New innovation agency stakes out its ground

Callaghan Innovation head Mary Quin

Callaghan Innovation - the new government-funded science, technology and innovation agency - will target high-value manufacturing and service businesses that are already in cahoots with other government export and capital funding agencies.

In its first statement of corporate of intent, tabled in Parliament this afternoon, Callaghan also declares it will stop competing for government science funding and will seek to hive off its non-commercial scientific research to universities and Crown Research Institutes.

"Over the first six months of the 2013-14 year we will be engaging in a process with our research teams and with universities and CRIs to finalise which teams will transfer from Callaghan Innovation creating the best fit for the longer term, and ensuring a smooth transition," the SCI says.

However, it will also seek to create an innovation "hub" at its existing Gracefield campus, in Wellington, by attracting high-growth potential firms, undertaking applied science for commercial application, and keeping some of the pure science effort taken up by new owners for collaboration on-site.

With a $249 million annual budget, $141.5 million of which is for direct grants, Callaghan also proposes to invest in a social media and search platform called Avatar to connect access to its services, national technology networks, and to allow information-sharing and job opportunities.

"Avatar will require a high level of IT innovation and expertise and will be developed in phases."

It is understood the Callaghan board and ministers debated at length over what kind of firms to support and has plumped in the end for firms with a "willingness to grow" rather than focusing on firm size.

"We will work with a broad range of businesses, from start-ups and SMEs with potential to innovate through to innovating business with the potential to grow faster," the SCI document says. "The 'sweet spot' will be firms that are already seeking market access help from New Zealand Trade and Enterprise and help in raising capital.

Powerful opportunity

"Where these firms also need access to technology and technical services there is a powerful opportunity to bring together the skills and knowledge of several government entities in supporting a firm's growth."

The SCI notes that small businesses in New Zealand tend to invest more in high value research and development than large firms, because medium-to-large firms are concentrated in lower-value industries, such as agricultural products, and that is a factor in the country's lower growth and incomes than in comparable developed economies.

"Our customer base therefore includes businesses that are 'high-value', as they produce specialised knowledge-intensive products and services that command premiums in markets, and also firms in sectors that have scale and represent significant opportunities for productivity gains through the application of new technologies in New Zealand - such as food and beverage.

"Our shared effort will focus on that sub-set of business owners and leaders who are willing to pursue growth but may not have the necessary capabilities or aspirations in place yet."

A main target for Callaghan will be to increase the proportion of the New Zealand economy represented by high-value manufacturing and service firms, which currently account for around 29 percent of economic activity and employ about 16 percent of the workforce.

"These businesses have higher labour productivity, spend more on R&D and product development, are more likely to have introduced "new to market" products and have higher export intensity than other businesses," the SCI says.

The equivalent of 250 more knowledge-intensive manufacturing and services businesses generating $100 million each year from exports would be required to help meet government targets to increase exports from 30 percent of gross domestic product today to 40 percent.

The SCI also promises some focus on large businesses, seeking out "entrepreneurs, business owners and leaders who are receptive to creating or growing big HVMS businesses. The message to this segment is "Better by Big", the document says.

Opportunity driven projects ("Big Projects") will also be pursued "to target the needs of very large customers, including government procurers, to deliver attractive new technology-based commercialisation opportunities" and could include local branches of global companies as well as home-grown New Zealand firms.

Callaghan will also "no longer create, own or manage for-profit businesses" other than to provide research and technical services, requiring rationalisation of current joint ventures and companies.

A strand of work will also focus on opportunities in the Maori economy, while overseas examples such as Germany's Fraunhofer Institutes and the Danish Innovation Networks had lessons for the new agency.


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8 Comments & Questions

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"I'm with the government and I'm here to help grow your business." Yeah, right.

Only business can grow business. What on earth do a bunch of bureaucrats know about growing business? Or innovation?

This is another sick joke from the NZ government, who continue to bilk taxpayers to pay for bilge like this. Steven Joyce should know better. What bureaucracy ever helped his businesses to grow (other than those that provided a subsidy?)

Name one government department anywhere in the world that has helped private sector businesses to grow. Not even autocratic China can make that claim.

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You could look at the NZ government's Venture Capital Fund, which has more than 100 successful start-ups to its credit, including Orion Health Care, which you might have heard of.

You could also look at the vast array of government services which are provided by the private business sector, in everything from roads, to parks, to hospitals, and latterly, prisons and schools.

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This govt may be so, but Dubai is an example where business have been boosted by govt help.

Also remember, while business do bulk of the work to grow business, it doesn't come without govt help (for all that businesses despise govt intervention) like tax breaks / holidays, favourable currency system.

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One government = Singapore!

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Who voted for Steven Joyce anyway?

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ATEED is running seminars on how to access funding from Callaghan ;) Gotta love Auckland Council!

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I am not sure Mary knew what she was signing up for. What I don't understand is, if they want the remaining scientists and engineers at CI to do “near-term” development work for companies in NZ why wouldn’t these scientists and engineers get jobs inside these companies or with consulting companies where they get paid a proper salary. Current employees who realise this will leave in the not too distant future.

In previous incarnations of IRL, it tried to generate revenue simply from working with companies. However, this was not a sustainable model due to the small size and distribution of NZ HVMS companies and the large overheads at IRL (which is unlikely to change in CI). In the SCI there is no evidence to show why this model should now work. Interesting enough, the KPIs set for the first year are already achieved as they are not measurable. In the future, the KPIs are as such that it is difficult to ascertain whether they were directly caused by CI activities.

There is strong shift in focus from employees delivering technical outcomes to those who try to reorganise the "innovation" system. Initially, there was talk about trying to learn lessons from DTI in Denmark, but DTI employs around 1000 research staff delivering technical outcomes. In comparison, CI will be left with around 250 research staff.

Then taking lessons from Frauenhofer, Germany, would have been a great idea. But Frauenhofer leads technical development in Germany, whereas the SCI indicates that CI will be reduced to providing "near-term" product development.

Unfortunately, this is NZ's answer to everything – restructuring. The only positive that you have here is that additional R&D grants will be administered to companies to increase company R&D activity.

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Yep, agree.

The only possible justification for government R&D is in the "blue skies" research end of the spectrum. That's where the market fails

Providing near-term development work is a job only for businesses. Can you imagine a government department providing near-term development to Google or Apple? Ridiculous.

In NZ business investment in R&D, even near-term development, is low. In part that is because of the small scale of NZ businesses. In part it is because of the business model used by many businesses, which does not require R&D investment (there are a few businesses that are notable exceptions to this).

But a government department trying to assist businesses in near-term will not encourage businesses to invest more in their own R&D - just the opposite, in fact. CI will fail in achieving any real business outcomes.

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