FUTURE CHRISTCHURCH: STRATEGIES TO ECONOMIC RECOVERY

INNOVATION ECONOMICS

ALEX HARYOWISENO

Table of Contents

Thesis Framework Thesis Statement

_______________4 _______________5

1. Innovation Economics _______________6

1.1. Innovation through the Built Environment 1.2. Connective Structure _______________7 _______________7

1.3. Commercialization as a form of Knowledge _______________7 transfer 1.4. Perceived Barriers to Developing _______________7 Innovation culture

2. Creating a Culture Based on _______________8 Innovation

2.1. New Zealand Within the Global Context _________8 2.2. NZs Market Orientation _______________9

2.3. Christchurchs Industry Profile ______________12 2.4. Conclusion: Creating Innovation ______________13 Culture

Alex Haryowiseno - Innovation Economics

Table of Contents

3. Fostering Connectivity & an ______________14 Innovation Ecosystem

3.1. Sector Priorities 3.2. A Measure of Innovation ______________14 ______________15

3.3. An Overview of NZs Innovation Landscape ________16 3.4. An Overview of Policies 3.5 Overseas models ______________24 ______________26

3.6 Conclusion: Fostering Connectivity and an ______________27 Innovation Ecosystem

4. Educated Workforce
4.1. The Importance of generating an Educated Workforce 4.1. Graduate Concentrations in Canterbury Universities

______________28 ______________28 ______________29

5. Urban & Building Design______________30

Alex Haryowiseno - Innovation Economics

Alex Haryowiseno - Innovation Economics

Thesis Statement
The Innovation Economics doctrine is a theory which puts the importance of technological development and transfer of knowledge at the centre of a nations economic growth. Knowledge and its subsequent products are seen as important factors alongside traditional primary commodities. It has shifted from being seen as independent forces unaffected by policies, to being a driving force which promotes productivity and better use of resources. The two key questions to be asked when considering this : Why should New Zealand consider adopting this thinking into its economic development strategy? and what is this theorys significance in terms of creating a strategy for Christchurchs recovery? New Zealands orientation towards the primary industries is widely known, with its agriculture and forestry products being the countrys top export income generators. The country has also marketed its products based on its clean and green image. However, this over-reliance on the exploit of natural resources has resulted in the inability to reverse the countrys decline in prosperity since the 1970s, as seen in its current position within the Organization for Economic CoOperation and Development (OECD). Sitting at 22nd out of the 33 registered countries, New Zealand falls short in terms of Gross Domestic Product (GDP) per capita compared to the average OECD mark, as well as countries such as Australia. New Zealand currently generates $29,800 GDP per capita, 35% behind Australia and 20% below the OECD average standard. One of the key reasons for New Zealands decline in GDP is the persistence of intense labour and low-impact jobs. It is recorded that NZ workers put in as much as 15% more working hours and generate 20% less returns when compared to the OECD average. In order to just maintain this current position, New Zealand needs to generate a minimum of $120,000 per employment, given its current FTE number of 1,300,000 (1 FTE = 1 Full Time Employment). Industry sectors such as winery and tourism, although popular, can only manage at the moment to generate $100,000 and $80,000 per job respectively. This is again caused by their nature to employ labourers for largely unskilled and low-impact jobs. It is clear that we need to look beyond the current orientation and invest in a sector which has potential to prosper in the long term. The key to generate values beyond the current minimum amount will be to invest in sectors which create high impact margins. The science, technology, as well as the high value manufacturing and services industry are sectors which present us with this opportunity. In the scale of New Zealand, Fisher & Paykell is currently the leader in innovation as well as R&D. The company currently employs 1,250 people and generates $290 million in revenue per year. This accounts to $232,000 generated per FTE, making it one of NZs top earning companies. In the scale of Christchurch, emerging companies in the Information and Communications Technology (ICT) sector present an opportunity to progress in this direction. ICT currently employs 4500 people in Christchurch and generates over $ 850 million Gross Regional Product (GRP) per year. This accounts to an average of $190,000 generated per FTE, 60% more value than the minimum required for New Zealand to maintain its current economic position. The city also has over 10,000 employees in the field of science and research which will be beneficial in creating the initial talent pool needed to establish it as a city for science, technology & innovation. Christchurch holds potential in fostering this new aspect of economic growth, where it is recorded that the city has a substantial number of graduates from its uni versities (Canterbury students make up around 25% of NZs graduates). By fostering this talented workforce, the city will be able to create a self-reinforcing cycle which creates a synergy with its existing manufacturing industries as well as Canterburys agriculture sector. The emerging industries in science and technologies serve as potentials for development and may introduce more technological export products to New Zealands economy, while the existing industries also stand to benefit from improved efficiency as a result. This thesis proposes to look at architectures role in encouraging the regeneration of economy through innovation and technological development. It is recognized that the integration of competences from various social areas, such as education, science, politics and the public, is an integral part of encouraging growth through innovative means (Simmie, 2001). As such, the research and design process will take stance from an ecological perspective. Within this methodology, architecture has taken up the function of contributing to the continuous provision and adaptation of the built environment as a framing system of social communication and organized spatial relations (Schumacer, 2010). As an ecological system, Architecture becomes the connective strand which creates the possibility for innovation and diffusion of knowledge to happen. The built environment operates as a catalyst for these developments to happen but they are dependent on the progression of other economies within the city. Aspects such as quality of life, advancement in sustainable practice will be necessary in order to maintain the standard of living to allow these environments to operate. The interdependency of these different aspects will also be looked at as part of the designs ecological framework.
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1. Innovation Economics
Adaptation of environment

ORGANIZATIONS & POLICIES INNOVATION PROCESS WORKFORCE ATTRACTION MARKET INTERACTION

Conducive Innovation Environment

Adaptation of environment
(Fig. 1) Innovation Economics Diagram (Fig. 2) Diagram on the Perceived Effects of Innovation

