The need to boost the expertise in the private sector to develop, adapt and adopt new technologies (innovation expertise)

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1 Implicatins fr New Zealand universities: cmmentary n Catalysing Ecnmic Grwth: Bsting Innvatin Expertise in the Private Sectr - a paper by the Institutin f Prfessinal Engineers f New Zealand (IPENZ) Overview The paper prduced by IPENZ discusses New Zealand s ecnmic situatin and lw place (25 th ) in the OECD league tables. It recmmends plicies designed t imprve labur prductivity in rder t imprve ecnmic perfrmance. It states that there are tw issues which need t be addressed in New Zealand: The need t bst the expertise in the private sectr t develp, adapt and adpt new technlgies (innvatin expertise) The need t make the New Zealand ecnmy mre sticky t high technlgy cmpanies (ie, make changes t the ecnmy s that high technlgy cmpanies remain in New Zealand). The paper cntains tw main prpsals t address these issues: The Gvernment shuld create an Innvatin Expertise Fund (IEF) which wuld be applied in tw shares ne fr universities and the ther fr CRIs. Funding wuld be diverted frm the Perfrmance-Based Research Fund int the university part f the fund, and each university department culd chse the extent t which its research activity is assessed under the Innvatin Expertise Fund and the PBRF. The IEF wuld measure research activity against the fllwing criteria: ecnmic impact f the research, amunt f private sectr investment attracted by the department, and number f level 8 r abve graduates wh have mved directly t New Zealand private sectr emplyment. The IEF wuld nly be made available t the university department when they are matched with new private sectr c-investment. The CRI part f the fund wuld be based n turning IRL int an innvatin develpment agency, using part f its cre funding. Other CRIs culd becme invlved at a later stage, als cntributing part f their cre funding. A cmpetitive test wuld be used frm time t time t allcate part f the IEF between universities and CRIs t ensure that funds went t the better-perfrming parts f the sectr. The Gvernment shuld prvide direct c-funding fr the early years f emplyment f wrkers in new R&D psitins in industry. The paper suggests that 50% f the salary (up t a maximum f $50,000) fr the first year, and 25% (maximum subsidy $25,000) fr the secnd year be prvided. It suggests that a pl f $30m per annum culd fund 500 new R&D wrkers per year. Cmment The paper highlights a number f very imprtant issues fr New Zealand, including the need t drive ecnmic develpment by lifting labur prductivity. New Zealand Vice-Chancellrs Cmmittee Level 9, 142 Lambtn Quay PO Bx Wellingtn 6142 New Zealand T F W

2 It prvides sme gd infrmatin abut the cntributin that engineering culd make t ecnmic develpment thrugh the grwth f high technlgy sectrs. The issues raised are serius nes and the paper is a useful additin t the debate, althugh the universities d nt agree with all f the appraches suggested. Ptential implicatins fr New Zealand universities T put the IPENZ paper int cntext it is imprtant t understand the rigins f the PBRF. The PBRF is funded frm Vte: Educatin, nt Vte: RS&T; adpting the prpsals in the IPENZ paper wuld in effect be a transfer f funding frm the educatin system t the RS&T system. When the PBRF was created its funding was based n funds previusly allcated t Universities as research degree tpups int the new fund. While new mney has been added thrugh the Budget prcess, ver tw-thirds f the PBRF is based n the earlier tp-ups. These funds were nt intended as a surce f funding fr research, but t enable tertiary institutins t prvide research-based teaching, enabling the universities t prduce the researchers and trained prfessinals upn which grups such as IPENZ depend. One-quarter f the PBRF is allcated n the basis f Research Degree Cmpletins basically the number f Masters and PhD graduates prduced each year. The ability t supervise and teach these peple and t retain them in New Zealand after graduatin wuld be seriusly limited if the prpsals in the reprt were implemented. These graduates are the researchers and prfessinals that ccupatinal grups such as engineers, dctrs and thse in industry need t keep the ecnmy ticking ver. Any reductin in verall PBRF funding wuld put in jepardy the maintenance f the prductin f these graduates. The paper suggests that sme PBRF revenue be reallcated t the Innvatin Expertise Fund, and that part f this fund culd ptentially be accessed by the CRIs, and that the funding wuld nt be available t research institutins unless they had c-funding frm industry. If the prpsals were implemented, it culd lead t an verall reductin in PBRF funding t universities, with sme f this funding ptentially shifting t CRIs and sme being unable t be spent due t the need t btain c-funding frm industry. With recent changes t the CRIs and the establishment f cre funding fr CRIs, research funding has already been diverted away frm universities and twards CRIs. Research acrss the university sectr in New Zealand is already facing significant funding challenges. If funding is shifted away frm the PBRF, it is likely that the activities currently funded by the PBRF (eg, research based teaching) will suffer. Diverting funding away frm these activities will actually pse a significant risk t the aim f grwing New Zealand s ecnmy thrugh the develpment f highly qualified graduates fr technlgy based industries. The prpsal t create an IEF and allw departments t chse the extent t which they are assessed under it r the PBRF wuld create a messy and impractical system. The Gvernment has stated its desire t simplify, rather than cmplicate, the RS&T envirnment in New Zealand. The PBRF already carries a significant administrative burden, and adding anther layer f perfrmance assessment will nly increase bureaucracy and reduce efficiency. In additin, it wuld be extremely difficult fr universities t manage with each department chsing the extent t which its research is assessed under each system. Likewise, it wuld be difficult if nt impssible t measure the relative perfrmance f institutins. Fr example if the Engineering Department at the University f Auckland decided t take part in the IEF while that at the University 2

