HVM Review Overview Report

8/3/2019 HVM Review Overview Report

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Powering

Innovation

ImprovingaccesstoanduptakeofR&Dinthehighvalue

manufacturingandservicessector

Overviewreportpreparedbypanelmembers:

ProfessorJohnRaine(Chair),ProfessorMinaTeicher,PhilipOReilly

AnindependentreportcommissionedbytheMinistryofScienceandInnovation


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ISBN: 978-0-478-06184-0

Date: June 2011

Published by the

Ministry of Science and

Innovation

PO Box 5762, Wellington

6145, New Zealand.

Tel 04 916 5881

Email [email protected]

Web www.msi.govt.nz


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1

13

Contents

Overview

Recommendations

Appendix: Independent Panel Members 27


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Overview

The high value manufacturing and services sector is key to New Zealandseconomicfuture,butiscurrentlyunderdeveloped

Rapid development of the high value manufacturing and services sector (HVMSS) has the

potential to generate a step change in the economic growth and socialwellbeing of New

Zealand. The country already has examples of highly successful firms in this space and the

numberisgrowing.Thetraditionalcontributionofourfoodandfibrebasedsectorswillremain

critically important for our future, but international experience shows that growth of the

HVMSSoffersapathwaytohigherproductivityandameanstoreverseourrelativedeclinein

livingstandards.Thissectorcanalsoincreasethediversityandoverallvalueofourexportsand

contributetothegrowthofnewskillsandcapabilitiesnationally.

However, there is evidence that the New Zealand HVMSS is underdeveloped, and could

contribute substantially more to the economy than it currently does, particularly through

growthinhighproductivityadvancedtechnologyindustries.

Notably, there isa relatively low levelof investment in researchanddevelopment (R&D)by

New Zealandbusiness (0.54%of grossdomesticproduct (GDP) in2010, comparedwith the

Organisation forEconomicCooperationandDevelopment (OECD)averageofapproximately

1.5%);similarlythereisarelativelylowlevelofoverallexpenditureonR&Dasapercentageof

GDP(1.30%in2010,comparedwiththeOECDaverageof2.33%).Theseratiosareconsiderably

lessthanthoseinothereconomiessimilartothatinNewZealand.1

TheMinisterofScienceand Innovation requesteda reviewbyan independent

Panel

Upon the Ministers request, the Ministry of Science and Innovation (MSI) assembled an

independentpaneltoadvisehowtheGovernmentcanbetterfacilitatethedevelopmentand

growthof theHVMSS throughenhancing the levelofaccess toanduptakeof researchand

development

(R&D)

services.

This

includes

lifting

the

number

and

quality

of

successful

commercialisationventuresfromuniversityandCrownResearchInstitute(CRI)research.

The Panel members were Professor John Raine (Chair), Professor Mina Teicher and Phil

OReilly.

Thescopeofthereviewincluded:

Firms across a range of advanced technologies, which in this report and its

recommendations refer to technologies including biotechnology, processing,

electronicsandembedded systems,mechatronicsand robotics, sensingand scanning

1StatisticsNewZealandResearchandDevelopmentSurvey:2010(availableatwww.stats.govt.nz).

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devices,advancedmaterialsandmanufacturingtechnology(includingplastics),marine

technology, medical technologies, pharmaceuticals, agritechnologies, digital

technologiesandinformationandcommunicationtechnology(ICT)).

The application of technology developments to themore traditionalmanufacturing

sector including, forexample,meatprocessing,woolprocessingandrelatedagritech

activities.

Theroleofpublicresearchorganisationsinvolvedinthissector.

ActionsthatcanbetakentoaddresstheopportunityfortheHVMSSto increaseNew

ZealandsGDPandlabourproductivity.

Specifically,thePanelwasaskedto:

Analyse the primary barriers to technology and knowledge transfer from research

organisations to theHVMSS inNewZealandandprovideoptions toovercome those

barriers.

Provideananalysisofoverseasmodelsforassistinganddrivinggrowth intheHVMSS

thathave themost relevance toNewZealand,analyse thekey lessonsandpractices

from these models and explore what their implications would be for the roles,

responsibilitiesandfundingstructuresofkeyresearchinstitutionsinthesector.

Provideoptions for the roles, functionsand fundingof researchorganisations in the

sector.

The full terms of reference for the review are available at

http://www.msi.govt.nz/sites/all/files/u4/TORHiTechReview2.pdf.

The Panel consulted widely with representative individuals and organisations key to the

HVMSS,including:providersofR&D(CRIs,universities,polytechnicinstitutesandindependent

researchorganisations); research consortia and associations (such as theHeavyEngineering

ResearchAssociation (HERA)); commentators; angel investors; companies in the sector; and

representativesofindustrysectorbodies.

Thisoverview report isaccompaniedby a full report.The reader is invited to read the full

reporttobettercapturethescopeofpotentialactionsforenablingchangeintheHVMSS.The

fullreportprovidesmorecomprehensivediscussion,andincludes:

AnoverviewofNewZealandsinnovationsystem

AnanalysisofbarrierstoaccesstoanduptakeofR&DbytheHVMSS,supportingthe

associatedrecommendations

Appendicesproviding information onNew Zealands research and commercialisation

organisations

Appendices that givemoredetailed information from the submissions to the review

andfromresearchontheinnovationsystemsinothercountries.

Thefullreportisavailableatwww.msi.govt.nz/hvmreview

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http://www.msi.govt.nz/hvmreviewhttp://www.msi.govt.nz/hvmreview


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This review report proposes new initiatives to grow the High Value

ManufacturingandServicesSector

Recenteffortstogrow theHVMSS includethe introductionofnewTechnologyNewZealand

(TechNZ) mechanisms aimed at accelerating the expansion of small to mediumsizedenterprises (SMEs) and larger companies. The intended National Network of

CommercialisationCentres(NNCC),andactionsrecommendedbytheCrownResearchInstitute

TaskforcewillalsoinfluenceR&Dengagementandnewtechnologyuptakebycompaniesinthe

HVMSS. The recommendations in this report offer additional mechanisms by which the

Governmentcanaccelerate theprocessofgrowthof theHVMSSand furtherdrive theNew

Zealandeconomy.

ThePanelalsonotesthatearlierwellresearchedreports,notablythoseofIPENZandtheNew

Zealand Institute,2present recommendations in the subject area for this review. The Panel

hopes that this report reinforces previously recommended actions and proposes newinitiativesthatwill,ifadopted,placeNewZealandonapathofmuchmorerapidgrowthand

developmentinitsHVMSS.

Innovationisanecosystemwithinteractionsatmanylevels

This report focuses on science and technologybased innovation. However, growth of an

innovationculturealsoinvolvesbroaderquestionsaroundthebreadthanddepthofsecondary

andtertiaryeducation,entrepreneurshipeducation,thedevelopmentofamorescienceaware

society

across

all

professional

disciplines

and

the

creative

connection

of

talented

minds

across

disciplineboundaries.A future innovationculture inNewZealandwillbecharacterisedbya

vibrant design and creative arts community, and by the innovative contributions of

professionals inbusiness, law, thehumanitiesand social sciences.These importantbroader

influences, and that of the challenge of longterm sustainability of our society, were

acknowledgedbythePanelasitfocusedonthemoreconfinedscopeofthisreview.

New Zealands innovation ecosystem has been shaped over the years by government, the

domesticandglobaleconomicclimatesandother factors, rather thanhavingbeen ledbya

longterm,wellunderstoodandwidelysupportednationalinnovationstrategy.

The innovation ecosystem is often seen narrowly as a pipeline or food chain, in otherwordsalinearcommercialisationmodelthatgoesfromideatofullmarketestablishmentwith

stages in research, proofofprinciple development, prototype, product betatesting in trial

markets andmarket launch. This scenariomaybe true for technologypush projects that

emergefrompublicallyfundedresearchorganisations,but,innovationtypicallypaintsamuch

morecomplexpicture.Itcommonlybeginsnotwithadiscoverybutwiththeidentificationofa

marketneedthattriggers industryled innovation,whichrepresentsthe largebulkofscience

andtechnologyinnovationinNewZealand.

2 InstitutionofProfessionalEngineersNewZealand:CatalysingEconomicGrowth:BoostingInnovationExpertiseinthePrivateSector,2011(availableatwww.ipenz.org.nz),andNewZealandInstitute:StandingontheShouldersofScience:GettingMoreValuefromtheInnovationEcosystem,2009;AGoalisNotaStrategy:FocusingEffortstoImproveNewZealandsProsperity,2010;andPluggingtheGap:AnInternationalisationStrategy,2010(availableatwww.nzinstitute.org.nz).

