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Auckland, New Zealand - 23 Feb 2010: IBM New Zealand and the University of Auckland have today published the Innovation Index of New Zealand, an inter-industry, multi-indicator study measuring the rate of innovation effort in New Zealand since 1998.
“Innovation performance is widely acknowledged as a key driver of economic prosperity, particularly in mature economies, and it’s important to understand our strengths and weaknesses when it comes to this important driver of growth,” says Jennifer Moxon, Managing Director of IBM New Zealand.
IBM and the University of Auckland formed a partnership to develop the Innovation Index of New Zealand in order to fill a gap in innovation research and provide business leaders, analysts and policy makers with valuable insights into New Zealand’s innovation performance over time.
The research looks at innovation across the whole of the aggregate New Zealand economy, as well as within 16 separate industry sectors, spanning both the commercial and non-commercial sectors.
Seven components of innovation are examined: research and development; patenting; Plant Variety Rights; trademarking; design registration; productivity; and organisational, managerial and marketing reforms. Together, the seven components provide insights into the extent of innovative activity at each stage of the innovation process.
The research reveals that, while some industry sectors have performed reasonably well, New Zealand’s overall rate of innovation has remained virtually flat for almost a decade.
After rising 13 per cent between 1998 and 2000, the overall rate of innovation in New Zealand remained virtually flat for the next seven years before dropping sharply in 2008, almost certainly in response to the then-deepening economic recession.
The rate of innovation in New Zealand rose steadily between 1998 and 2000 but then remained virtually flat before dropping sharply in 2008.
“Given the critical role that innovation plays in creating wealth and prosperity, it is concerning that the rate of innovation in this country has been virtually stagnant for the last decade”, says Ms Moxon.
“For New Zealand to achieve step-change economic growth, we must foster greater levels of innovation in key industry sectors where there is significant potential for commercialisation and wealth creation. By focusing our efforts on market-relevant innovation, we will ensure the greatest return on the investments we make as a nation,” Ms Moxon added.
From an industry sector point of view, the strongest innovation performance came from the Agriculture, Forestry & Fishing Sector, where the sector index more than doubled between 1998 and 2008. It was the only sector where innovation activity has consistently increased year on year since the base year of 1998. In 2008, the rate of innovative activity in this sector was double the 1998 base rate and almost double the national all-sector average.
The Agriculture, Forestry & Fishing sector delivered the strongest innovation performance of all the industry sectors measured.
Associate Professor Basil Sharp, one of the principal researchers at the University of Auckland Business School, says that this finding came as no surprise to the researchers.
“Given that Agriculture, Forestry & Fishing is responsible for more than half of New Zealand’s total export income – by far the largest single export sector – we would expect to see greater than average investments in innovation in this sector,” says Professor Sharp.
The effects of the economic recession are evident in the 6% decline in the rate of innovation in 2008. Ten out of the 16 industry sectors declined, with three sectors hit particularly hard: Construction (down 15%); Accommodation, Cafes & Restaurants (down 12%); and Property & Business Services (down 11%).
“An economic recession is the time when you should increase your rate of innovation, not let it drop off. Continuing to invest in innovation when times are tough gives you an advantage over your competitors when the economy picks up again. The sharp decline in innovation intensity seems to indicate that some organisations in New Zealand view investment in innovation as a luxury, not a necessity,” Sharp said.
IBM New Zealand’s Chief Technologist Dougal Watt says it is time for New Zealand to prioritise innovation to secure a brighter economic future.
“Innovation has the power to transform organisations, industries, even our whole country, but improving New Zealand’s innovation performance will not be simple or quick. It will require collective investment and long term commitment from many stakeholders, including industry bodies, research institutions, universities, business leaders, government policymakers, and investors. To drive meaningful change, this will have to be a truly collaborative effort. We at IBM look forward to being part of it,” says Mr Watt.
About the IBM-University of Auckland Innovation Index of New Zealand
The IBM–University of Auckland Innovation Index of New Zealand tracks patterns in the rate of innovative activity in New Zealand across both commercial and non-commercial sectors since 1998. The Innovation Index is designed to record the intensity (i.e. rate of change) of a wide range of innovation in relation to goods and services, technical operations, and organisational, managerial and marketing functions.
