Innovation Investment For Tech Minnows Drys Up

Last year the government signalled its intention to invest heavily in “primary sector innovation”. As an efficient producer of food with a huge and growing consumer market emerging on our back doorstep, it absolutely makes sense to invest in this area, but it should not be treated in isolation. It also sends a disturbing message that high carbon, environmentally damaging industries are the priority.

TheĀ official announcement of a $144M investment into the Primary Growth Partnership (PGP) springs from a promise made in 2009 to form a public-private partnership to invest into developing more innovative high value added products and services based upon our existing expertise in farming. But this funding was purloined from an almost identical programme that had already been set up just prior to the demise of the previous government. While the Nats rebranded the package, nothing happened for over a year. In the meantime the global economy tanked and the public’s attention was diverted away from the issue.

The recently announced and much lauded additional $189M in funding for high tech industries also sounds good at first glance, but is worthy of closer inspection. It’s spread over four years and is entirely targeted at larger firms. The problem here is that a lot of the most interesting ideas are being generated in smaller companies that are already being hit hard by the recession. Small companies don’t have a lobby group and tend to be way too busy innovating and simply staying afloat to complain anyway.

Starting-up and growing a tech company has always been a crucible of fire and only the best and brightest will succeed. That is why I’m sometimes a little bit ambivalent about publicly funded handouts. On the other hand, larger firms now have better access to government grants than smaller one, which seems a little unfair. New Zealand is way too reliant on commodity exports and certainly needs to add more value through innovation. But let’s not forget emerging software and high tech manufacturing companies that build and export high value products and services with almost no pollution or carbon attached.

There is a real disconnect between innovation at the coal face within small and enterprises and the resources being made available by government to stimulate these enterprises, some of which will grow to be bigger fish eventually. Under the new system, small companies will self assess their needs and receive training to improve “capability”. That is both laudable and necessary, but it doesn’t help get new products developed and to market faster.

Postscript: In response to my friends at TechNZ. My comments above refer to the new funding. There remain avenues for small firms to access co-funding for small projects from the existing funding pool.

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