From earliest times, New Zealand has been a country of thought leaders and innovators.
In the days of pigeon post and wind-blown ships, people had to be resourceful because the chances of receiving assistance and supplies from overseas were zero.
They learned to find their own solutions to problems, improvise and make anything from whatever was lying around — being inspired equally by lengths of flax in the early days to No 8 wire. It was a case of adapt and innovate or be very uncomfortable.
The country's isolation led to the development of national characteristics such as a willingness to work together and help others. Survival and progress depended on sharing ideas and successes.
Unfortunately, we also have the tendency to give our ingenious ideas away — or at the very least not protect ourselves so that others can just take them, without regard for their potential value.
Infamous examples of this generosity are not hard to come by:
In the 1880s, clever Kiwis worked out effective refrigeration for shipping and then allowed the Australians to use it to sell frozen meat abroad in competition to us.
Then there was the re-sealable tin lid. This should have made its Dunedin inventor very rich but instead it was British companies who, realising it wasn't patented, made the millions.
We pioneered the industry standard Hayward variety kiwifruit and then enabled others to grow them. Being the good sports we are, we even let them use the kiwifruit brand — until it ceased to be one.
But times have changed and we're now part of the global economy. The altruism necessary for survival and growth in an isolated community is no longer appropriate.
Our focus must now be on owning and controlling the results of our brilliance beyond our shore and make money from intellectual property in Asian, European and North American markets.
Policies don't help intellectual property
The solution seems simple — except that Kiwi businesses are swimming against a tide of naivety and unhelpful policies.
In the recent past, when international prices were low for the primary product commodities, successive governments talked up the need for a knowledge economy. However, as soon as better commodity prices returned, policy makers returned to what they knew — farming.
We kid ourselves that all is well and that the economy will always do okay because of our ability to produce quality agricultural and horticultural goods cost efficiently — not to mention charging a premium because we're apparently 100% pure.
However, if you have tried vine-ripened Chilean kiwifruit, you would be starting to feel a bit nervous.
And an all out sphincter-clenching fear should set in when you hear of New Zealanders assisting South Americans to convert high altitude tropical land into super productive, low cost mega-dairy farms. These can carry 50,000 cows on pasture that grows all year round, producing three times the grass of a lush Waikato paddock.
Serious competition is on its way and we're only one major bio-security screw-up away from becoming a struggling peasant economy.
And there are other alarming signs for the New Zealand economy. Despite economic growth in recent years, global ranking for GDP per capita (indicative of our standard of living) is declining with alarming speed.
Dropping GDP per capita
In 1900, New Zealand was ranked number one for GDP per capita. As late as 1973, New Zealand was still in the top 10. But in 2005 we had fallen to 27th and by 2011 we were hovering at 32nd.
By the end of 2013 we had plummeted to 46th — that's almost a 20-place drop in GDP per capita global ranking in less than 10 years.
If we continue to eschew an innovative knowledge-led economy and pin our aspirations on producing cheap protein, we will keep spiralling down the GDP per capita rankings.
But it doesn't have to be this way. According to Global Innovation Index rankings, New Zealand is ranked 17th for innovativeness but 90th in terms of innovation efficiency.
In other words, despite a lack of nurturing, traditional can-do innovativeness hasn't deserted us. It's just that in general, we're desperately bad at building profitable new businesses out of good ideas, then taking them to the world market and making some serious money.
If we want a prosperous future, we have to turn this around.
Government policy could help a lot to drive a shift to a more innovation driven economy. New Zealand has one of the lowest rates of R&D spending in the OECD.
Unlike most developed countries, New Zealand businesses receive no tax incentives for innovating. Compare this to Australia, where there is a 50% tax deductibility on R&D expenditure.
The government also offers no assistance to local companies to own the IP rights they create in order to improve innovation efficiency and facilitate far greater economic benefits. However, many of the countries we compete against do.
China, for instance, offers local companies 50-100% funding of their international IP ownership costs through government, regional and local grants. English companies only have to pay 10% tax on profits derived from patented products and technologies. Government encouragement of IP ownership is common overseas.
It is seen as a good thing for a reason — because encouraging innovation, supporting clever ideas and businesses, and ensuring New Zealanders own and control their money making ideas could transform the economy.
The end result would be economic diversification and security; stronger, healthier businesses; more jobs, more money and a higher standard of living.
This article first appeared on nbr.co.nz and was written by Ceri Wells, partner, James & Wells.