Seven components of innovation are included in the Innovation Index: 1) Research and development; 2) Patenting; 3) Plant Variety Rights; 4) Trademarking; 5) Design registration; 6) Productivity; and 7) Organisational, managerial and marketing reforms. Each series is divided by a measure of economic activity to give an intensity measure. Relative weights, which mimic each component’s respective contribution to overall innovation, are used to add the series together.
The resulting integrated Innovation Index is a comprehensive summary of the rate of innovative activity among organisations in New Zealand.
The methodology used to construct the IBM-University of Auckland Innovation Index of New Zealand is based on similar research undertaken by IBM Australia in conjunction with the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne.
Key Findings of the IBM-University of Auckland Innovation Index of New Zealand
1. After rising by 13 per cent between 1998 and 2000, the aggregate, whole-of-economy Innovation Index remained virtually flat for the next seven years. 2. At the end of 2007, prior to the effects of the global economic recession, the aggregate Innovation Index was 15 per cent above the base year of 1998.
3. The Innovation Index fell sharply by 6 per cent in 2008, almost certainly as a result of the global economic recession, resulting in an aggregate Innovation Index at the end of 2008 that had fallen back to 8 per cent above the base year of 1998.
4. Overall, R&D has shown a modest upward trend since 2004, while productivity has remained flat during the same period, after increasing rapidly from 1998 to 2004. Neither component reacted significantly to the recession in 2008.
5. Intellectual property (IP) indicators have exhibited diverse patterns during the period under review:
6. The 6 per cent decline in the aggregate Innovation Index in 2008 is attributable to the declines in the four IP components, specifically the sharp declines in trademark and design applications.
The industry sector indices show some differences in patterns of innovation performance over the 1998-2008 period but are broadly similar to the overall Innovation Index and reveal the factors underlying New Zealand’s overall innovation performance over this period, particularly in the 2008 recession year.
1. Overall, the strongest performance in innovation activity was in the Agriculture, Forestry & Fishing Sector, where the index more than doubled between 1998 and 2008.
2. For the period 1998-2007, the Innovation Index reveals generally positive trends in innovation activity in Agriculture, Forestry & Fishing; Manufacturing; Accommodation, Cafes & Restaurants; Communication Services; and Health & Community Services.
3. In contrast, Government Administration & Defence and Cultural & Recreational Services showed a declining trend.
4. Other sectors were either flat for much of the period or volatile with no discernible trend.
5. In 2008, the aggregate Innovation Index was pulled down by declines in 10 out of the 16 sectors, the most significant being in Construction (down 15 per cent); Accommodation, Cafes & Restaurants (down 12 per cent); and Property & Business Services (down 11 per cent). In all sectors that experienced a decline, there were substantial falls in one or more of the IP categories (patents, PVR, trademarks, and/or designs).
6. Of the sectors showing increased innovation activity in 2008, the most significant gains were in Education (up 11 per cent) and Government Administration & Defence (up 6 per cent).
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About the University of Auckland
The University of Auckland is New Zealand's leading research-led university, ranked among the world's top 65 in the Times Higher Education Supplement 2008 rankings. The University of Auckland Business School has an unconditional commitment to quality teaching and research in topics that are forward-focused and relevant to the commercial world today.
This table shows the innovation index (in two-yearly intervals) for each of the 16 industry sectors measured.
This graph shows the rate of innovation in the Agriculture, Forestry & Fishing Sector compared with the national all-sector innovation index. This sector delivered the strongest innovation performance, with the index more than doubling between 1998 and 2008. In 2008, the rate of innovative activity in this sector was double the 1998 base rate and almost double the national all-sector average.
This table shows (in two-yearly intervals) the performance of the seven components that together make up the Innovation Index of New Zealand.
This graph depicts the overall rate of innovation in New Zealand since 1998. After rising 13 per cent between 1998 and 2000, the overall rate of innovation in New Zealand remained virtually flat for the next seven years before dropping sharply in 2008.
PDF version of the 2010 IBM-University of Auckland Innovation Index of New Zealand
Disclaimer: IBM, the University of Auckland and the University of Auckland Business School give no representation, make no warranty, nor take any responsibility as to the accuracy or completeness of any information contained in the IBM-University of Auckland Innovation Index of New Zealand and will not be liable to any other party on any basis whatsoever whether arising under contract, tort, including negligence or any other basis whatsoever for any direct, indirect or consequential loss or damage. The views and findings expressed in the report do not necessarily coincide with those of IBM.