New innovation agency stakes out its ground

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.

(BusinessDesk)