WAIKATO REGIONAL INNOVATION SYSTEM REVIEW

Transcription

1 WAIKATO REGIONAL INNOVATION SYSTEM REVIEW Background report Commissioned by Waikato Means Business May 2017

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3 CONTENTS Executive summary 3 Introduction 5 The importance of innovation 8 Framework for analysis 11 Entrepreneurship 14 Education and training 19 Knowledge creation 25 Knowledge dissemination 2 System framework 8 Market development 15 Finance/capital 18 Innovation culture 21 Connection with other innovation systems 25 Overall assessment and discussion 28 Potential actions 29 Governance 34 Innovation metrics 35 Review on a page 39 References 40 Acknowledgements 89

4 APPENDICES Appendix 1 Method 51 Appendix 2 Review of regional innovation policy instruments 53 Appendix 3 Prioritisation of initiatives 79 TABLES Table 1. Regional innovation strategies and associated policy mixes 29 Table 2. Innovation system lifecycle 30 Table 3. Potential action output measures 35 Table 4. Innovation support services, and New Zealand provision 66 FIGURES Figure 1. The relationship between innovation and GDP per capita 9 Figure 2. A Waikato innovation system framework actors are indicative and not exhaustive 13 Figure 3. Illustration of the Waikato region s capabilities (business and industry in yellow; research in orange) 32 Figure 4. Evaluation of the Waikato regional innovation system 28 Figure 5. Governance arrangements 34

5 PREFACE This report has been prepared for Waikato Means Business by EeMun Chen from MartinJenkins (Martin, Jenkins & Associates Limited). Interview support was provided by Mark Tamura from MartinJenkins. MartinJenkins advises clients in the public, private and not-for-profit sectors, providing services in these areas: Public policy Evaluation and research Strategy and investment Performance improvement and monitoring Business improvement Organisational improvement Employment relations Economic development Financial and economic analysis. MartinJenkins provides an integrated and comprehensive response to client needs connecting our skill sets and applying fresh thinking to lift performance. MartinJenkins is a privately owned New Zealand limited liability company. We have offices in Wellington and Auckland. The company was established in 1993 and is governed by a Board made up of executive directors Kevin Jenkins, Michael Mills and Nick Davis, plus independent directors Sir John Wells (Chair) and Hilary Poole.

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7 EXECUTIVE SUMMARY Business innovation is vital for regional success. Innovation leads to improved prosperity and wellbeing through making, organising and marketing products, services and processes in new and better ways. For the Waikato region, there is no regionally agreed and accepted view of how the region performs in relation to innovation. Without this, it is unclear what actions might be implemented to address (perceived) underlying weaknesses or to capitalise on (perceived) strengths. The review finds that the Waikato region has much of the elements of what one would expect from a successful regional innovation system: Strong tertiary organisations: University of Waikato, Wintec, Te Wānanga o Aotearoa and Toi Ohomai Institute of Technology Almost all the Crown research institutes (CRIs): AgResearch, Landcare Research, GNS Science, Scion, NIWA, Plant & Food Research Innovation infrastructure: Waikato Innovation Park, SODA Inc, FoodWaikato, Fieldays, DairyNZ Innovation support: SODA Inc, Waikato Innovation Park, Regional Business Partners network, Callaghan Innovation, New Zealand Trade and Enterprise, banks, professional services firms, industry and business associations Research and industrial capability in diverse and connected sectors agriculture, agritech, environmental technologies, dairy and meat, ICT, machinery and equipment, and engineering. However, innovation often occurs when diverse and similar disciplines, sectors, organisations and businesses get together. The review found that these kinds of collaborative forums, work and projects were few and far between. The research and education strengths in the region were not wellconnected to businesses and entrepreneurs. Additionally, businesses were not collaborating with each other and small and enterprises, in particular, were finding it difficult to navigate the array of organisations who provide innovation support. Relatedly, linkages to customers/consumers/clients and other innovation systems were also weak. Ultimately, the Waikato region appears to be good at knowledge creation but struggles with knowledge exchange and commercialisation of that knowledge. International studies of what makes a successful regional innovation system focus on collaboration and connectivity, but also leadership. Leadership helps drive change and paves a way forward for the region. Currently, there is a lack of innovation leadership in the Waikato region. In the absence of a clear strategy or plan, other regional innovation systems, such as Auckland, find it difficult to engage with the Waikato region. In a leadership vacuum, innovation entities, businesses and organisations operate in silos. Further, determining what actions or initiatives may address the challenges the region faces, and tracking their success, is hindered by the lack of relevant regional innovation data. While there is useful data at the national level, this data is not yet available at the regional level. 3

8 To improve the Waikato regional innovation system, the review (through prioritisation and filtering of potential actions) has led to three recommended actions: Activation of the Waikato innovation system, through a place/space that has a facilitation, coordination and promotion role Leadership of the Waikato innovation system, through a group of individuals and entrepreneurs who are passionate about innovation in the region and the development of an innovation plan Tracking the Waikato innovation system, with a set of innovation metrics and by working with the Ministry of Business, Innovation and Employment and Statistics New Zealand to develop new regional innovation indicators. 4

9 INTRODUCTION Innovation is critical to a region s success. It leads to increased incomes, productivity and quality of life through the ability to make, organise and market things in a better and smarter way. Flows of knowledge about new ways of doing things tend to occur more freely in regions. The hot housing of talented individuals, production facilities, research services, and a range of technical infrastructure means regions are typically where new products and services are developed and commercialised. Waikato Means Business, the Waikato region s economic development strategy, sets out a 20-year vision: We want to improve standards of living in the Waikato region, where all people, communities and businesses reach their potential Within the strategy, one of the strategic priorities is growing global industries. The strategic priority makes specific reference to: encouraging greater value-added, capital investment, sustainable innovation and productivity improvements from Waikato s natural resource-based and related industries, and tourism and events sector better coordination of industry and stakeholders across value chains encouraging and supporting businesses to develop international markets encouraging improved linkages between business and innovation support. As part of the strategic priority, this report is the first step to developing a shared understanding of the Waikato region s innovation system its strengths and distinguishing features in order to identify interventions/actions that would improve the system and innovation performance in the Waikato region. Scope of this report MartinJenkins was commissioned to: 1 gather and analyse available data and research on innovation, innovation functions and innovation actions/initiatives in the Waikato region, and in other regions where appropriate 2 undertake workshops and interviews with businesses and organisations in the Waikato region in order to assess the performance of the Waikato regional innovation system 3 identify and develop innovation actions and development of long term metrics for the innovation system. 5

10 Partnership We would like to thank all the individuals, businesses and organisations who have generously provided their time to participate in this project. Their contribution is critical to the provision of informed and effective innovation and economic development policy advice. Waikato Means Business Steering Group The Waikato Means Business (WMB) strategy is governed by an independent, business-led Steering Group made up of representatives from Waikato business, iwi-māori and local government. WMB is also the government s economic growth partner in the Waikato region via the Regional Growth programme. The WMB Steering Group comprises: Chairperson, Dallas Fisher Director, Montana Catering Parekawhia McLean Regional Director Waikato & Bay of Plenty, NZTA Gray Baldwin Councillor, South Waikato District Council Tom Findlay Board member, Enterprise Great Lake Taupō Donna Flavell Chief Executive, Waikato-Tainui Mark Flowers CEO, Wintec Traci Houpapa Chair, Federation of Māori Authorities Don Scarlet Director, Hamilton and Waikato Tourism Bob Simcock Councillor, Waikato Regional Council Mike Pohio Director 6

11 Waikato regional innovation system review Project Steering Group The Project Steering Group (PSG) is an operationally-focused group comprising central government and local organisations. The PSG has reviewed the analysis in this report. The Project Steering Group comprises: Mark Flowers, WMB Steering Group member CEO, Wintec Stuart Gordon CEO, Waikato Innovation Park Rob Heebink R&D Executive, Gallagher Group Simon Rae Manager Innovation Policy, Ministry of Business, Innovation and Employment Simon Lovatt Director, Research and Enterprise, University of Waikato Mike Pohio, WMB Steering Group member Director Harvey Brookes WMB Programme Manager Workshops with businesses, entrepreneurs and the Project Steering Group were facilitated using components of the LEGO SERIOUS PLAY method. The photos that appear in this report are models that participants built in response to the question: What is critical for innovation in a regional context? 7

12 THE IMPORTANCE OF INNOVATION What is innovation? Innovation is defined formally by the Organisation for Economic Co-operation and Development (OECD) and the European Commission (OECD & Eurostat, 2005, p. 46) as: the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method in business practices, workplace organisation or external relations Innovation basically involves introducing new ideas and new or improved ways of doing things whether they be products, ways of organising and producing things, ways of organising work, or ways of marketing. Innovation is not just about high-tech activities or formal research and development. It occurs in all parts of the economy from agriculture to services and varies across businesses. It is also not just about radical advances continuous improvements over time can be just as important to a business s bottom line. For the purpose of this report, the focus is on the application of new ideas and ways of doing things in a commercial environment. It is acknowledged that innovation can be defined more broadly to cover public and societal innovation which importantly complements and reinforces private sector innovation. However, commercial innovation is what leads to high-value economic outcomes. Innovation relies on collaboration individuals do not typically develop and test new or improved ways of doing things in isolation. They engage with colleagues, with customers and suppliers, and with other organisations. Innovation is uncertain and involves creativity and risk. Innovations may be unexpected and opportunistic, or they may take a very long time to materialise, or may not bear fruit at all. Why is innovation important? Innovation and economic growth are inextricably linked. Economies which are more innovative are more productive and grow faster (Department for Business, Innovation and Skills, 2011a). In turn this leads to greater prosperity and wellbeing (Department for Business, Innovation and Skills, 2011a; Ministry of Economic Development, The Treasury, & Statistics New Zealand, 2011). Many empirical studies show that while labour (for example, labour productivity and hours worked) and capital (investment in assets) contribute to economic growth, it is other factors such as innovation and technological change that explain the differences between the performance of different countries and cities (Department for Business, Innovation and Skills, 2011b). Indeed, the ability to create, 8

13 distribute and exploit knowledge and information is often regarded as the single most important factor underlying economic growth and improvements in the quality of life (OECD, 1999, p. 7). The OECD s recent work on measuring innovation shows that spending on innovation and new knowledge (investment in intangible assets such as improved software, human capital and organisational structures) explains a good proportion of multifactor productivity growth (a measure of technological change). Indeed, studies suggest that innovation and technological change account for between two-thirds to three-quarters of labour productivity growth in some OECD countries (OECD, 2010). Figure 1. The relationship between innovation and GDP per capita Source: The Global Innovation Index 2016 (Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO), 2016) Notes: The economies that appear close to the trend line show results that are in accordance with what is expected based on their level of development. The further up and above the trend line an economy appears, the better its innovation performance is when compared with that of its peers at the same stage of development. Light-coloured bubbles in the figure correspond to the efficient innovators (a majority of them are situated above the trend line), while the dark-coloured bubbles represent those countries in the lower half of the Innovation Efficiency Ratio. 9

14 The Global Innovation Index (GII), co-published by Cornell University, INSEAD and the World Intellectual Property Organisation (2016), shows that innovation (as measured by a number of factors such as capacity for innovation, quality of scientific research institutions, company spending on R&D, university-industry collaboration in R&D, government procurement of technology products, availability of scientists and engineers, patents granted, and intellectual property protection) has a strong correlation with economic prosperity (Figure 1). While we cannot establish the direction of causality, the innovation score is associated with 66.1 percent of all variation in GDP per capita across the 128 countries in the figure a high proportion of variation to be potentially explained by just one variable. Innovation is also essential for business success. New Zealand official statistics find that innovative businesses are more likely to record an increase in market share, profitability and total sales than noninnovative firms (Statistics New Zealand, 2010). Internationally these results hold. For example, in the UK, there has been a consistent relationship between investment in innovation and sales from innovative products, and a strong association between product innovation and labour productivity (Department for Business, Innovation and Skills, 2011b). 10