3 f Canterbury pted fr the status qu, meaningful cmparisns culd nt be made. The purpses f the PBRF, are t: increase the average quality f research ensure that research cntinues t supprt degree and pstgraduate teaching ensure that funding is available fr pstgraduate students and new researchers imprve the quality f public infrmatin n research utputs prevent undue cncentratin f funding that wuld undermine research supprt fr all degrees r prevent access t the system by new researchers underpin the existing research strengths in the tertiary educatin sectr. Wider Issues These pririties are different frm thse f the IEF and fr the IEF t be implemented as utlined wuld invlve a majr realignment f the PBRF s gals. Befre the plicy prpsals put frward in the paper can be cnsidered, mre wrk will need t be carried ut t shw that the plicies will be successful, what the alternatives are and why these appraches are preferred. As utlined, the IEF wuld nt have a fcus n increasing the quality f New Zealand s research, ne f the main aims f the PBRF. If New Zealand is t make significant prductivity gains, it is very imprtant that we cntinue t fund research f the highest quality. Fr the universities t help industry it is als imprtant that we cntinue t grw the amunt f research-based teaching, a gal that wuld be difficult t achieve if PBRF funding was reduced. Businesses are unlikely t supprt high quality research unless it meets their immediate and shrt t medium term needs. The prpsals d nt cntain any incentives fr businesses t engage with universities r t c-fund research. Businesses can already access public R&D capabilities thrugh schemes such as the Technlgy Transfer Vuchers s it is unclear why the prpsals in the paper wuld be taken up by businesses. Fur f the universities are invlved in a trial f the scheme and the thers are keen t play their part. The paper ignres the fact that the universities are already highly engaged with business. Fr example, in the middle f 2010 the universities cmmenced a prgramme f natinal events t shwcase the research research capabilities present in the universities and t strengthen the existing ties. The paper identifies $30m as being needed t c-fund the salaries f R&D staff acrss New Zealand businesses, but it is unclear where this wuld cme frm. It is als unclear frm the paper what wuld be the likely take-up rates f this type f plicy interventin r the number f cmpanies which wuld like t emply R&D staff but cannt affrd t d s. Befre any changes are made t the PBRF r ther funding mechanisms, a number f wider issues need t be cnsidered. 3