1. Innovation Economics
The concept of innovation economics positions a nations advance of technological development and knowledge transfer at the centre of its economic strategy (Lambooy & Boschma, 1998.). One of the fundamental aspects to this doctrine is that higher productivity, efficiency and more effective use of resources should be achieved through higher levels of innovation. In many cases within the worlds emerging and developed countries, this would mean a shift away from the traditional material economy based on export and manufacturing, and into a new paradigm which fosters innovation capacity and knowledge based economy. Growth in innovation economics is the end-product of knowledge transfer, policies allowing for entrepreneurship and innovation (R&D expenditures, permits, licenses), technological spillovers and contact between collaborative firms, as well as systems of innovation that create innovative environments (clusters, agglomerations, metropolitan areas). Empirical evidence worldwide points to a positive link between technological innovation and economic performance. For example, Germanys flourishing Bio-tech industries can be attributed to a national innovation system where there exists such factors as R&D subsidies to joint projects, network partners, and clustering effect which facilitates close contacts with research associates. A shift towards innovation leads to a better perception the quality of life, as shown in the GE Survey for global innovation (2012). Innovation is seen to have significant potential in facilitating future advances in the fields of healthcare, energy, environmental quality, as well as improving the job market. The following sections will look at the necessary aspects required in order to implement this economic theories, as well as the perceived barriers currently faced by New Zealand in order to establish itself as an innovative country.

Alex Haryowiseno - Innovation Economics

1. Innovation Economics 1.1. Innovation through the Built Environment

Innovation is serendipitous in its nature. As such, it is important to consider that we can not plan innovation as a linear process. Rather, we can create environments within which innovation can flourish as the result of the organic process between its associated actors (research institutions, small to medium sized companies, government research facilities, etc.). (Komninos, 2008) The Agglomeration theory (close proximity of businesses lead to a higher level of competition and therefore a higher level of productivity) is seen as a significant contributor to innovation, and regions which possess such urban configurations, signified by the presence of high quality facilities and attractive environments are in a better position to attract and retain innovators and brainworkers. (Lambooy & Boschma, 1998)

1.3. Commercialization as a form of Knowledge transfer

Research is a crucial component of innovation; but it becomes fertile by mobilizing various capabilities within a wider system of knowledge, risk taking & entrepreneurialism. Converting scientific knowledge into new products and services, which is the core process of innovation, is only feasible under an environment rich in resources for research, experimentation, financing and entrepreneurialism. In order to facilitate the organic nature of the interactions, a conducive innovation environment needs to be provided, one that allows the 5 basic innovation functions to operate: research, funding, technology transfer, new product development, and innovation supply networking (Komninos, 2008) The reliance on primary industries and the exploit of natural resources as being key earners for the country Relatively low support for the long-term investment in R&D, which is reflected in the current level of government funding 2. The second problem looks at the issue of Connectivity, which deals with the way organizations operate and policies are implemented to support the progress of innovation. The following problems currently needs to dealt with: Fragmentation in geographical spread and lack of business and research clustering. Sub-optimal networking and collaboration between industries, universities and government research facilities A lack of advanced technology manufacturing infrastructure Sub-optimal networking and collaboration between industries, universities and government research facilities There is a need to turn more research projects into commercial products 3. The third problem looks at Capability issues, revolving around the workforce needed to support the progress of innovation. Current problems exist which revolve around: Low mobility of R&D staff between universities, CRIs and industry Problems with the attraction and retention of an educated workforce.

Local mechanisms such as meetings at tradeshows, conferences, seminars and social activities are also Innovation culture seen as contributors to the exchange of knowledge in Efforts to introducing Innovation to New Zealands the region. economy is currently met with several barriers which can be classified into problems within 3 differing scales of interaction: Culture, Connectivity and Capability. 1.2. Connective Structure In order to implement an economic strategy based on The discussion in regards to innovation always innovation, it is necessary to locate key areas of issues emphasizes the importance of cooperation - It attributes within these aspects, as well as the possible solutions innovation to the ability of organizations to collaborate which can be facilitated by a consideration of the urban and advance collective learning and knowledge sharing. and architectural form. There is a great need to promote an awareness to innovation culture within businesses, organizations & the 1. The first problem looks at New Zealands National and general public. Entrepreneurship, cooperation between Organizational Cultural Barriers, which involves institutions, research facilities, as well as companies all the current interaction between New Zealand and the contribute to this to create networks of synergy (Simmie, global market. In order to establish innovation as a key 2001.) In order to facilitate this connectivity, measure of factor in the progress of the countrys economy, several business clustering which is enabled by a consideration problems within this aspect can be identified: of the urban fabric will be needed. This facilitates increased ccolaboration between organizations which New Zealands position within the OECD ranking can lead to higher levels of productivity
Alex Haryowiseno - Innovation Economics

1.4. Perceived Barriers to Developing

2.1 Creating Innovation Culture: NZs within the Global Context

2. Creating a Culture Based on Innovation

The first aspect necessary to introduce innovation into to a countrys economic development plan is situated within the global realm - that is to determine the countrys current position given its economic strategy, and whether a shift towards an approach based on innovation is needed This step starts by looking at how New Zealand is doing economically compared to other countries in the Organization of Economic Cooperation and Development (OECD) (Section 2.1), an analysis of NZs current market orientation will then be done to determine whether it deters or supports New Zealands progress (Section 2.2). A local study based on Christchurchs existing and emerging industries will then be carried out to locate opportunities within the scale of the city. (Section 2.3) A conclusion will then be drawn out (Section 2.4)

Oil Price Shock & Loss of Britain Dairy Market

(Fig. 3) OECD ranking (1972 to 2009)

Source: Little, S. (2010). Role of Innovation in Economic Growth in a New Zealand Context. Wellington: The Treasury.