15 FRAMEWORK FOR ANALYSIS Given the multi-faceted nature of innovation, and the role that people, businesses, and a variety of institutions can play, an innovation systems approach is often used in examining innovation at a detailed level within a regional context. The innovation system is basically the set of interconnected organisations, and connections between them, that influence the level of innovation in an economy. In understanding the strengths and weaknesses of the Waikato region s innovation performance and what can be best done to facilitate it, a useful focus is the key functions of the system and the roles of different actors in performing these functions. Drawing on innovation system frameworks used internationally, the key functions and relevant actors for assessing the Waikato region s performance are: Entrepreneurship: Innovation involves a range of activities related to business that have little to do with technological capabilities. This includes market development and the ability to finance innovation, the ability to create efficient production systems on an adequate scale, the ability to recruit and coordinate appropriately skilled staff, the ability to construct and use marketing channels, and the ability to create and deploy logistics and distribution systems. Key actors are businesses, support organisations, education providers and capital providers. Education and training: Innovation requires a broad range of skills and an effective system which distributes skills and talent effectively to where they are needed, through mobility, education or other transmission mechanisms. Key actors are research providers, education providers and support organisations. Expertise can also be obtained from offshore. Knowledge creation: Knowledge and ideas, and talent and skills are essential for innovation (eg, science, commercialisation, engineering, management, entrepreneurship, marketing and design). Key actors are businesses, research providers and education providers. Knowledge dissemination: The creation of knowledge and skills becomes more valuable when it is shared and built upon. This can be through open-source approaches, mobility of skills and talent, partnerships for innovation, research networks and access to intellectual property. Key actors are businesses, research providers, education providers and support organisations. System framework: Some innovation is infrastructure-dependent. It requires certain types of equipment or facilities for testing, developing and coordinating resources. Various factors in the local and economic environment can also impact on pressures to innovate and the assessment of potential returns, such as leadership, the level of competition, regulatory constraints, infrastructure, and local demand. Key actors are businesses, education providers, research organisations and support organisations. Market development: Firms respond to and find market opportunities, including opportunities for new and improved products, services, processes and market developments. Relevant activities include market and consumer research, basic and applied science and research, market testing, design, scaling-up and launch. This is not a sequential set of activities and can involve multiple feedback loops. Key actors involved are businesses, research providers and capital providers. Finance and capital: Firms and entrepreneurs undertake innovation activities because they anticipate that these will result in improved productivity, improved profits and improve their market 11

16 position. Depth of capital markets, investor and investee experience, foreign direct investment and type of foreign direct investment will also have an impact. Key actors are capital providers and support organisations. Innovation culture: Innovation flourishes in an environment which acknowledges and encourages entrepreneurship, collaboration and the process and outputs of innovation. The key actors here are businesses and support organisations. Connection with other innovation systems: A regional innovation system does not operate in isolation. The institutions involved interact with other players in other regional systems within a country and overseas. International sources of knowledge, technology, skills, and consumer demand are particularly important for small economies such as New Zealand, and for the Waikato region. The framework for thinking about the functions and actors of an innovation system is depicted in Figure 2, with illustrative Waikato examples of different actors. A strong innovation system will mean that all the actors carry out their functions well and collaborate effectively. The innovation system s performance is influenced by the way these actors respond to different cues; the way they interact with one another; and how they apply available resources. A strong innovation system will mean that all the actors carry out their functions well and collaborate effectively. Businesses will identify market needs and search for solutions to meet those needs. Research organisations may generate ideas and research to meet that need, or be part of the journey to develop the solution. Entrepreneurs and businesses will have the capability to effectively commercialise research, solutions and ideas, and will develop and test these ideas in the market with customers and suppliers; they will have access to relevant facilities and technical skills from research and education organisations if required; and access to funding, management and marketing advice from support organisations and investment from capital providers when needed. Their efforts will be supported and encouraged by the broader public, so that even if they do not succeed they are willing to take up the risks again. By thinking about innovation in this way, we can isolate which parts of the system are working to their potential as well as those which will need more support to bolster performance. Further details on study method are in Appendix 1. 12

17 Figure 2. A Waikato innovation system framework actors are indicative and not exhaustive 1 Wintec Toi Ohomai Institute of Technology Waikato- Tainui College of R&D University of Waikato Education and training Education and training organisations: Universities Private training establishments ITPs Wananga ITOs Smart Waikato System framework Te Kōtahi Research Institute (UoW) Te Wānanga o Aotearoa Waikato Innovation Park Plant & Food Landcare Research Knowledge dissemination Entrepreneurship Scion Research organisations: Crown research institutes University research groups NIWA Technology transfer/ commercialisation offices Private research organisations Centres of Excellence International researchers, businesses, entrepreneurs, inventors GNS Science Businesses Ag Research Customers and Suppliers Pioneer Capital Enterprise Angels Capital providers: Banks Investors Venture capital companies Knowledge creation Banks WNT Ventures Finance/capital SODA Inc Support NZTE organisations: Business and industry associations EDAs Government Councils MBIE Agencies Incubators MPI Callaghan Innovation Chambers EMA TPK Poutama Trust Market development Innovation culture Te Hūmeka 1 EMA = Employers and Manufacturers Association MBIE = Ministry of Business, Innovation and Employment MPI = Ministry for Primary Industries Niwa = National Institute of Water and Atmospheric Research NZTE = New Zealand Trade and Enterprise TPK = Te Puni Kōkiri UoW = University of Waikato 13

18 ENTREPRENEURSHIP Entry rate (percentage of new firms to existing firms), 2016 Source: Statistics New Zealand 0% 2% 4% 6% 8% 10% 12% Auckland New Zealand Bay of Plenty Canterbury Northland Waikato Otago Proportion of businesses with zero employees, 2016 Source: Statistics New Zealand 60% 62% 64% 66% 68% 70% Auckland Northland New Zealand Bay of Plenty Waikato Canterbury Otago Proportion of businesses with over 100 employees, 2016 Source: Statistics New Zealand 0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% Auckland Canterbury New Zealand Otago Bay of Plenty Waikato Northland The background report for Waikato Means Business concluded that entrepreneurship in the Waikato region is about average, although lower than several other regions, which may constrain the region s growth ambitions (Knuckey, Chen, & Donald, 2013). This was based on the following data: Business entry gives an indication of the availability and uptake of business opportunities. While there has been an increase in the enterprise entry rate over time, the rate is still below the New Zealand average (Waikato Regional Council, 2016). The proportion of high growth businesses in the region is slightly lower than the national average. Few globally-significant firms. The largest organisations, by employment, are generally domesticfacing organisations the Waikato District Health Board, the regional and local councils and tertiary education providers. Our interviews with businesses and organisations in, and outside of, the Waikato region found: The biggest growth challenges that businesses in the Waikato face, are broadly similar to those experienced by other businesses across New Zealand. The New Zealand Innovation Council (2016) found that the biggest challenges for innovators were: funding, consumer awareness/education, strategy and alignment (business model, structure, channels), expansion/upscaling, skills and talent and R&D (in order of proportion of New Zealand Innovation Awards entrants who indicated this was their biggest growth challenge). Waikato Innovation 14

19 Park s (2017a) tenant survey found that R&D, strategy and alignment, market development, capital and skills and talent were the biggest issues (in order of proportion of tenants). A business growth advisor commented that business and management capability, particularly outside of Hamilton, was weak. It was suggested that more business growth advisors working in the wider region would be of assistance. Smaller businesses and entrepreneurs who took part in workshops, for this project, indicated that they struggled to run their business, had difficulty gaining access to business resources and wanted directional advice as to how they could grow their business. A virtual and physical business hub or network was raised as a solution to this issue. Most CRIs indicated in their interviews that they had limited engagement with small to medium sized enterprises (SMEs) in the Waikato region. Those that had no or very little engagement commented that they tended to work with larger companies or national industry bodies who had the resources to be able to engage with CRIs and who had national linkages so were able to disseminate research findings and results. Our previous study also found that universities from outside the region (Canterbury, Auckland, Lincoln and Massey) were regarded more as partners for innovation and research for manufacturing and service sector businesses than the local university (MartinJenkins, 2012). We are a national company, most of the innovation I work with actually comes out of Canterbury, P North [sic] or Auckland. In fact in 12 years I can say only one innovation came from our Waikato office. It s a numbers game, we have only 35 staff here in a company of 400, hence I don t think it is lack of imagination here, just low chance. Crown research institute interviewee In contrast, Scion appeared to place much greater emphasis on their location and engaging with their community. They have plans, as part of their campus redevelopment, to develop an Innovation Hub to co-locate research and business, and act as a showcase of what Scion does. Additionally, they plan to increase their currently very small commercial income base to 25 percent of their income by A couple of student entrepreneurs who took part in the project workshops felt that the University of Waikato was not encouraging of entrepreneurship. At the same time, University of Waikato was complimented for reaching out to SMEs in the region and finding out what their needs are. However, it was felt that SMEs did not have the capability and capacity to engage with the university in a meaningful way. 15

20 Workshop participants noted the lack of large, and multinational, businesses in the region. It was thought that this could hinder the region s exposure to international markets and international ideas. Tetrapak was mentioned, and questions were raised as to the extent to which their R&D is embedded into Waikato Innovation Park and the region generally. Entrepreneurship and innovation capability and capacity is also determined by a broader range of supporting processes and practices not just the direct investments. A range of international and domestic research has suggested key supporting practices required for innovation include (Campbell- Hunt & CANZ, 2001; Nilsson et al., 2008; Previously Unavailable, 2016; PricewaterhouseCoopers, 2013): Process: Ideas management and environmental scanning processes which seek and gather ideas and knowledge widely from customers, suppliers, employees, competitors; and allow ideas and knowledge to be shared, stored in a user-friendly form and made freely accessible. Efficiently achieving alignment on which innovation territories or ideas to move forward with (prioritisation and buy-in) was noted as a particular challenge for CEOs of large New Zealand businesses (Previously Unavailable, 2016). A survey of 57 small high innovator firms in Western Australia found that those with formal, systematic systems for new product development or innovation management were significantly more likely to generate superior innovations from a commercial perspective (high sales, high profit and good market longevity) than firms without such systems (Mazzarol & Reboud, 2005). Culture: A culture (including shared understandings, routines and processes) that encourages ideas to flow freely through the business by promoting creativity and having a go, internal collaboration, and upskilling of people, using carefully designed reward, recognition and development systems to reinforce behaviours that encourage innovation and give staff considerable discretion to pursue ideas. Empirical studies of the relationship between firm culture and innovation finds that the internal culture of a firm is the strongest driver of radical innovation across nations, and its impact exceeds other potential factors including geography, number of scientists and engineers, IP protection, patents and R&D (Tellis, Prabhu, & Chandy, 2007). The extent to which a firm is prepared to be future focused, risk tolerant, support individuals who pursue new ideas, and the use of monetary and non-monetary incentives to reward innovation all contribute to radical innovation. Governance: Vision and strategy; strong leadership and clear strategic intent to pursue improvement and not rely on the status quo. In a PricewaterhouseCoopers (2013) survey of 246 CEOs from around the world, most CEOs (37 percent) indicated that they saw their primary role as a leader 2 in driving innovation within their organisation. Creating clear objectives and benchmarks is also key (Previously Unavailable, 2016). The following section outlines our findings from the interviews in relation to these three key supporting practices. 2 As opposed to visionary, facilitator, sponsor, advocate or follower. 16

21 Process Most businesses appeared to have an internally-focused approach to innovation management (10 of the 13 businesses interviewed). Six businesses had formal innovation processes, with the rest undertaking learning-by-doing and using informal processes. A few businesses and entrepreneurs found that it was difficult to understand the pathway for innovation, and found it challenging determining their next step. The New Zealand Innovation Council has started launching a website series, Innovation Heroes, which focuses on New Zealand businesses and their innovation challenges and how they overcame them. This is a useful resource which businesses in the Waikato region should be referred to. Some businesses who were interviewed for this project, or who participated in the workshops, appeared to have formalised innovation management processes. Businesses used the following methods to manage their innovation processes: Stage-gate processes Specific areas on premises devoted to 2019 and beyond technology and products Evolved and developed their own processes over time, which became formalised Formalised plans and directions with goals and resources attached Access to an Innovation Team at head office in Auckland, using co-design methodologies Agile software development Internal Dragon s Den type initiatives which are evaluated and, if successful, developed and resourced. No one mentioned using dedicated innovation management service providers, such as Creativate in Cambridge, or engagement with the New Zealand Innovation Council. Additionally, no one mentioned accessing Callaghan Innovation s IMProve initiative which provides an assessment of a business s innovation management capacity and capability and highlights areas for improvement. A Hamilton-based entrepreneur / business built this model to illustrate the importance of stage-gate processes, having a plan, implementing a plan and adequate resourcing for business innovation and regional innovation. Culture There are also many businesses who do not focus on innovation. For example, a study of 13 owners of small farms in the Waikato region, found that the main goals of their business strategies were flexibility and time for non-farming activities and sufficient funds for the family and business (including debt reduction or debt management) (Westbrooke, 2013). Most actively did not want to expand as they didn t want to employ staff and become people managers. 17

