Business services sector innovation declines, new index shows

Communication services sector, including telecommunications, weathers recession well

Innovation in the property and business services sector, which includes technical and computer services, fell below the national all-sector average for the first time since 1998 in the Innovation Index of New Zealand.

The index findings, launched today by collaborators IBM and the University of Auckland, are based on seven components of innovation – R&D, patent intensity, plant variety rights intensity, trademark intensity, design intensity, organisational/managerial innovation and productivity, creating an aggregate index covering 1998 to 2008.

Sixteen sectors are examined in the index, and property and business services was one of ten industries which pulled down the overall aggregate index for 2008. The sector declined 11 percent that year.

The strongest performer in innovation was the agriculture, forestry and fishing sector, where the index more than doubled between 1998 and 2008, say the two companies.

They say that after rising 13 percent between 1998 and 2000, the aggregate, whole of economy innovation index was virtually flat for the next seven years, and in 2008 fell by six percent as a result of the global recession. By the end of 2008, the index had fallen back to eight percent above the 1998 base year.

The property and business services sector was above the national all-sector average from 2000-2002, but declined from 2005.

According to the index, “Productivity has declined slowly over much of the period under review. By its very nature [the property and business services] sector is a large employer, thus providing less scope for productivity gains due to the application of ICT and other technologies reflecting major innovation.”

The communication services sector, encompassing telecommunications, postal and courier services, dropped below the national average between 2002 and 2006, but rose 14 percent in 2007 with a jump in R&D activity and productivity. “The communication services sector was one of only a handful that showed positive index growth in 2007-2008,” the index says.

According to the research findings, the nation’s overall innovation rate has remained virtually flat for almost a decade.

“Given the critical role that innovation plays in creating wealth and prosperity, it is concerning that the rate of innovation in this country has been virtually stagnant for the last decade,” says IBM managing director Jennifer Moxon. “For New Zealand to achieve step-change economic growth, we must foster greater levels of innovation in key industry sectors where there is significant potential for commercialisation and wealth creation.”