2.1. New Zealand Within the Global Context

2.1.1 New Zealands decline in OECD ranking The Organization for Economic Cooperation and Development (OECD) report has highlighted New Zealands decline in economic growth when compared to the OECD average. Although NZ started out well above the OECD average in the 1970s, its position continued to fall down. It currently sits at 22nd out of 33 countries. The entry of Britain into the European Union and the resulting loss of free entry to British markets for dairy products, and the oil price shocks of the 1970s are also potential explanations for New Zealands relative fall in the real GDP per capita rankings during this period. Although New Zealand performs well in certain areas within the OECDs measure, some aspects are lacking which ultimately lead to the inability for the country to reverse the decline in prosperity. For example: New Zealand ranks as the 3rd most democratic country and the 6th in terms of its achievement in the field of science, however it currently sits on the 26th position in terms of the rate of employment output. The cause of this as well as its impact on the nations economy will be discussed in the following sections.
Alex Haryowiseno - Innovation Economics

2.2 Creating Innovation Culture: NZs Market Orientation

2.2. NZs Market Orientation

2.2.1. A Measure of NZs Productivity The decline in New Zealands relative prosperity compared to other OECD countries since the 1970s can be attributed to its current economic orientation favoring industries with intensive labour and low-impact output. This fact is shown in the diagram to the right, which measures a countrys properity in terms of the average number of working hours and the amount of output generated per person. It is clearly shown that New Zealand is the second hardest working country out of the list (putting around 15% more working time compared to the OECD average), yet generates one of the lowest output (We achieve an output worth only 80% of what the rest of the OECD countries achieve) 2.2.2. New Zealands Market Orientation & Free Trade Arrangements New Zealand currently generates an average of $29,800 GDP per capita. In order to just maintain this rate (and thus its 22nd position out of 33 countries), we need to generate $120,000 from every one of our 1,300,000 Full Time Employments (FTE). However, NZs current economic orientation towards primary exports in agriculture, forestry low-skilled and low-impact employment makes this hard to do. Popular industries such as wine and tourism only generate around $100,000 and $80,000 per FTE. In order to prosper in the long term, we need to consider other sectors which has the ability to create high-impact employments.
Alex Haryowiseno - Innovation Economics

(Fig. 4) Measure of productivity within OECD countries

(Fig. 5) Amount of revenue generated per FTE

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2.2 Creating Innovation Culture: NZS Market Orientation

TOP 3 COUNTRIES FOR NZ EXPORT:

Wood Export (2007 - 2011)

Meat Export (2007 - 2011)

Dairy Export (2007 - 2011)

data sourced from www. stats.govt.nz

(Fig. 6) NZs market orientation, showing increasing reliance on primary industry exports

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Alex Haryowiseno - Innovation Economics

2.2 Creating Innovation Culture: NZS Market Orientation

2.2.3. Opportunities for Development
The key to generate values beyond the current minimum amount will be to invest in sectors which create high impact margins. The science, technology, as well as the high value manufacturing and services industry are sectors which present us with this opportunity. More emphasis needs to be put on potential technology markets (e.g. Electronic parts in Australia - Fig.6 ) For example, Fisher & Paykell is currently the leading company in R&D. The company currently employs 1,250 people and generates $290 million in revenue per year. This accounts to $232,000 generated per FTE, around 90% more than the average amount generated per FTE in New Zealand. In order to make sustainable progress in the future

2.2.4. Current Level of Investment in R&D as a Barrier to Innovation

The amount of R&D spent as a percentage of a nations GDP can be seen as an indicator of whether a country is leaning towards prioritizing high-impact sectors. As such, the relationship between the two can often times be seen as linear (as seen in Fig. 8 - countries which spend more on R&D generates more GDP per capita because it is less focused on providing low impact employments). The graph shows that New Zealand is underperforming when compared to other countries within this respect. A need to better utilize the countrys resources has been acknowledged, and one of the ways to go forward is to improve efficiency and productivity through innovation and R&D. There is a relatively low level of overall expenditure on R&D as a percentage of GDP (1.30% in 2010, compared with the OECD average of 2.33%). These ratios are considerably less than those in other economies similar to that in New Zealand.

(Fig. 7) Revenue generated per employee in top tech companies

NZ invests the least amount of R&D and generates the least GDP per capita

(Fig. 8) Comparison of GDP to R&D investment (1981 - 2009)

Source: Raine, J., Teicher, M. & OReilly, P (2011). Powering Innovation. Wellington: Ministry of Science & Innovation. .

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2.3 Creating Innovation Culture: Christchurchs Industry Profile

2.3. Christchurchs Industry Profile

2.3.1 Existing and Emerging Sectors within Christchurch
An analysis into the statistics of employment and GRP per industry in Christchurch shows that a majority of its employment opportunities come from the manufacturing sector. This industry also generates the second highest amount of GRP for the city in 2009, next to the property and business services. However looking at the employment count of this industry reveals that it has seen quite a significant decline of around 15 % between the period of 2006 and 2009 - a possible cause of this is the increasing value of the NZD between this period (0.59 to 0.75 index), which limits exporter income . Another analysis of the GRP per industry values also reveal Christchurchs emerging industries, notably in the health & community services area, as well as the communication services. The health & community services experienced and increase of GRP by 25% in the period between 2000 and 2009, and is currently the second largest employer in Christchurch next to manufacturing. The communications services (ICT) sector is an interesting case of a high growth sector. Although levels of employment remained modest (around 4500 people) in the period of 2010, the industry generated a high amount of GRP in 2009 and shows a significant growth in this respect (GRP grew almost 50% within a period of 10 years)
Alex Haryowiseno - Innovation Economics

(Fig. 9) Industry GRP Progression (2000 - 2009)

(Fig. 10) Industry Employment Count (2000 - 2009)

Source: www.ccc.govt.nz

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2.3 Creating Innovation Culture: Christchurchs Industry Profile

Rather than abandoning a citys older sector, a suggestion was made to create a synergetic relationship between the two different industry types. Introducing strategies based on innovation has the potential to reverse the role of manufacturing and service.
Source: Stats NZ. (2009). International engagement by New Zealand businesses. Wellington: Stats NZ

and tourism has been identified, at present, to be unable to fulfil this demand due to its labour intensive nature. One of the key solutions identified which may deal with this situation is to put higher priority towards growing sectors which are characterized by its high level of output. The science, technology and high value manufacturing services have been identified as examples of these R&D intensive sectors. Key companies within this sector, such as Fisher & Paykell have been recorded to generate over 90% more than the minimum value per FTE needed for New Zealand.

