International comparisons suggest that, although the New Zealand public sector invests considerable resources into scientific research, New Zealand firms are not particularly effective at generating applied knowledge and even less so at turning it into commercial products. However, these findings are based on aggregate data and there is limited evidence on innovative activity at the firm level.

This paper provides an overview of measures that capture both the inputs into and outputs from the innovative activities of New Zealand firms, using data on firm-level innovation from 2005 to 2013 available from Statistics New Zealand’s Longitudinal Business Database. The paper finds that the various measures tell different stories about the pattern of innovative activity across New Zealand firms. Notably, R&D expenditure and intensity are only weakly correlated with, and display different patterns to, measures of innovative output. For example, different types of innovation output occur in firms that do not report any investment in R&D. Accordingly, to get a full picture of the innovative activity of New Zealand firms, it is necessary to use multiple measures to get a broader picture.

This working paper was produced under the Longitudinal Business Database Partnership, along with “The impact of R&D subsidy on innovation: A study of New Zealand firms” (Jaffe and Le), released by Motu Economics and Public Policy Research. This paper focuses on firms that have received R&D grants and found that receiving an R&D grant almost doubles the probability that a firm introduces a product or service that is new to the world. However, firms that received R&D grants were no more likely to introduce organisational or marketing innovations. Although R&D grants help drive one type of innovation, other, complementary activities are needed to increase innovation across the board.

Number  WP 2015/2
JEL codes  O32 - Management of Technological Innovation and R&D; O38 - Government Policy

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