22 Due to the nature of this project, most businesses interviewed had a focus on innovation, trying new ideas and/or were looking to improve existing products, services and processes. However, most businesses and entrepreneurs had relatively closed innovation models innovation is performed and developed internally and in a self-sufficient way. It has been suggested, in an examination of a small sample of innovative companies in the Waikato region (Black, 2015), that open innovation is likely better suited to New Zealand, and the Waikato, as it helps to compensate for the lack of diversity and scale (Hendy as cited in Black, 2015). It should be noted that open innovation is an increasing trend internationally. Governance One business interviewed mentioned that their organisational culture changed to be more innovative, continuous improvement-focused and engaging better with staff post a leadership change. The new leadership moved office layout to be more open rather than everyone in an office (including the CE), which enabled collaboration and idea sharing. A few workshop participants commented that while innovation can be given a profile in larger companies, it can be difficult in practise to manage and ensure ideas can be generated from the bottom-up. Participants commented that, in their experience, often the ideas are not generated in the same areas as where decision making occurs. This separation makes it hard for ideas to get buy-in at the executive level. Additionally, it was felt that acceptable levels of risk for the executive team were relatively low. Communication of innovation strategy at the organisational level was considered to be critical. While these observations are certainly not unique to the Waikato region, the delivery of management and leadership capability training in the region should ensure that innovation leadership and strategy is a key component. Entrepreneurship summary Assessment Issues Opportunities Initiatives Lower rate of business start-up than the national average Not all businesses are growth and/or innovationfocused Improving access to the Regional Business Partner network and NZTE/Callaghan Innovation services Increasing the number of business growth advisors to enable better coverage of the Waikato region Business hub/network 18

23 EDUCATION AND TRAINING Proportion of the population with Bachelors or higher qualifications, 2013 Source: Statistics New Zealand Auckland New Zealand Otago Canterbury Waikato Bay of Plenty Northland 0% 5% 10% 15% 20% 25% Education institutions are often the providers of scientific knowledge and commercialisation capability for innovation through their research and related activities. In addition, they create the skilled workforce for innovation. There are several examples of education organisations working with businesses and industry to commercialise research in the region, such as: The New Zealand Titanium Technologies Platform (TiTeNZ) which is a partnership between the University of Waikato, Callaghan Innovation, the Titanium Industry Development Association, GNS Science and University of Auckland to create a multi-company, multi-sector manufacturing base for high value titanium-based export products No.8 Wireless/Lightwire worked with the University of Waikato to bring reliable broadband internet connections to rural Waikato. A University of Waikato Computer Science team developed computerised machine learning techniques that can be used to speed up the analysis of data by testing laboratories. The software has now been in routine use at Hill Laboratories. A joint venture between WaikatoLink and Hill Laboratories, Khipu Systems Ltd/11 Ants Analytics, was established to commercialise the software. Recently, 11 Ants Analytics was sold to a joint venture between Air New Zealand and Aimia Inc, a Canadian-based data-driven marketing and loyalty analytics company. Wintec s Centre for Transdisciplinary Research and Innovation also provides research and innovation services to businesses. The Centre has prototype and product development facilities and specialises in using transdisciplinary approaches to solving complex social and industrial problems. They use software, hardware, business and combined technologies. The Centre has 19

24 helped customers develop new products or new research in the areas of farming, remote healthcare, rural development, youth engagement, and smart ageing. For example, Wintec has worked with the Waikato District Health Board and regional bodies to design and develop a framework for information sharing across the health sector. Good George launched a competition for Wintec students to create a new special edition can label design for the Pilsner brew in The winning design was printed and applied to a limited edition run of cans. However, in general, linkages between some industries and businesses in the region and researchers are perceived to be weak. Capabilities Limited linkages between industry and researchers may in some sectors reflect the quality and perceived relevance of the research being undertaken. Based on the Performance Based Research Fund quality evaluation 3, the University of Waikato is strongest in chemistry, communications, ecology, engineering, human geography, law, mathematics and psychology (Tertiary Education Commission, 2013). Subjects where there is greatest capacity (average quality score multiplied by FTE staff 4 ) are education, management, ecology, computer science, engineering, law, economics, marketing, psychology, Māori knowledge, earth science and human geography (F Scrimgeour, 2013). Some of these areas are clearly relevant for the industrial base of Waikato, particularly engineering. Indeed, University of Waikato research income (from a number of sources) has also increased over time (Waikato Regional Council, 2012a). Interestingly, ICT, cyber security and computer science do not feature highly in the PBRF evaluation, but was consistently mentioned by interviewees (particularly those in the ICT or ICT-related sectors) as a strength of the Waikato region and the Universit y of Waikato. The University of Waikato does have a ranking in the top 200 universities for computer science and information systems (Quacquarelli Symonds Limited, 2016). The research, alumni and graduates from the University of Waikato in ICT and computer science were considered, by interviewees, as world-leading and industry appropriate. Indeed Emeritus Professor Ian Witten is known as the grandfather of Google for his 1993 book Managing Gigabytes which taught Google founders Page and Brin how to build a search engine. One interviewee commented that the University of Waikato plays an important role in skills, but that it should also play a role in setting the region s sense of purpose and direction. It was felt that the University of Waikato was not playing this leadership role, nor selling itself and the region well. A few businesses thought the University s value proposition was not well articulated. Interviewees tended to not mention Wintec in relation to specific innovation-related capabilities. Most commentary was related to the students and skills generated, which were considered to be industryrelevant. The engineering and trades faculty was the most relevant to the businesses interviewed. 3 The next Quality Evaluation round is in Number of funded evidence portfolios is used as a proxy for FTE staff 20

25 In 2017, research across Wintec focused on the following themes (Wintec, 2017): Inclusive Culture, Language and Indigenous People - Cultures, Indigenous Peoples, and Migration - Languages and Literacies - Māori and Pasifika Innovation, Creativity, and Design - Industrial and Product Design - Experience design and customer-focused Innovation and co-creation - Societal Innovation and co-creation Human and Societal Health, Wellness and Performance - Health and wellness - Thriving and resilient communities - Sport and Performance Transformative technologies and the future of learning, workplaces and careers - Technologies that transform society and work - Future learning and learners - Future workplace and careers Regeneration, Revitalisation and Transformation - Rural Environments and Communities - Urban Environments and Communities - Business, Society, Industries (Agriculture, Tourism, Manufacture and Export). In conjunction with SODA Inc, Wintec offers Launchpad which provides students an opportunity to explore their business idea or grow an existing business through a customised 12 week programme. A business growth advisor is appointed to the student for the duration of the incubation programme and other experts are brought in as required. 21

26 Business and academia linkages Exploratory interviews with businesses in the region in 2012 found business and innovation relationships with Waikato Institute of Technology (Wintec) were more numerous and successful than those with University of Waikato (MartinJenkins, 2012). Additionally, relationships with tertiary organisations outside the region were stronger, for example, with University of Auckland, Massey University and Lincoln University. Discussions in interviews and workshops for this project were consistent with the 2012 findings. One large business commented that engagement on the research side with Wintec and University of Waikato was minimal, but that they had collaborative research projects with academics at University of Auckland and Victoria University of Wellington. Their relationship with Wintec and University of Waikato tended to be in relation to student placements and curriculum development. However, the University of Waikato was commended by a couple of interviewees as making substantial efforts to connect with SMEs to find out what their business and innovation challenges were. Some interviewees also spoke of successful relationships with the university for innovation. University of Waikato s analysis of their research contracts in the Waikato and Bay of Plenty regions between 2014 and 2017 found that (University of Waikato, 2017): An innovation support organisation built this model to represent that regional innovation requires joined up entities, integration and connections. It was noted that the connections are fragile in places and easy to break. Research interactions in the region, by numbers of contracts, are with local government, CRIs, businesses and government departments (in that order, by decreasing numbers of contracts) the main activities in the region that involve the University relate to the Science and Engineering faculty. The next highest faculty, by numbers of contracts, was Computing and Maths. there are 50 businesses in the region with which the University has had contracts in the last three years. However, with a total of 86 contracts with those 50 businesses, there is the implication that most of those businesses only had one contract and were less likely to be repeat customers (University of Waikato, 2017). In relation to universities as supporters of their commercial endeavours, interviewees in the 2012 and current project commented on the perceived difficulty of managing intellectual property, the need to sign long confidentiality agreements, the lack of commercial nous and the long time frames for research output (especially when the request was converted to a Masters or Doctorate project). It does not appear to be isolated to the University of Waikato, as interviewees mentioned they encountered the same challenges when working with other universities. However, there may be an opportunity for the region to design or facilitate a better local system which has strong, enduring and positive connections between the university and industry. Wintec offers innovation services through Wintec Innovate / Centre for Transdisciplinary Research and Innovation. While they have undertaken projects with industry and business in the past, none of the 22

27 interviewees nor workshop participants mentioned that they knew or had accessed this service. The University of Waikato offers the Start-Up Waikato Scholarship Programme which offers $5,000 for 10 weeks to develop a project or idea with the help of mentoring, workshops and full-access to a shared working space in Hamilton. The same programme runs in Tauranga in association with Toi Ohomai Institute of Technology, named Project Ignite. The Hamilton programme is well-connected with industry, being sponsored by Ballance, APL Window Solutions, Waikato Innovation Park, Office Max and Gallagher. Work placements and practicums as part of degree courses at Wintec and the University of Waikato is another aspect of business and academia linkages. A few interviewees (businesses and CRIs) mentioned that they hosted students and in many cases offered them full time positions postgraduation. Examples include: The Auckland ICT Graduate School (a collaboration between the University of Waikato and the University of Auckland) delivers two postgraduate programmes to develop industry-ready ICT graduates. Industry internships and research projects are part of the programmes. Wintec s Master of Transdisciplinary Research and Innovation is a full-time 18-month programme of study, with no formal classes. Students are guided through the programme by an academic lead supervisor and will also be paired with an industry mentor. The student develops a research plan in the first part of the programme and spends at least 3 days a week in business, working on the project. Students are supported by a community of practice, with supervision and mentorship, and with access to a national and international network of researchers. Wintec s Design Hub provides an opportunity for students from different disciplines to work on creating a solution with an industry partner. Wintec s Co-operative Education Project (CEP) is a work integrated learning programme and major feature of: The Bachelor of Applied Management (BAM), Business Graduate Diplomas, Bachelor of Applied Information Technology, and Post-Graduate Applied Information Technology programmes. It is a three way partnership between the student, the workplace and Wintec for work placement or an industry project. In 2015, it was reported that the University of Waikato had at least 70 programmes which offer work placement or a practicum component, which in one year exposed almost 2,000 students to first-hand industry experience ( It is likely that these programmes would benefit from further promotion to businesses in the region. Skills The skills produced in the region have a positive affect on innovation (see Faggian and McCann (2009)). In general, interviewees and workshop participants thought that skills produced by regional education organisations were of appropriate quality and quantity. There were some exceptions, namely: There could be more done to modernise primary and secondary schooling and education. That is, being more applied, teaching outside of the classroom and improve the use of technology in education. A need to make sure ICT graduates are learning on appropriate and industry standard platforms. 23

28 The need to encourage and teach entrepreneurship in an applied way at university. Universities should teach using New Zealand businesses as case studies, rather than an overreliance on international businesses. Other skills-related challenges were due to other weaknesses in the system: It can be hard to employ staff from overseas in a timely way (due to immigration processes). It was perceived there was a lack of training and apprentices in the manufacturing industries (due to tendering processes driving down costs/profit so that businesses can no longer afford to hire trainees and apprentices). In some cases, competitors were poaching staff. In general, we conclude there were no regionally-specific concerns related to innovation and skills. Māori and iwi One interviewee mentioned that Māori engagement in the regional education system was an opportunity that could be leveraged more. The University of Waikato has the highest proportion of Māori students of any university in New Zealand (University of Waikato, 2015). In 2015, there were 2,249 Māori students studying at the University of Waikato. It is viewed that the university is an example to New Zealand and the world of positive cultural partnerships in tertiary education. The university also has a high proportion of academic staff with Māori descent and good relationships with Waikato-Tainui. Education and training summary Assessment Issues Opportunities Initiatives Weak linkages between academia and businesses/industry Capabilities of tertiary education organisations not widely known Māori heritage and participation 24