This trend shows the increasing value of GRP generated per capita within this industry. In 2010 the industry generates over $850 million in revenue, adding up to $190,000 per FTE. The survey of the industrys engagement with the service export market also shows a strong return,with IT (part of the ICT industry) placing second in terms of income from overseas. The decline in employment of Christchurchs main industry, as well as the trend in emerging sectors would suggest that a shift will be taking place in the coming years which favours the emerging high impact technology industry.

While the service of labour is traditionally used in a linear pathway to produce finished commodity through manufacturing, a reversal in this methodology would create a self-reinforcing cycle (Simmie, 2001) - which means that manufacturing would benefit the high value services as well as the ICT sectors, whose products can be utilized to further improve the efficiency and product quality of the manufacturing industry. There is possibility One of the key barriers to developing this sector that this process can be applied to Christchurch to at the moment is the low level of funding towards help create a powerful innovation agglomeration. R&D made by the government. Although this is not the only source of funding available within the innovation ecosystem, government support can be crucial in enabling basic research by companies. 2.4. Conclusion: Creating

Innovation Culture

New Zealands decline in prosperity since the 1970s, triggered by the oil price shocks and the 2.3.2 Innovation Economy Vs. loss of the British dairy market, has resulted in its Embedded Economy current position within the OECD. The persistence In The Economies of Cities (2007) Sassen brings of intense labour and low-impact jobs in the forward an enquiry into the nature in which inno- country has prevented it from reversing this overall vation economics principles are introduced into negative trend. a citys development strategy. An argument was made regarding the role of the old material econ- In order to just maintain its current position omy (manufacturing industries, etc.) with regards within the OECD ladder, New Zealand needs to to its newer counterpart (High Value Manufacturing generate $120,000 from every one of its fulltime employment. Popular sectors such as winery and ICT, etc.).

Christchurch already has a strong base of ICT industries to serve as a basis for introducing more high output sectors. Introducing sectors such as high value manufacturing and services can also create a synergy with its current manufacturing industries and both new and existing companies will benefit from this.

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3.1. Fostering Connectivity & an Innovation Ecosystem: Sector Priorities

3. Fostering Connectivity and an Innovation Ecosystem

The previous section discusses the importance of aligning New Zealands priorities towards high growth sectors in the global scale interaction with other countries in order to reverse its decline in prosperity. The next step is to then consider the issue of enabling the interaction between organizations within the national scale, which would help develop these high growth sectors. Connectivity between organizations and the presence of a conducive Innovation Ecosystem are crucial in order to promote the implementation of Innovation Economics. It is important, therefore, to understand the interaction between the current spread of organizations with government policies and existing industries to gauge whether New Zealand and Christchurch provides an environment which enables the organic process of innovation to take place. A general picture will first be drawn by looking at the current priority sectors for research funding, assessing whether the money put in by the government is being invested in the most favourable sectors (Section 3.1). A current measure of interaction between business, government research institutions, as well as the rate of R&D activities in businesses will also be looked at to see whether there is a sufficient level of connectivity between these organizations (Section 3.2) In order to better understand the structure of organizations and policies involved in enabling innovation, an overall picture will also be drawn in Section 3.3 and 3.4. A study on an overseas model will done (Section 3.5.) and a conclusion will drawn (Section 3.6.)

3.1. Sector Priorities

In the ranking for sector priorities based on funding and competitiveness, the Agriculture and food industry is ranked as the most competitive and received the most funding. The clean energy, Creative industries, as well as the Information, Communication and Technology sector was shown to have moderate levels of competitiveness and received relatively low government funding. Section 2.3.1 talks about the opportunity for Christchurch to benefit from its ICT industry, where it currently generates 60% above the average value for 1 FTE. The high technology sectors present the emerging economies within New Zealand and need to receive more support in order to become internationally competitive. The profile of funding by the Ministry of Science and Innovation for its 8 Crown Research Institutes shows a trend towards prioritizing research in the Agriculture sector (CRI Task Force, 2010). However, it was addressed in the Powering Innovation report (2011) that the government will be increasing funding in the area of High Value Manufacturing (which includes ICT). This is a step in the right direction towards promoting the high value industry in New Zealand. Organizations and businesses in Christchurch within this field will stand to receive benefit from further funding.

Source: Innovation Policies and Funding in New Zealand: How Effective Are They? (2011 report). Wellington: MoED
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(Fig. 11) Sector priority diagram

Alex Haryowiseno - Innovation Economics

3.2. Fostering Connectivity & an Innovation Ecosystem: A Measure of Innovation

3.2. A Measure of Innovation

3.2.1. Source For Business Innovation
In a survey of businesses between the years 2007 and 2009, it was found that existing staff members and costumers were the primary source of business information. In contrast, tertiary institutions and CRIs ranked the lowest in terms of providing information to businesses. This suggests a lack of connection between industries and research institutions and facilities. There is a clear lack of communication structure between these institutions and business which needs to be addressed. An opportunity to promote better connectivity arises from this situation, because these organizations currently represents untapped potentials in contributing towards the advance of businesses. (For example, Christchurch universities generate 20% of New Zealand graduates and research projects which offers potential help for companies trying to expand their R&D activities)

(Fig. 12) Source of business innovation

Source: Little, S. (2010). Role of Innovation in Economic Growth in a New Zealand Context. Wellington: The Treasury.