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Itmayalsobeginwith lateralthinkingthattakesanexistingtechnologyandputs it inanew

application or applies a technology to different markets. Innovation also emerges from

partnershipsbetweenR&D institutionsand industry,whereworkonaprojectproducesspin

offideasthatproducenewandoftenunexpecteddevelopments.

Inreality,the innovationecosystemhasinteractionsatmany levelsandmay involveiterative

organicprocessesratherthanasimplelinearmodel.Itisimportantthat,betweeninvestments

from the Government and the private sector, all innovation pathways and stages of the

commercialisationprocessarefunded,butbasedonsoundmarketleddecisionmaking.

The primary R&D organisations in New Zealand are its eight universities (Auckland, AUT,

Canterbury,Lincoln,Massey,Otago,VictoriaandWaikato)andeightCRIs (AgResearch,Plant

andFoodResearch,EnvironmentalScienceandResearch(ESR),Scion,GNSScience,Industrial

Research Limited (IRL), Landcare Research and the National Institute of Water and

AtmosphericResearch(NIWA)).Inaddition,thereareanumberofindustrysupportedprivate

sectorresearchassociationsandorganisationsthatdrawupongovernmentfundsforspecific

typesof research.Thepolytechnics,particularly theMetroGroup,alsohave the capacity to

offertechnologydevelopmentservicestoindustry.

ThereissignificantroomfordevelopmentofNewZealandsHVMSS

NewZealandindustryischaracterisedbyarelativelylargenumberofverysmallcompaniesin

theSMEsector,manywith littleornohistoryofengagement inR&D.Thisfactor limitstheir

capacity to implement new products and processes that are generated through research.

However, contrary to popular perception, New Zealand has a slightly lower proportion of

employees in SMEs,with 19 or fewer employees, than theOECD average (Figure 1). New

Zealandhasasimilarproportionofpeopleemployedinlargefirms(250ormoreemployees)to

theOECDaverage,although thenumberofvery large firms inNewZealand is less than the

OECDaverage.LowproductivityinNewZealanddoesnotseemtorelatetoitshighproportion

ofsmallcompanies.Denmark,forexample,hassimilarproportionsofSMEsbutamuchmore

productiveeconomymeasuredasGDPpercapita(Figure2).

Unlikeothersectorsimportanttotheeconomy,suchasagriculture,theHVMSSisexceptionally

diverseandfragmented: it iscomposedofalargenumberoftechnologysubsectorsthatare

notunifiedbyanoverarchingnationalstrategyorvision.

ThelandscapeofR&Dcapabilityacrossthesectorisbynomeansuniform.Inthissector,small

technologystartups,suchasthosethatspinoutofuniversityresearch,maybeR&Dintensive

to the exclusion of other skills that are necessary for successful entrepreneurial or

internationalgrowth.Largecompanies, suchasFisher&PaykelHealthcareandRakon,have

embedded inhouse R&D capability but have difficultymeeting the demand for additional

skilledprofessionalsforspecialistresearchneeds.

Despitethesecharacteristics,theNewZealandHVMSSincludesmanyfirmsthathaveachieved

global leadershippositions inspecialistnichemarketsandthere isevidencethatthisgroup is

expanding. For example, of the 116 firms where joint MSI and New Zealand Trade and

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Enterprise(NZTE)serviceplanswerecompleted,for200809totalturnoverincreasedby14.4%

to$11.15Bn,andtotalexportsincreasedby18.9%to$7.83Bn.

Figure1:Numberemployedbysizeclassofbusinessasapercentageofthetotalnumberof

personsengaged(Source:2011EconomicDevelopmentIndicators,StatisticsNewZealand)

However, there is significant room for furtherdevelopment.While a substantialnumberof

companiesareinvolvedinadvancedtechnologybusinessexports,thebulkofexportearningscome from relatively few.Forexample, in theyearendingMarch2010, the top100TIN100

companies3hadcombinedrevenuesof$6.7Bn,ofwhich$4.9Bnwereexportsinvolving24,000

staff.Thenext100companieshadtotalrevenuesof$508Mandemployed2,900staff.

Because of its location, and longterm focus and dependence on primary industries, New

Zealandhasdevelopedanadvantageoverothercountries insome fields.While thecountry

should, without doubt, continue frontier research in agriculture, oceanography, water,

aquaculture, geology, bioecology and veterinary science, it should not allow the focus on

theseareasofexpertisetobecomeabarriertosuccessinotherareas,forexample,insciences

thatdonotneedmajor(orcostly)equipmentinvestmentbutthathavethepotentialtodeliveradvancedtechnologyproducts.

NewZealandsmacroeconomicenvironmenthasbeen identified inarangeofstudiesasnot

beingassupportiveasitcouldbetoinvestmentintheprivatesectorandinnovation.4Specific

actions taken to develop the HVMSS must be accompanied by ongoing changes to the

macroeconomicenvironmenttosupportinnovation.

3 TIN100,IndustryAnalysis,NewZealand,2010,SixthEdition.4 UniversityofCanterbury:InnovationinNewZealand:IssuesofFirmSize,LocalMarketSizeandEconomicGeography,HongShangqin,PhilipMcCannandLesOxley,2009(availableatwww.econ.canterbury.ac.nz/RePEc/cbt/econwp/0904.pdf);Ministryof

Research,ScienceandTechnology:BecomingMoreGloballyCompetitive,PeterMorten,2006(availableatwww.morst.govt.nz/publications/az/b/becomingmoregloballycompetitive/).

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http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/0904.pdfhttp://www.morst.govt.nz/publications/a-z/b/becoming-more-globally-competitive/http://www.morst.govt.nz/publications/a-z/b/becoming-more-globally-competitive/http://www.morst.govt.nz/publications/a-z/b/becoming-more-globally-competitive/http://www.morst.govt.nz/publications/a-z/b/becoming-more-globally-competitive/http://www.morst.govt.nz/publications/a-z/b/becoming-more-globally-competitive/http://www.morst.govt.nz/publications/a-z/b/becoming-more-globally-competitive/http://www.morst.govt.nz/publications/a-z/b/becoming-more-globally-competitive/http://www.morst.govt.nz/publications/a-z/b/becoming-more-globally-competitive/http://www.morst.govt.nz/publications/a-z/b/becoming-more-globally-competitive/http://www.morst.govt.nz/publications/a-z/b/becoming-more-globally-competitive/http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/0904.pdf


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OECDdatashowsaclearlinkbetweeninvestmentinR&DandGDPgrowth

IthasbeennotedthatNewZealandfallswellshortoftheaverageOECDtotalR&Dexpenditure

asapercentageofGDP.In2010,NewZealandinvestedthefollowingamountsinresearchand

development.5

Business $1013M 0.54%GDP

Government(excludinghighereducation) $629M 0.34%GDP

HigherEducationSector $802M 0.43%GDP

Totals: $2444M 1.30%GDP6

ThelinkbetweeninvestmentinR&DandGDPgrowthisclearlyseeninOECDdata. TheOECDScience, Technology and IndustryOutlook 20007 contains a comprehensive summaryof theempirical linksbetween innovationandeconomicperformance.Basedona largenumberof

studiesevaluatingtheratesofreturnonR&Dinvestments,itfindsthedirect(private)ratesof

returnaretypicallybetween10%and20%,makinginvestmentsinR&Dultimatelyaprofitable

undertaking.Ratesofreturntypicallyshowconsiderabledifferencesacrosssectors,withR&D

inresearchintensivesectorshavinghigherreturns.8

AcomparisonofGDPpercapitaversusnationalR&Dexpenditure(GERD)percapita,overtime

inUSdollar equivalents (Purchasing Power ParityUS dollars), forNew Zealand and various

othercountries,confirmsthat increased investment inR&Ddoescorrelate to increasedGDP

(Figure2).Althoughthiscorrelationmaybeoneofdiminishingincrementalreturnovertime,

this return is worth seeking, in terms of the expected absolute GDP per capita growth

achieved.9There isclearlyanopportunity forNewZealandto lift itsHVMSSperformanceby

movingclosertoOECDaverageR&Dinvestmentlevels.

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

0 200 400 600 800 1,000 1,200 1,400 1,600

GDPpercapita

R&D per capita

ComparisonofGDPpercapitatoR&Dpercapita,19812009

New Zealand

Australia

Denmark

Finland

Total OECD

Figure2:HowNewZealandGDPpercapitacompares

5 StatisticsNewZealandResearchandDevelopmentSurvey:2010(availableatwww.stats.govt.nz).6 Duetorounding,somefiguresmaynotaddtostatedtotals.7 OECDMainScienceandTechnologyIndicators201012,February2011;StatisticsNewZealand;MinistryofScienceandInnovation.8 OECDScience,TechnologyandIndustryOutlook2000(availableatwww.oecd.org).9 OECDMainScienceandTechnologyIndicators201012(2011);StatisticsNewZealand;MinistryofScienceandInnovation.

