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Knowledge-based industries

by Mark Derby

New Zealand is isolated from world markets, and ‘weightless’ exports like computer games or drug patents are a key to economic success. Creative, biotechnological and internet technology industries are growing quickly, and some have had striking international successes, including Peter Jackson’s Lord of the rings blockbusters and fashion icon Karen Walker’s designs.


New knowledge industries

New Zealand’s economy is expected to change greatly during the 21st century. In the 1950s, exporting farm produce to Britain gave New Zealanders an average income among the highest in the world. However by 2006 New Zealand was near the bottom of the income table for developed countries.

New Zealand is small and remote. To compete successfully with other countries it needs to build efficient export industries. High-speed broadband internet allows high-value, ‘weightless’ products – such as research, design and broadcast programming – to be supplied easily to customers anywhere in the world. Knowledge-based industries exploit peoples’ ideas and create ‘intellectual property’, property like copyright or patents which can be sold.

Future economic potential

The creative, biotechnology, and information and communications technology (ICT) industries are growing faster than other sectors of the New Zealand economy. They use digital technology and internet communications to overcome the disadvantages of the country’s remoteness from international markets. These industries are knowledge-based, selling ideas as well as products worldwide. They are closely interwoven.

In 2002 the government identified creative, biotechnology and ICT industries as having the potential to transform the New Zealand economy.

Funding new industries

Although knowledge-based industries are growing rapidly, they are quite small compared to other sectors of the New Zealand economy, for example farming. They face difficulties in trying to expand. New Zealand’s domestic market is so small it usually cannot fund the high costs of entering larger and distant offshore markets.

Knowledge-based industries often require large amounts of development funding and research, especially in the early stages. They need to sell products as soon as possible after they are created to recover costs and make profits.

High-speed internet access has been more expensive and less widely available in New Zealand than in some other countries, and knowledge-based industries cannot usually afford to provide it themselves.

State support

A high level of financial and policy support from the government and universities is needed to develop New Zealand’s knowledge-based economy. Some traditional industries receive ongoing support from government and knowledge-based industries are likely to need higher levels of funding for development and research.

Government policies encourage people to train in specialist areas. Industries have to attract and retain suitably trained staff, as well as foreign investment and expertise.

Research

Clusters of similar enterprises have been developed on single sites to share their facilities and specialist knowledge. For example, the University of Auckland combined its schools of architecture and planning, fine arts, music, dance studies and the Centre for New Zealand Art Research and Discovery to form the National Institute of Creative Arts and Industries.

Special funds have been set up to support research and innovation, and opportunities for exporting. In 2015 the government introduced a 28% tax credit on the cost of carrying out research and development.


Creative industries

The creative industries include cinema and television, fashion and textiles, and design. They grew by about 9% in value between 2005 and 2006, much faster than the overall New Zealand economy. By 2008 they contributed about $2.86 billion (3.1%) to New Zealand’s gross domestic product (GDP).

Film industry

The New Zealand movie business is the best-known creative industry, locally and internationally. In 1978 the New Zealand Film Commission was set up to fund local productions and New Zealand filmmaking took off, with widely popular movies like Roger Donaldson’s Sleeping dogs.

In the 1990s filmmaker Peter Jackson went from making low-budget comedy-horror films to directing films like the blockbuster Lord of the rings trilogy. He used state-of-the-art post-production and special-effects technology in his Wellington studios.

By 2008 New Zealand had a well-established international reputation for making innovative movies, and for supplying crews and post-production facilities for foreign productions – as well as scenic locations. However the local industry found it difficult to raise the finance needed to make its own films.

Foreign productions, attracted by the low cost of New Zealand as a filming location, bring employment opportunities, and increase professional skills. But they can inflate crew prices for local productions, and at times have breached local pay and working conditions, and safety requirements.

Television

The New Zealand television industry has always had to struggle against foreign competition. It is much cheaper to buy programmes from overseas than to make them locally. Some New Zealand-made programmes have sold overseas, for example the soap opera Shortland Street.

The local television industry has taken advantage of the worldwide move towards technology that allows digital broadcast programming to be received not just on TV sets but also by computers, mobile phones and other electronic devices.

Film and television exports

Film and television industries sell their products in various markets and formats. One example is NHNZ (formerly Natural History New Zealand), a documentary filmmaker based in Dunedin. Their documentaries have been seen on television in more than 50 countries and they have won numerous international awards. They sell stock footage and market DVDs of their programmes online.