3.2.2. Level of Innovation Activities

Overall trend of decline (especially in small & medium enterprises)

There is a relatively low ratio of Small to Medium sized Enterprises (SMEs) in New Zealand which engage in R & D activities when compared to large companies (100+ staff members). A conducive innovation ecosystem should involve equal interaction by both SMEs and large corporations, and this low rate of R&D activity may be caused by an absence of innovation culture and awareness and an overall reluctance by business to take risk.
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(Fig. 13) Trend in business innovation (by size - number of employees)

Source: Innovation Policies and Funding in New Zealand: How Effective Are They? (2011 report). Wellington: MoED
Alex Haryowiseno - Innovation Economics

3.3 Fostering Connectivity & an Innovation Ecosystem: NZs Innovation Landscape

3.3. An Overview of NZs Innovation Landscape

3.3.1. Breakdown of Organization Types

In order to better understand the way the innovation system operates within the country, it is necessary to break down the structure of innovation into its main actors. As it currently stands this comprises of three types of organizations: Research Facilities (Tertiary Institutions, Crown Research Facilities and Independent Research Organizations), Centres of Research Excellence which aims to create a synergy between the different research facilities, and finally funding agencies and offices, which provide the initial investment for these facilities to conduct research, as well as services which turn completed research projects into profitable products.
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Tertiary Institutions

Crown Research Institutes

Tertiary institutions in New Zealand are comprised of three main bodies: Universities (Auckland University, Otago University, etc), Polytechnics (Unitec, etc.) and the Wananga. These institutions are one of the leading sources of research projects, and is connected to offices which organizes the turning of intellectual properties into commercial products.

Crown Research Institutes are publicly funded research facilities which conducts projects based on industry sector needs. Their range of expertise varies from fields in agriculture, geology, to ICT

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3.3 Fostering Connectivity & an Innovation Ecosystem: NZs Innovation Landscape

Independent Research Organizations

Centres of Research Excellence (CoREs)

Funding Agents
Government funding agencies. Each one offers funding and incentives based on their own fields of interest. A number of organizations, such as the Ministry of Science and Education holds annual investment round, in which applications can be made to secure a contract with the organization

Privately funded research organizations of differing The Centre of Research Excellence is a relatively fields of expertise new typology within the main bodies of New Zealands innovation field. It represents the interaction between tertiary institutions with publicly funded Crown Research Institutes. Eight centres of excellences exist through New Zealand, each focusing on a specific field of interest.

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3.3 Fostering Connectivity & an Innovation Ecosystem: NZs Innovation Landscape

(Fig. 14) Map of NZ research organizations

3.3.2. Spread of Research Organizations

Crown Research Institutes (red dots on the New Zealand map) Eight CRIs were established in 1992 as government owned businesses with a scientific purpose. Each institute is based around a productive sector of the economy or a grouping of natural resources. 1. AgResearch A life sciences research organisation with an increasing emphasis on product development and commercialisation of Agricultural Bio-technology. 2. Institute of Environmental Science and Research Ltd (ESR) Provides specialist science solutions related to public health, environmental health and forensic science. (Micro-biology) 3. GNS Science (Institute of Geological and Nuclear Sciences Ltd) the New Zealand Crown owned research institute that focuses on geological resources, environmental and industrial isotopes, and natural hazards. 4. Industrial Research Ltd (IRL) Undertakes science, development and technology commercialisation in areas of communication, information and electronic technologies, advanced materials and performance, intelligent devices and systems, biochemical technologies, energy technologies, complex measurement and analysis.

Source: Raine, J., Teicher, M. & OReilly, P (2011). Powering Innovation. Wellington: Ministry of Science & Innovation. .
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3.3 Fostering Connectivity & an Innovation Ecosystem: NZs Innovation Landscape

5. Landcare Research Research focuses on six areas: biodiversity and ecosystem processes, greenhouse gases and carbon storage, sustainable business and government, biosecurity and pest management, rural land use and urban environmental management. 6. National Institute of Water and Atmospheric Research (NIWA) Provides a scientific basis for the sustainable management and development of New Zealands atmospheric, marine and freshwater systems and associated resources. 7. Plant and Food Research A science company formed in December 2008 through the merger of HortResearch and Crop & Food Research. Provides R&D that adds value to fruit, vegetable, crop and food products. 8. Scion Provides research and technology solutions to all levels of forest and wood products industries, including biomaterials science, alternative species and plantation resources. Scion has recently extended its focus beyond wood to meet the growing consumer demand for renewable materials and products from plants.

Independent Research Institutes

1. Building Research Association of New Zealand company supplying research, testing, consulting and information to the building industry 2. Cawthron Institute marine, freshwater and aquaculture research 3. Cement and Concrete Association of New Zealand 4. CRL Energy Research energy and environmental consulting company 5. DairyNZ industry body funding R&D and technology transfer 6. Fert Research the New Zealand Fertiliser Manufacturers Research Association 7. Harmonic NZs Information and Communications Technology Research Institute 8. Heavy Engineering Research Association (HERA) 9. Malaghan Institute of Medical Research 10. Beef and Lamb (formerly Meat and Wool) New Zealand funding for R&D and technology transfer activities 11. New Zealand Leather and Shoe Research Association 12. New Zealand Plant Breeding and Research Association 13. Transport Engineering Research NZ 14. Information Technology and Communications

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3.3 Fostering Connectivity & an Innovation Ecosystem: NZs Innovation Landscape 3.3.6. Clustering Mechanism
The importance of urban clustering has been identified as beneficial to a citys efforts in harnessing its knowledge resource potential (Komninos, 2008). The clustering phenomenon is described as the building of systematic relationships between companies and institutions, based on their involvement in specific fields of expertise. The close linkages between organizations within urban clusters facilitates cooperation as well as improvement in competition and productivity. Recent studies have highlighted the nature of this potential as an aspect that is generated through the collective transfer of knowledge between organizations which are located within close prozimities (Nonaka and Takeuchi,1995)

(Fig. 15) Map of Christchurchs research organizations

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3.3 Fostering Connectivity & an Innovation Ecosystem: NZs Innovation Landscape