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ThereareanumberofbarrierstoaccessanduptakeofR&DinNewZealand

An importantstep intheReviewwas to identifywhatbarrierscurrentlystand in thewayof

growthofanR&D culture in industry,alongwithenhancedknowledge transfer to industry

fromresearchorganisations.

Fromthesubmissions tothis review,genericbarrierswere identified in four thematicareas:

Structure/Infrastructure,Capability,InvestmentandCulture.

Thereisalackofconnectivitywithinthesector

ManysubmissionstothePanelhighlightedstructuralandinfrastructuralbarriers,including:

Fragmentation,andlimitationsindepthandrelevanceofresearchcapabilityinresearch

organisationsservicingtheneedsoftheHVMSS,manifestedasalackofavailable

researcherstodeveloptechnologiesneededbythecompany.

Geographicalspreadofcompaniesandresearchorganisations,andthereforealackof,

orpoorlydeveloped,sectorclusters.

Alackofadvancedtechnologymanufacturinginfrastructuretodeveloptechnologies.

Suboptimalnetworkingandcollaborationbetweenorganisations(includingbetween

researchorganisationsthroughoutthecountry).

The need for greater critical mass and scale in commercial research services and

researchcommercialisationunitsattachedtoresearchorganisations.

Oneindustryresearchassociationsubmittedthatpubliclyfundedresearchorganisations...arenot generally linked to a particular niche manufacturing sector or particular companies.Thereforethereislittlenetworkingand/orinteractionandcompaniesdonotidentifywiththoseorganisationsasbeingtheirresearchproviders.OftheindustryfocusedCRIs,IRLismostdirectlyinvolvedwiththeHVMSS.However,because

of the diversity and fragmented nature of the sector, IRL has a very diverse portfolio of

activities that probably lack the depth to be as effective as they need to be in supporting

advancedtechnologyinnovation.TheIRLsubmissiontothePanelnotedthattheWhatsYour

ProblemNewZealand?programmewasheavilyoversubscribed.This is symptomaticof the

presentinabilityofIRLtofullyengagewithindustryasbroadlyanddeeplyasitcould.

IRLhasspunoutcompaniesfromitsbasicresearch.However,theabandonmentofBioPharm

in2006and the slowpath tomarketofHTS11010

indicate that thereareopportunities for

improvingcommercialoutcomesfromthisCRI.IRLhasbeenhinderedbyalackofbreadthand

depthofscienceandengineeringcapabilitytofullyengagewiththewiderangeofindustriesin

theHVMSS.ThereisanopportunityforIRLtobecomemoremarketdrivenandbetteraligned

with short and longterm industry needs, particularly through much greater engineering

engagementinproductandprocessdevelopmentprojectswithindustry.

10HTS110waslaunchedtocommercialiseIRLshightemperaturesuperconductingtechnology.ApartofthisentitywasrecentlyboughtbytheNewZealandbasedcompanyScottTechnology.

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Therearesignificantcapabilityissues

The second key groupofbarriers identified in responses fellunder the general categoryof

capability.Thisisprimarilyfocusedaroundaccesstoandmobilityofknowledge,andattraction

andretentionoftalent. Intheareaofresearchcommercialisation, internationalcomparisonsshow that New Zealand appears to perform well per dollar of research funding spent.

11

However,anumberoffactorshaveworkedagainsttheinstitutionalcommercialisationsystem

beingabletodeliveraseffectivelyasitcould.

Barriersidentifiedincluded:

A lackofaccess toknowledgeby industry, and transferofknowledge from theR&D

sector to industry. This often links to a lack of experience in using R&D and of

understandingofwhatR&DcandoforanorganisationthisabsenceofanR&Dculture

acrossmanySMEsshowsasapersistingcutandtrydo ityourselfapproach.This in

turn

links

to

a

commonly

risk

averse

attitude

in

New

Zealand

companies,

and

a

focus

on

shorttermcashflowandsurvival.

LowmobilityofR&Dstaffbetweenuniversities,CRIsandindustry,attributabletostaff

performanceincentivesnotbeingalignedtoindustryR&Dengagement.Inthisregard,

incentivesintheTECPerformanceBasedResearchFundwerementionedasabarrierby

anumberofrespondentstotheReview.Relatedtothisistherelativelackofincentives

foruniversity(orCRI)stafftoengageinIPcommercialisation.

Inregardtoattractionandretentionofskills:

A shortage of professional skills in a number of areas in business and advanced

technology.

For

example,

it

is

estimated

that

New

Zealand

needs

2,000

2,750

new

engineeringgraduateseachyear,butin2008therewereonly1,50012.Thisshortage

stemsfromculturalandeducationsystemissues inNewZealandthere isaneed

tomotivatemore youngpeople to retain science andmathematics at secondary

schoolandtopursuescienceandtechnologyeducationattertiarylevel.

For larger companies with internalised R&D functions, difficulty in attracting

universitygraduates,orgraduateswiththerequiredcapabilities.

Difficultyforuniversitiesinattractingtopacademicsfromtheinternationalmarket,

andreducingteachingcontacthourstofreeupmorestafftimeforresearchand/or

industryorcommunityengagement.

Consequencesof thedifference inalignmentofuniversity,CRIandcompanycultures

anddriverssuchas:

AlackofindustrypresencesinuniversityandCRIspecialistresearchcentres

Tensions around IPownership frustrating some commercialisationprocesses, and

concernsthatleakageofIPwilloccurfromresearchorganisationsundercontractto

industry.

11Seewww.universitiesnz.ac.nz/files/u2/NZVCC_Uni_ResearchFIN_1C59D.pdfand

www.otago.ac.nz/entrepreneurship/docs/Qual%20report_31%20August%202010.pdf.12InstitutionofProfessionalEngineersNewZealand:NationalEngineeringEducationPlan,2010,PreparedfortheTertiaryEducationCommissionbytheNEEPProjectGoverningGroup(availableatwww.ipenz.org.nz).

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Limited capability to takeprojects through theearly commercialisation stage,ornot

beingabletofindtherightbusinessorcommercialisationpartner.

Few industry partnershipswith R&D companies overseas, and a lack of government

initiativesandschemes thatpromotetheengagementofNewZealandresearchers in

theinternationalarenaandencouragecollaboration.

Investmentorfundingwasmentionedasabarrierineverysubmission

Fundingbarriersrelatenotonlytoavailabilityofinvestmentfundsbutalso,andvery

importantly,tohowtheinvestmentofgovernmentandprivatesectorfundsisprioritised.

Barriersmentionedincluded:

A lackof integration in theHVMSSsector,andof identifiednicheareasand focuson

uniqueproductsandprocessestoimproveinternationalcompetitiveadvantage.

LowlevelofR&Dinvestmentbygovernment,andstructureofgovernmentfunding.

Underinvestment by the private sector, and a lack of risk capital for R&D led

innovation, especially for small companies, to take projects from idea to

commercialisationandcompletethevaluechain.

Alackofintegrationamongthepublicsectorresources,alargenumberofintermediary

organisations (such as NZTE, TechNZ, Business New Zealand, EDAs, Chambers of

Commerceandsoon)andhighturnoverofstaffintheseorganisations.Thislinkedtoa

lack of alignment around investment decisions that support companies or industry

sectors.

Overseasownership leading touseofNewZealandoperation formanufacturingonly

andthereforeanabsenceofdriveforinnovation.

Culturalbarriersarebothnationalandorganisational

Finally,agroupofbarrierswasclassifiedascultural.Thesealsolinktocapabilityinparticular,

but included those relating toNewZealandsnationalcultureand theperceived lackofand

need for a national innovation strategy. Cultural barriers also included differences in

organisationalculture,forexample,betweenresearchorganisationsandbusiness,challenges

around relationships,management of intellectual property (IP) and barriers that have their

genesisinbusinessculture.Thesebarrierstendtoaffecttheinnovationsystemcapabilityand

longterm strategicdirection.Becausean innovationculture isnurturedbypotentialactions

under each of Structure/Infrastructure, Capability and Investment, culturerelated

recommendationsappearunder these threeheadingsandundera fourth TheBigPicture

HowtoMakeanEvenGreaterImpact,whichfocusesprimarilyonlongtermstrategicissuesand

outofscoperecommendations.

