The Treasury

Global Navigation

Personal tools

Future outlook

The fast pace of change is likely to continue. As discussed earlier, the pace of technological progress is likely to continue, resulting in greater gains from international connections and higher risks should New Zealand fail to provide an environment conducive to knowledge creation and acquisition.

Ideas may increasingly come from Asia. The UK, USA, and Europe are traditional sources of new knowledge. Increasingly, however, firms and sectors in expanding Asian economies will be at or near the technology frontier, creating an additional source of ideas relevant to New Zealand.

General policy lessons

Policies that can be made unilaterally

Encourage inward flows of trade, people, and capital to capture embodied ideas. Knowledge is embodied in imports, immigrants, and inward investment. Knowledge can also be obtained through exports, emigrants, and outward investment, but the evidence suggests these effects are much weaker than inward flows.

Create a well-functioning innovation system. Ideas can be transferred through absorption and adoption by the domestic economy:

  • Encourage business R&D to increase absorptive capacity. Undertaking R&D helps provide the ability to access knowledge from overseas.
  • Provide some public funding streams that incentivise international knowledge transfer. The research system should explicitly acknowledge the important role of foreign knowledge and encourage transfer to domestic circumstances. At the margin, this may mean a trade-off between original research and the adoption and adaption of foreign research.
  • Consider a specific function by a public agency to promote international knowledge transfer. A number of countries use policies that assist firms and industries to locate, transfer and absorb new knowledge from overseas, such as through information and network facilitation, or co-funding R&D.

Design intellectual property rights to reflect New Zealand as largely a technology follower. Encouraging innovation, especially in areas of comparative advantage, suggests ensuring sufficient incentives to the holders of intellectual property. But as largely a technology follower, there are strong arguments for New Zealand to strike a balance in rights closer to the users of intellectual property relative to other OECD countries.

Page top