Several typologies have been identified with respect to a clusters life-cycle: Potential clusters comprise of a collection of organizations concentrated around a region. However, the are still lacking in synergy which results in a low level of interaction. Emerging clusters are a concentration of organization which have just started to realise common opportunities through their linkages and operate around a core activity. Established clusters are those which have gained critical mass (the amount of organizations necessary to facilitate cooperation and colaboration), and are able to develop relationships inside and outside of the cluster around the use of common infrstructure and services. Declining clusters are those thich have reached their peak and have to adapt to changes in order to sustain itself. A preliminary study to identify Christchurchs existing urban clusters reveals the broad spread of organizations participating in research activities.These organizations are mainly focused on the study of energy and agricultural products. Although the city shows great promise in its high value manufacturing and services (as discussed in section 2.3.), there is currently little research infrastructure and facilities which supports this field. There is however, a trend for engineers and mechanical manufacturers to gather in Middleton - Waltham, as well as the Bromley suburbs. This existing cluster of manufacturers and consultancy services represents a emerging cluster which may be helpful in creating the critical mass required to implement a strategy to further the fields progress in the future. The current lack of research infrastructure opens up possibilities for organizations specializing in this particular field to be introduced in Christchurch.
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(Fig. 16) Map of Christchurchs specialized manufacturing clusters

General Engineer

Mechanical, Automation, Precision Engineer

Manufacturing Engineer
Alex Haryowiseno - Innovation Economics

Metal Engineer

3.3 Fostering Connectivity & an Innovation Ecosystem: NZs Innovation Landscape

3.3.3. Private Organizations

Private organizations also play an important role to creating a conducive innovation ecosystem. The presence of these organization play a major role in helping SMEs, because of the amount of investment they make during the initial stages of the business projects. The following list provides a examples of these organizations which can help SMEs in particular and can serve as a catalyst to attract companies to locate themselves within their proximity to form a productive business cluster.

An organization which serves as a platform for business investors to generate capital for investment in SMEs. Angel investors are affluent individuals who invest capital in exchange for a companys convertible debt or ownership equity.

A business incubator dedicated to support Small to Medium sized enterprises (SMEs). The organization provides access to various funds as well as connections to angel investor networks. It was named as one of the worlds top 10 business incubators by Forbes magazine.

The New Zealand Knowledge Bank is a knowledge and information portal proposed by Sir Ray Avery in order to focus the sum knowledge of NZs innovation ecosystem and provide a conduit for International Trade and Knowledge exchange. It aims to improve the countrys global innovation index by creating a high density collection of research information to be accessed by businesses.

3000.org.nz is an initiative with a goal to help set up 3000 New Zealand based businesses by the year 2020 in order to raise the countrys presence in the international market. It serves as a platform for pitching ideas to better NZs innovation ecosystem.

Power House is a seed-stage investment house specialising in emerging technologies. Its sector focus is on engineering, clean technology, agri- and bio-sciences, software, innovative foods and healthcare devices. The intellectual property powerHouse commercialises comes from Universities and Crown Research Institutes and from private sector businesses. It is based in Christchurch.

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3.3 Fostering Connectivity & an Innovation Ecosystem: NZs Innovation Landscape

3.3.4. Incentives
What incentives support the R&D field in New Zealand at the moment? Technology Development Grants: designed to assist firms that conduct significant amounts of R&D. The grants cover 20% of project costs to a maximum of $2.4M. TechNZ Project and TechNZ Capability: provides 1:1 matching funding for discrete projects and capability development. Technology Transfer Vouchers: designed to give firms that lack existing R&D capacity access to research organizations. Pre seed Accelerator Fund: Helps commercialization of research projects These incentives provide an opportunity for SMEs to conduct in R&D activities, and thus plays an important part in enabling Christchurchs emerging companies to undertake the activities necessary during the critical initial development stages

3.3.5. Christchurchs Technology Hub

It was announced on the 3rd of April 2012 that funding has been allocated in the construction of a new IT hub for Christchurch. The $1.8m investment into the Enterprise Precinct and Innovation Campus (EPIC) will come as two grants from the Ministry of Science and Innovation and NZTE The Christchurch City Council granted the use of the site on the corner of Manchester and Tuam streets, rent free for five years. The site was originally the location of a para rubber store The rest of the finance would come from the Bank of New Zealand, and be paid back with the grants and rent from tenants. The bank had naming rights for the hub and would be a tenant as well. The hub will take 20 weeks to build and another month to fit out - It is aimed to be occupied by August of 2012. The EPIC initiative is broken down into two stages which corresponds with both a short and long term approach. The short term stage of the project (EPIC Sanctuary) will house sixteen companies that are currently displaced from the CBD by the Earthquake.
Preliminary design by Warren & Mahoney

In the long term phase of the project (SIGMA Stage), the project is expected to attract more than 700 FTEs, representing a value of $3 million per annum in rent. Given the current value of the ICT sector in Christchurch of $ 190,000, the introduction of this project could bring in an additional $133 million in GRP to the city when its fully up and running. Comparing these values to the level of initial government investment ($1.8 million), alongside the cost of providing a rent free site to the project for five years ($40,000 per year totaling to $200,000 over five years - this is how much money the government would have made if it were to follow through initial plans to turn the site into a car parking lot), the EPIC project is viable in terms of generating a return which would benefit both the city and in promoting the advance of the technology industry

Source: http://www.stuff.co.nz/business/rebuilding-christchurch/6687155/IT-hub-set-for-central-Christchurch
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3.4 Fostering Connectivity & an Innovation Ecosystem: Government Policies

3.4. An Overview of Policies

3.4.1. The Knowledge Wave
In 2001, They University of Auckland, in partnership with the labour party, held a conference which was intended to addresses the long term economic development plan for New Zealand. A focus on the growing knowledge sector was emphasized, with workshops held to establishes key policies which would help foster the emerging sectors such as science and technology. The following are some of the highlights from the workshop: Innovation and creativity - Provide extra resources for education in priority areas, e.g. ICT - Ensure cross-fertilisation between industry and research providers to ensure R & D is relevant; - Encourage growth of New Zealand venture capital industry; People and capability - Liberalise immigration rules to attract immigrants with skills in industry, academia and the arts; - Establish specialist centres of excellence in our leading research institutions. Sustainable Economic Development Strategy: - Active foreign direct investment attraction& pursuing free trade agreements; - Build a young entrepreneur system; - Create specialist industry clusters capable of international leadership through consultative and collaborative local processes. Entrepreneurship: - Create a venture capital industry body; - Create 100 new, high-growth business ventures per annum; - Upgrade the status of science and technology in NZ

3.4.2. National Development Policies

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Source: http://www.localgovt.co.nz/

