We’re all proud of the fact that New Zealand is a country of thought leaders and innovators. They are qualities which have their roots in our country’s isolation.
Until goods could be quickly and reliably transported around the world, our predecessors had to find their own solutions to problems, improvise and make anything from whatever was lying around – for the earliest inhabitants this tended to be lengths of No. 6 flax. Subsequent settlers were equally inspired by No. 8 wire. It was a case of adapt and innovate, or be very uncomfortable.
Geographic isolation also led to the development of other national characteristics such as a willingness to work together and help others. Survival and progress depended on sharing ideas and successes, and to this day we have a tendency to give ingenious ideas away (or not prevent other from taking them) without regard to their potential value.
Infamous examples of this generosity abound - effective refrigerated shipping is one. Kiwis worked out how to do it, then allowed the Australians to use it to sell frozen meat abroad in competition to us.
The re-sealable tin lid is another example. This ubiquitous invention should have made John Eustace of Dunedin very rich, but instead British companies who realised it wasn’t patented made the millions.
Then there was Earnest Godward’s egg beater; another great Kiwi invention which led to that other famous Kiwi creation - the pavlova, which we lost before we had time to lick the beaters clean.
More costly still, we pioneered the industry standard Hayward variety kiwifruit and subsequently enabled others to grow them. And being the good sports we are, we also let everyone use the KIWIFRUIT brand, until it ceased to be one.
Kiwis just keep on developing stuff, and letting it go. For free. But times have changed. We’re now part of a 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 small corner of the world and making money from our intellectual property in the lucrative Asian, European and North American markets.
Unfortunately New Zealand businesses wanting to do just this are swimming against a tide of local business naivety and unhelpful government policies.
In the recent past, when international prices were low for the primary product commodities our economy so relies on, successive governments talked up the need for a knowledge economy. However, as soon as better commodity prices returned, policy makers re-embraced what they understood – farming.
We kid ourselves that all is well; that New Zealand’s economy will always do OK because of our ability to produce quality agricultural and horticultural goods cost efficiently, and charge a premium because we’re apparently 100% pure. However if you’ve tried vine ripened Chilean kiwifruit, you should start to feel a bit nervous. And 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 carrying 50,000 cows on pasture that grows all year round producing 3 times the grass of a lush Waikato paddock. Serious competition is on its way and we’re one major bio-security screw-up away from becoming a struggling peasant economy.
There are other alarming signs that the New Zealand economy has too many cowpats in the wrong basket. Despite our economic growth in recent years, our global ranking for GDP per capita (which is indicative of our standard of living) is declining with alarming speed. In 1900 New Zealand was ranked No.1 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. But then by the end of 2013 we had plummeted to 46th – that’s almost a 20 place drop in our GDP per capita global ranking in under 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 and our standard of living will gurgle down the plug hole with it.
But it doesn’t have to be this way. According to Global Innovation Index rankings New Zealand is ranked 17th in the world for innovativeness, but 90th in terms of innovation efficiency. In other words, despite a lack of nurturing, our 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.
The value of innovative products and technologies doesn’t blow hot and cold like the commodities on which our economy now depends. If we own the intellectual property in those products we can charge what the market is prepared to pay, rather than be forced to match what our competition in low wage economies can produce them for. And therein lies our problem: the reason why we’re ranked 90th for innovation efficiency – innovative Kiwi businesses tend not to own much of their IP. This may be due to old fashioned attitudes or simple naivety, or it may be that by the time entrepreneurial start-ups have begged and borrowed to get an idea market ready, they’re out of funds to own their IP through the patent and design registration system.
The attitude of many New Zealand business people to IP ownership is out of touch with reality and locked in the past. We have to stop kidding ourselves that no one would be so unsporting as to copy us and that our geographical isolation will protect us. The amount of “R&D” undertaken by camera-toting foreign visitors to the National Agricultural Fieldays is testament to that myth.
Other absurd strategies you might hear from time to time are that through speed of innovation, competitors can be kept one step behind, or that through speed to market we can flood the market with new products so competitors won’t get a look in. Does anyone really believe a little New Zealand company can gain a significant market share internationally by out-innovating or out-manufacturing the quickest, biggest and best resourced manufacturers in the world? Unbelievably, it seems so.
So often we see ingenious local ideas patented in New Zealand and Australia only. The inventors might just as well advertise to the rest of the world that they don’t want to be greedy and their technology is free to whoever wants it.
New Zealand patent filing statistics back this up. In 2007 New Zealanders filed 400 international PCT patent applications. By 2013 this had dropped to around 250. Our nation’s rate of international patent filing is pathetic compared with many countries and there are even some companies overseas that file almost ten times more international patents than the whole of New Zealand does. Indeed, some foreign companies employ more patent attorneys in-house than are currently practicing in New Zealand.
Along with our GDP per capita rankings, our share of the world’s IP wealth is going backwards and successive governments apparently don’t seem to have worked out that we have a problem.
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 business receives no tax incentives for innovating. Compare this to our nearest neighbour Australia, where there is 50% tax deductibility on R&D expenditure.
Our Government also offers no assistance to local companies to own the IP rights they create in order to improve our ‘innovation efficiency’ and facilitate far greater economic benefits from Kiwi ingenuity. Many of the countries we compete against however do.
China for instance offers local companies between 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 – it grows businesses, creates jobs and generates wealth.
Encouraging innovation, supporting clever ideas and businesses, and ensuring New Zealanders own and control their money making ideas could transform the New Zealand economy. The end result would be economic diversification and security; stronger, healthier New Zealand businesses; more jobs, more money and a higher standard of living. It’s a wonder every politician in the country isn’t trumpeting it – but then clever sounding words like “intellectual property” are just a little bit scary for some people.