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Development and Research in New Zealand

2011: An address By Dr G.A. Carnaby – President, The Royal Society of NZ given to the Royal Society of New Zealand’s President’s forum in Auckland on 2 November.

In 2010 NZ$2.4 billion was spent on development and research in New Zealand by the public and private sectors – $1 B by business, $629 M by Government departments, and $802 M by the higher education sector. The goals of this investment are many: to facilitate economic development; to address national policy issues; to educate and train our people; and to investigate the world in which we live.

I have found that in discussing these issues, scientists and technologists tend to talk at cross purposes, primarily because they try to hold the discussion whilst assuming that they share a common view of what development and research actually are. But my contention is that these two activities, development and research are not necessarily connected or even it might be controversially suggested, actually interested in each other.

Research

So let me start by making a plug for public investment in research. A small part of this expenditure ~ NZ$50M p.a., is invested in the Marsden Fund administered by the Royal Society. The Marsden Fund is unequivocally dedicated to the support of investigator initiated research. It is a small research fund by national or international standards and yet its leverage on the entire effectiveness of the enterprise, collective effort, and well being of New Zealanders is enormous. This is because it provides the stretch and aspiration to greater excellence that feeds right through the systems which develop our intellectual capital as a nation.

The Marsden Fund has a major effect on the development of our cleverest individuals. The intellectual elite from our university and knowledge-based institutions compete vigorously, in every field, to gain funding from the Marsden Fund. Success provides an opportunity for the most creative people in the country to free up time to engage in research of their own choosing. It also supports the international participation of our best scientists in global science, and assists scholars in the humanities and social sciences also, to share our own human experience with people everywhere. The Marsden Fund, therefore, sets the standard for excellence in intellectual life in New Zealand.

Most of the successful applicants to the Marsden Fund are academics employed in our principal universities. It is a well established fact that the world’s best universities are populated by academics whose teaching and mentoring of students is in itself informed by active research at the knowledge frontier.

Vote Education and the funding of the universities simply dwarfs the independent investment in the Marsden Fund. The PBRF system and the establishment of the CoREs has highlighted and strengthened the academic excellence of our universities. The Marsden Fund however could not realistically be made large enough to ever do more than fund activities at the margin and to provide extra support for the very best.

Although our Universities are increasingly embracing a more entrepreneurial culture in their research, it is research , scholarship, and knowledge creation which they do best.

It is also a fact of life that over ninety-nine percent of science discovery happens outside of New Zealand. This discovery process is generally characterised by open exchange of ideas. But to participate fully New Zealand researchers need also to be able to contribute, so as to be worth talking to. Only by the participation of our best can the New Zealand science and technology sector hope to remain fully engaged and expert in the full range of modern science. It is a world of rapidly changing opportunity which is best understood by those participating in it. They cannot be easily directed to one area or another but must be free to move to where the new opportunities are emerging.

The applied research effort in New Zealand aimed at our increasing the competitive advantage in our established areas of global comparative advantage will also be far more effective if it has access locally to advanced and excellent research knowledge. Whilst we don’t know what research expertise will be needed over the next ten years, we do know that the New Zealand applied research effort will need to access a broad range of sophisticated research expertise from a wide range of disciplines. Renewal of this human resource and the human resource in the applied institutes, with new graduates with contemporary global research knowledge is essential. It is here that the intellectual stretch, standards of research excellence, and global connectedness apply the greatest leverage on the entire education, science and technology capability of New Zealand.

Quite apart from leveraging the productive efficiency of the economy, Marsden research has the potential to have a more immediate and direct impact via social and cultural benefits. New Zealand’s cultural industries (heritage, digital media, film, books, visual and performing arts) are some of the main reasons New Zealand has become the world destination it now is, producing significant economic revenue.

At a social level, New Zealanders are also currently grappling with issues of national identity, biculturalism, multiculturalism, family and behavioural dysfunction and cohesiveness. Through its research in the social sciences, Marsden is supporting our leading thinkers in their efforts to propose new research based ideas and perspectives. The new paradigms may help us all to move forward with a stronger national consensus and identity. The human cost of not addressing these issues and in not developing new paradigms are likely to be profound. The scale of the social services ambulance at the bottom of the cliff currently is a measure of this. Equally the sheer pleasure that new intellectual insights into ourselves provide is perhaps one small luxury we can afford as a country.

So research aimed at new knowledge creation has a very strong value proposition for the use of public funds. It is arguably appropriate that of the NZ$2.4B total, around one third is spent on maintaining human capacity in our tertiary education sector and that the very best researchers are freed up by Marsden Funding and allowed to set their own priorities, so leveraging all of the Vote Education investment.

Development

The largest part of New Zealand’s investment in development and research, perhaps two thirds, is however aimed at addressing the economic needs of the country. Most of this is provided by MSI and businesses. We are a small community remote from the markets to which we are successfully supplying only an alarmingly small number of commodities. The number of companies capable of exporting at scale is low. If we are to improve this situation, the case for more technological development to support both the successful industries we do have, and to create new ones which we do not, is compelling.

And there are some wonderful examples of market led technological development. One such an opportunity is offered by the “Placemakers Lab” on the Boulder bank in Nelson where Cawthron scientists have cloned the breeding lifecycle of our major shellfish species. This will enable selective breeding of improved stock to commence, and create a competitive advantage for the country. This won’t necessarily lead to papers in Nature, but it could add $1B to aquaculture exports from New Zealand. Or we could cite the Fonterra ingredients team at Palmerston North, or the Hortresearch efforts in the sensory science of New Zealand wine.