Source: http://www.national.org.nz

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3.4 Fostering Connectivity & an Innovation Ecosystem: Government Policies 3.4.3. Global Innovation Survey

(Fig. 17)Survey of Innovation Actors

(Fig. 18)New Modes of Innovation

Source: GE Innovation Survey

3.4.4. Past, Present, Future

A comparison between the 2001 Knowledge wave workshop outcome, the GE Global Innovation survey and the current National Economic development plan provides a comparison between past aspirations, perceived ideal conditions, as well as current efforts to improve New Zealands progress on innovation. In the survey of the worlds executives and CEOs with regards to innovation actors, a majority supports the idea where an ecosystem is established based on the synergy between different public and private organizations. The synergy would include the cooperation between government as well as private investors to encourage the growth of SMEs as well as large companies. The need for better industries access to tertiary institution and government research facilities is also addressed. New possible modes of innovation were also discussed
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where it is yet again identified that innovation depends on the partnership between several different players. The need for more efficient use in R & D funding, as well as greater awareness of innovation culture is also important to boost innovation activity of smaller enterprises. A majority of the points addressed within this survey is actually in line with the 2001 Knowledge Wave workshop outcome (Promotion of science and technology, synergy between different industries and organizations, prioritizing high value sectors such as Information Communication Technology, etc.). However, the implementation of these workshop outcomes has largely been lacking. Over the past 10 years, there is still an apparent lack of synergy between government research facilities, tertiary institutions as well as industries; and the emphasis of government funding is still largely on New Zealands primary

sectors. It is only recently that National has introduced new policies to better support the technological sectors such as ICT and High Value Manufacturing. Although the recent introduction of policies in support of these high impact sectors represents a step towards the right direction for Christchurch (in support of its growing ICT industry), a consideration also needs to be made in how this money is spent. An adequate infrastructure is needed for the city in order for developments to be made within this field (investment in internet connection to facilitate transfer of knowledge among other things)

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3.5 Fostering Connectivity & an Innovation Ecosystem: Overseas Model

(Fig. 19) Finnish Science & Technology System

(Fig. 20) Comparison of Innovation Level Between Finland & New Zealand

Source: www.globalinnovationindex.org

3.5. Overseas model

Finland ranks second in the OECD in R&D investment (3.45% of GDP). Investment is mainly made in the areas of electronics Research & Development, while the traditional industries (wood and metal) account for less than 16% of the nations GDP A continuing increase in R&D . spending since 1990, from $600 to $1400 per person has seen the level of GDP per capita increase from $20,000 to over $ 37,500 in 2009. The following discussion of Finland as a possible model for creating innovation ecosystem follows a similar structure in enquiry with regards to its innovation culture, ecosystem and workforce.

3.5.1 Finlands Innovation Culture

Finland is one of the worlds leader in the field of innovation and R&D. They were, however, faced with a similar post-industry situation in the early 1990s, where their manufacturing sector plunged into decline. As a model of transformation towards an economy based on innovation, Finland shifted from its reliance in the traditional industry and shifted towards a strategy favoring the use of knowledge resources. In order to do this, managed to increase the number of researchers in science and technology from 16,000 in 1990 to 40,000 in 2000. New Zealand is now faced with a similar challenge of generating a greater mass of educated workforce needed in order to shift towards innovation economy. In order to catch up to the OECD standard, it is estimated that the country needs to boost its number of active researchers from 4,000 to 20,000 people. The first step towards is to create a culture based on innovation where the importance of scientific knowledge and technology is more recognized.

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3.6 Fostering Connectivity & an Innovation Ecosystem: Conclusion

3.5.2 Finlands Innovation Ecosystem

Finlands Strategic Centers of Excellence (SHOKs) Finlands SHOKs are public private partnerships established in the early 2000s, tasked with speeding up the innovation processes and boosting private sector initiated research in partnership with publicly funded research. There are six centres, based around particular areas of industry: - forest cluster - information and communication industry and services - metal products and mechanical engineering - energy and the environment - built environment innovations - health and well-being. Companies and research units work in close cooperation, carrying out research that has been jointly defined in the strategic research agenda of each Centre. The research aims to meet the needs of Finnish industry and society within a five-toten-year period. R&D activities are also encouraged by the countrys policies. Some of its newly introduced ones include: - Boosting R&D spending to 4% - Creating incentives for higher education

institutions to engage in co-operation with companies. - Introducing an R&D tax incentive scheme for companies - The most important funding targets are research infrastructures, basic R&D of tenure tracks for researchers, fields of education, research and innovation activities of the highest international level and other selected focus areas, SHOKs and internationalisation.

are currently put in place. Funding continues to be an issue in research facilities specialising in high output sectors.It is evident that the Science, ICT and High Value Manufacturing sectors that require a substantial amount of investment in R&D have received little funding over the years. Given its potential in the existing ICT industries, Christchurch has little support in terms of relevant research organizations. Primary sectors such as agriculture and forestry are mainly prioritized. It is only recently that the government has introduced more funding towards research in the high value manufactures. Connectivity between the relevant organizations is also an issue, where it was shown that a declining trend in the investment towards R&D by companies of all scale is taking place. Out of these activities, universities and Crown Research Institutes (the primary research organizations within the country) are shown to have a relatively low impact towards these businesses. These issues regarding connectivity need to be dealt with in order to create an innovation ecosystem that will support the introduction of high output sectors. A focus towards investment in these areas by establishing relevant research organizations as anchors for R&D activities can be helpful in forming the necessary agglomeration in order for these emerging sectors to flourish.