29 KNOWLEDGE CREATION Patent Cooperation Treaty patent applications per million population, 2011 Source: OECD Regional database San Francisco South Netherlands Zurich Aberdeen Edinburgh Dublin Auckland Brisbane Waikato Canterbury New Zealand Queensland Otago Bay of Plenty Northland Proportion of employment in R&D intensive industries, 2015 Source: Infometrics 0.0% 0.5% 1.0% 1.5% 2.0% Canterbury Auckland New Zealand Waikato Bay of Plenty Otago Northland Natural and physical science professionals, and agricultural, medical and science technicians, as a proportion of the workforce, 2016 Source: Ministry of Business, Innovation and Employment 0.0% 0.5% 1.0% 1.5% 2.0% Waikato Otago Canterbury Northland Bay of Plenty New Zealand Auckland Technology now enables businesses and industry to produce products and services, and structure their business models, in different ways. This offers opportunities for New Zealand, the Waikato and more rural parts of the region. However, the importance of face-to-face contact for innovation and knowledge intensive activities has increased (McCann, 2009) because of the increasing complexity of knowledge that is generated and manipulated. As a result, the importance of proximity and linkages has increased. Within businesses Innovation is highly dependent on the availability of appropriate skills and different types of skills have important roles at different stages of the innovation process. Key skill elements for innovation include the numbers of scientists and engineers and the proportion of knowledge workers in a region. With a strong science and technology sector, particularly off the back of dominance in agriculture and horticulture, the Waikato region has the highest proportion of scientists and technicians in its regional workforce in New Zealand. The Waikato region is the only region in New Zealand which MBIE expects to increase its proportional scientist and technician workforce by 2019 (from 1.9 percent to 2.0 percent) (Ministry of Business, Innovation and Employment, 2016). 25

30 Growth in the knowledge intensive industries 5 and workforce is also positive. Between 2015 and 2016, employment in knowledge intensive industries increased by 2.5 percent in the Waikato region, while New Zealand s employment in those same industries increased by 2.1 percent. Bay of Plenty s was highest at 2.9 percent (Infometrics, 2017). It appears that science and technical skills in the region offer a good base for increasing the level of innovation possible. As discussed previously, a key barrier may be encouraging models of open innovation. Interviewees commented that entrepreneurs and industries which have historically been operating through one-man-bands tend to be overly secretive and closed which hinders open innovation and collaboration. New Zealand has a low rate of patent applications (five times less than Finland), but on a per capita basis New Zealand produces a high number of scientific papers (Callaghan & Hendy, 2014). The Waikato region has a higher rate of patent applications than the New Zealand average. It is suggested that the environment for R&D in New Zealand is good, but the conversion of ideas into innovative products and services is low (Black, 2015). One businesses commented that a barrier to innovation for them was access to reference sites and the ability to live test ideas and prototypes. Interestingly, another, large business, commented that they were open to being used to showcase new products, services and processes, and saw the potential for businesses in the region to test innovations at their site, particularly if it fitted with their business interests and brand. For them, fintech, virtual reality and artificial intelligence were specific technology interests. A Hamilton-based business built this model to highlight the difficulties larger organisations can encounter in undertaking innovation. The levels show the different hierarchies within a large organisation and the cylinders represent ideas. Ideas occur at all levels, but often not in the same places as decisionmaking. It can be hard for ideas to make it up the levels. There can be separation of buy-in into innovation between employees and the executive. A strategy or plan is required. Workshop participants in Taupō suggested that an R&D facility could be developed to take advantage of the ideas that the region appears to be good at generating. This R&D facility was described as a place with various pieces of equipment which entrepreneurs, inventors and businesses could use to test out their ideas in a safe environment. The participants recalled Thomas Edison s Invention Factory in New Jersey. The Invention Factory, built in 1887, had chemistry, physics and metallurgy laboratories, a machine shop, pattern shop, research library and rooms for experiments. Such an R&D facility is consistent with conclusions reached in other Waikato regional economic development reviews. In examining the Waikato regional economy, Hughes (2007) concluded that New Zealand needs to achieve large scale production in the value added areas such as food, forest products as well as products related to animal and food production even if the manufacturing of these products is undertaken offshore. R&D for many agricultural products and services can be undertaken 5 Knowledge-intensive industries are industries that satisfy two basic criteria: At least 25 per cent of the workforce must be qualified to degree level and at least 30 per cent of the workforce must be employed in professional, managerial, as well as scientific and technical occupations. 26

31 in New Zealand s well established agricultural research infrastructure, tested in the field with full scale production of associated products etc undertaken overseas if necessary. There are a number of other R&D-related facilities available in the Waikato region: Spray dryer at FOODWAIKATO: Located at the Waikato Innovation Park is New Zealand s first and only independent spray dryer capable of developing new products, from concept to commercialisation. The commercial-sized processing plant provides scale up opportunities and access for independent milk suppliers and nutritional bands looking to produce milk or ingredient powders. - One business interviewed mentioned accessing this facility. The Creation Room: A trial social good initiative created by Adroit Creations in partnership with Promapp and MBIE, located in Paeroa in Adroit Creations premises. It is an open resource for residents of the Hauraki area who are interested in exploring opportunities in the creative and tech industries. From learning about code and web design to blogging, setting up an online market place to exploring the internet of things and robotics the Creation Room offers a free, no barriers place to create within the offices of a professional software and consulting company. The Creation Room is open every Monday and Thursday, 10am 5pm. - Uptake has been relatively slow. However, Adroit Creations has helped an entrepreneur with his fintech idea which may be sold to an Auckland firm in the near future. Perhaps this initiative could be better communicated to other entrepreneurs and businesses. Even businesses in Thames were unaware of this service. TechGym: TechGym is located in Wintec s Engineering and Trades facility on its Rotokauri campus in north Hamilton. The training space is equipped with specialised trades and engineering equipment and staffed by experienced Wintec instructors. It is a gym membership for R&D facilities, with monthly fees and concession cards available. It is an environment where people of all skill levels can come and use industrial tools, equipment and technology to design, create and build their own projects. Members have access to equipment and tools for light and heavy fabrication, welding, woodworking and the machine shop. As membership and demand grow, other specialist areas such as CAD design, 3D printing, electrical and automotive will also be available. During opening hours, TechGym will be staffed by at least two instructors who will be onsite to offer support. One-on-one training, group training and custom training programmes are also available. - An interviewee mentioned that the Tech Gym has tended to be used by hobbyists rather than those focused on entrepreneurship and business innovation. There may be opportunities to target this service to businesses and entrepreneurs, and more widely across the region. Thames Coromandel District Council and Waikato Innovation Park have been having exploratory discussions with businesses and organisations about the concept of a Test Kitchen in Thames. The concept is a potentially mobile commercial test kitchen that allows artisan food businesses in the Thames area to test and refine new products. The concept also wraps in tourism aspects, allowing tourists to see some of the products and arrange packaging and sending offshore. It is unclear the extent of demand for this concept at this stage. 27

32 Workshop participants (who were not in the food and beverage sector) were sceptical of the concept and believed there could be opportunities to broaden its concept to other sectors. We asked the question to Waikato Innovation Park about whether those businesses and entrepreneurs in Thames could access the Food Pilot in Palmerston North and Food Bowl in Auckland and use those testing facilities. They commented that transport of food and ingredients for commercial use can be prohibitively difficult and costly for SMEs. Wintec has suggested developing an IP Hub/Bank where members can make use of deposited intellectual property (IP) for any application and only pay if they start to use their solution/product outside of the Waikato region. This concept was part of their Regional Research Institute (RRI) bid (see below for further information on RRI). By way of example, Wintec has suggested that their patented sensor could be deposited into the IP Hub for use by companies and organisations, and the data captured could also be made available for public use. The concept could involve members of the IP Hub having the option to contribute the IP they generate to a central IP pool, in exchange for IP credits. Members will be able to use their credits to obtain access to other IP that has been contributed, creating an exchange network of ideas accessible to all members. Crown research institutes All Crown research institutes (CRIs) have a physical presence in the region, other than ESR, while Scion has a base in Rotorua in the nearby Bay of Plenty. While primary industries are served by CRIs and industry organisations in the region, manufacturing and services businesses appear to have more limited engagement with CRIs (MartinJenkins, 2012). Several businesses interviewed in the 2012 study considered that either CRIs were hard to engage with and that businesses did not know what services they could provide, or that CRIs were not focused in areas that were relevant to their businesses. AgResearch had the most, by number, of links with business and industry, for example with Tatua, all the meat companies, Fonterra, Dairy Goat Co-operative, CRV Ambreed, Animal Breeding Services, Tru-Test and Fibre Fresh Feeds. Miraka and AgResearch received $1 million over three years by the High-Value Nutrition, National Science Challenge, for a research project to unlock the natural health benefits of milk that minimises allergies in children (Miraka, 2015). Miraka is also working with Plant and Food Research and AgResearch to develop a new family of shelf-stable and healthy whole food-based beverages that will appeal to high value segments of Asian markets (Plant and Food Research, 2015). GNS appeared to have particularly good relationships with businesses and industry, and they viewed those relationships as long term partnerships with a strong focus on commercial outcomes. GNS spoke of a model of working that works alongside business and develops a deep understanding of each business it works with. One large business that was interviewed commented that while it did not result in a research project, they noted that GNS s attitude and mindset was refreshing where they were keen to work with industry, understand the business and had good commercial thinking. 28

33 However, CRIs did have linkages with other actors in the regional innovation system, beyond business/industry: NIWA: Te Waiora is a Joint Institute for Freshwater Management between NIWA and the University of Waikato. NIWA also works increasingly with iwi groups such as the Waikato River Authority. NIWA also has a MoU with Waikato Regional Council (WRC) which encourages collaboration, joint studies and direct research funding. WRC is also a major consulting customer for NIWA. NIWA has also taken part in Wintec s Employment Partnership Groups. AgResearch: Partners with like institutions such as Dairy NZ. AgResearch was to co-locate with DairyNZ and LIC at Ruakura but this is now not proceeding. The Future Footprint review (a largescale reinvestment programme) led to the relocation of 200 AgResearch staff in Ruakura and Invermay to Palmerston North and Lincoln campuses. The Ruakura regional research centre would focus on regional science issues such as farm systems, environmental science and dairying). Also works with the Waikato Innovation Park and Waikato Regional Council. Landcare Research: Works with national businesses to develop information products (such as Fonterra, Balance and Ravensdown). Interaction with KiwiNet. Has worked on environmental technologies but has found that farmers may not want to adopt the technology as they do not want councils to be aware of the data. Undertakes research that may get sold and implemented internationally, such as in US, South East Asia, and European markets. Has an accreditation service which businesses may use to gain sustainable business credentials. Has undertaken staff swaps with the Waikato Regional Council to gain value from each other s skills. GNS Science: Regularly engages with district and regional councils. Developed a RRI for funding in 2015 which was unsuccessful. Plant and Food Research: Closely linked with University of Waikato through individual professors and MBIE-funded projects (such as the Primary Innovation project). Scion: Engages with industry associations such as the New Zealand Forest Owners Association. Scion is located in Te Papa Tipu Innovation Park in Rotorua. The 114 hectares is shared with by a number of businesses including PF Olsen, Tui Technology and Industrial Lubricants & Services Limited. As part of Scion s campus redevelopment over the next two years, it intends to develop an innovation hub to leverage the benefits of co-location with more businesses, industry associations and government departments, as well as to showcase and make more visible its capabilities to industry and the community. MBIE s Regional Research Institute (RRI) initiative seeks to maximise the unique business, technology and economic growth opportunities in New Zealand regions by establishing research centres that help build research and development intensity and lift innovation in key regional industries. RRI was announced in Budget 2015, with an initial commitment of $25 million. In Budget 2016, the Government provided an additional $40 million to support the initiative, bringing the total funding to $65 million. In the second round of funding (results to be announced in June 2017), up to $35.5 million remains available. RRI s must perform relevant research in support of industry-led efforts to increase their R&D intensity. RRI s are also expected to bring new research activity in the regions whilst meeting industry demand in their host region and possibly across several regions due to the nature of their industry engagement. 29

34 There were five unsuccessful bids for RRI from the Waikato in 2016: Lead agency GNS Livestock Improvement Corporation Priority One - TRIM Priority One - KRI2 Wintec Area of research Geothermal Agritech Medical Devices Technology SMEs Technology Development SME Development That there were five bids for the RRI from one region suggests a lack of coordination. With no innovation and economic development leadership in the region, bids from different lead agencies arise. It is likely that if regional innovation actors were aware of each other s potential bids, collaboration on a single or potentially two, joined-up bids would be more successful both in terms of the bid and the RRI itself. In terms of the RRI process, University of Waikato who were involved with the agritech proposal mentioned that the process of proposal development was relatively straight forward as it built on an existing set of trusting relationships between the companies and organisations involved. The RRI initiatives could learn from previous innovation initiatives in the Waikato region like the AgBio Innovators Academy (AIA). AIA was funded $1 million by Tertiary Education Commission (TEC) as part of the Growth and Innovation Pilots brought together five businesses (one multinational, three medium-sized companies and one small company), the innovation park, a CRI, two universities and one institute of technology and polytechnic (ITP), via a joint innovation platform. The initiative ran between 2007 and 2009; however, there were no tangible results or returns (Buerkler, 2013). Interviews with the AIA participants, and assessment against the Diamond Model for Innovation 6, found the following factors contributed to lack of outputs and outcomes: Ideation: Participants were selected for the AIA, not on a project idea, but on an existing cluster and geographical proximity. There were no common interests or objectives. The businesses thought new products were the main goal (and wealth creation for the region), while the universities and ITP thought the main objective was networking. Interests: All participants didn t allocate dedicated resources or incentivise participation. The large multinational was unwilling to allocate its own resources to the project. It wanted to benefit without making a serious contribution. The universities internal structures rely on production of publications rather than participation in innovation projects. Resources: Financial resources mainly came from TEC. While this removed hurdles to participation, it removed some of the commitment from participants. It was concluded that there was a shortage of people, commitment and quality (Buerkler, 2013). Interviewees agreed that there was a mismatch between budgets, ambitions and a lack of financial commitment from everyone. 6 The Diamond Model for Innovation illustrates the factors that must be in place in order to achieve successful inter-sectoral and collaborative innovation. These are interests, resources, behaviour and trust. These four critical factors positively influence each other. 30