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Inmakingitsrecommendations,thePaneldrewonlessonsfromoverseas

ThePanelreviewedinnovationstrategiesinanumberofcountriesandregionsthroughoutthe

worldwhere there are good examples of growth being driven from the HVMSS and how

improvementhasbeenachieved inaccesstoanduptakeofR&D.These includedtheNordiccountries (particularly Norway, Denmark and Finland), Taiwan, Singapore, Israel and the

Australian state of Queensland, who have programmes, institutions and policies that are

worthyofstudyandconsideration.Thesesmalltomediumsizejurisdictionsarealsoworking

togrowinnovativebusinesssectors.Notably:

Finland, for example, has adopted a centralised and coordinated approach to the

developmentoftheir innovationecosystem,withtheestablishmentofanoverarching

ResearchandInnovationCouncilwhichischairedbytheirPrimeMinister.Finlandisset

to significantly overhaul its science and education system. Among other things, its

Strategic Centres of Excellence (SHOKs), set up in the early 2000s as publicprivate

partnerships,willbereviewedby2013.TheactivitiesoftheSHOKsareexpectedtobe

strengthenedandfundingexpanded. Inaddition,theResearchand InnovationCouncil

of Finland has identified actions to develop their innovation system, for example,

structures will be reformed and organisational, operational and regionalfragmentationwillbereduced.Strategicdevelopmentpolicieshavebeendevelopedtoimprovetheflexibilityoforganisations,raisetheirprofileandintegratecomplementary

organisations.

Denmark, a country respected for its innovative approach to R&D, has an elegant

innovationpolicy.Manyofthetoolswithin italreadyexist inNewZealandandwould

benefit from expansion or enhancement. Denmark has had success with R&D

institutionsworking closelywith industry.An international reviewof theDanishGTS

InstituteSystemin2009foundthatwhiletheGTSsystemhasdonewellinmeetingitstarget groups national and even international needsfor technological servicestheworldischangingaroundit,soGTSmustadaptasneedsevolve.13

Finland, Denmark and Queensland have introduced support schemes, analogous to

NewZealandsTechnologyFellowshipscheme,whichplaceresearchersinindustry.The

outcomes of such initiatives can be outstanding, such as theIndustrial PhD

ProgrammefundedbytheDanishCouncilforTechnologyandInnovation.

QueenslandsSmartFuturesCommercialisationFellowshipsareaimedatresearchers

inresidence, and seek to improve industry uptake of new technologies and cross

pollinationofideasbyplacingaresearcherinhouse.Thefellowships

includegrantsofupto$100,000peryear

are available to industry and businesses to engage an innovationfocused

researcher(PhDorequivalent)foraminimumofsixmonthsandmaximumoftwo

yearsoneitherafulltimeorparttimearrangement

mustbematchedbyasponsorcashcontributionof1:1

13DanishMinistryofScience,TechnologyandInnovation:AStepBeyond:InternationalEvaluationoftheGTSInstituteSysteminDenmark,2009,p48(availableatwww.teknologiportalen.dk/NR/rdonlyres/43A1715381594FD583BB67D33F650897/3647/AStepBeyond_web_2.pdf),ISBN:9878792372802.

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researchersmustberetainedandsponsored forthetermofthe fellowshipbya

QueenslandbasedSME.

Reciprocalfellowships,whichbringindustrystaffintouniversitiesorresearchinstitutes,

arealsoavailable.

Finlandhasidentifiedthatitunderutilisesschemessuchassabbaticalsforresearchers

toworkincompaniesandtailoredpostgraduateandresearchprogrammesatitshigher

education institutes.One of its strategic development policies is that incentives for

businesscooperationarecreatedforhighereducationinstitutions.14

ITRI inTaiwanencouragesstaff tocycle throughandgainexperienceand thenmove

intoindustry.Professionaldevelopmentofstaffispartoftheinstitutesculture,andit

isexpectedthatstaffwillleaveITRIandjoin(orform)acompany.

NewZealandmaybeabletoincorporateintopolicyaspectsoffindingsofothercountrieswhoare also currently reviewing their innovation systems. The Panelwas aware that adopting

portionsofaparticularcountrysinnovationstrategydoesnot,however,guaranteesuccess.

Apartfrom industrylinkedR&Dfunding,NewZealandhassomeexamplesonthehomefront

of schemes to lift industry capability thathaveworkedwellandwhichcouldbeadapted to

enhance R&D uptake in the HVMSS. For example, NZTEs Better by Design business

mentoringprogrammeisbasedontheideaDesignunlocksbetterbusinessbetterthinking,betterapproaches,andbettercustomerconnections.ThishashelpedNewZealandcompaniesincreasetheir internationalcompetitivenessby integratingdesignprinciplesrightacrosstheir

business.ByusingananalogousapproachtodevelopmentofanR&Dculture,companiesinthe

HVMSSshouldbeabletoenhancetheirprospectsforgrowth.An indepthcommentaryonfeaturesofthe innovationsystems inothercountriesthatwere

studiedisincludedinthePanelsfullreport.

ThePaneltookaholisticviewoftheinnovationsystem

MSI does not have policy and operational oversight of the entireNew Zealand innovation

system. For example, universities and polytechnics are partially funded by the Tertiary

EducationCommission(TEC),andotherresearchorganisationsarefundedbyindustry.Inorder

tomakeeffectivechangetotheinnovationsystem,alloftheseinstitutionsneedtobeengagedin the changeprocess. Therefore, the Panelhas, in taking aholistic viewof the innovation

system,made some recommendations that are technicallyoutside the scopeof the report.

Theseareintendedtoengageotherplayersinpotentialchangesthat,collectively,couldpower

theinnovationsystemfurtherandfaster,therebybenefittingtheeconomyofNewZealand.

Overall,thePanelbelievesthatadoptionoftherecommendationsthatfollowcouldleadtoan

excitingtransformationinNewZealandsadvancedtechnologiesindustrysector.

14ResearchandInnovationCouncilofFinland:ResearchandInnovationPolicyGuidelinesfor20112015,2010,(availableatwww.minedu.fi/export/sites/default/OPM/Tiede/tutkimus_ja_innovaationeuvosto/tiedotteet/RIC_press_2010.12.21_Linjaus.pdf),ISBN:9789524859981(pdf).

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ThePanelsrecommendationsaimtodriveconnectivity,enhancetheinnovation

culture,andcatalyseinnovation

ThePanelsfullrecommendationsareprovidedonpages13to26ofthisreport.

The Panel recommends changes that relate to roles, responsibilities and structures of key

research institutions in the HVMSS, notably a significant restructuring of IRL and the

establishment of a new organisation that focuses primarily on industry demanddriven

developmentprojectswhileretaining IRLsestablishedstrengths.ThePanelrecommendsthe

new institution be based in Auckland, Wellington and Christchurch and exist on a scale

appropriatetotheneedsofthesector,nowand inthe future.Tomoveawayfromresearch

instituteconnotations,thePanelhassuggestedthatthisneworganisationbecalledAdvanced

Technology New Zealand (ATNZ). The Panel also recommends changes or incentives to

enhanceknowledgeaccessandR&DactivityintheHVMSS.Otherkeyrecommendationsrelate

to providing incentives for mobility of R&D capability between research institutions andindustry, enhancing R&D access for marketled product and business developments, and

enhancingcommercialisationactivityfromresearchinstitutions.

The Panel recommends setting a national innovation strategy, including top level political

leadershipofanenduringinnovationagendathroughtheestablishmentofanewScienceand

InnovationCouncil.Internationalexperienceisthatthedevelopmentoftheinnovationsystem

requires the highest levels of government support. The Panel recommends that the new

Science and Innovation Council be led from a very seniorministerial level in Government.

Recommendations also include potential changes in the education sector that are seen as

essentialingrowinginnovationcapabilitythatwillunderpinanationalinnovationculture.

ProgressiveincreasesinGovernmentinvestmentinR&Darerecommendedoveranextended

period,ideallytobringNewZealandsoverallR&DinvestmentatleastuptotheOECDaverage,

underpinnedbyacontinuedcommitmenttobasicresearch.Thekeyaimofsuchchangesisto

betterleveragetheGovernmentsinvestmentinR&Dwithinvestmentfromtheprivatesector.

The report recommendsan increased focuson thePhysicalSciencesandEngineering,while

recognising thata successful innovation systemdependsalsoonscienceawaregraduates in

Business,CreativeArts,Design,theHumanities,LawandtheSocialSciences.

