Improving research connections and linkages to create economic opportunities
The global economy offers rich and rewarding opportunities, but only if we prepare for its demands. We will earn our way by investing in knowledge, skill, research and innovation. And we will earn our way by improving our connections to the world.
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Address at lunch hosted by Acting Master, Corpus Christi College, Cambridge. 1.15PM Friday, 28 September 2007
Today I want to talk briefly about the importance of research connections and the difference research makes to our economic well-being.
This is a topic of some currency to us in New Zealand.
Our economy is in the process of transformation to a high-skill, high-value, knowledge-led economy. Research and innovation are crucial foundations of a knowledge economy. Our entire tertiary education sector is being reformed in part to improve the focus on quality and the connections between tertiary institutions and industry.
The starting point is to think about the kind of world we need to prepare for, and then how we want to position ourselves within it.
The world is becoming increasingly globalised. Products and services are being sourced from around the world. The goods we use could have come from around the corner, across the country or another continent.
A year or two ago an American magazine followed the production process of an iPod. This is a global product selling millions of expensive units globally every month. Yet six years ago no one in the world had heard of an iPod or knew they wanted one.
The iPod is designed and sold by Apple Computer in California. Firms in China and Taiwan assemble it. Inside it, there is a microchip provided by a different Californian company. But that firm out-sources every piece of design and manufacturing of the chip. It sources the basic chip from Britain. Software design on it is done in India as well as the US. Engineers in different continents collaborate as if they were just down the corridor. The chip is then assembled in Taiwan and Korea, before being shipped to Hong Kong and Shanghai for final assembly. Once the device as a whole is created, of course, Apple sells the songs made by bands all over the world through its iTunes website.
It is hard to think of a more global manufacturing process. The iPod has revolutionised personal entertainment - yet it would not exist without global research linkages.
It is a model for the way things are heading. Components are being sourced more widely. Even the manufacture of components is being sourced more widely. Engineers, researchers and businesses have to collaborate more than ever and develop links around the world.
The process offers enormous challenges and opportunities common to all developed economies.
We all need to find opportunities within those global value chains. And we face increasing competition from everywhere.
When I was in Brussels last year I visited the European Commissioner for Enterprise and Industry. He said Europe needed to respond to globalisation by being the best. Europe couldn't compete for cheap labour, doesn't want to compete for lower industrial standards, and doesn't have an abundance of natural resources.
What is left are brains and knowledge. Fortunately, knowledge is the most valuable resource of all. It is not the resources that matter, but what we do with them.
In New Zealand, we enjoy vast resources of high-quality farmland and a moderate climate, and these have sustained our economic growth for our entire modern history.
But we also face growing competition from China, Brazil and India, with massive economies of scale and very low wage costs. We are no longer the lowest cost producer of very much, and nor would we want to compete with their low cost model.
Instead, if New Zealand is to sustain higher growth rates we must transform to a high skill, high productivity, and high wage economy. This is not a process that can be done once, and then it is finished. It is a continual culture of innovation, based on research and ideas.
The government's vision for New Zealand is for a highly skilled, innovative economy capable of competing in a globalised world with smart products that command a premium.
You have seen examples such as our world-class film industry that brought you Lord of the Rings. Or you might have worn Icebreaker merino wool fashion products. Both are the result of global collaboration on knowledge products. Lord of the Rings was a collaboration with Hollywood, and other countries. Icebreaker manufactures in China.
The global economy offers rich and rewarding opportunities, but only if we prepare for its demands. We will earn our way by investing in knowledge, skill, research and innovation. And we will earn our way by improving our connections to the world.
Innovation gives us a competitive edge. And innovation comes from research. Linkages are crucial. Research depends on linkages - it depends on ideas accumulating, on researchers building on each other's insights.
And innovation depends on international connections to identify opportunities. In the internet age we have become familiar with Metcalfe's Law: the value of a network grows exponentially as the number of users grows. The principle has long been true. The more connections we have with the world, the more we are enriched as a society by the learning we gather and the opportunities we harvest. Or to put it more prosaically - our connections to the world give us access to better ideas.
On their own, researchers cannot create a dynamic, knowledge-led economy.
Research needs to be commercialised. Someone needs to identify market opportunities where research can be used. Therefore linkages with industry are crucial as well.
In New Zealand this year we developed a new business tax package aimed directly at increasing productivity. It is significant that the package contained two measures designed to increase research and development, and to increase linkages to opportunities in global markets. Research and development received a tax credit, allowing businesses to deduct some of the cost of expenditure on new research and development, including R&D they commission and pay for from educational institutions and Crown-owned research institutions. Second, a scheme to develop market access was expanded, with grants to assist our innovative exporters to open new markets.
It is no coincidence that these two measures were in the same package. It is all about creating a competitive edge and taking it to market.
The initiatives to promote research and connections in the private sector are matched by a new direction introduced this year in tertiary education. A new emphasis is being placed on quality in the sector, rather than on our old model of processing as many people as possible. That will give institutions more room to pursue original research.
In addition, institutions themselves will have a clearer focus for research direction. Although academic freedom is, obviously, carefully protected, institutions will have to work much closer with the community.
University research is being funded directly, rather than being made dependent on student numbers. We are now making the link between excellence and funding for research much more explicit.
Centres of Research Excellence have been opened to build critical mass in areas of particular strength. The Centres span areas such as nanotechnology, bio-security and indigenous knowledge. What they all have in common is an emphasis on getting the best people together with the best kit so that we can get the very best ideas flowing.
And active partnerships with the private sector are being encouraged through a fund to match private sector investment in universities.
The aim of our tertiary education strategy is to build our linkages, and to harness our research as a keystone in the development of a high-value, knowledge-led economy.
Thank you.