3.5.3 Finlands Educated Workforce

The awareness for R&D culture in Finland is reflected in the progression of university graduates in the field of science and technology (a 500% increase in the period 10 years). In comparison, it is recorded in 2006 that NZ produced 51 PhD graduates in engineering , while Finland produced 300. An increase in the amount of researchers is necessary in order to eventually create the critical mass needed for an effective innovation ecosystem

3.6 Conclusion: Fostering Connectivity and an Innovation Ecosystem

In order to start implementing strategies for the advance of innovation and high output sectors in New Zealand, consideration has to be made regarding the existing structure and connection between the associated organizations and businesses, as well as the relevant policies that

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4.1 Educated Workforce 4.1 The Importance of Generating an Educated Workforce

The attraction and retention of an educated workforce is crucial in the process of creating the critical mass needed for New Zealands innovation ecosystem. This fact has been illustrated in the previous section in the case of Finland, where it was shown how the country has managed to overcome the hurdles of transitioning into a postindustrial economy by increasing its number of knowledge workers five fold in the span of ten years. New Zealand is faced with a similar position. It needs to increase the amount of knowledge workers from 4,000 people to 20,000 in order to progress forward in the OECD standard. The New Zealand skill deficit is a phenomenon that has been identified in a number of OECD reports. An ongoing issue related to this is the country shortage of talent working in the field of applied sciences. This fact is illustrated on figure 21, where it a trend can clearly be observed that graduates this area has not seen any significant increase since 1998. Meanwhile, PhD graduates in the field of social sciences, business and commerce has been steadily increasing in the period of 1998 to 2006. Within this time, the field experienced an increase of about 110% in graduates. Within the field of science (Fig. 22), we can again observe the lack of progress in the number of graduates in engineering and architecture. Although the increase in the number of researchers generated from the biological science area since
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(Fig 21.) Rate of NZ Graduates by Faculty

(Fig 22.) Rate of NZ Graduates In Science Faculties

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4.1 Educated Workforce

2001 is encouraging (this is mainly caused by the New Zealand governments push towards biotech to make further investment on New Zealands experience in the agriculture industry), it is now known that field has generated minimal returns for New Zealands economy since its introduction. (This is shown by the fact that the TIN100 report, which lists the 100 top earning companies in New Zealand only features 2 bio-tech companies).

4.2 Graduate Concentrations in Canterburys Universities

The trend towards the social sciences field is again shown in the data for Lincoln and Canterbury university, where it is shown that graduates in the science and technology area makes up 16% and 26% of the total in the respective universities. This poses an opportunity for Christchurch city to invest more towards creating the educated workforce necessary to fuel its growing high value manufacturing and ICT sectors. The knowledge worker is a crucial part in innovation-based economies and a better alignment is needed between tertiary educations and associated industries to generate the educated workforce in order for New Zealand to close the skill deficit gap.

(Fig 23.) Graduates by Faculty - Lincoln University

(Fig 24.) Graduates by Faculty - Canterbury University

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5. URBAN & BUILDING DESIGN

Architecture as Catalyst
The urban design needs to address the following issues: At the scale of global interaction 1. Market Led Research - as opposed to Blueskies research 2. Establishing Global Partnerships - to expand the product market and sharing of knowledge and technologies. 3. Synergy with Existing Industries At the national scale, involving organizations & policies 4. Connectivity - cooperation between related firms, funding agencies, as well as end users. 5. Greater awareness to innovation culture & entrepreneurship - Encouraging Small and Medium Sized Enterprises (SMEs) to invest in R&D 6. Implementation & Commercialization of Technologies - Ensuring contribution to the economy & transfer of knowledge At the local scale, involving the educated workforce 7. Attraction and Retention of Workforce What attracts people and what makes them stay? - Strong cultural setting, provision of higher education and connectivity to industries, better infrastructure

Funding Agencies

(Fig 25.) Diagram of Urban Design Factors

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BIBLIOGRAPHY

Literature Burdett, R., Sudjic, D. (2007).The Endless City. London: Phaidon Press, Inc. Carrillo, F. J. (2006). KnowledgeCities: Approaches, Experiences, and Perspectives. Amsterdam: Elsevier. Cooke, P Schwartz, D. (2007). Creative Regions. ., London and New York: Routledge. Cooke, P Lazzeretti, L. (2008). CreativeCities, ., Cultural Clusters and Local Economic Development. UK: MPG Books, Ltd. Edensor, T., Leslie, D., Millington, & S., Rantisi, N. (2010).Spaces of Vernacular Creativity. London and New York: Routledge. Komninos, N. (2008). Intelligent Cities and Globalisation of Innovation Networks.London and New York: Routledge Nonaka, I. and Takeuchi, H. (1995) The Knowledge-creating Company, Oxford: Oxford University Press Sassen, S. (2007).The Economies of Cities.In Burdett, R., Sudjic, D. (2007). The Endless City. London: Phaidon Press, Inc. Schumacer, P (2011).The Autopoiesis of Archi. tecture.Chichester: J. Wiley. Simmie, J. (2001). Innovative Cities. London and New York: Spon Press. Online Journals Hamilton, G. Economic Development Action Plan. Retrieved 30th of March 2012 from www.national. org.nz/ Innovation Policies and Funding in New Zealand: How Effective Are They.(2011 report). Wellington: Ministry of Economic Development Kesting, S., Lin, J. & Pringle, J. (2010).Identifying Emerging Industries.Retrieved from www. mwa.govt.nz/news-and.../indentifying-emergingindustries.pdf Lambooy, G. &Boschma, R. (1998).Evolutionary Economics and Regional Policy.Presented at the 38th Congress of the European Regional Science Association, Vienna. Little, S. (2010).Role of Innovation in Economic Growth in a New Zealand Context. Wellington: The Treasury. Accessed on the 14th of March 2012 from http://www.treasury.govt.nz/publications/ media-speeches/speeches/innovation-ecogrowth Statistics New Zealand. (2009). International engagement by New Zealand businesses: Key results from the Business Operations Survey 2007. Wellington: Stats NZ Raine, J., Teicher, M. & OReilly, P (2011).Power. ing Innovation.Wellington: Ministry of Science & Innovation. Accessed on the 14th of March 2012 from www.msi.govt.nz Neville, J. (2010). How to enhance the valueof New Zealands investment in Crown Research Institutes. Wellington: MSI. Accessed on the 2nd of April 2012 from www. msi.govt.nz Rosenberg, N.Innovation and Economic Growth. Retrieved 22nd of March 2012 from www.oecd. org/dataoecd/55/49/34267902.pdf

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