Fashion industry

The fashion industry in New Zealand grew from a tradition of solo designers making tailored or one-off garments for women to wear on race days, weddings and other social occasions.

Baaa

 

Jeremy Moon of Icebreaker has introduced a ‘baacode’ to his woollen clothes, a tag attached to each garment that traces its production process right back to the sheep stations that produced the Merino wool it’s made of. By the early 2000s Icebreaker was the biggest name in the Australasian outdoor clothing market. In 2016 its clothes were sold in 4,700 stores in 50 countries.

 

Overseas styles led local fashion, but from the 1970s more people wanted to buy original New Zealand styles in clothing. Designers like Marilyn Sainty, and brands like Workshop and Streetlife, sold clothes that were often made in studios directly above their shopfronts.

The industry took off internationally in 1997 when fashion designers Moontide, World, Wallace Rose and Zambesi were invited to show at Australian Fashion Week, and later in London.

Karen Walker

In 2016 New Zealand fashion designer Karen Walker’s streetwear was sold in over 1000 stores around the world, including New York, London, Hong Kong, Los Angeles, Sydney and Tokyo. Walker also designed jewellery, eyewear, shoes, bags and fragrances.


Design and digital content

Design and digital content are expanding industries in themselves. They are also ‘enabling technologies’, technologies used in other knowledge-based industries. Companies that place a strong emphasis on the design of their products – not just their appearance but the whole production, packaging and marketing process – are typically more competitive internationally.

Industrial design

In the 1990s New Zealand industrial designers emerged as boutique producers of sophisticated everyday objects, including dishwashers and school chairs, which sold worldwide.

In 2007 the New Zealand furniture company Design Mobel opened stores under the name Okooko in Wellington, Hong Kong and Philadelphia to sell its eco-friendly beds and bedroom products.

New Zealand is a world leader in the design of racing and luxury yachts. Former Aucklander Bruce Farr’s yachts won many international titles.

Jump start

 

In 1944 Auckland furniture designer Garth Chester mass-produced the world’s first cantilevered plywood chair, made from a single elegantly curved sheet of plywood. At first the public distrusted the chair’s strength. The designer had celebrity wrestler Lofty Blomfield jump up and down on one in public. Chester helped form the Auckland Design Guild to promote local design in 1949.

 

Digital effects

Weta Workshop in Wellington was set up in 1993 by Peter Jackson, designers Richard Taylor and Tania Rodgers, and film editor Jamie Selkirk, to provide digital and visual effects for Jackson’s movies. By 2008 Weta had won four Oscars. The New Zealand film industry has created other digital content companies specialising in artificial intelligence, sound post-production, web design, 3-D visualisation, and interactive game development.

Leetspeak

 

‘Leetspeak’ users replace ordinary alphabet letters with keyboard characters when they communicate online: h@x (hacks – cheating or breaking the rules), n00b (newbie – someone new to the scene) and ROFL (roll on the floor laughing) are examples. Now there’s a word combining Māori and Leetspeak: rofflenui. Add the word nui (big) to ROFL and you’re rolling on the floor laughing big-time.

 

Interactive games

The interactive games industry has grown quickly. Peter Jackson’s Lord of the rings trilogy quickly spawned a number of computer games.

Terabyte, based in Auckland, was one of the first New Zealand companies to work primarily in interactive design. The company developed the yacht-racing computer game Virtual Spectator in 1999. They went on to design and build interactive websites, museum exhibitions and DVDs which have won several international awards.

Wellington-based Sidhe Interactive, the largest games studio in New Zealand, developed its first Playstation game, Championship Surfer, in 2000. It has since developed a Playstation game based on NRL rugby league.

Educational publisher Wendy Pye Group in Auckland is a world leader in providing digital animation through the internet to teach basic reading and maths. The company exports its early childhood education resources to schools around the world.


Biotechnology

Biotechnology applies science and technology to living things to solve problems and make products. New Zealand biotechnologies include the development of livestock improvement processes and medicine. In 2007 biotechnology contributed $400 million (0.5%) to New Zealand’s gross domestic product (GDP).

Over 75% of New Zealand’s biotechnology partnerships are with overseas agencies, reflecting the international nature of the industry.

Geographical advantage

New Zealand has some clear advantages for developing a world-leading biotechnology industry, especially in agricultural and medical research. Its land and marine environments are geographically isolated, so New Zealand native plants and wildlife have a unique genetic heritage which could provide highly valuable biological resources.

