The warm glow of intangible assets

Editorial

By Simon Eskow, Auckland | Friday, 23 September 2011
It is probably an awkward time to admit this right now, but I wouldn’t know a rugby game if I was caught in a scrum with cauliflower ears. It is not that as an American I have a greater affinity for baseball, basketball or American football. I just don’t care that much about sport.

I looked forward to the Rugby World Cup as much as I do a trip to the dentist, and as the first day approached, I was fully commited to a pose of studied indifference throughout the entire affair.

Some poses are harder to maintain than others. The wonderful energy and excitement being generated by the World Cup proved to be contagious. Whether you grew up here or just arrived, you have to take some pride in how New Zealand is presenting itself as host to tens of thousands of visitors from abroad, its inadequate mass transit infrastructure aside.

This is what I felt, anyway, as I walked along Queen’s Wharf in Auckland on the Saturday after the Cup began. You had to assume that in this crowd — eating, watching Fiji play Namibia on the big screens, slowly getting soused on Heineken — there were New Zealanders tossed together with visitors from around the world. It was downright cosmopolitan, dispelling a notion I’ve sometimes had in my two years here that we in New Zealand are islands onto ourselves.

Those happy faces may also translate into a fiscal shot in the arm. New Zealand’s Reserve Bank head of economics John McDermott last month said he the World Cup would be a “significant event” for New Zealand’s economy, with visitors expected to spend $700 million over the duration of the Cup.

The Reserve Bank did not take into account government spending or potential loss of spending elsewhere because of the Cup, so the actual economic picture is a little hazy. Sure, it’s great to see New Zealand polish its image abroad as more than just a place for eartquakes and hobbits, but that is quite an intangible asset.

I had a similar reaction last month to the Ministry of Science and Innovation’s awarding of $50 million to 19 companies in the second round of its technology development grant programme. Before talking to anyone, I wondered what good was an investment in New Zealand technology when the largest grant of $5.9 million was awarded to a company that is a subsidiary of a US corporation, presumably with its own sources of capital.

It turns out that in order for companies to receive the grant, the money has to be spent on research and development here in New Zealand. Many of the awardees, including Mako Networks and Xero, have definite plans to add R&D staff as a result.

So the benefits to New Zealand of this investment are tangible—money is filtered back into the economy through domestic employment and expenditures; semi-tangible—the tech industry gets resources to attract engineers and perhaps develop technology that will spur new businesses; and intangible—that New Zealand increases its goodwill as a technology innovator and exporter of products.

(As far as exporting goes, the Ministry also announced in July its partial financing of Landing Pad in San Francisco, an office space and networking programme to help Kiwi tech companies get a toe-hold in the US).

Most resellers don’t benefit directly from these kinds of investments. And strictly speaking, a reseller is agnostic about the origins of the products and services it sells. It doesn’t matter whether the product comes from home or abroad (where most do already, obviously), as long as it gets the support and training from their vendors and distributors to make money.

But, as New Zealand companies, do resellers reap any intangible benefit from that kind of investment?
I’m not sure, but ask me after the World Cup.