Clusters: a growth remedy for innovation?

Clusters: a growth remedy for innovation?

Waikato Innovation ParkThe world needs more food. And some believe the best way for New Zealand to get a piece of that pie is to learn from Silicon Valley.  Anthony Doesburg visits the Waikato Innovation Park to see the model in action.

As a global food crisis looms, New Zealand should be working to turn food production knowledge into a commodity, says Canberra-based science communicator Julian Cribb.

“New Zealand has some real gold in its agricultural know-how but it is not thinking of it in the right way,” says Cribb, author of a book on the impending food shortage.

A way of accelerating the commoditisation process is through the creation of primary industry clusters of the Silicon Valley kind, he says.

“New Zealand needs to build a cluster of small companies that are all exporters of agricultural and food knowledge.”

Concentrated in a hub, they would seed innovation within the cluster and, by joining forces, small businesses could compete for big contracts.

The scale of the impending crisis — and opportunity — is enormous, according to Cribb. As the world’s population grows beyond seven billion people, food production will need to double with half the inputs of land, water, fertiliser and fossil fuels available today.

At the same time, though, New Zealand — like its transtasman neighbour — has “taken its foot off the accelerator” in terms of investing in agricultural research and development, Cribb says.

“The world today is only investing the same amount in agricultural science as it was when there were three billion people. The amount of new knowledge that is coming out to make farmers more productive and sustainable has shrunk dramatically.”

He points to Israel’s success as an exporter of micro-irrigation technology developed during the 1960s and 70s to solve a water shortage as an example of clustering in action.

More recently, specialist Australian mining technology companies have formed a cluster to export expertise developed during the country’s resources boom.

Cribb says New Zealand shouldn’t be put off selling its farming nous overseas out of fear of undermining its competitive advantage, a fate some say befell the kiwifruit industry.

“Knowledge is better than kiwifruit — it’s worth more. With knowledge you invest some of your profits in research to take it to the next level.

“That’s how it works with computers — Silicon Valley doesn’t stay ahead of the game by sitting on its arse.”

Andy West, former head of AgResearch and a director of Waikato Innovation Park, a hub of agriculture and biotech businesses, thinks lifting R&D investment above today’s level of 1.2 percent of GDP is an essential first step.

“We talk about an agricultural Silicon Valley, but unless we start investing at least 2.5 percent in R&D with significant amounts around agriculture … Cribb’s idea is romantic, it’s not going to happen, because we’re going to be out-competed.

“You can see this happening already. China is ramping up R&D enormously and it is the only other country in the world that takes sheep seriously, that values deer products, that is moving very heavily into partially grazed farming systems.”

Like Cribb, he thinks ongoing innovation is crucial.

“In the end our skills come from innovation, excellent training systems and good attitudes to work and problem-solving. Unless we start focussing domestically on more innovation in our farming systems we’re really going to run into trouble. Across all of our agriculture we need to be smarter and smarter.”

Cribb is not the first outsider to prescribe clustering as a growth remedy for New Zealand, says economist David Webber.

“When [Harvard economist] Michael Porter came out here about 20 years ago he talked about clusters, which were all the rage internationally, but New Zealand never really picked the idea up.”

Webber thinks Cribb’s emphasis on primary industry is sound since the sector offers the best long-term economic prospects, but he supports West’s view that more R&D spending should be the priority.

“I’ve always been moderately warm on the idea of clusters, but I think the reality is we haven’t got our primary industry research and development act together, and that is the bigger issue.

“Private sector R&D spending is relatively small and the government’s spending is largely through the universities and CRIs and their first priority is basically their own survival.

“For that reason you have a disconnect between what those research organisations are doing and the private sector, which is doing its own thing.”

If R&D spending was stepped up, clusters would naturally form around the research centres, Webber believes.

“You can’t just say to industry, ‘look, we think you should be moving your businesses into a particular area’. They will only do that if there is a commercial advantage for them to locate there.”

Waikato Innovation Park is New Zealand's growth hub for ag-biotech businesses

Webber says Wellington’s software hub, for instance, has come about because those sorts of businesses were attracted to the city’s café culture, which resulted in a critical mass of like companies developing.

“You reach a point where having a certain number of firms in close proximity leads to something happening that you wouldn’t get if they were scattered all around the country.”

Webber says Silicon Valley is a model other industries might like to follow but that is easier said than done.

“The reasons people will gather their industries together are quite hard to pin down. The difficulty of a cluster in the primary sector is where would you choose to do it because there are many possible locations.

“But if the R&D problem was addressed first a cluster or several clusters might take shape spontaneously. That’s probably not going to happen unless we start channelling our investment more effectively.”

Although West and Cribb are of like mind on the need to innovate, West thinks the resulting knowledge should be applied to food production for export.

“Real food prices have been going down for years and they’re finally going back up, so it makes no sense to be diversifying away from food production.”

One way or the other, Cribb says, food is going to be on everybody’s mind in coming decades.

“To solve the food problem we need to reinvent agriculture. It’s important for the people at the top of agricultural and food science in New Zealand to think about that and understand their knowledge has a value beyond what it can achieve on a New Zealand farm.”

This story originally appeared in Primary magazine. Click here to subscribe.

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