The total additional R&D expenditure generated by the RDTI was $1.83 billion.

The additional R&D stimulated by the RDTI was estimated to generate an impact on New Zealand’s GDP of $6.77 billion, which suggested an overall economic impact of 4.2 times government investment, the report found.

The results were “cautiously positive”, said report co-author Tadhg Ryan-Charleton.

“It is generating additional R&D spending. That’s the positive bit.”

“The cautious piece is just that it will be very interesting to see, when the data exists, whether that’s transferring into productivity.”

The researchers were not surprised that there were no signs of improved productivity as yet, he said.

“We always expected that there would be a lag on investments in productivity and R&D to feed through.”

It takes time for the gains from increased R&D to be integrated into businesses’ regular operations.

The researchers were working with productivity data that only goes to 2023.

The previous R&D Growth Grants scheme had closed to new applicants in 2019 but was not fully phased out until 2021.

Many companies, particularly larger ones, had stuck with the old scheme until 2021, he said.

The researchers combined quantitative analysis of survey and administrative data with qualitative insights from interviews with key stakeholders.

The qualitative insights were broadly consistent with the quantitative findings.

When comparing the RDTI with the previous Growth Grants scheme, many businesses reported that significant compliance costs associated with the RDTI were more than offset by the ability to access greater levels of R&D support, the report found.

A majority reported that the RDTI had a positive impact on their R&D activities and business outcomes.

Several firms with international operations explained that the RDTI was influential in attracting and retaining R&D work in New Zealand.

The RDTI scheme appeared to be more inclusive than the previous scheme, Ryan-Charleton said.

The researchers also found evidence of an uptick in reported rates of innovation as well as higher levels of sales, he said.

Interviewees across the board indicated they wanted to see policy stability, with the implication that instability leads to lower R&D expenditure and lower uptake.

Given there were reasonably significant compliance costs associated with the RDTI, it took time for many businesses to develop processes for recording and documenting the R&D development, Ryan-Charleton said.

This meant the costs associated with compliance fell with time.

The researchers looked at whether the RDTI should be extended to include higher levels of international R&D.

Expenditure on R&D activities outside New Zealand can form up to 10% of an entity’s total RDTI claim, provided the activities support a core R&D activity conducted in New Zealand.

Based on Supplementary Returns records, 31% of firms’ eligible overseas R&D expenditure is currently outside the existing cap.

However, most overseas R&D expenditure comes from high R&D spenders, who are generally less responsive to R&D support, the researchers said.

On that basis, the researchers concluded this would have had a negative net impact, with government costs outweighing the additional R&D expenditure generated.

“We did highlight a few areas where there was room for improvement,” Ryan-Charleton said.

“The eligibility of software development was one major area.”

The original design of the RDTI placed a lot of emphasis on ensuring that only activities involving genuine scientific or technological uncertainty qualified as R&D.

The report highlighted opportunities to revisit the RDTI’s approach to software R&D.

Liam Dann is business editor-at-large for the NZ Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.

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