35 Trust: There appeared to be high levels of trust between the companies, but academics thought that there was a lack of trust in each other s capabilities and intentions throughout the initiative. Behaviour: The AIA was not oriented towards innovation success. As there were no common objectives and high commitment, behaviour amongst participants was deemed to be too passive and unfocused (Buerkler, 2013). There was no collaborative behaviour. The universities did not improve their entrepreneurship and the businesses did not adjust and become more researchoriented. Capabilities To date, there has not been an assessment of the region s capabilities and where it might have globally competitive advantage. The UK has recently launched the Science and Innovation Audit (SIA) process to provide support to regions to gain a view on their science and innovation strengths to help future investment decisions and foster collaboration (see Appendix 2 for further information on this and other international innovation initiatives). Based on our understanding of the Waikato region s strengths (from the interviews, information on research strengths and data on business demography), there is a strong thread in a number of interrelated areas: agriculture, agritech and agribusiness; food and beverages and value added food; IT and technology; engineering and equipment manufacturing for the food, environment and agriculture industry; and environmental management (Figure 3). There also appears to be some areas where research and industry are not well matched. For example, businesses in mining and quarrying, logistics, tourism, food manufacturing and equine do not appear to have corresponding research strengths in the region. Conversely, health, human factors and the future of work has wide business and industry applicability but no immediate matched business/industry strength in the region. See Profiling and celebrating innovation for further discussion on strengths and advantages of the region and promoting these more widely. 31

36 Figure 3. Illustration of the Waikato region s capabilities (business and industry in yellow; research in orange) Vegetable growing Crop growing Plant varieties Bio-engineering Horticulture Treatment of wastewater Forestry and logging Mining and quarrying Sawmilling and timber dressing New breeding techniques Eco-system services New products Bio-energy Cement, lime, plaster and concrete products Wood and fibre technology Paper products Bio-control of pests Fertiliser and pesticides Sensors for environmental monitoring Big data Data analytics Land and soil systems Computer science ICT Plastics Engineering Dairy cattle farming Poultry farming Sugar and confectionery Aluminium and steel products Motor vehicle and motor vehicle parts Management Freshwater management Waterways Coastal Scientific research services Dairy products Meat and meat products Machinery and equipment Trades Human factors Ergonomics Aquaculture Innovation, creativity and design Aquaculture Transformative technologies and future of work Livestock farming, including horses Human and social health, wellness and performance Veterinary services Farm animal and bloodstock leasing Horse and dog racing activities Clubs (hospitality) Geothermal science Electricity distribution Amusement and other recreation activities Electricity generation Energy management Road freight transport 32

37 Knowledge creation summary Assessment Issues Opportunities Initiatives Knowledge created in silos Ability to convert ideas into commercial products and services Weak linkages between academia and businesses/industry Better coordination and leadership in developing RRIs Depth of knowledge and R&D in CRIs in the Waikato region High number of scientists and technicians in the region Strong capabilities in a number of related industries, sectors, platforms and technologies. Promotion of existing R&D facilities in the region (e.g., The Creation Room, TechGym, FoodWaikato) Further assessment of the Test Kitchen, Invention Factory and IP Bank/Hub Potential to develop a system for businesses to use other businesses and organisations in the region as reference/test sites. 1

38 KNOWLEDGE DISSEMINATION Innovations developed in partnership New Zealand ,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Cooperative arrangements for innovation by partner, 2015 Source: Statistics New Zealand, Business Operations Survey Cooperation No co-operation Cooperation No co-operation Customers Suppliers Other businesses Universities or polytechnics Cooperation No co-operation Cooperation No co-operation Cooperation No co-operation Crown research institutes, research associations / institutes Ubiquity in patent classes (in which a region has revealed comparative advantage) Regions below the trendline have lower ubiquity Source: OECD (2013) and Hendy, Te Pūnaha Matatini Normalised Ubiquity Index, average Northland 0 Waikato 10, ,000 1,000, West Coast Hawke's Bay Tasman/Nelson /Malborough Southland Taranaki Otago Bay of Plenty Manawatu-Wanganui Average population, Wellington Canterbury Auckland Diversity in patent classes (in which a region has revealed comparative advantage) Regions above the trendline have higher diversity Source: OECD (2013) and Hendy, Te Pūnaha Matatini Normalised Diversity Index, average Waikato Canterbury Wellington 0.5 Bay of Plenty 0 10,000 Otago 100,000 Manawat-Wanganui 1,000, Tasman/ Northland Nelson/Malborough Taranaki -1 West Coast Hawke's Bay Southland -1.5 Average population, Auckland Innovation support organisations The Waikato region has a significant range of innovation support organisations. The Waikato regional economic profile catalogues the range of tertiary education institutes in the region (that is, University of Waikato, Wintec, Toi Ohomai Institute of Technology, Te Wananga o Aotearoa), industry training organisations, Crown research institutes (AgResearch, GNS Science, Landcare Research, NIWA, Plant and Food Research, Scion) and Waikato Innovation Park (Waikato Regional Council, 2012b). It also notes the presence of government agencies (Ministry of Business, Innovation and Employment, Te Puni Kōkiri, Ministry for Primary Industries and New Zealand Trade and Enterprise), membershipbased businesses organisations (such as the Chambers of Commerce, Employers and Manufacturers Association) as well as many sector-based associations and business groups which provide support to businesses. Waikato AgriHub The Waikato AgriHub was launched in 2014 following AgResearch s Future Footprint review. The nine partners in the Waikato AgriHub were AgResearch, Dairy NZ, University of Waikato, Landcare Research, Wintec, Lincoln University, Waikato Innovation Park and Hamilton City Council. LIC, Gallagher and Greenlea Meats were interested observers of the concept. The concept was 2

39 championed by Hamilton City Council s chief executive at the time, Barry Harris. His previous experience and expertise was a significant influence, having previously been a senior executive at Fonterra and a director of DairyNZ, the former Animal Health Board, AgResearch and Primary ITO. He was also a chief executive at Environment Waikato and Greater Wellington Regional Council. The following themes (not too dissimilar from the findings of this review) supported the development of the Waikato AgriHub concept: There were many smart businesses in the city and region undertaking innovation in environmental systems, agriculture and agritech, and there could be better science and innovation partnerships with research providers. There were few collaborative projects between industry and research/academia. The specialities and strengths of research in the region were not well-known. Tertiary education organisations were not well-positioned/branded in relation to ag-bio and agritech even though they had strong capabilities in those areas. Success stories were not well identified, promoted and/or celebrated. Better promotion of the region and city s strengths could attract other businesses and investment. The nine partners agreed to pool resources to concentrate on four workstreams: Improving farming profitability and productivity whilst reducing the environment footprint (led by DairyNZ) Product integrity (led by AgResearch) Developing our talent pool (led by University of Waikato) Shared infrastructure opportunities (led by DairyNZ) However, projects struggled to maintain momentum due to: Lack of dedicated resources to move the projects forward. Partners moving their focus to other large funding streams such as National Science Challenges. Lack of an on-going leader to champion the concept. A local council leading the concept without a regional mandate, against a backdrop of their core business. Lack of clear objectives for the Waikato AgriHub. The concept has stalled, meeting a similar fate to the AIA discussed previously. Waikato Innovation Park The Waikato region differs from many other regions in New Zealand with a dedicated science and technology park, Waikato Innovation Park (WIP). Economic modelling prior to WIP s establishment, suggested that the research sector was the most valuable to the Waikato economy (as an output driver), and that the WIP had the potential to be commercially viable and to significantly enhance the regional economy (Frank Scrimgeour, Hughes, & Marsh, 2006). 3

40 An education and research organisation s model of regional innovation shows Waikato s strengths in food and food processing, as well as many smaller organisations who go their separate ways and can lack critical mass. The shelter (in pale yellow) is the Waikato Innovation Park which protects small organisations as they grow and lower their risk. The two low horizontal structures represent the expressway which connects the region to the rest of the world. Many interviewees were complimentary of the services that the Park provides, and those located inside WIP highly valued the collaborative activity the WIP shared space supports. WIP presentations indicated that turnover of Park tenants were in excess of $427 million in 2016 (growing from $158 million in 2013) (Gordon, 2017). Additionally, much higher proportions of tenants were exporting, experiencing job growth and investing in R&D, compared to the national average (Gordon, 2017). However, arguably more could be done to connect organisations and businesses who reside in the wider Ruakura Innovation Precinct. While businesses and organisations who are located in the WIP building itself are well connected (indeed, almost 40 percent indicated that they had collaborative partnerships) (Waikato Innovation Park, 2017a), there appears to be weak linkages within and between organisations and businesses in the Ruakura Innovation Precinct, including with TetraPak. Interviewees also perceived that WIP had focused on agritech but that the majority of its tenants were from broader sectors which was confusing from a positioning point of view. A Master Plan for WIP was unveiled in 2015 which will see it grow from a $25 million asset into a $180 million asset within 20 years. Hamilton City Council has wholly owned Waikato Innovation Park since 2013, but has recently announced it is exiting its investment (Waikato Innovation Park, 2017b). The Park is seeking a new investor. Economic development organisations There is no regional economic development agency, but multiple local economic development agencies and units as well as multiple regional tourism entities. The economic development entities in the Waikato are Otorohanga District Development Board, Rotorua Economic Development Limited/Destination Rotorua and Enterprise Great Lake Taupō. All councils also have dedicated economic development officers and units, with the exception of Matamata-Piako (in response to community consultation). Most areas also have a local economic development strategy (other than Otorohanga and Matamata-Piako, although both have an economic development framework). There is no organisation in the region which is dedicated to innovation across the region. There appears to be an opportunity to improve business innovation through better connections and engagement between innovation organisations and business. Interviews with a small sample of businesses in the Waikato region in 2012 found that businesses perceived that innovation support organisations were working in their own silos and were not well aligned to their business and the region (MartinJenkins, 2012). Some felt some organisations were difficult to engage with. Others perceived that their businesses were not the right fit with innovation infrastructure, such as WIP, because their core business areas were not dairy or agritech. 4

41 This perception that the region, and thus its innovation-support organisations, is mostly focused on dairy and agriculture was reiterated by interviewees and workshop participants in this project. Interestingly, examination of the region s patents and areas of revealed comparative advantage, finds that the Waikato region has one of the most diverse regions internationally (see graph at the start of this section). However, those areas of advantage are relatively ubiquitous, that is, common to many other regions (see graph at the start of this section). The region s diversity may be worth celebrating more, but it is also important to recognise that the areas the region is strong in are highly competitive on an international basis. Analysis of patent applications also finds that New Zealand applications have low rates of coownership which lends further support to the finding that businesses are not collaborating (Callaghan & Hendy, 2014). Knowledge diffusion Very few businesses indicated that they had had involvement with a CRI in the past. This is unsurprising given the discussion in the Entrepreneurship section whereby CRI interviewees themselves indicated little involvement with businesses in the Waikato region. Again, depth of capacity and capability are key concerns for CRIs in working with businesses. For those that have worked with smaller businesses, they have experienced a lack of alignment of businesses models (particularly in relation to IP ownership) and that businesses are not prepared to pay for the research. While they are open to working with businesses, they also find that businesses are not aware of CRI capability. The extension services they offered, such as Open Days, are now no longer part of their funding structure. A couple of CRIs noted that the way they are funded means that working with larger, national businesses or industry associations gets a bigger bang for buck and enables research results and findings to be disseminated to a wider audience. One CRI mentioned that mismatch in funding structures between CRIs and universities was a barrier to CRIs working with businesses. Universities are seen as, and are cheaper than, CRIs, and the use of students is an advantage for universities. Some interviewees mentioned that their relationships with CRIs were positive. It is likely that those interviewees were from research backgrounds which may have led to more of a meeting of the minds between the two. Waikato Innovation Park are only over the railway line, but we don t work with any of the companies in there. Crown research institute interviewee A few workshop participants mentioned that it was sometimes difficult to communicate with CRI-based researchers as they didn t understand business imperatives and/or didn t speak plain English. The 5