Last year I made a special Presidents award to Henry Kasper for his efforts at Cawthron for the work on shellfish breeding. The Council of the RSNZ tries to get out and to visit our researchers in the field, and recently we visited GNS in Taupo where we were very excited by what we saw. Accordingly this year I will be giving the President’s award to Dr. Greg Bignall and the Geothermal Geology Team at the Wairakei Research Centre, GNS Science. As well as consultancy services, the team conducts fundamental geoscience research, addressing issues of critical importance to the New Zealand geothermal industry, concerning field (system) delineation and management, identification of deep permeability and fluid-rock interactions.

Greg and his team are supporting the deep drilling project in the Taupo Volcanic Zone in collaboration with the New Zealand and international geothermal industry and various research partners. The project will explore the potential of our deep geothermal resources with the aim of enhancing renewable geothermal energy use in New Zealand.

Sir Paul Callaghan has given a series of talks recently in which he has identified a possible solution to closing the $40B GDP gap with Australia. His solution is to create in New Zealand around 100 companies which match the average performance of New Zealand’s top 10 high technology companies. These top 10, companies like Rakon and F&P Healthcare, produce $4B p.a. So 100 of them would create $40B. No pressure on the environment (unlike dairy), no need to exploit natural resources (with attendant Treaty issues), just brains and IP tied up in niche products servicing high value specialized industries. Its a good idea, And has been well picked up by Shaun Coffey and both IRL and MSI.

This is a higher risk-return investment area where not all the benefit will be captured by private investors. However, it has the potential both to be transformational and to contribute to economic risk mitigation for New Zealand.

In New Zealand it is particularly difficult to access early stage capital to fund risky start-ups such as these. Now it used to be said that the small number of block busters would cover the cost of all the failures and that if an investor spread his or her risk across a significant number of start-ups, their average return would justify the high and variable risk. I am currently of the view that investment in high technology start-ups probably has a return on equity of less than 1:1, i.e. it is a loss making activity. The answer is public intervention. A bit of public funding support in the so called “valley of death” stage of new company creation differs only in degree from R&D funding which is always expensed and written off in the year it occurs, and will go a long way to creating the 100 new top ten companies needed. How thrilled I was therefore to see last week’s announcement that the Incubators would be given delegated “seed and kill” budgets by MSI.

In agriculture, State imposed levies are another example of where Government is playing a significant role through public intervention. Much of our most successful technological innovation in NZ has come from institutions utilizing combined levy and direct government funding. This is because levy funding is usually applied to technology development projects and fills a gap between government funded basic research and having market ready technology. However we need a better vehicle for this than the flawed Commodities Levy Act.

Of course it is appropriate that as development projects mature, they should attract and be supported by increasing proportions of private funding. But there will still be market failure to support enough close to market “D” in the absence of dedicated public funding leverage. This means greater collaboration with business and government co-funding at this level of project maturity. The cost of projects escalates as they mature so the need for funding is greatest at the mature end of the process. Indeed excellence in development as opposed to research is characterized by a focus from day one on needs. These might be a need identified in the market or a shortcoming in the current technology. Development is best done with company partners also involved from day one. The recent budgets of the current Government have signalled a great deal of new funding available through the primary growth partnership or for business oriented research applied close to market. This represents a major new opportunity for New Zealand based scientists to engage with business and to win new resources for their research teams and is likely in my view to greatly accelerate the impact of Vote R,S & T on economic growth.

There is a risk though that this trend will be extrapolated and applied inappropriately to research as well as development. That would be a mistake as the purpose of research and its value proposition for the use of public funding differs. I would even go so far as to say that I don’t personally see much of a place for large platforms of so called targeted basic research. Is this development or is it research? If it is research, then it is unlikely that it will be at the cutting edge if selected by administrators. If it is really development, we would be better off supporting 1000 seed and kill initiatives administered locally to screen possibilities with small amounts of funding to assess the opportunity rather than support large teams well away from the market and unlinked to company partners.

I said at the start that development and research are separate activities which are not necessarily linked. You need to know when you are doing research and when you are doing development and the difference between the two. Development technologists start with needs and may need to access science knowledge but it generally happens this way round rather than the other. The term targeted basic research is in my view an example of muddled thinking which reveals a lack of understanding of the culture and philosophy of both applied research and technology development.

The Role of the Royal Society

So what is the role of the Royal Society of New Zealand in all this? The Society has been a constant advocate for greater public and private investment in development and research, and we have been generally very positive about the present government’s moves to more strongly engage science with business.

The Society represents interests from basic research in science, social sciences and humanities to the most applied areas of technology development. There are a wide range of views in the Society, and amongst recipient organisations, as to where public investment is most effective. As President, I have tried to set out for the politicians, who hold the public purse, what the different value propositions for public intervention in the various alternative areas actually are. The Royal Society has gone out of its way to be inclusive of the value systems of applied research and technology development, and to recognise the researchers involved whilst at the same time supporting and valuing those researchers involved in more traditional academic research and scholarship.

I have also been very active in promoting the view that different excellence criteria should be used to assess the excellence of development and research in pure and applied areas. I have put the case within the Royal Society, and publically, that applied research needs to be assessed according to the objectives of the research and that systems of recognition of achievement in research in New Zealand need to be fully inclusive of this world view.

In conclusion, I believe that a dual approach is needed if we are to properly embrace both development and research. It needs to be one which accommodates and celebrates at one end of the spectrum, the Marsden Fund’s diverse and adaptable research community and investigator led focus, based around research excellence where ever it may be found. That will leverage our whole tertiary education investment.

At the other end of the spectrum our dual approach needs to understand and accommodate the culture of technology development. This involves applied mission-driven funding which escalates in scale as the projects mature into commercialization. It works with and alongside business on needs identified by business. It has the potential to leverage New Zealand’s total economic performance.