Business R&D spend rises – Expert reaction

New Zealand businesses increased their research and development spending by more than 15 per cent in the last year, according to Statistics New Zealand.

ScopeThe findings come from the latest Business Operations Survey undertaken by Statistics. According to the survey, business spending on R&D has grown from $1.25 billion in 2014 to $1.44 billion in 2015.

“These are very encouraging numbers,” said Science and Innovation Minister Steven Joyce in a media release. “They show that the work the government is doing through Callaghan Innovation and the R&D Grants programme is helping have the desired effect of growing New Zealand’s Business R&D activity.”

The Science Media Centre collected the following expert commentary.

Dr Trinh Le, Fellow at Motu Economic and Public Policy Research, comments:

“As a first pass, the increase in reported R&D spending is good news. It’s not surprising though, given the significant boost in government subsidies on business R&D through the creation of Callaghan Innovation. The first approved spending from the Callaghan scheme would have started in the tax year 2014-2015, which is the tax year covered by Business Operations Survey 2015.

“Many Callaghan grants are co-funding, requiring businesses to spend a certain amount on R&D. The increase in reported R&D spending might in part reflect some reclassification in order to qualify for the grants, without the actual increases.

“R&D spending is only an input in the innovation process; it’s innovation output that matters to economic growth. We’ll need to wait and see if the increases in R&D spending will translate into increases in innovation output.”

Prof Shaun Hendy, Director of Te Punaha Matatini, and Professor of Physics, University of Auckland, comments:

“It’s really very encouraging to see the growth in research and development in the business sector. Business R&D is crucial for our economy’s productivity, and both are much lower in New Zealand than in other comparable countries. While this year’s increase in business R&D is large, we will need to sustain this for 6-7 years to just reach the OECD average. Minister Joyce will be relieved as he has had his chequebook out for the last few years, and has dramatically increased subsidies for business R&D. ”

Prof John Raine, Pro Vice Chancellor – Research and Innovation, Auckland University of Technology, comments:

“This is good news but not entirely surprising as the collateral Callaghan Innovation investments will have helped stimulate business investment. Has the Callaghan Innovation investment been included in the Business R&D figure? If so, the true increase in business expenditure on R&D would be somewhat less than the 15% figure given. If this figure is net of the Callaghan Innovation co-investment then this is better news.”

What could be the main drivers behind the increase?

“Possibly the government co-investment, but also a recognition by more companies, particularly in the high value manufacturing and IT sectors, that R&D investment is vital to enable growth and avoid stagnation or decline.”

Is this likely to change our standings in OECD measures (e.g. R&D as a percentage of GDP)?

“Without being able to see comparative OECD trend figures I cannot comment on this other than that we are well below the OECD average. Any upward movement is good but this change will still see the aggregate gross expenditure on R&D and business expenditure on R&D sum as a percentage of GDP remain well below the OECD average.”