows.

The Business Operations Survey: 2015 shows total R&D spending rose by 15 per cent to $1.4 billion from 2014 and the “Innovation Rate”  increased for the first time since 2009 to 49 per cent, up 3 percent.

However the R&D spend within the total amount spent on product development dropped to 52 percent, 4 percent down on 2013. Product development expenditure also fell in both the design and marketing areas but rose in other areas such as prototyping, trials and commercialisation. The proportion of businesses that reported engaging in R&D has shown little change since 2012, along with the number exporting.

Labour’s Science, Innovation, Research and Development spokesman David Cunliffe said the overall rise in R&D expenditure is just a drop in the bucket when the big picture is considered.

“In essence, not much has improved and for me the big picture is very stark,” he said.

He points to the timing of the survey release yesterday after 180 Fisher & Paykel Appliance workers had been told they had lost their jobs, with manufacturing now being carried out mainly in Thailand.

New Zealand business R&D still ranks in the bottom quarter of the OECD and far below leading small countries, he said. New Zealand business expenditure on R&D (BERD) is 0.54 percent of GDP, a third of the OECD average of 1.62 percent which places New Zealand in the bottom quarter of the OECD. Small advanced economies like Denmark, Finland and Israel typically invest more than 3 percent in R&D.

However, the figures Cunliffe is quoting – the latest available - are from 2014. While other OECD countries have updated their figures to 2015 and do so annually, New Zealand only provides BERD figures every two years and won’t update them until next year, so they don’t yet reflect whether the latest expenditure rise has significantly shifted the dial.

Science and Innovation Minister Steven Joyce said New Zealand has historically had low levels of R&D conducted by businesses compared with most other OECD countries, but the latest survey confirms that is now changing.

The annual Business Operations Survey is conducted on 7,500 companies nationwide as a representative sample of the 39,000 companies employing six employees or more. Statistics NZ points out it is just one measure of estimated R&D spending.

The largest growth in R&D spending was from medium-sized firms – those with 20 to 99 staff. Their R&D spending grew 19 percent to $434.6 million compared with 2014 while large firms’ spend rose 15 per cent to $800 million.

Cost and lack of management resources were the two biggest barriers to innovation, the same as the last time this was measured in 2013.

The survey also showed only 8 percent of businesses surveyed sold both in the domestic market and overseas and less than 1 percent exported only. The percentage of companies trading with China dropped to 7.8 percent in 2015, slightly less than in 2011, despite a 61 percent boost in exports to that country to $10.9 billion over the same period.

 Australia remains the largest overseas market by those surveyed with 21 percent selling goods and services across the Tasman compared with 19 percent in 2011.


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