Low productivity spurs call for innovation

WELLINGTON: The productivity of leading companies in New Zealand is on average less than half that found in the top companies in other small advanced economies.

The Productivity Commission has released its findings into what are known as frontier firms, the top 10%.

Productivity Commission chairman Ganesh Nana said a mere 30 companies accounted for more than half of all exports from this country.

New Zealand needed to focus its efforts more or it risked falling further behind, he said.

‘‘To prove our innovation . . . let’s focus on exporting distinctive products that can’t be imitated elsewhere rather than focusing on volume of commodities, which can be imitated elsewhere.’’

The Productivity Commission in its latest report said New

Zealand was becoming less competitive, making it harder to maintain and improve the wellbeing many expected.

It compared the country’s top 30 companies with those in other small advanced economies, such as Denmark and Singapore.

Dr Nana said the focus must be on innovation and moving away from volume to valueadded products.

‘‘Let’s grow some big frontier firms; let’s grow what we call those anchor firms that will enable a lot of the smaller firms to develop underneath that canopy . . . That is the missing element.’’

New Zealand companies needed to become more productive to be able to compete globally.

New Zealand was becoming less and less competitive, which affected everyone, he said.

‘‘This is not productivity just for productivity’s sake and this is not productivity for profitability’s sake. This is productivity to enable us to deliver the wellbeing for future generations and frontier firms is a critical part of that jigsaw puzzle.’’

He believed workers were up for the challenge and innovation was the key.

‘‘We have a chance to build a worldclass competitive advantage in some markets. Without it, products and production processes become standardised and leave us trying to compete against lowerwage economies.’’

New Zealand could learn from successful small advanced economies (SAEs), he said.

‘‘They have outstanding records of worldleading firms exporting specialised, distinctive products at scale. By comparison, most of New Zealand’s larger companies are strongly oriented towards domestic sales.

‘‘Successful SAEs focus their investments on creating worldclass innovation ecosystems around their leading firms.’’

Small countries could not be worldclass at everything.

‘‘New Zealand needs to make some tough choices about where to prioritise investment on a few targeted innovation ecosystems, much like we do in sport.’’

Maori firms could help light the way because they took a longterm perspective and used innovation to manage multiple objectives, he said.

Many Maori firms were already involved in exporting and had higher rates of innovation and R&D than other New Zealand firms generally.

Maori values such as kaitiakitanga, manaakitanga and whanaungatanga helped differentiate Maori goods and services and provided added brand value overseas. — RNZ