R&D future looks rosy

A much more productive approach to research and development from central government has been signalled in briefing papers to the new administration.

A much more productive approach to research and development from central government has been signalled in briefing papers to the new administration.

Ministry of Research Science and Technology officials have outlined a range of possible measures to boost private-sector research and development, as well as technology transfer, to incoming minister Pete Hodgson.

The options include:

• Allowing New Zealand firms to treat research and development spending as an expense for tax purposes - as do most OECD countries;

• Boosting awareness and use of the New Economy Research Fund, which was introduced last year to support new ideas and technology that could generate new businesses;

• Establish the reasons New Zealand private investment in research and development is so poor compared with other OECD countries;

• Improving linkages between private firms and tertiary education organisations and Crown Research Institutes.

"Left to itself the New Zealand economy only partly provides the necessary knowledge, skills, technologies and innovation path for the innovation process," the papers say.

"This is not an argument for massive and detailed government intervention - 'picking winners'. The government's role is to address systematic failures that block the functioning of the innovation system."

However, the officials do not seem to be arguing for New Zealand to develop more high-tech industry. Rather, they advocate enabling local firms to better use new technologies, particularly in areas where the country already has a competitive advantage.

However, a greater level of investment all round is necessary - even New Zealand's high-tech firms have a low level of research and development by international standards, the papers say, although there are no explicit figures to quantify that.

Officials also argue for a government appointed advisory body to consider the best ways of using new technologies - an approach taken by both the UK and Finnish governments in recent years.

One of the main trends in research and development in recent years has been its increasing globalisation, with countries placing great emphasis on inward and outward research-related foreign direct investment.

Several countries - such as Australia and Ireland - have adopted an explicit policy of encouraging multinational firms to set up research and development facilities on their soil, according to an OECD study released last week.

Some industries - such as pharmaceuticals - have for several decades tended to have laboratories in other countries doing their research and development work.

However what has emerged in the past 15 years is a growing trend for some firms to form international strategic alliances for such work. The approach minimises risks and allows quicker recovery of investment.

The report notes that information technology, as well as biotech, is one industry where this approach has been particularly popular.

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