A number of activities that businesses perform can be classed as innovation-related activities (product development and related activities). This chapter explores these activities, along with product development expenditure.
- research and development (R&D) was the area where most expenditure on product development and related activities occurred
- product development expenditure per employee shows that 55 percent of innovating businesses spent more than $1,000 per employee.
Please view detailed tables 14–16 (in chapter 17 of the pdf or in the available files section online) along with this chapter.
Product development expenditure
A key component of innovation is product development or activities related to it. Businesses were asked how much they spent on these activities.
Overall, New Zealand businesses spent almost $2.5 billion on product development and related activities in 2009 – a similar amount to that in 2007. This spending equates to 0.5 percent of businesses’ total expenditure. Levels of expenditure increase with business size, as larger businesses have more capacity and funding for product development. The industries that spent the most in 2009 were:
- manufacturing ($773 million)
- professional, scientific, and technical services ($414 million)
- wholesale trade ($332 million)
- retail trade ($307 million).
These figures are dependent on the number of businesses in each industry, as industries with more businesses can spend more money collectively than smaller industries with fewer businesses. Therefore, the average spend per business is of interest. The industries with the highest average expenditure per business were:
- telecommunications ($830,000)
- other machinery and equipment ($691,000)
- finance ($666,000)
- insurance ($603,000).
Innovators spent an average of $131,000 per business compared with $14,000 per business for non-innovators.
Product development expenditure per employee
Forty-five percent of businesses who invested in product development or related activities spent less than $1,000 per employee. The overall average spend per employee was $2,115, which is less than the average spend per employee on indirect taxes ($5,675) and interest and donations ($55,435), but more than salaries and wages paid to self-employed commission agents ($1,234) (Statistics New Zealand, 2009).
Product development expenditure by type
Data collected on product development and related expenditure encompasses R&D, design, marketing, and other activities. Innovating businesses spent the highest proportion (38 percent) of their total product development expenditure on R&D.
Eleven percent of total product development expenditure was on design. Small businesses were more likely to report expenditure on design (16 percent) than larger businesses (9 percent).
The rest of the expenditure was spread across marketing and other product development and related activities. Verification of this data with respondents has indicated that these results are subject to variability due to respondent understanding of which innovation-related activities should be included in these categories. For example, expenditure on marketing may include activities related to product development, or may also include general marketing.
Statistics New Zealand considers figures for marketing and other activities to be less reliable than figures for the other activities. The 2011 innovation collection will be further developed in an attempt to better capture these activities.
Product development expenditure scales
To give these results context across the New Zealand economy, it is useful to consider dimensions of scale. Only 4 percent of businesses in the survey have 100+ employees, whereas 74 percent have 6–19 employees.
However, in terms of economic impact, a different picture emerges. The 4 percent of businesses in the largest business-size group account for 50 percent of all employees and 47 percent of all product development expenditure. This means that the innovation practices of all the business-size groups are important to give an accurate picture of the New Zealand economy.
Figure 8.01
