The recent exposure given to the development of a ‘knowledge-based economy’ has brought about the need for detailed statistics on business innovation. Innovation has been cited as a key factor in sustaining economic growth, and in developing a more flexible New Zealand economy capable of competing successfully on the international stage. This report aims to present a statistical picture of the current state of business innovation in New Zealand.
The information presented in this report was collected in the Business Practices Survey (BPS) conducted in June 2001. The BPS was the first economy-wide survey of business practices in New Zealand and was jointly sponsored by the Ministry of Economic Development (MED); the Ministry of Research, Science and Technology (MoRST); and Statistics New Zealand. The BPS collected information on three aspects of business activity: use of IT, innovation, and management practices. Initial results from the survey were released in January 2002. This is the second of three reports, each taking a detailed look at one of the main survey themes.
Overview
What is Innovation?
An innovation is the result of new or recent developments or applications in science, technology or other knowledge areas, or the result of new combinations of existing technology. For the purposes of this report, an innovation does not have to be new to the market, but rather new to a firm. There are two forms of innovation discussed in this report:
- Product innovation was defined as new or significantly improved products (goods or services) offered by businesses to their customers. A new or significantly improved product was counted as an innovation if it had significantly different technological characteristics or intended uses than the existing products. Fashion or aesthetic changes did not count as a product innovation.
- Process innovation was identified as new or significantly improved production processes introduced by businesses, including new ways to supply services or deliver products.
For the purposes of this report, firms which have introduced an innovation (product innovation, process innovation, or both) in the last three years are referred to as 'innovators'. Firms which have not introduced a product or process innovation in the last three years are referred to as 'non-innovators'.
Who innovates?
- Sixty-eight percent of New Zealand private sector enterprises introduced an innovation in the three years ended June 2001. Forty-two percent of firms introduced both product and process innovations, while a smaller proportion introduced product-only innovations (19 percent), and process-only innovations (7 percent).
- The proportion of New Zealand firms that introduced an innovation increased with business size. Eighty percent of large firms (those with 50 or more full-time employees) introduced an innovation, compared with 66 percent of small firms (those with 6 to 19.5 full-time employees).
- The manufacturing sector had the highest rate of innovation in the economy (79 percent of firms). In particular, 87 percent of firms in the petroleum, coal and chemical manufacturing industry introduced an innovation. Fifty-six percent of firms in the primary sector introduced an innovation, and 67 percent of firms in the services sector introduced an innovation.
- The survey suggests that the level of innovative activity carried out by New Zealand enterprises is at least equal, if not higher, than that indicated in a survey of European Union (EU) countries. The level of innovation in the New Zealand manufacturing and services sectors (the EU survey excluded the primary sector) was higher than that of all EU countries. The differences were most pronounced in the primary product processing industries such as food, beverages and tobacco; textiles and leather; and wood, pulp and printing. The gap in knowledge industries such as machinery and equipment; electrical and optical equipment; and computer activities was smaller.
How do businesses innovate?
- The survey results indicated that product innovations were more reliant on externally developed mechanisms than process innovations. Twenty-one percent of product innovators relied on external resources (outside the business) compared with 8 percent of process innovators.
- Competitor benchmarking emerged as the most important source of information and ideas for innovative firms (85 percent). Books, trade journals, conferences and shows (81 percent); and industry and employer associations (62 percent) were also important sources.
- Of the New Zealand firms that invested in innovative activities in the year ended June 2001, the majority (82 percent) invested up to 20 percent of their total expenditure on innovative activities, with most investing 5 percent or less.
- Sixty-one percent of innovative businesses invested in machinery and equipment related to the introduction of new or significantly improved products, while over half of innovators invested in employer training.
The impact of innovation on businesses
- Innovation appears to have an influence on business performance. The survey results indicate that innovative businesses are more likely to record an increase in market share, profitability and total sales than non-innovative businesses. For instance, 60 percent of innovative businesses recorded an increase in market share compared with 45 percent of non-innovative businesses.
- The largest single obstacle identified by New Zealand businesses to developing new or significantly improved products was the nature of the economic climate (29 percent). Lack of access to capital was identified as another significant barrier (27 percent).
- As expected, innovators used more up-to-date technology to produce the business’s main goods and services compared with non-innovators. In addition, it seems the rate of change in technology, and management and operating systems, was greater in innovative businesses in the last three years.
- Seventeen percent of innovators used copyrights or trademarks to protect their innovations in the three years ended June 2001, while another common form of intellectual property protection was supply agreements (15 percent).
- The survey results indicate that innovators are more likely to export than non-innovators. Twenty-eight percent of innovators exported, compared with 16 percent of non-innovators. Fourteen percent of innovators had a medium to high export intensity, compared with 9 percent of non-innovators.
Printable version
The 'Innovation in New Zealand 2001' report is available to view as an Adobe Acrobat file. If you do not have the Adobe Acrobat Reader you may download the reader to view or print the contents of the available file.