The report contains research showing manufacturers who invest in innovation – such as new products and services or a change in the way they run their business - can enjoy significant productivity gains over those that do not.
“We understand that investing in innovation can seem risky and a big leap for some businesses” ANZ Commercial & Agri General Manager Penny Ford says.
“But we believe innovation is important, and can be achieved through an ongoing series of small steps – including research and development, adding new machinery, making better use of data, and introducing new skill-sets.”
What is productivity?
When economists talk about productivity they don’t mean working harder or putting in more overtime. They are really talking about finding a better or smarter way to do things.
For companies, that could mean growing their earnings by adding a new product or service, data system, technology or by finding new ways of running their business.
New Zealand’s GDP per capita consistently trails the United States, Australia, Canada, the UK, France and Japan.
The authors of the ANZ Insights report say the per capita growth figures “challenge our long held perception of ‘Kiwi ingenuity’.”
The reasons for New Zealand’s low productivity growth are complex. There is no one simple solution.
The report suggests a number of ways New Zealand firms can try to improve their productivity. These include operating in new markets and encouraging capital investment.
Investing in innovation
As part of putting together the report, researchers looked at 49 manufacturers which had received Government co-funding grants for R&D activities through Callaghan Innovation. They were benchmarked against 504 other businesses operating in the same sectors.
Callaghan Innovation is a government agency which supports hi-tech businesses in New Zealand. It was named in honour of physicist Sir Paul Callaghan and established in 2013 with the aim of making New Zealand businesses more innovative.
The 49 grant recipients generated a median Return on Invested Capital (ROIC) over four years of 14.1 per cent, compared to 10.9 per cent for the control group of 504 businesses. They also grew sales revenue faster, achieving a median result of 9.3 per cent a year relative to the control group at 6.4 per cent.
“The research shows that companies who decide to invest in innovation can be rewarded by gains in productivity,” ANZ’s Penny Ford says.
“New Zealand’s competitors are embracing change and investing in innovation. It is important we also think differently about how we drive our future growth.”