42 potential for translators was mooted as a solution to this issue. This issue was also raised by an innovation support organisation who noted that it was also about businesses needing to better understand research. Although there are examples of knowledge diffusion in the region, for example Dairy Push, supported by Dairy NZ, which collects environmental, financial and employment data from farmers to identify and work on weaknesses in their systems, it was felt by interviewees and workshop participants that none of the innovation support organisations in the region had responsibilities for knowledge diffusion or technology transfer. Conversely, workshop participants, in particular, felt that they received little value from the business and industry organisations they belonged to. Opportunities to network and events were seen to be specific gaps in their offerings. We were surprised that in each workshop we facilitated, there were businesses and entrepreneurs who did not know each other (often in the same sector), and who were able to add value to each other through suggestions for mentors, advisors and new business opportunities. Collaboration and networking amongst and within the businesses we spoke to were limited. Businesses mentioned that they felt that others in their sectors were overly competitive and therefore reluctant to collaborate. They commented that they should be working together to compete offshore rather than compete domestically. This competitive element also led to a general lack of trust. Workshop participants in Hamilton commented that there does not appear to be a natural inclination toward networking and sharing in New Zealand (business) culture. However, all the businesses and entrepreneurs we spoke to appreciated the benefits of collaboration and wanted to be able to network more with other businesses in the Waikato region. There were some examples of formalised collaborative working, such as Stainless Alliance International, which developed from a past Joint Action Group. The alliance consists of four companies, located in Hamilton, Blenheim, Palmerston North and Christchurch. They work together to achieve scale to bid for larger Australian tenders. However, the interviews and workshops did not uncover other collaborative activities between businesses that are Waikato region-based. Operation of peer-to-peer support networks could be a way to improve collaboration for innovation and management capability. The PLATO support and business development network that was trialled in Auckland in 2008/09, which helped businesses improve business and management capability and collaboration, could be worth examining as to whether it would be appropriate in the Waikato context. Technology transfer An ICT-based business believed that IT literacy and communication were the most critical factors for regional innovation. The wall between the person and the tower of innovation is a metaphor for the barriers within and between industries, business scepticism of how technology can help them innovate, and how communication occurs between disciplines. None of the interviewees mentioned exposure to the technology transfer profession. On the whole, new technologies and ideas tended to be generated internally, within the business. 6

43 The Ministry for Primary Industries (2012) online survey of technology transfer services to farmers and growers in New Zealand found that services are fragmented and thinly spread. It was concluded that the number of people providing technology transfer services is insufficient to provide effective support across the primary industries. In order to improve both the quantity and quality of technology transfer services, the following were suggested: Improve connectivity between the people involved, including better linkages with CRIs Ensure those involved are highly skilled, including better linkages with CRIs, collaborative working between consulting firms and professional standards/certification Attract more people into the profession, particularly younger people as most were over the age of 50 Stimulate the demand for professional services mostly through a better understanding of where farmers obtain their information and what professional support they use, and how farmers undertake innovation and learning. We note that expectations related to technology transfer for farmers and growers can differ from other industries, as the Commodities Levies Act 1990, and associated orders, imposes levies on farmers and growers where research and technology outputs, and technology transfer, can essentially be provided through the levy. Open data A number of interviewees mentioned that open data and big data present opportunities for the region, particularly with the level of experience and capability in the region in the IT and internet of things (IoT) sector. Sparktank has been having initial conversations in the region to launch a Waikato Open Data Initiative. Knowledge dissemination summary Assessment Issues Opportunities Initiatives Extension services and science communication not seen as a priority in CRIs and other research organisations Businesses have weak linkages with industry associations and other organisations who play a technology transfer / knowledge dissemination role Development of the technology transfer / translator profession The Waikato region s industrial diversity Open data Incentives for individuals to act as translators between research organisations and businesses Peer-to-peer support networks for businesses More opportunities for businesses and other innovation actors to network and interact Leadership in knowledge dissemination Ensuring that businesses who are not directly in the dairy sector are championed too 7

44 SYSTEM FRAMEWORK Wintec LaunchPad UoW Innovation Station Totally Thames Te Awamutu Chamber of Commerce Network Thames Wintec Toi Ohomai Institute of Technology Hamilton Young Professionals Kopu Business Group Smart Waikato Waikato Chamber of Commerce Landcare Research University of Waikato Waikato- Tainui College of R&D Waikato Pacific Business Network Cambridge Chamber of Commerce NZ Innovation Council NIWA Hamilton Central Business Association Te Aroha Business Association DairyNZ Te Wānanga o Aotearoa Cultivate IT Ag Research GNS Science Academic and research EMA Waikato Plant & Food Research Te Hūmeka Taupō Chamber of Commerce and Industry Waikato Engineering Careers Association ESR Crown research institutes Communities and associations Creative Waikato Scion Federated Farmers Farming WNT Ventures Innovation Awards Enterprise Angels Events and showcase Pioneer Capital The Kudos 2020 Fieldays Wintec Innes48 Gov Hack NZ Innovation Centre and Innovation Awards Ignition Partner Private equity, venture capital and angel investors TEDx Ruakura Oriens Capital Tainui Group Holdings Equipment Businesses and entrepreneurs Turongo me Maahina-arangi (Leaders by Design Summit) Spray dryer at Food Waikato Shared spaces Incubators SODA Inc Waikato Innovation Park Wintec TechGym The Creation Room Crowdfunding Enterprise Great Lake Taupō Kloud Collective Alpha Crowd Business growth/ innovation services Accelerators Councils and economic development agencies Waikato Means Business Snowball Effect The light grey coloured organisations are not physically based in the Waikato region, but are used by Waikato businesses and organisations Equitise Pledge Me Poutama Trust Otorohanga District Development Board Waikato Regional Council Crowd Sphere SparkTank Banks FinTech Central government MBIE District and city councils Flux Destination Coromandel Sprout Online Education Limited. 3Coding and Tech Entrepreneurship boot camps Deloitte Private Club Regional Business Partners MPI NZTE Creativate SODA Inc TPK Callaghan Innovation Hamilton Waikato Tourism Destination Great Lake Taupo It appears that the region has all the innovation actors, organisations and institutions within it, but perhaps does not use it to its potential. Some areas are also relatively cluttered with multiple parties having similar roles. Look at it! It s a mess Entrepreneur, Workshop participant We suspect this has arisen from a historical lack of leadership and associated agency devoted to economic development and innovation in the Waikato. With so many different organisations involved 8

45 in innovation support, businesses and entrepreneurs we spoke to commented that the system of support was confusing, they were always becoming aware of new things they didn t know about before, and that each appeared to be working in silos. Innovation support organisations interviewed also acknowledged that the system can be confusing, and one interviewee commented that a decision support system for businesses could be a potential solution. Leadership A few interviewees spoke of the need to have visionary leadership and a conductor of an orchestra. There also seemed to be demand for someone or some organisation to define what the Waikato region is about and what s our thing? in relation to competitive advantage. The Waikato Story work as part of Waikato Means Business is about creating and sustaining a positive image and story for the region. This work may need to more widely promoted, and A large business built this model to illustrate the importance of leadership (the person standing on the chair raising their hand), a common purpose and a burning platform to improving innovation in the Waikato. The other structures which all meet in the middle show there are lots of opportunities for collaboration. Central government support NZTE and Callaghan Innovation more focus paid to the invest and industrial chapters of the story. Work in Australia on innovation systems finds that leadership is one of the five features of successful innovation ecosystems (the others being places and spaces, connectivity, collaboration and communities of practice) (Advance Queensland, 2016). In the system, leaders play the role of host and facilitator of strategic innovation conversations, alliances and activities. They connect and coordinate innovation actors to expand the exchange of ideas and minimise duplication and unproductive competition. Interviewees in the 2012 study also commented that there was no one organisation to provide regional leadership and economic development direction (MartinJenkins, 2012). Note that this project is occurring in tandem with a project on the region s economic development capacity and capability. At the national level, innovation system reviews find that there is a lack of actors to provide strategic leadership in industries (Turner, Klerkx, Rijswijk, Williams, & Barnard, 2016), in that case, agriculture. Awareness of central government support through Callaghan Innovation and New Zealand Trade and Enterprise (NZTE) was high amongst interviewees and workshop participants. Two workshop participants commented that the level of business support in New Zealand was much better than that on offer in the United Kingdom. The Regional Business Partnership (RBP) network in the region appears to be working well. In general, interviewees were more complementary of NZTE than Callaghan Innovation. However, they also acknowledged that Callaghan Innovation is a relatively new organisation which has had a number of restructures. 9

46 In relation to Callaghan Innovation, workshop participants commented on the frustrations experienced when grant programmes changed mid-application. It was felt by workshop participants that there was no national innovation strategy that drives funding. These issues were also mentioned in the agricultural innovation system review. The review concluded that there was fragmentation of innovation funding because of the variety of mechanisms (industry bodies and government), frequent changes in government mechanisms and relatively small disbursements from those funds (Turner et al., 2016). We note that these experiences are not specific to the Waikato region, and occur in other regions in New Zealand. A business director indicated that the Waikato s innovation system needed to be accessible from many different entrances and pathways (represented by the steps, bridges and tracks). There are more than one way to get to the end game/innovation (the orange cylinder). There are eyes on the grey tower which represents observers who are reference points for advice and encouragement. They see what is happening from different perspectives. The umbrella is the parachute that helps businesses leap to different points and pathways. Callaghan Innovation does not have a physical presence in the region, other than through the RBP. However, WIP, as the RBP in the Waikato region, has been working to improve access. A Callaghan Innovation interviewee commented that often businesses equate RBP as Callaghan Innovation, so they have found in the past that negative perceptions in relation to Callaghan Innovation were really related to services provided by RBP. Accordingly, they have focused more on training of RBPs. NZTE staff in Hamilton are due to move into WIP in July 2017, which will improve business and innovation support for the region and allow NZTE to take part in the water cooler culture. Interviewees were grateful for the depth of international networks that NZTE had, taking part in international trade delegations, and access to offshore staff and facilities. However, interviewees and workshop participants commented that the information available on NZTE s website and responses to queries tends to be relatively generic, and tailoring and specific contacts would be more helpful. NZTE has an intensively managed customer portfolio (the Focus 700 or F700) of which about 43 are based in the Waikato region. Their other 3,000 customers (Foundation customers) are provided lighter touch engagement, providing information about markets and connections. This includes exploring local regulations in different places, undertaking research, or identifying contacts with key buyers or distributors. The Waikato region houses 10 percent of New Zealand businesses, so we would expect NZTE to be engaging intensively with at least 70 businesses in the Waikato region. Furthermore, we may expect more than 70 businesses, due to the export focus of the region (see Market development section). Support and ICT Interestingly, NZTE interviewees commented that they did not come across many start-up ICT companies (ICT products rather than professional services) in the region, that are generally found in all other cities. This appears to be at odds with the interviews and workshops we conducted that highlighted the region s advantage in IT, IoT and computer science. Further, a considerable portion of Callaghan Innovation s client portfolio in the Waikato region is IT-based. 10

47 It has been estimated that the IT sector in the Waikato region consists of: 2,600 employees $100 million in exports Contributes $700 million in GDP. 7 Businesses also commented that NZTE appeared to be focused on heavy-weight exports and were less helpful in relation to IT sector concerns. Cultivate IT has recently been launched in the region to: Attract and retain talent Connect talent across the business and innovation system Promote Waikato technology capabilities and advance the region as a technology powerhouse Encourage more technology investment ( Ministry for Primary Industries Multiple parts of the Ministry for Primary Industries (MPI) work with primary, food, fibre and forestry sector companies to facilitate growth. Investment Programmes is a directorate within MPI that actively aims to facilitate innovation in the sector by providing funding to enable innovation. Funding is made available through investment schemes, such as Primary Growth Partnership (PGP) and Sustainable Farming Fund (SFF) whereby the government shares the risk of innovation and build capability. These investment programmes are aimed at maximising export opportunities, increasing productivity, and improving sustainability. With 10.1 percent of the Waikato region s GDP derived from agriculture (not including food and beverage and agritech) (Ministry of Business, Innovation and Employment, 2017) 8, much of MPI s work is highly relevant to, and influences, the region. MPI engages with businesses and organisations in the region to understand the growth landscape and trajectory of the sector(s), and identify what is required to get there and how government could support that. In 2015/16, over 50 companies were involved across PGP, including companies in the Waikato region (Ministry for Primary Industries, 2016). Their past experience has shown that larger companies have the capacity and capability to undertake the initial work required to access government investment schemes, whereas, smaller companies require assistance to undertake preparatory work. Similar observations were made by the CRI interviewees. MPI s investment programmes actively look for opportunities to assist smaller companies to undertake the preparatory work and thinking required for accessing government funding. Compared with regional and local councils (further discussed below), MPI has trade and production data that it could use to identify small companies that might require preliminary assistance with preparatory work. MPI actively seeks to connect with other agencies, and also connect companies with other agencies. MPI's Economic Intelligence Unit provides market insights and economic information to support exporters and government agencies, help identify market opportunities and develop export strategies, 7 Provided by interviewee involved with Cultivate IT. These figures are to be released soon in the form of a press release. 8 Estimate for Regions with higher proportions are: Southland 19.1%, West Coast 10.7%, Tasman 11.9%. New Zealand s is 4.2%. 11