4 The brain drain and plicies that wuld encurage graduates and entrepreneurs t remain in New Zealand, rather than g verseas. The small size f mst New Zealand cmpanies, and the difficulties that mst small cmpanies have in investing in R&D. Ninety per cent f enterprises in New Zealand emply fewer than five peple, and grwing these cmpanies t a size where they warrant dedicated R&D staff will take mre than a simple subsidy fr R&D salaries. The issue f the ability f the ecnmy t absrb science, innvatin and technlgy and prcess these int valued prducts and services at a prfit can be imprved. Research suggests that the develpment f science and technlgy is ging n in universities and institutes acrss the glbe, but that the ecnmies with the best ability t use and absrb the ideas t generate prducts and services are experiencing ecnmic grwth (ie, there is a net flw f innvatin, science and ideas frm sme regins t thers). In New Zealand, this may require develpment f the right sized businesses which are able t market and exprt high technlgy prducts and services. This type f develpment is likely t require a cmprehensive grwth strategy, greater amunts f expansin capital, develpment f talent and expertise in directing, develping, managing and marketing internatinalising businesses, and the develpment f greater entrepreneurship. Allwing businesses t determine (via c-investment decisins) which R&D activity gets funded at universities may assist ecnmic develpment in the shrt term by funding research that is likely t be used by the market in the shrt t medium term. Hwever in the lng term this will divert funding away frm basic research platfrms, which are als needed if New Zealand pursues a high technlgy ecnmic develpment strategy. While businesses are unlikely t cfund basic research, it is imprtant t fund and supprt research acrss all stages, frm basic t applied. The prpsals in the paper appear t be based n a linear mdel f technlgy develpment, yet successfully cmmercialised technlgy has seldm fllwed a linear develpment mdel. In sme cases, basic research has led t technlgical advances that are able t be cmmercialised, and in mst cases the path t market is messy. Regardless, it is imprtant that funding is nt diverted away frm basic research. The way frward Ecnmic develpment needs nt just graduates but the right type f graduates. Universities are already playing their part in this area. Befre new university qualificatins are apprved the universities must cnsult with industrial, prfessinal and ther grups n whether the prpsed qualificatin meets their needs. Once a qualificatin has prduced its first set f graduates there is a review prcess t check that the qualificatin meets the needs f the wider cmmunity. Thrugh such prcesses the universities help t ensure that they are respnding t the needs f the market. The IPENZ paper believes that mre can and shuld be dne t blster innvatin, a sentiment with which we agree. A number f mechanisms have been develped ver the years, such as the Technlgy fr Industry Fellwships, the TechNZ undergraduate and pstgraduate internships. These arrangements prvided graduates with an pprtunity t gain experience, while prviding businesses with much needed expertise at an affrdable price. As well as prviding cmpanies with fresh eyes t cme up with new slutins they als enabled prspective emplyers and emplyees t test each ther ut, a kind f technlgical speed dating. While sme f these measures have been 4

5 discarded, any debate n helping industry deply graduates shuld lk at these measures alngside any new prpsals. The discussin dcument identifies a set f issues that are relevant and imprtant t the ecnmic develpment f New Zealand and the universities clearly have a rle t play in addressing sme f them. One issue highlighted is the need t ffer undergraduate and graduate students experience f either wrking in qualifying technlgy cmpanies r investigating technical prblems f relevance t such industries if ur innvatin system is t be accelerated. Ideally such interactins will prvide a psitive experience fr the student, the industry and the university. This vehicle has been tried elsewhere and has prved t be a success. Fr example, in 2003 the Knwledge Transfer Partnerships were intrduced in the United Kingdm. This scheme invlves cmpanies, a knwledge transfer base (such as a university r a research rganisatin equivalent t ne f ur Crwn Research Institutes), and a recently qualified graduate. The scheme allws fr cmpanies t btain knwledge and technlgy frm universities and fr a graduate t enhance his r her business and technical skills. The cmpany entering int the partnership arrangement cntributes between 40% and 67% f the prject csts with the gvernment cntributing the rest. The scheme is cnsidered t be a success and at any ne time there are apprximately 1,000 prgrammes in place. We believe that a new initiative, based n dedicated new funding, t prmte wrkintegrated learning and knwledge transfer wuld als wrk in New Zealand. The universities believe that it is imprtant t prduce the graduates the cuntry wants and needs, whether this is in the arts r the sciences, and that industry is prvided with the apprpriate resurces t enable it t cntribute t the cuntry s develpment. The issues raised in the paper are imprtant and need serius cnsideratin. Hwever, we d nt believe that the slutin is t use the PBRF t slve these prblems; we d nt see the best way frward being the remval f funding frm the PBRF, in effect penalising it fr being successful in what it set ut t achieve. The universities wuld be willing t wrk with IPENZ and ther bdies t further define the issues and debate the slutins. Universities New Zealand Research Cmmittee March

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