ConcludingComment

The recommendations in this report are a call to action that thePanel sees asessential to

achieve outperformance in the national innovation system, and growth in access to and

uptakeofR&D intheHVMSS.Theserecommendationssit inawidermacroeconomiccontext

andthereareongoingimperativesontheGovernmenttoaddressfactorssuchasincentivesto

developastrongsavingsand investmentculture inNewZealand,broaderanddeepercapital

markets, and creationofamore attractiveenvironment for foreigndirect investment. Such

developments will be essential if the desired growth in private sector engagement and

investmentinR&Distobefullyrealised.

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Recommendations

Structure/Infrastructuredrivingconnectivity

Recommendation1

Develop a strategic and structured approach for connectivity between research and

developmentprovidersandthehighvaluemanufacturingandservicessector

Recommendation1.1IRLshouldevolveintoanewPlatformforIndustryorganisation,as

Advanced Technology New Zealand (ATNZ), which would focus primarily on industry

demandledresearchanddevelopmentcontractworkandwoulddeliverexpertiseacrossa

selectedrangeofadvancedtechnologyplatforms

(i) Assumingits

new

form,

ATNZ

would

extend

its

industry

development

project

supportactivitiesanddownsizeitsbasicresearchprojects.

(ii)Consideration shouldbegiven tomovingselected researchplatforms from IRL to

oneormoreuniversitiesor,possibly,tootherCRIs.

(iii)Thesignificantmajorityoftheprofessionalstaffshouldbeengineersandthosewith

applied science skills, including those in new and emerging areas of interest to

business.

(iv)TwoadditionalsitesforATNZshouldbeestablished,oneinChristchurchandonein

Auckland.Therelativesizeandscopeof thesesiteswouldbebasedon the likely

demand and industry sectors in these locations. The universities in each of the

three citieswhereATNZ is locatedwould collaborate on this initiative andhelp,

where needed, in the transition and establishment phase by facilitating such

aspects as joint appointments and possibly with temporary physical facilities.

(Detailedrecommendationsonrolesand fundingappearasRecommendations19

and20inChapter4.)

Recommendation 1.2 Government should give consideration to combination,

rationalisationor coordinationof related research themes,operating structuresorother

business arrangements for closely related research organisations. This should be done

where itwouldenable theseorganisations toexchangeknowledge,betterallocate fundsfor incomingprojects,use human resourcesmore effectively and run commercialisation

unitsthathavemorescaleandeffectiveness.

Recommendation 1.3 In certain sectors (for example, agritechnology and other service

sectors)wheremanysmall tomediumsizedenterprises(SMEs)aregenericallysimilar,the

Panel recommends developing an industry engagement strategy for more effective

outreachbyCRIs,andotherresearchinstitutesandassociationstoensurebetteruptakeof

technologies.Theseactivities(forexample,industrysectoradvisorprogrammes)couldtake

placeincooperationwithindustrybodies.

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Recommendation 1.4 The establishment of further universityCRIindustry research

consortiashouldbeexploredinadvancedtechnologysubsectors,withmatchingfundingby

government and industry. Each consortium should include at least two research

organisationsandtwo industriessubmittingajointproposalunderacompetitiveprocess,

on a project initiated by the industry partners. The associated IP commercialisationframeworkwouldbedesignedtoincentiviseindustrytoparticipate.

CapabilityandCommercialisationEnhancingtheInnovationCulture

Connectivity,StaffMobilityandIPBenefits

Recommendation2

Enhance connectivity between research organisations, tertiary education institutions and

industry, throughmore flexiblearrangements foremployment, IP rightsandbenefits,and

incentivesfor

staff

mobility

and

engagement

in

commercialisation.

Promote

R&D

awareness

andknowledgeaccessschemes.

Universities

Recommendation 2.1 Introduce more flexible university employment and IP benefits

incentivestoencouragestaff,subjecttomeetingagreedteachingandresearchduties,to:

(i) Undertakepaidconsultancyworkwithbusinessandindustry.

(ii) Take on joint appointments or substantial secondary paid employment with

business and industry at a level that enables New Zealand to match overseasincomelevelsforsoughtafteracademics.

(iii) Facilitateleaveofabsenceforworkinginindustryforperiodsofuptotwoyears.

(iv) Engageincommercialisationandindustryrelationships,byadoptingamoreflexible

and generous policy towards the percentage of the researcher share in the

commercialisation revenues and ensuring that full national and international

patentsaregivencreditforacademicpromotion.Insomecases,aresearchershare

ofIPbenefitsof50%orhighermaybejustified.

Relatedincentivesarerecommendedforthepolytechnicsectorwhereastaffmemberhas

technologicalknowledgethatisindemandfromindustrypartners.

CRIs

Recommendation2.2IntroduceincentivesforCRIstaffto:

(i) MoveintoindustryafteraperiodofemploymentintheCRIsectortotransferR&D

capabilitytoadvancedtechnologyindustries.

(ii) Engagewithcommercialisation,byadoptingastandardpolicythatallowsashareof

IPbenefitsintheformofaperformancebonusorroyaltysharetoresearcherswho

areactivelyinvolvedinsuccessfulcommercialisationinitiatives.

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MoreFlexibleApproachestoIPRights

Recommendation2.3Tomaximisethepotentialforsuccessfulnewtechnologyinnovations,developmoreflexibleapproachestoIPrightsunderwhichuniversityorCRIIPorspecialist

knowledgemaymoreeasilybetransferredtoanindustrypartnerortoaspinoutventure

fundedbyexternalinvestors.Seekmoreflexibleshareofbenefitsarrangementsthatmay

notnecessarilybeequityorroyaltyarrangements,butcouldbesuccessbased fundingof

staffpositionsorofstudentscholarshipswithorwithoutanequityorroyaltycomponent.

Lookforlongtermpartnershipstoachievelongtermbenefits.

R&DAwarenessandKnowledgeAccess

Recommendation2.4ToenableMSItointroduceR&Dawarenesstoandgainengagementfromindustrysectors,andimprovedaccesstoknowledge:

(i) Create anR&D analogue of theNZTE Better byDesign programme,which helps

NewZealandcompaniesincreasetheirinternationalcompetitivenessbyintegrating

designprinciplesacrosstheirbusiness.

(ii) PromotetheexistingTechNZGlobalExpertschemeandlinkthistothenetworking

and industry advisory capability embedded in the proposed ATNZ (see

Recommendation1.1).

IncreasingCommercialisationfromUniversitiesandCRIs

Recommendation3

Individual commercialisationunits should continue to developor increase capabilityboth

throughembeddedskillsandthroughnetworkedactivity,todeliverhighqualityscreeningof

IPopportunitiesandincreasedgoodqualitycommercialisationdealflownationally.

Recommendation 3.1 Build on current networks of commercialisation units to link all

universities and CRIs, and create the planned National Network of Commercialisation

Centres(NNCC).Thisnetworkshouldalsoenhancelinkagestoindustrypartners.

Recommendation3.2ProvideanNNCCcoordinationoffice thatwoulddeliver support to

the networked commercialisationoffices by facilitating administrative services, database

managementandconnectionstowiderinvestorandtechnicalexpertnetworks. Thiswould

include:

(i) NetworkingtoEconomicDevelopmentAgencies (EDAs),angelandventurecapital

investorgroups,technicalexperts,nationaland international IP lawyersandother

businesses.

(ii) Creationandmanagementofdatabases for technicalexpertise, investorcontacts

andsoon.

PAGE15/27


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(iii) Connection through theATNZhubs (seeChapter 4) tobusinesses and industries

needingcommercialisationadvice.

(iv) Assistance for individual researchorganisationunits to obtain expert input to IP

commercialisation decisions or to connect to similar technologies under

commercialisationinadifferentorganisationinNewZealandoroverseas.(v) Encourage and support networking activity and the operation of regional

crosssectorgroupsineachofAuckland,WellingtonandChristchurch.

(vi) Administrativesupport fornetworkoperationssuchasmeetings, travel,database

maintenance, Preseed Accelerator Fund (PSAF) contract expendituremonitoring

andreporting.

Recommendation 3.3 University and CRI commercialisation units should develop or

increase embedded capability to deliver high quality screening of IP opportunities and

increaseddealflow,through:

(i) Appointment of directors with international business experience, and business

developmentmanagerswiththenecessarytechnologybackgroundstoidentifyand

effectively screen commercialisation opportunities, existing competition and

prospective connections to similar technologies and strategic partners in New

Zealandoroverseas.

(ii) Governance or advisory boards that bring to the commercialisation decision

processawiderangeofknowledgeof,andexpertisein,internationalmarkets.

