Our economy is not promoting innovation

Omid Aliasghar

Innovation is the primary driver of economic growth and employment.

According to the latest ranking in the World Intellectual Property Organisation’s Global Innovation Index 2021, we are moving headlong in the wrong direction.

Our AUT research not only confirms this trend but also offers an alternative and smoother pathway for New Zealand to amplify its human ingenuity.

But first – what do we take from the latest Global Innovation Index?

In 2015, the World Intellectual Property Organisation (WIPO) ranked New Zealand 15th on the same index – ahead of Australia, Japan and France.

The Global Innovation Index ranks the innovation ecosystem performance of 132 countries based on 80 different indicators, including institutions, human capital and research, infrastructure, credit, investment, linkages; the creation, absorption and diffusion of knowledge, and creative outputs.

To better capture innovation, these indicators are grouped into innovation inputs and outputs.

Innovation inputs measure elements of the economy that stimulate innovation, such as institution, infrastructure, and human capital and research.

Innovation outputs are the outcome of innovation investments within the nation.

The current Global Innovation Index shows New Zealand has dropped a whopping 10 spots – from 15th down to 25th among the 51 high-income economies.

According to the report, Switzerland has led the world in innovation during the last decade, and there have been few changes over the last few years among the top five economies.

In South-east Asia, East Asia, and Oceania the top three innovation economies are the Republic of Korea, Singapore, and China.

And therein lies NZ’s problem

Innovation is the primary driver of economic growth and employment – that’s why many governments are looking to innovation as the best option for sustainable growth.

Governments can contribute to the development of innovation capacity by investing in research and development (R&D) as well as by facilitating a safe and stable environment for businesses to operate and collaborate.

-  The problem is that New Zealand has failed to translate costly innovation investments into more and higher-quality outputs.

While our input levels are good relative to the rest of the world, our innovation outputs are surprisingly weak.

The report says the problem is that New Zealand has failed to translate costly innovation investments into more and higher-quality outputs.

In other words, while we are already investing in the stuff that should lead the country to become a highly productive knowledge-intensive nation, we are failing to reap the benefits.

To put this into perspective, countries such as Iceland and Ireland, with far fewer investment in innovation activities than New Zealand, reap significantly more benefits from their investments.

How can we do better?

Apart from sponsoring and funding innovation, the government also needs to create and support an environment in which businesses can form relationships and collaborate with universities, research organisations and any other actors in the innovation ecosystem.

Data from our survey of 541 New Zealand businesses showed those that are more open and deeply involved in both domestic and international collaborations are in a better position to develop and commercialise their innovations.

This approach contrasts to the closed innovation model, which is based on the view that innovations are created and developed by companies themselves.

The open business model comes to life when businesses depend not only on their own in-house knowledge, experience and resources (such as their own internal R&D) for innovation, but also collaborate with smart people and organisations with different backgrounds, experiences and motivations.

Simply put, open approaches towards innovation help businesses to better profit from innovation inputs.

This is good news for Kiwi businesses that are thinking of moving from a closed innovation approach to a more open one.

Embracing open innovation would enhance public good outcomes through learning new methods for accelerating innovation – and lead to economic growth.

As American innovation expert Henry Chesbrough says, we are “operating in a world of abundant knowledge, where not all the smart people work for you, so you better go find them, connect to them, and build upon what they can do”.

Moving from closed to open models of innovation will enable businesses to better recognise and harness a greater number of technology transfer opportunities and, ultimately, better commercialise their innovations and gain competitive advantage in international markets.

Accordingly, our scientists, academics and industry leaders and policymakers need to interact, share, and transfer knowledge, without worrying so much about sharing intellectual property.

For its part, the government must facilitate a collaborative innovation climate by protecting the innovator through effective and robust intellectual property strategies.

This approach will benefit businesses and individuals engaged in innovation, enabling them to capture return from their activities while ensuring their ideas are protected by effective intellectual property enforcement strategy.

Building an open innovation ecosystem is the best way to help the New Zealand economy more effectively transform innovative ideas into higher-quality, competitive outcomes.

This article first appeared in the National Business Review

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• Read profile of Omid Aliasghar
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