48 and support work on market access, systems audit and assurance monitoring. MPI also regularly has a presence at Fieldays at Mystery Creek. Te Puni Kōkiri Te Puni Kōkiri (TPK) has an office in Hamilton, but none of the businesses interviewed or who participated in the workshops mentioned accessing their services. They did, however, mention Te Hūmeka, the Waikato Business Māori Network. One participant, of Māori descent, commented that networks should not have (cultural or other) divides and should be open to all. TPK currently offers the Māori Business Facilitation Service which supports Māori who are either at the business idea stage or are currently in operation, to achieve their entrepreneurial ambitions and establish sustainable commercial enterprises. This service is currently under review. TPK also supports relevant business and innovation activities such as the rangitahi Leaders by Design summit, and facilitates workshops amongst different sectors of the Māori economy. Regional and local government On the whole, business interviewees and workshop participants had few positive comments in relation to working with regional and local government on business projects that enhance their potential for innovation. CRIs tended to have good and strong R&D relationships with councils, mostly built on consultancy contracts and prior working and research relationships. Tertiary organisations made little mention of regional and local government. Local government (across all the territorial authorities) were regarded as: Difficult to deal with Hindered by political infighting Lacking in vision Obstructive Having a tendency to say no, rather than how can we help you with this. - There was one example provided where a local council was initially very positive, but later put up multiple barriers and were evasive, so that 15 months later the issue was not resolved and a European investor exited the project due to the lack of certainty. They are control freaks Not having a focus on economic development. Economic development was perceived as being of low priority Not acting in a timely manner Having an inability to work amongst themselves. - One workshop participant in the IT sector described a situation where they were able to help the council with rolling out fibre to the district. The business proposed working in tandem with the neighbouring council to increase outcomes. However, the council was not open to considering this. 12

49 - One of the innovation support organisations commented that councils in the region tended to be competitive rather than collaborative. The interviewee mentioned the three councils involved in the Hauraki Rail Trail as being able to work well, but only in the capacity of the project itself. This was then contrasted with South Waikato District Council and Rotorua District Council being able to cooperate well across regional boundaries for business and tourism opportunities. In setting up workshops in centres around the Waikato region for the project, we found that council staff had weak knowledge of the businesses that reside in their district. Waikato Regional Council was generally viewed positively, with only comment relate to the potential for improving their timeliness and that they were constrained by legislation. One interviewee thought the regional council should stick to core business and that the council has grown to an unwieldy and unnecessary size. Economic development There was little engagement with the businesses we spoke to with their local economic development agency (if they had one). For those that did, they relayed negative experiences. One workshop participant commented that the economic development officer in their area was hampered by other departments in the council. Tourism Hamilton Waikato Tourism was mentioned favourably by a few interviewees. One interviewee thought that Hamilton should be taken out of the name, as the strength of the region was Waikato, not Hamilton (as Hamilton is perceived negatively by individuals in other regions). There was no mention of the other regional tourism organisations in the region (namely, Destination Coromandel and Destination Great Lake Taupō). Some interviewees had had exposure to the tourism components of the Waikato Story and thought that that project was of value to the region, and their businesses. Regulation and standards A couple of businesses in the food sector commented on excessive compliance costs in relation to complying with national regulation, particularly development of Food Control Plans. Additionally, they felt they had received conflicting advice in relation to Food Control Plans from MPI. Interviewees in the innovation support sector commented that perhaps there were opportunities to deliver advice and training for Food Control Plans, other regulatory issues, and business and management capability, on a one-to-many basis to reduce costs for SMEs, particularly those in towns outside of Hamilton. Auckland Tourism, Events and Economic Development Limited (ATEED) also commented that where they have developed programmes that could be delivered in, or for, Waikato region businesses, they were happy to discuss how this could occur, rather than Waikato entities reinventing the wheel and developing programmes. The implementation of local government regulation was considered excessive and not businessfriendly. One business provided the example of the district council wanting to know everything about the development of their premises, including the paint colour of the interior. Regional councils also 13

50 have significant levers through some legislation and regulations, such as the Resource Management Act. There are likely to be significant opportunities for both local and regional councils to better support and enable innovation in the Waikato region. Industry and business associations As discussed above, Cultivate IT has recently been launched, giving a cohesive voice to the technology business community. A couple of interviewees commented it was unusual there was no similar agritech body given the region s strength in that area. As previously mentioned, the agriculture sector lacks industry leadership (Turner et al., 2016). In the absence of a regional economic development agency and local economic development, business network groups have appeared. In Thames, there are a number of these, all run by volunteers. The Waikato Chamber of Commerce was mentioned by a few businesses, and one workshop participant commented that the Chamber struggles to improve its membership and has partnered with the Institute of Directors. Te Hūmeka is the Waikato Māori Business Network and was mentioned by a few of the workshop participants as providing value. System framework summary Assessment Issues Opportunities Initiatives Experiences with district and city councils have not been positive nor business-friendly Industries lack coordination and leadership Regulatory compliance costs Lack of regional economic development and innovation leadership and governance Many innovation-support organisations Stream-lining the system Working with ATEED Waikato Story Leadership of the innovation system Shared programme services with ATEED Delivery of one-to-many workshops in towns outside Hamilton Greater Callaghan Innovation presence in the Waikato region Moving Waikato region businesses onto the F700, particularly IT businesses 14

51 MARKET DEVELOPMENT Exports Employees in foreign owned companies Exports as a percentage of GDP 2016 Employed in businesses with greater than 50% foreign ownership New Zealand 15% 2015 New Zealand 30% 2016 Percentage of employees employed in businesses with >50% foreign ownership, 2015 Source: Statistics New Zealand 0% 5% 10% 15% 20% 25% Auckland New Zealand Canterbury Bay of Plenty Waikato Northland Otago Exports as a share of GDP, 2016 Source: Infometrics 0% 10% 20% 30% 40% 50% Bay of Plenty Waikato Northland Canterbury New Zealand Otago Auckland Using the Statistics New Zealand Integrated Data Infrastructure and data from the Statistics New Zealand Business Operations Survey, researchers from Motu Economic and Public Policy Research found that firms that export tend to innovate more, even after controlling for size (Sin, Fabling, Jaffe, Maré, & Sanderson, 2014). Interestingly, whether a firm exports is what matters for innovation, not how much it exports. Additionally, firms that export to more countries innovate more. However, exports of raw goods is not correlated with innovation. Additionally, most types of international engagement are correlated with innovation (Sin et al., 2014): A firm that produces a good or service overseas is 24.6 percentage points (132 percent) more likely to introduce a product innovation Being an exporter, having an ownership interest in a foreign business, or making direct purchases from overseas are associated with probabilities of product innovation that are 15.6 to 18.9 percentage points (79 to 101 percent) higher Being partially or wholly owned by a foreign business is associated with 10.2 percentage points (52 percent) higher probabilities of product innovation The Waikato region is highly export-focused, with 39 percent of the region s GDP consisting of exports, compared to 30 percent of GDP for New Zealand as a whole. Eleven of the thirteen businesses we interviewed were exporting or involved in some sort of internationalisation. 15

52 There were few regionally-specific barriers to exporting and market development. Some interviewees mentioned shipping costs but this was not considered overly restrictive. One interviewee described developing a prototype that required purchase of new equipment so that they could conduct market testing. The market testing gave them the confidence to purchase more expensive equipment to produce the product on a larger scale, and to meet offshore demand. As long as connectivity was maintained, that is through Auckland sea and air ports, Tauranga port and good internet connectivity, it was concluded by interviewees that there were no real barriers. In relation to good internet connectivity, those in Hamilton and surrounds tended to have good access to fibre and the rural broadband initiative. Those in the Thames and Hauraki districts commented that their access to fibre needed to be progressed as a matter of urgency. On the whole, most businesses we spoke to tended to develop their markets and identify new opportunities based on word-of-mouth and referral. Very few appeared to undertake more formal market development processes such as: Identification of target market(s), sectors and niches Development of sales part of the business Source or develop a prospect database Develop and agree strategic proposition. Where the company did have a business development manager, it was still challenging finding opportunities, identifying where the leads are, and getting to the right decision makers. An innovation support organisation highlighted the importance of listening to the global customer (the person in the model) in improving regional innovation. The stepwise structure is the value chain and changes colour as the product changes as a business listens to the global customer and validates the product. The blocks on the side of the steps are the various inputs, such as calling in the right team, and the product is morphed into something else (the flower). For businesses tied to the dairy sector, their market diversification and internationalisation activity tended to only actively occur when dairy commodity prices are low and the dairy sector is struggling. One innovation support organisation mentioned that the agriculture sector needs to focus more on market development. The sector was described as having three areas: (i) production, (ii) cross border and (iii) consumer/customer. Production undertaken in New Zealand was assessed by the interviewee as good with the potential to improve efficiencies. However, it was believed that the sector is weak in the areas of crossborder and engaging with the consumer/customer : The sector needs to be active in all three areas, and need to know the consumer. We believe that this is not just an agriculture sector issue, but one which can be equally applied to all other sectors nationally. Interviewees mentioned that because they were relatively small businesses, they could not afford to be in market for long periods of time. Additionally, they felt they get lost in a sea of competitors and do not know what different options there might be for market development. 16

53 Businesses we interviewed did use a variety of methods to engage with international markets such as NZTE offshore staff, in-market agents and licensing. In the examination of New Zealand s agricultural innovation system it was concluded that there were a lack of actors undertaking market formation (Turner et al., 2016). This was evidenced through: Conservatism within some businesses, so they stick with traditional markets, rather than exploring opportunities in new markets. Weak business capability with few large firms who have financial and human resources to undertake market development. Research organisations do not undertake market development, it is not viewed as their role. Market development is also not viewed as a government role. These are relatively consistent with our findings where lack of funding and resources to develop markets offshore was an issue identified by businesses, and there are opportunities for research organisations who have many international connections to work with businesses to develop markets (further discussed below). Opportunities Business interviewees commented that the 100% Pure tourism campaign was helpful for them in internationalisation. It was suggested that New Zealand s perceived good environmental credentials could be capitalised more on in relation to food and food-related exports. Interviewees commented that for IT-based businesses, New Zealand-specific advantages included: The weightless aspect of the export of technologies and services Time differences between New Zealand and key markets Ultrafast fibre made conversing with international customers easy, so that businesses no longer need to be there to maintain client relationships. CRIs and tertiary education organisations appeared to have quality and quantity relationships with international partners and organisations. We suggest that these could be better utilised for innovation, and for businesses international engagement. Market development summary Assessment Issues Opportunities Initiatives Rollout of UFB and RBI has not yet covered the whole Waikato region Lack of active market development IT-based businesses have specific advantages in relation to offshore customers Leveraging New Zealand s environmental credentials in exporting food and foodrelated exports Leveraging CRI and tertiary education international connections 17

54 FINANCE/CAPITAL Number of Authorised Financial Advisors per 10,000 population Source: Financial Markets Authority census Otago Auckland Canterbury New Zealand Bay of Plenty Waikato Northland Enterprise Angels deals by region Source: Enterprise Angels Enterprise Angels deals by sector Source: Enterprise Angels Manawatu, 5% Otago, 7% Hawke's Bay, 5% Nelson, 2% Bay of Plenty, 22% Medical - humans, 9% Horticulture, 10% Dairy, 2% Animal productivity, 9% Waikato, 9% Software & Services, 31% Agriculture, 7% Canterbury, 2% Wellington, 16% Auckland, 33% Food & Beverage, 9% Technology, hardware & equip, 24% The pool of available capital sources within a region may serve to limit or facilitate the ability of local firms and industries to develop. Research has found that firms that have inward and outward foreign direct investment (FDI), had positive correlations with innovation (Sin et al., 2014). It appears there is relatively low FDI in the Waikato region, based on proportion of employees in foreign-owned companies, which could be constraining innovation. In the early-stage capital market, Enterprise Angels services the Waikato and Bay of Plenty regions, based in Tauranga. Enterprise Angels was established in 2008 and is governed by a Board of Directors elected by its members. Enterprise Angels is financially supported by Priority One (as a strategic partner), and currently does not receive any support from the Waikato region. One of the businesses interviewed had pitched to the Hamilton chapter of Enterprise Angels a few times and were successful. It was acknowledged by innovation support organisations that the investment community is relative immature, especially in the start-up capital space where it is too early to get a return on investment. There is not the history of exits where investors have received good returns and entrepreneurs are investing back in. It is perceived that there is a gap for later stage companies in the $3-5 million turnover band who are above angel investment but will be competing against other companies in the private equity and venture capital arena. 18