(iii) Anactivelymanageddatabaseofaccessibletechnicalandbusinessexpertsacrossa

rangeoftechnologieswhocanbesummonedtogiveadditionaladviceonpotential

technologyopportunities.

(iv) The services of the best (international) patent lawyers, aggregating demand if

possible across several institutions and/or commercialisation centres to obtain

servicesatlowercost.

Recommendation3.4Inadditiontotheenhancedaccesstoinvestorsenabledthroughthe

NNCC,universityandCRIcommercialisationunits shouldenhance their linkages toangel

investorsandinvestorsyndicatesandseektoestablishserialsuccessfulcommercialisation

venturepartnerships.

InternationalRecruitmentofSkills

Recommendation4

Implementastudytodeterminewheretheprofessionalskillsgapsare intheNewZealand

research organisations and advanced technology industries. Then launch an international

talent attraction campaign including repatriating talented New Zealanders through a

dynamic Bring Back our Brains programme. The programme would aim to attract top

scientists, engineers andbusinesspeoplewho areworkingoverseas,but also to create a

buzz inNew Zealand during the process. Implement this programme by expanding the

existingRoyalSocietyofNewZealandRutherfordFoundationinitiatives,usingatalentedand

creativeadvertisingfirm,andencouragingtheuniversities,CRIsandindustrypartnerstorun

talentsearch

campaigns

at

the

same

time.

PAGE16/27


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(i) Foruniversities: theprogrammewould includecreatingnewpaidpositions foror

cofundedbytheGovernmentforthreeyears(includingastartupresearchgrant)

andsubsequentlypaidforbytheuniversity.

(ii) Fortheprivatesector:introducetheprogrammetocreatenewpositionscofunded

bytheGovernmentandthecompanyforthepurposesofanewR&Dprogramme

withinthecompany.ThiscouldtakeplaceasapartofcurrentTechNZfunding,fora

definedperiod,forexample,threeyears.

EnlargingtheTalentPipeline

Recommendation5

InordertomeetthedemandforskillsthatareandwillberequiredbyNewZealandshigh

valuemanufacturing

and

services

sector,

current

education

policy

settings

and

initiatives

shouldberevisited.

Recommendation5.1Reviewpolicyontertiaryeducationtuitionsubsidylimits,whichhasled

to capping of enrolled student places, with the aim of enabling universities to enrol

students intheareasofSciencesandEngineering thatare indemand,withoutpenalising

otherdisciplines.

Recommendation 5.2 Reinforce initiatives to engage underrepresented groups in the

scienceinnovationsystemthroughsecondaryandtertiaryeducation(forexample,women

remainunderrepresentedamongengineeringgraduatesandMoriandPasifikaareunderrepresentedmoregenerallyinthesciencedisciplines).

InternationalCollaborationandAgreements

Recommendation6

ThePanel recommends thatNew Zealand should research and subsequently increase the

number of international research and development collaboration agreements in strategic

areas for theHVMSS, inboth large research infrastructureandareasofbasicandapplied

researchthatsupportcapabilitydevelopmentinthiscountry.R&Dcollaborativeagreements

betweenspecific

companies

and

overseas

partners

should

also

be

encouraged.

Recommendation6.1Pursuetargetedbinationalandcompanytocompanyagreementsin

science and technology areas that support the HVMSS. Binational agreements for co

fundedresearchprojectscouldbepursuedwithcountrieswherethereareexisting(largely

unfunded)cooperationagreementssuchasChina,Japan,Korea,France,Germanyandthe

UnitedStatesofAmerica,butalsootherssuchasAustralia,Taiwan, IsraelandSingapore.

This should include continuing negotiation for improved access to international

organisations like the European Commission Framework Programme for Research and

TechnologicalDevelopment.

PAGE17/27


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Recommendation 6.2 the Panel recommends continued and new membership in

megaresearch infrastructure projects in order to participate in advanced international

scientific research that requires shared infrastructure investment. Examples of existing

participationincludetheAustralianSynchrotronprojectandtheEuropeanOrganizationfor

NuclearResearch(CERN)LargeHadronCollider.Prioritiesforsuchmembershipsshouldbereviewedeveryfiveyears.

RaisingAwarenessinBusiness

Recommendation7

Increasevisibilityandawarenessof technologydevelopmentsand thevalueof innovation

andthesuccessesachievedbythesectorthroughnetworkingandpromotionalevents.

Recommendation 7.1 The formerly TECfunded Priorities for Focus (PFF) technology

showcase events currently hosted by university research, and commercialisation officesshould be extended to continually increase mutual awareness of R&D capability and

innovationopportunitiesbetweentheuniversity,polytechnic,CRIandindustrysectors.

Recommendation7.2InthecaseofCRIs,tertiaryeducationinstitutionsandotherresearch

organisations, the seniororganisational leadership should increase thepromotionofand

publicity for successfulbusinessindustrypartnerships and technology commercialisation

from research, tomotivate theirorganisations tomove towardsamoreoutwardlooking

innovationculture.

InvestmenttoCatalyseInnovation

PrioritisingandDrivingValuefromGovernmentInvestment

Recommendation8

Whilemaintaining sufficient investment capability to foster serendipitous discovery and

innovation,MSI should select a numberof advanced technologyplatforms as a focus for

TechNZ funding of R&D. In order to achieve scale in particular industries, New Zealand

shouldconcentrateonnicheareas,forexample,biotechnology,processing,electronicsand

embeddedsystems,

mechatronics

and

robotics,

sensing

and

scanning

devices,

medical

technologies, advanced materials and manufacturing technologies (including plastics),

pharmaceuticals (only to early IP licence stage), agritechnologies, digital and ICT

technologies. The basic research focuses of Recommendation 14.1 would service these

platforms.

Recommendation9

TheinvestmentinTechNZgrants,includingTechnologyDevelopmentGrantsandTechnology

TransferVouchersand thePreseedAcceleratorFund,shouldbe increasedasprogrammes

become established and industry demand increases. Such grants should continue on a

partnerco

funding

basis.

In

future

policy

design,

the

Government

should

consider

models

PAGE18/27


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thatprovideforrepaymentofaproportionofagrantwherethe fundedprojecthas ledto

commercialsuccess,toallowforreinvestmentbackintotheTechNZinvestmentfund.

Recommendation

10

Maximiseearly stage internationalmarket intelligence input into technologydevelopment

funding.MSI should continue and enhance its collaborationwithNZTE to provide better

market information, inparallelwithMSI, early in the investment process. Thiswill inject

additionalhighqualitymarketinputintothedecisionprocessarounddevelopmentsupport

foradvancedtechnologyprojectsatasearlyastageaspossible.

Recommendation11

Continue themove towards collaborative investment in large research infrastructure, as

exemplified by the planned investment in High Performance Computing. New highcost

physicaland/or

communications

infrastructure

that

is

required

for

clusters

of

industries

and

universityresearchgroupsshouldbeestablishedonacooperativebasisandlocatedtobest

servethecommunityofresearchers (inuniversities,CRIsand industry)andonthebasisof

cofundingwhereappropriatebypartnerindustries.

Recommendation12

Leveraging private sector investment is a key factor and important for all government

investmentinprivatecompanies,butconsiderationofagraduatedscaleofcofundingmay

provideanincentiveforengagementofnewplayers.

Recommendation12.1 Industrycofundingshouldcontinuetobeusedforallgovernment

investment in private companies, with the level of the matching customised for each

programme of support. To engage new participants in schemes such as the Technology

TransferVoucher,agraduatedscaleofcofundingshouldbeexplored,whichcouldprovide,

forexample,amore substantialgovernment fundingcomponent for smallcompanieson

theirinitialprojectengagement.

Recommendation 12.2 Government should continue to collect and use for future

investment decisions statistics on commercial success of companies that have received

governmentfunding.Amongotherthings,thiscanbeusedasapublicrelationsfactorto

attractmoreprivatefundingtoR&Dandtoassistfuturegovernmentfundingallocations.

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TheBigPictureHowtoMakeanEvenGreaterImpact

OversightandLeadership

Recommendation13

Form a Science and Innovation Council, led from a very senior ministerial level in

Government, with representatives from the university, public and private research

organisations and from industry.Members should represent awide rangeof science and

technology themes, including the social sciences. The role of the Science and Innovation

Council should be to establish a national innovation strategy and advise on science and

innovationpolicyandpriorities.

ReinforcingtheBasicResearchPlatform

Recommendation14

The Panel recommends thatNew Zealandmaintain its commitment to basic and applied

researchthroughMSIandothergovernmentsciencefunding,but,asfundingincreasesallow,

givemoreemphasistoengineeringandthephysicalsciences.

