Defining High-Tech Manufacturing- Does it Matter?
By Dieter Adam, Chief Executive, New Zealand Manufacturers and Exporters Association. I recently spent time in Wellington, meeting members and officials from the Ministry of Business, Innovation and Employment (MBIE) and Callaghan Innovation. It was interesting to discuss MBIE’s recent Sector Reports, and to see how government defines and views manufacturing, in particular high-tech manufacturing. There are still misconceptions on what manufacturing is, and what should be considered high or medium-technology manufacturing. High-tech manufacturing is often touted by government as an important source of growth and innovation for our country. But it does not capture all the high value-added activity happening across manufacturing businesses, and focusing only on what is defined as high-tech can lead to missing and undervaluing all the innovation and growth that is created in other parts of the sector, just because they do not fit a specific definition. The definition used for high-tech manufacturing in the Sector Reports covers those manufacturers who spend greater than 8% of revenue on research and development (R&D). By this definition, the high tech sub-sectors of manufacturing are: pharmaceuticals, aircraft manufacturing, professional and scientific equipment manufacturing and computer and electronic manufacturing. Medium-tech manufacturing is defined by R&D expenditure of between 2% and 8% of revenues, and sub-sectors listed as medium tech are: Chemical manufacturing, transport equipment manufacturing and machinery and equipment manufacturing. It is important to note that these definitions have been created by the OECD and are used so to allow international comparison. One issue is that any definition based on R&D expenditure relies on such expenditure being captured reliably by the accounting practices used by the companies in question. We know that this is often not the case, as doing so introduces additional complexity in accounting methods without any immediate benefit to the firm. Moreover, accepted definitions of ‘R&D […]