55 Several businesses and organisations (in interviews and workshops) said that there was not a lack of capital in the region. In fact, it was felt there was a lot of capital in the region, but it may not be managed and applied to its maximum potential. It was commented that farmers held a lot of capital but tended to be conservative in their investments. Others mentioned that there are many high net worth individuals in the region who should be encouraged to give back more to the region, to pay it forward. Greater coordination of capital at the regional level, and working with institutional investors, were mooted as ways to improve this part of the innovation system. Larger companies in the Waikato are also investing in smaller companies, improving the region s innovation performance. Examples include Gallagher and NetValue. This could be a model that other businesses in the region could learn from. While there are a number of crowdfunding mechanisms in New Zealand available to businesses, none are based in the Waikato region. It was suggested that the region needs to develop a system of funding that s tailored to the Waikato, and has clarity for where businesses need to go depending on their different lifecycle stages. In general, businesses in the Waikato appear to face the same access to capital issues affecting businesses across New Zealand. Access to capital was an issue mentioned by many businesses interviewed and workshop participants. Issues raised were: Related to investment-readiness, financial literacy and understanding of the role of investors: - Some businesses had received investment interest from SODA Inc but were unsure whether the equity requirements were a good deal. SODA Inc also aims to help start-up companies raise capital through its investor networks. - There are a lot of companies that don t need to be financed there s too much money in the wrong deals. That is, some businesses and business models are not sustainable and finance is going to those who have limited capability. - VCs take too much equity ownership. Financial advisors will be based where the wealth and capital exists. The Waikato region has less Authorised Financial Advisors per 10,000 population than the national average, and much less than the likes of Otago and Auckland. Investors are perceived to be risk averse. But at the same time New Zealand companies are perceived as not dreaming big enough, they are a bit too humble. It s a cultural thing. Iwi investment An entrepreneur shows the difficulty experienced in trying to finance the development of an amphibious wheelchair (the orange chair in the model). The difficulty in obtaining finance is represented by the wall between the person and his children in the water (represented by the two circles). The Māori asset base in the Waikato region has been estimated at $6.2 billion (BERL Economics & Te Puni Kōkiri, 2014). Additionally, 26 percent of the Māori collective asset base in New Zealand is in the 19

56 Waikato region. The asset base consists of mostly (86 percent) primary sector and property development investment. Tainui Group Holdings (TGH) is the inter-generational investor and kaitiaki of the commercial assets for the 67,000 members of the Waikato-Tainui people. TGH has traditionally had a portfolio of commercial property and farms. It is now three years into its journey of diversification (to spread risk) and its commercial property portfolio now represents less than 65 percent of its overall portfolio. The remainder is a mix of equity investments in businesses, and in the primary sector (farms and fisheries). Business include hotels (Novotels in Hamilton and Auckland, and looking to add another in Auckland), Waikato Milking Systems and GOBus. Waikato Milking Systems represents TGH s desire to invest in the dairy sector and different parts of the value chain. GOBus had a clear strategy for growth, and is an important employer and service provider for tribal members. TGH s future portfolio is likely to move back to commercial property, due to development and investment in the inland port at Ruakura. TGH receives several thousand investment proposals, but does not invest in proposals with undue risk. It generally does not invest in start-up businesses, but will consider proposals in expansionary phase. None of the business and organisational interviewees mentioned TGH in relation to finance or innovation. Interestingly, few businesses and organisations mentioned Māori economic development and innovation as potential opportunities for the Waikato region. NIWA mentioned that they had organised themselves to be more engaged with Māori, including recruiting new staff specifically to foster links. They have a team of 14 in the group, half of which are based in Hamilton. Finance/capital summary Assessment Issues Opportunities Initiatives No dedicated angel network in the Waikato region Potential to work with institutional investors and high net worth individuals to expand their portfolio to include local businesses Waikato-based funding for Enterprise Angels 20

57 INNOVATION CULTURE Proportion of events run for businesses, 2016 Source: Ministry of Business, Innovation and Employment 0% 20% 40% 60% 80% Canterbury 2,454 Events were run for businesses 2016 Auckland Waikato New Zealand Taupō Bay of Plenty Otago NZ needs to develop its S&T sector in order to enhance its international competitiveness 83% Of New Zealand public perceive this as important United Kingdom, 81% 2014 Enjoy finding out about new ideas in science 79% New Zealand public 2014 Enjoy finding out about new ideas in technology 84% New Zealand public 2014 Profiling and celebrating innovation Innovation flourishes in an environment which acknowledges and encourages collaboration and business success. Many interviewees commented that business and innovation needs to be given a higher profile in the Waikato region. Business and innovation success did not seem to be celebrated and given profile, and there was not an obvious internet or physical presence for businesses and organisations who were interested in innovation. It was felt there was no leadership in this area. Workshop participants also mentioned that some newspaper outlets in the region were actively not prioritising business and innovation stories and news. The New Zealand Innovation Council is a social enterprise which aims to help businesses innovate and grow. The Council runs the Innovation Awards. In 2016, 7 percent of their entries were received from the Waikato region, up from 4 percent the previous year (New Zealand Innovation Council, 2016). We would expect to see at least 10 percent of entries to be from the region. The Waikato Story programme of work was mentioned as a good start and process in bringing the Waikato to New Zealand and the world, and to improve market development and international connections. In doing so, it would also attract and retain innovative people to the region s innovation system. Interviewees raised questions as to how the Waikato Story could be further developed and how it should be executed. Many interviewees were unaware of the Waikato Story work. 21

58 Workshop participants and interviewees mentioned a number of strengths and advantages of the region which should be profiled more: Industrial/sector strengths - Food and the food value chain (ingredients, packaging, processing, research, sensing, etc) - Specialised manufacturing, particularly in plastics, stainless steel fabrication, aviation, precision engineering - IT and computer sciences and the integration of IT into other sectors, such as agritech, genomics, data analytics, data centres, biology - Energy - Health and social services, and potential for health innovation to be better commercialised - Māori economy - Equine - Environmental sustainability and technology - A diverse range of industries Quintessential New Zealand landscapes - A little bit rural and a little bit urban Good base of innovation institutions Geography and geology - Critical point of the golden triangle - Lower earthquake risk, relative to other regions Quality of life - Access to nature and recreation, and all the services you would expect - Quality schooling (primary, secondary and tertiary) - Comparatively lower cost of living (and housing) - Family-friendly - Quality of infrastructure, including inter-regional roading - The natural environment Interviewees and workshop participants also mentioned a number of detractors to a positive innovation, and business, culture in the region, such as: The look and feel of Hamilton CBD and Garden Place Too much focus on Hamilton at the expense of other towns in the region. One interviewee went as far to say exclude the word Hamilton from any promotions and campaigns as the city is viewed so negatively by outsiders. Lack of collaboration and trust 22

59 Perceived non-business-friendly attitudes of councils in the region Competition between the territorial authorities. In asking interviewees what they required for innovation, or what is critical to innovation, many spoke of a beacon for innovation or being inspired. It was felt that having some sort of physical embodiment of innovation would help the region sharpen its focus and show that it was a priority. Others felt that being inspired would facilitate more innovation, and pondered how that might occur. Encouraging everyone in the region to be active and involved in the innovation system might be one way of doing that. The business culture Interviewees expressed that they saw a lot of innovative products, processes and services within the region. However, there were elements of the business culture that were prohibitive to more or better innovation: Old boys network Lack of sharing, trust and collaboration Overly secretive Businesses being self-sufficient and not wanting to work with others. In relation to collaboration, most central government funding is specifically targeted at improving collaboration, through requiring projects to be supported and developed by multiple parties. Interviewees mentioned that there were not many forums and networks (informal or formal) where businesses can get together, find out about what each is doing and/or be exposed to new business and innovation ideas and initiatives. As mentioned above, there is no physical centre for innovation or business in the region. Some kind of business hub was mooted by several workshop participants and one interviewee. Workshop participants thought that this hub would provide access to vetted and reviewed information and contacts, be neutral and be a vehicle to enhance connections and improve collaboration. A Taupō-based large business stated that people who are able to shelter innovators from naysayers, or safe spaces to undertake innovation (the umbrella in the model) were critical for regional innovation. Being resilient, constantly pushing forward and dealing with roadblocks (the pathway in the model) was also considered important. 23

60 Innovation culture summary Assessment Issues Opportunities Initiatives Lack of collaboration and networking No physical or online presence devoted to business and innovation Better connections to the New Zealand Innovation Council Leadership of the innovation system Business hub 24

61 CONNECTION WITH OTHER INNOVATION SYSTEMS Connecting with other New Zealand regions The Waikato region does not act in isolation of the rest of New Zealand, and the world. Many interviewees commented that the region, as a whole, could be more connected with the Bay of Plenty, and in some cases Auckland, for innovation. It was felt that the Bay of Plenty had complementary skills and strengths that would add to the Waikato region. Additionally, it was commented that the Waikato and Bay of Plenty regions combined could become a significant force. In relation to profile, innovation and economic development, it was perceived that Priority One had achieved successes in raising profile. Many felt that the industry/business-led model it operates under would be a good model for the Waikato region. Auckland s economic development agency, Auckland, Tourism, Events and Economic Development Limited (ATEED) commented that it did not have as much engagement with the Waikato, at the regional level, as it does with other regions/territorial areas like Northland, Bay of Plenty and Thames Coromandel. Although it has good relationships with various councils in the region and the Waikato Regional Council, the region was not as visible to them as others. Those other regions and areas had communicated clear strategies, projects and/or plans for innovation and growth, with clear lines of accountability. This was not the case for the Waikato region. While ATEED is aware that Waikato-based businesses are accessing some of its events and forums, at the regional and strategic level, engagement has been limited. ATEED were open to delivering their services and programmes in the Waikato region. However, where this has implications for the 25

62 Auckland rate-payer, service provision contracts would need to be negotiated. It was recognised that the cost of scaling up some of their programmes was relatively marginal, and would be of benefit to the Waikato region. ATEED also mentioned that there was not a clear point of contact within the region to discuss opportunities there is no one post box to send it to. The Upper North Island Strategic Alliance (UNISA), established in 2011, responds to and manages a range of inter-regional and inter-metropolitan issues. Members consist of Northland, Waikato and Bay of Plenty Regional Councils, Auckland Council, Whangārei District Council and Hamilton and Tauranga City Councils. Mayors and Chairs from the respective regions make up the alliance. ATEED acknowledged that while tourism is one area that has achieved some success through the alliance, economic development and innovation have been hard areas to achieve traction. ATEED suggested that developing a UNISA-wide view and strategy of commercial and industrial land could be of benefit, particularly to the Waikato region. Waikato businesses engagement with the New Zealand Innovation Council through the Innovation Awards (see Innovation culture section), suggests that the region is not as well connected into national systems and initiatives as it could be. Some interviewees suggested that because the region is doing relatively well economically that there has not been a need to connect with other innovation systems and markets. Conversely, other interviewees thought the region was overly parochial that hindered connections and innovation opportunities. At the physical level, the Ruakura inland port could be a significant manufacturing and logistics hub connecting the Auckland and Bay of Plenty regions. All three regions may not be realising the potential for reductions in empty containers moving inter-regionally, and the potential for a significant scale of light manufacturing to be located at the port. An entrepreneur stated that making connections was critical for regional innovation. Connections between Waikato and Māori, through conference and hui (represented by the different pieces meeting in the middle). It requires all connections to work together towards goals (the pieces coming together in the middle into a tower with the orange lights at the top). In business you need the support of others to get to your goals, you can t get there by yourself. There needs to be more opportunities to connect with likeminded people. Business and academia connections with other innovation systems One interviewee felt that the Waikato region was particularly insular in its approach to business and innovation, compared to other regions. Examining patent linkages, Hendy (2011) finds that New Zealand s inventor network stretches across the country, with a centre in Auckland. Arguably, the data may be limited by the head office effect of Auckland, but it does show that the Waikato region may not be as well connected to other parts of New Zealand as it could be (see map on previous page). 26