Recommendation 14.1 Along with investments in life sciences, New Zealand should

prioritiseareasofresearch inengineeringandthephysicalsciencesthatareessential for

innovation in advanced technology, including computer science, mathematics,

neuralcomputation, mechatronics, robotics, smart devices and embedded systems,

information and communications technologiesandmedia.New Zealand shouldprioritise

areas of the scienceswhere it is capable of playing a leading role given its capital and

capabilitybaseandwherethereisthepotentialtodeliveradvancedtechnologyproducts.

Forexample,theapplicationofcomputerscienceandmathematicsinneuralcomputation

ormobilehealthproducts,mediaandcybersecurity,areareasthatofferthepotentialfor

highvalueexports.Advanced research in, forexample,agriculture,oceanography,water,

aquaculture,geologyandforestryandbioecology,shouldcontinueatboththebasicand

appliedlevels.Amongotherfactors,theseareessentialtoensuringlongtermsustainability

ofourlivingenvironment.

Fundingsupportwouldbethrough:

individualgrantsandscholarships

collaborationgrants(forresearchersfromdifferentuniversities,CRIs)

interdisciplinaryandemergingtechnologiesgrants(forcrossdisciplinaryresearch)

CentresofResearchExcellence(CoREs).

Recommendation14.2Maintain, in real terms, theexisting levelof funding forbasicand

appliedresearchthroughMSIandothergovernmentsciencefundingagencies.Thisfunding

should be part of awider longterm agenda to increase funding levels into the tertiary

educationandCRIsectorstoprovideworldclassfacilitiesandenabletheappointmentand

retentionoftopstafffromtheinternationaltalentpool.

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EducationCreatingtheNextGenerationofInnovators

Recommendation15

Introduce initiatives toproduce anew generationof youngpeople inspired tomove into

creativeand

entrepreneurial

careers

in

the

Sciences

and

Engineering.

Recommendation15.1 Inordertobegin fillingthe funnelatanearlyage, launchamajor

national campaign encouraging young people to choose science and engineering career

paths. This campaign should include success stories of startups in the media, science

programmeson television, schooladvisorsconnecting scienceeducationwith technology

advances, sustainability and nature conservation, presentations in schools, and, for

example, rolemodels presenting to groups of sciencegifted girls,Mori and Pasifika. It

shouldincludesocialmediacampaignsaswellastraditionalmedia.Growthinnumbersof

graduatesultimatelymovingintocareersinthesciencesandengineeringmustbebalanced

bymanychoosingcareersinbusiness,designandthecreativeartstoensurethatavibrant

innovationculturecontinuestoevolve.

Recommendation15.2EstablishnewgovernmentfundsforPhDscholarshipsinthepriority

areas of Applied Sciences and Engineering (see also Recommendation 15.3) for R&D

capabilitybuilding.These scholarships shouldbe larger than theusual typeofuniversity

PhDstipend.Theyshouldbeprestigiousandcompetitive.

Recommendation15.3 Increase funding into theexistingMSI capabilitybuilding schemes

(suchas thecurrentTechnologyFellowships) toenhance the levelofknowledge transfer

intoindustrysectorsandcapabilitybuildingthrough:

(i) IndustrybasedandcofundedMastersandPhDprogrammesinappliedscienceand

engineering.Universitieswould build partnership programmeswith industries in

their region. Studentswould spend thebulkof their time in the companyunder

jointsupervisionoftheuniversityandtheindustrypartner.AflexibleapproachtoIP

rights should go handinhand with this scheme, with agreement at the

commencementofprojectsontheallocationoffinancialbenefitsthatwouldfollow

successfulcommercialisation.

(ii) Industrycofundedemploymentofgraduates inscienceandengineering.This isa

partnershipschemeinwhichrecentgraduatesorpostgraduatestudentsworkonanindustrybasedproblemwherethesupervisingacademicandindustrypartnersgive

jointoversighttotheprojectbasedemployee.

Recommendation15.4Developanewgenerationofgraduateswithinternationalbusiness

skillsthataddresstheshortageidentifiedbyvariouscommentators15

byensuringthatNew

Zealand has a premier international business school, probably based in Auckland. This

shouldevolvethroughenhancementofpresentprogrammesatoneoftheexistingbusiness

15NewZealandInstitute:StandingontheShouldersofScience:GettingMoreValuefromtheInnovationEcosystem,2009;AGoalisNotaStrategy:FocusingEffortstoImproveNewZealandsProsperity,2010;andPluggingtheGap:AnInternationalisationStrategy,2010(availableatwww.nzinstitute.org.nz).

PAGE21/27


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schoolsorasacollaborativeventureacross twoormore.Student internationalbusiness

entrepreneurshipprojectswouldbeintegraltotheacademicprogramme.Itshouldinvolve

successfulNewZealandinternationalbusinessentrepreneursinguestteaching,mentoring

andsponsorshipofacademicpositionsandscholarshipsintheschool.

AcademiaEngagementwithBusinessandIndustry

Recommendation1616

If the TECPerformanceBasedResearch Fund (PBRF) continues in (or close to) its present

formafterthe2012PBRFQualityEvaluation,introduceaseparatebutsimilarlyperformance

basedfundthat:

(i) Recognises excellence in innovative work in the areas of applied sciences,

architecture,design,engineeringandtechnology.

(ii) Would

likely

be

linked

to

business

and

industry

co

funding

for

postgraduate

studentsand/orpartneredprojects.

MakingandIncentivisingInvestmentinAdvancedTechnologyBusinesses

Recommendation17

ThePanelrecommendsthattheNewZealandGovernmentshouldtakeproactivestepstolift

theleveloflocalandforeigninvestmentintheNewZealandHVMSS.

Recommendation 17.1: The Government should court multinational companies to

establishlocal

industry

collaborations

and

establish

R&D

facilities

in

New

Zealand.

Ideally,

such initiatives shouldbe led from thehighestpolitical level (in some countries thishas

beenthePrimeMinister)andshouldincludeincentivesforforeigndirectinvestment.

Recommendation17.2:TheGovernmentshouldtakestepstoattractinternationalventure

capital to invest in new startup companies, and other foreign direct investment into

established industries,by raisingongoingawarenessof theopportunities inNewZealand

andconsideringotherincentives.

Recommendation 17.3: The Government should encourage the investment of a small

proportion (for example, 1%) of the New Zealand Superannuation Fund and Accident

CompensationCorporation FundinadvancedtechnologycompaniesinNewZealand.

TheGoalofIncreasedInvestmentBothPrivateandPublic

Recommendation18

SetatargetofmatchingOECDaveragepublicsectorinvestmentinR&Dwithin10yearsand

using increased investment to leverage private sector investment. This recommendation

16Note:AsPrincipalModeratorforthe2012PBRFQualityEvaluationandpotentiallyinvolvedinthe2018PBRFQualityEvaluation

design,thePanelChairfeltitnecessarytostandasidefromthisrecommendation.

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addressesthecountryslongterminvestmentinR&Dandshouldbethesubjectofafollow

upproject.

Recommendation18.1 Increasepublic fundingby2.5%perannumormore in real terms

overa10yearperiodtoplacepublicinvestmentinresearchandinnovationatleastattheOECD average level. The Panel believes the eventual target should be above theOECD

averageinordertodriveperformanceintheinnovationsector.

Recommendation18.2Usetheincreasedpublicfundingtoleveragesignificantlyincreased

innovationinvestmentfromtheprivatesector.Thetargetfortheprivatesectorinvestment

increaseshouldbemuchhigher.Itisinstructivetonotethatfortheprivatesectortoliftits

investmenttotheOECDaveragein10yearswouldrequirea30%perannumincrease.

RolesandFundingofATNZtheFutureofIndustrialResearchLimited

Recommendation19 ATNZBusinessModel:OperatingStructureandRoles

The Panel recommends that the ATNZ should have an operating structure and roles as

follows:

(i) ATNZwouldbeaCrownownedcompany,operatingonthebasisofreinvestment

of any operating surpluses and drivenby industry needs rather than blueskies

research.

(ii) TheemphasisforATNZwouldbeondevelopmentratherthanresearchbutit

wouldretain

some

embedded

science

and

engineering

research

capability

and

would linkstronglytouniversitiesandotherresearchorganisationsaswellasto

industry.

(iii) ATNZ science and engineering staff would be engaged primarily in marketled

industry projects in both technology and market identification and

characterisationroles.

(iv) ATNZwouldbegeographically locatedatkeysites inAucklandandChristchurch,

butwithcontinuationandtransitiontothenewfocusattheWellingtonGracefield

site.Establishmentofthetwonewsiteswouldbeginassoonaspossible.

