The recently published New Zealand Productivity Commission Report on the economic contribution of “frontier firms” predictably rated only a passing mention in local media. However recommendations in the publication could have far reaching impacts if implemented. But is the government listening?
Frontier firms are described as the most productive, profitable and innovative in an economy and generally have scale and global reach. But the report says that New Zealand’s frontier firms lag behind their global peers in terms of productivity. The OECD defines productivity as the ratio of economic output compared to inputs. Nations with highly productive frontier firms have greater competitiveness because of more efficient use of resources such as labour and capital. These nations also benefit from secondary “innovation and knowledge diffusion” within their economies.
Chairperson of the Commission Ganesh Nana, in an interview with Radio New Zealand says New Zealand is already well behind other small developed economies in the OECD in terms of productivity and the gap is growing every year. He says part of the reason is because we do not have many so-called frontier firms to which smaller innovation based companies can anchor. One of the key findings of the report is that the government must invest in developing a deeper innovation ecosystem, including supporting more commercialisation of research, science and technology.
But will the government take on board this message? Many of us currently working within the New Zealand innovation ecosystem have lobbied in the past for vastly increased resourcing and for setting greater aspirations as a nation. But such pleas have largely fallen upon deaf ears over the years. There are sadly also actors within our ecosystem that are philosophically opposed to any kind of government investment on the basis that only wealthy and well-connected players should be allowed in the game. This is despite the fact that our neighbours (and competitors) in places like Australia, South Korea and Singapore identified the value many years ago and have literally invested hundreds of millions of dollars into building out their own innovation ecosystems.
Developing more frontiers firms is not about growing more “unicorns” as some have mistakenly claimed. But it is about building a more interconnected economy that has research, science and technology at the heart of the beast. That’s a big ask for a small nation for which there are many competing priorities and challenges to face such as health, housing and climate change. But the key to motivating the decision-makers involves grasping the reality that having a powerful innovation ecosystem is actually part of the solution to those challenges.
Paul Spence is a commentator and serial entrepreneur, a recently exited co-founder of a New Zealand based technology venture, a co-founder and director of Creative Forest, advisor at ThincLab within the University of Canterbury Centre for Entrepreneurship and principal at GeniusNet Research. You can follow Paul on Twitter @GeniusNet or sign up for a free weekly digest of startup, tech and innovation related events curated by him through New Zealand Startup Digest. Paul is a co-author of the Entrepreneurship Manifesto 2020.