Outcome Five: A dynamic business environment fostering innovation and international connections

To achieve a sustained lift in economic performance and participation, we need a business environment that is dynamic, where businesses are able to respond to new opportunities and where resources are allocated to the most productive use. We also need to innovate sustainably and adopt new economic thinking at pace.

Outcome Five progress bar

Success of our innovative companies are key to creating new knowledge, new or improved processes, services and goods, and skilled jobs for more New Zealanders. MBIE worked with Inland Revenue and Callaghan Innovation to ensure that businesses have access to support for research and development activities through the Research and Development Tax Incentive.

Many of our efforts to foster innovation continued in 2020/21 in the form of overseeing and/or administration of research of research funds. These included the MBIE Science Whitinga Fellowship ($10 million) to support early career researchers impacted by COVID-19 and the Endeavour Fund ($187 million) to support research in applying leading-edge technology to realise and create long-term positive impacts for New Zealanders in an ever-changing world.

In 2020/21, the business environment has become even more complex with the implications of COVID-19 and interruptions brought on by closed and restricted borders. MBIE worked collaboratively with other agencies to offset these impacts; importantly, through our managment of the MIQ system and, additionally, through other initiatives to help businesses respond to the impacts of COVID-19. An example is our management of temporary COVID-19 relief measures such as the business debt hibernation and ‘safe harbour’ for company directors from their insolvency-related duties under the Companies Act 1993. We also worked with the Ministry of Health to use technology to improve the system and process for registering business travel documentation and allow businesses to request and receive travel documents for workers who need to cross an alert level boundary. While the system was designed to give authority to workers within minutes, exceptions managed by all contributing agencies were processed in the back end of the Business Connect portal as a demonstration of a true cross-agency solution to a problem facing New Zealanders.

As part of MBIE’s work to develop a long-term industry strategy, a steering group for the Advanced Manufacturing Industry Transformation Plan was established and convened in June 2021. The steering group is co-chaired by business, government and union representatives. This was part of our plan to make it easier for businesses to work with Government to deliver a deliver a dynamic, diversified, high-tech, low-carbon and resilient economy as part of the productive, sustainable and inclusive framework.

What we're working towards

Performance measure Indicator Current trend Desired trend Commentary
Increasing the proportion of businesses exporting Percentage of firms exporting Decrease
The percentage of firms exporting was 23.8% in the year to August 2020, decreasing from 25.6% in the year to August 2019, while remaining within a similar range to that of the last nine years.
Increase in firms collaborating internationally for innovation Percentage of firms collaborating internationally for innovation N/A Increase
There is no data update in 2021 for this indicator because the survey module is run every two years.

In 2019/20 we reported that the percentage of firms collaborating internationally for innovation in 2019 was 4.3%, very similar to the result of 4.2% in 2017 and a small decrease from the decade high of 4.7% in 2015. The 2019 result is close to the 10-year average (2009–2019) of 4.2%.
Increase in firms reporting innovative activity Firm innovation rate Steady
The number of businesses reporting innovative activity (ie, developed or introduced new goods/ services, processes, organisational or manager processes, or marketing methods) remained steady at 40% in 2020.5
Increase business research and development expenditure Business expenditure on research and development as a percentage of GDP Increase
Business expenditure on research and development as a percentage of GDP was 0.84% in 2020, increasing from 0.78% in 2019. This value has been increasing steadily since 2014.
Increase access to ultra-fast broadband Percentage of households and businesses able to connect to ultra-fast broadband in New Zealand Increase
The percentage of households and businesses able to connect to ultra-fast broadband in Aotearoa New Zealand was 85% in the quarter to June 2021, up from 83% in the quarter to June 2020. This value has been increasing steadily since 2018.
Increase business dynamism Average five-year growth in employment in new businesses Decrease
The average five-year employment growth rate for the period 2014–2019 was 27.3%, slightly lower than the growth rate for 2013–2018, which was 28.7%.
Increase capital intensity Net capital stock per capita Increase
Net capital stock per capita was $143,350 in the year to March 2020, up 0.6% on the previous year, which is consistent with a five-year compound annual growth rate of 1.0% over the 2015-2020 period.

This measure is an indicator of New Zealanders' wealth.
Increase productive capital investment Proportion of net capital stock that is not residential Steady
The proportion of net capital stock that is not residential buildings remained at the high level of 56.8% in the year to March 2020, the same as it was the year before (56.7%). This measure is an indicator of productive capital investment.
Increase early stage capital investment Capital investment in early stage companies6 Increase
The capital investment in early stage companies was $157.6 million in 2020, an increase of 22% from $128.7 million in 2019. This is the third year of $100m+ of investment in startups.
Improve quality of foreign direct investment (FDI) Potential direct economic impact (pDEI) multiplier: ratio of pDEI to foreign direct investment (FDI), which is a proxy of economic impact to dollar of FDI attracted (FDI quality). It is used by NZTE to estimate the potential benefits to Aotearoa New Zealand from the investment deals that it facilitates Decrease
The pDEI multiplier was 2.6 in the year to June 2021. This is a 26% decrease compared to the ratio value of 3.5 in 2020.

The decrease is explained by some deals or investments not progressing due to a lack of access from border restrictions and some investors prioritising spending closer to home (particularly the case for some greenfield activity).
Maintain position in the World Bank Ease of Doing Business Survey Ease of doing business ranking N/A Steady
There is no update for this measure in 2020/21 as the report was not published online by the World Bank in 2020. In 2019/20 we reported that Aotearoa New Zealand ranked top in the World Bank Ease of Doing Business Survey in 2020 for the fourth consecutive year.

The Ease of Doing Business Survey assesses the regulations of 190 different nations for the ease with which business is done.

5 The data used to measure this indicator is different this year from the data used in previous years. The comparison this year is within the same dataset.

6 The methodology for this indicator has been refined since the MBIE Statement of Intent 2018–2022. The refined version directly uses the start-up investment estimated by PwC’s Startup Investment magazine as the proxy for capital investment in early stage companies.