(v) Ideally,theATNZsiteswillbecollocatedwithtechnologystartupcompaniesand,

possibly,specialisttechnologyresearchcentres.

(vi) ATNZwould be framed around a series of advanced technology platforms that

relatetoitsindustrysectorfocuswhicharenotcoveredbysectorspecificCRIs.

(vii) TechnologyplatformsforATNZcouldinclude:

Microelectronics and embedded software systems (a generic field covering

medicaltechnologies,electronics,mechatronicdevicesandothers)

IT&Telecommunications

Electrooptics

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Alternativeenergysystems

Advancedmaterialsandnanotechnology(includingplastics)

Advancedmanufacturingtechnology

Marinetechnology

Future:Nanobioelectronics.

(viii) At the time of the creation of ATNZ, consideration should be given tomoving

selectedresearchplatformsfromIRLtooneormoreuniversitiesortootherCRIs.

(ix) SomeR&DspecialisationsthatcurrentlyexistinotherCRIscouldbeconsideredfor

transfertoATNZ,orviceversa,ifthiscontributestocreatingrelevantcriticalmass

ofrelatedR&Dactivity.

(x) ATNZwouldprovidealocationforshareduseofhightechnologyR&Dequipment

andITservices.

(xi) ATNZwouldofferaportalforinformationorspecialisedknowledgeenquiriesfrom

theindustrysector,alsoprovidingconnections intomoresectorspecificresearch

institutionsandassociations.

(xii) TheATNZsiteswouldofferahubforindustryinstitute(includingCRIs)academia

networking, joint project activity and for connection with other R&D service

providers such as specialist research centres, the NNCC, incubators, research

associationsandprivateresearchlaboratories.

(xiii)

ATNZ

would

aim

to

create

an

internal

culture

that

encouraged

the

mobility

of

staff

to feed talent into industry sectors. Most scientists and engineers would be

expectedtoremaininATNZfornotlongerthan10yearsandwouldbesubjectto

incentivestomoveintoindustries.

(xiv) TheATNZshouldwork inassociationwiththeMetroGroup17

ofpolytechnics,to

providestaffconsultancytoindustryonproductand/orprocessdevelopmentand

on production problemsolving projects on a subsidised basis. For example,

projects couldbeeffectively cofunded through apartial inkind contributionof

staffandstudenttime.

Recommendation20 ATNZBusinessModel:GovernanceandInvestment

ThePanelrecommendsthattheATNZshouldoperateunderthefollowinggovernanceand

fundingframework:

(i) ATNZwouldhavean independentGovernanceBoard appointedby the relevant

Ministerswithamajorityofbusinessappointees(includingtheChair).TheBoard

would include representatives from the applied science/engineering research

sectoraswellasinternationalmembers.

17 TheMetroGroupconsistsof:ChristchurchPolytechnicInstituteofTechnology,ManukauInstituteofTechnology,OtagoPolytechnic,UnitecInstituteofTechnology,WaikatoInstituteofTechnologyandWellingtonInstituteofTechnology.

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(ii) ATNZwouldreceivecoregovernmentfundingbutwouldbetaskedwithleveraging

governmentfundingwithatleastequalfundingfromindustrylinkedcontracts.It

isexpectedthatthelevelofindustrycontributiontoprojectfundingwouldrange

fromhalftotwothirdsofthetotalcontractvalue.

(iii) ThefuturesizeofATNZwoulddependontheavailable investmentenvelopeand

industrydemandandcoinvestmentbutthePanelforeseesaneffectivetargetsize

ofbetween600and1,000professionalfulltimeequivalent(FTE)staff(currentIRL

staff320)acrossthethreesites.Thesignificantmajorityoftheprofessionalstaff

shouldbeengineersandthosewithappliedscienceskills includingthose innew

andemergingareasofinteresttobusiness.

(iv) ATNZanditsindustrypartnersshouldbeabletouseprojectfundingflexiblyacross

project costs, including labour, financial and legal services, equipment and

consumables,subjecttomeetingindependentexternalauditrequirements.

(v) Amongkeyperformance indicators forATNZ, the following, ifable tobe clearly

linked toATNZ interventions,wouldhelp show thatATNZwas succeeding in its

partnershipswithindustry:

Revenue growth and export market development of project partner

companies.

Employment growth in existing companies or in new companies that are

createdthroughATNZindustrypartnerships.

Thenumberofnewproduct launchesasaresultofprojectpartnershipswith

existingpartner

companies.

The amountofnew foreign investment securedby companies as a resultof

project

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Sevenpriorityactionswillsetthestageforconstructivechange

AllofthePanelsforegoingrecommendationsareconsidered importanttogivean integrated

suiteofactionsthatwoulddrivechangeacrossdifferentgroupsandsectorsthatcontributeto

New Zealands innovation system. In the following, thePanelhas setdownwhat it sees aspriorityactionsthatsetthestageforconstructivechange.

Priority1

1. CommencethereshapingofIRLasATNZ.(Recommendations1.1,19and20).

2. Setupdialoguewithingovernmentonreviewingthepolicyontertiarytuitionsubsidy

limits, in relation tomeeting industrydemand forgraduates inareasof theSciences

andEngineering.(Recommendation5.1).

3. Proceed with the National Network of Commercialisation Centres, concurrentlypromoting stronger commercialisation units in the research organisations.

(Recommendation3).

Priority2

4. SetupajointMSIMoEInnovationTaskForcewithuniversities,CRIs,polytechnicsand

industryrepresentativestoworktowards:

More flexible employment andperformance incentive arrangements to enhance

R&Dcollaboration,staffmobilityandknowledgetransfer.

More open IP management strategies to better support national economic

development.(Recommendation2)

5. Whileremainingopentoserendipitousadvancedtechnologyopportunities,determine

priority investment areas based on the NZTEmarket input and identified advanced

technology platforms for industry, and focus new investmentmore heavily in these

areas, increasing investments inpartnercofundedgrantschemessuchasTechnology

DevelopmentGrants,TechnologyTransferVouchers,PreSeedAcceleratorFund,Global

Expert, and Technology Fellowships in the priority areas as budget allows.

(Recommendations8,9,10and15.3)

LongtermStrategicPriorities

6. Form a Science and Innovation Council, led from a very senior ministerial level in

Government, and develop a longterm science and technology investment strategy.

(Recommendations13and18)

7. WorkingacrossMSI,MoE,MED,implement:

Acampaigntoattract internationalandNewZealandcitizentalentfromoverseas

toNewZealandtofillessentialcapabilitygaps.

A major young brains into science and engineering campaign, supported by

scholarships.

(Recommendations

4,

15.1

and

15.2)

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Appendix:IndependentPanelMembers

ProfessorJohnRaine(Chair)istheHeadoftheSchoolofEngineeringandProViceChancellor

InnovationandEnterpriseattheAucklandUniversityofTechnology. Johnhashad long terminvolvement in setting up university commercialisation operations, and was cofounder of

WhisperTech Ltd, the Canterbury Innovation Incubator and the HITLabNZ. He has been a

member of the MED Design Task Force, and the Governance Boards of the MacDiarmid

Institute for AdvancedMaterials andNanotechnology, and of IPENZ. He is currently chairs

REANNZLtd,theCrownownedCompanymanagingtheKARENadvancedbroadbandnetwork,

and is Principal Moderator for the 2012 TEC Performance Based Research Fund Quality

Evaluation.

ProfessorMinaTeicheristheDirectorofEmmyNoetherResearchInstituteforMathematicsat

BarIlanUniversity.MinahaspreviouslyheldpostofChiefScientistattheMinistryofScience

CultureandSport andDirectorGeneralat theMinistryof Science andTechnologywith the

Israel government.Mina is currently a member of the Uniservices Stage Gate Investment

ManagementCommittee.Minaiswidelycreditedforthedevelopmentoftheinnovationsector

inIsrael.

PhilOReilly is theChiefExecutiveofBusinessNZ,NewZealands largestbusinessadvocacy

group, representing thousands of businesses of all sizes. Phil chairs the Capitalising on

Research and Development Action Group (CRAG) and the Governments Green Growth

AdvisoryGroup.PhilisamemberoftheMSIInnovationBoardandwaspreviouslyamemberof

theBoardoftheFoundationforResearchScienceandTechnology.Heisalsoamemberofthe

Council of the Royal Society ofNew Zealand. Internationally, Phil represents New Zealand

employers at the International Labour Organisation (ILO) and is a Board Member of the

Business&IndustryAdvisoryCounciltotheOECD.

HVM Review Overview Report

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