The country’s traditional emphasis on livestock farming, and the early necessity for self-reliance and innovation, made the country a world leader in raising sheep, cattle and, more recently, deer. This expertise has been combined with the scientific advances of biotechnology to lift livestock production to new levels.

Types of biotechnology

In 2007 the most common area of biotechnology application in New Zealand was the environment (32% of all projects were in this field). Other areas were:

  • plant improvement
  • plant growth
  • functional foods, ‘nutriceuticals’
  • biomanufacturing and medical diagnostics and devices.

There were 168 New Zealand organisations actively involved in biotechnology, an increase of one-third on the previous two years. Expenditure by biotechnology organisations increased by more than 60% between 2004 and 2007, and in 2007 totalled more than $250 million.

Agriculture and medicine

Livestock and humans share a large proportion of the same genes, so biotechnology research on animals can help to discover solutions to human medical problems. The convergence of agriculture and medicine is a unique feature of New Zealand’s biotechnology research.

Intellectual property

Knowledge-based industries rely on legal protection of their ideas to make profits. New Zealand organisations were granted 225 biotechnology-related patents in the two years to June 2007. Of these, 75 were in the public sector, 48 in the higher education sector and 108 in the private sector.

A2 milk, containing high levels of the naturally occurring protein A2, comes from cows DNA-tested for A2 beta-casein type. They are bred for their genetic ability to produce this milk, which is thought to reduce the incidence of some diseases in people who drink it.

Genetic modification

Genetic modification (GM) is a controversial area of biotechnology in New Zealand. In 2000 the Royal Commission on Genetic Modification was established by the government to investigate the options and risks for New Zealand in using GM. The commission concluded that the best approach was to remain aware of potential opportunities from GM technology while limiting and managing the risks.

In the early 2000s Environmental Risk Management Authority (ERMA) maintained a record of all GM organisms made in the country.


Biotechnology research

Biotechnology research and development is often very expensive and can take long periods of time. Mitoquinone, the first drug to be tested and manufactured in New Zealand, was in development for at least 10 years before April 2008, when it was shown to have positive results on patients with the hepatitis C virus.

Most New Zealand biotechnology companies are small and cannot afford to fully fund their own research. Biotechnology research is usually carried out by government institutions or universities, often in partnership with private companies. Auckland is the main base for biotechnology research in New Zealand.

Sharing ideas and expertise with other countries is important for New Zealand’s biotechnology researchers. The high level of scientific expertise, complex equipment and large amounts of funding required make international collaborations essential for most major projects.

Physiome Project

In 2008 one of the largest biotechnology exercises under way worldwide was the Physiome Project, a multinational effort to model the human body scientifically. Separate research teams in different countries were working on each of the 12 main organ systems.

The University of Auckland’s Bioengineering Institute collaborated with the University of Oxford in the UK on the cardiovascular (heart and blood circulation) system. A ‘virtual’ human heart was created by microscopic analysis of thousands of paper-thin slices of real hearts. This will enable medical researchers to safely replicate and study digitally various types of heart disorders and their treatment.

Premature babies

 

By studying sheep on Auckland’s One Tree Hill, Professor Graham (Mont) Liggins discovered how an unborn lamb lets its mother know that it is ready to be born. Biotechnological research into this discovery enabled doctors to save the lives of premature babies and prevent brain damage in infants. This discovery was regarded as one of the greatest single contributions to the advancement of human health worldwide.

 

Bioprospecting

Bioprospecting, a branch of biotechnology, is the search for natural resources such as plants, animals and microorganisms that could be used to develop valuable products, for example insecticides or medicines. New Zealand is a good site for bioprospecting because of its many unique species, its isolation from other countries, the large marine exclusive economic zone, and traditional Māori knowledge of the environment.

Once the useful properties in an organism have been identified, researchers look for ways to apply them.

Researchers have discovered that white rot fungi produce a compound that kills the bacteria causing a type of stomach ulcer. The compound is produced in such tiny quantities that it cannot be used commercially. A New Zealand company is making an artificial copy of it which can be made in sufficient quantities to produce a medicine.

Another New Zealand firm, Living Cell Technologies, develops cell treatments for neurolgical disorders in humans. They collect cells from a unique herd of disease-free pigs that evolved from pigs left in the subantarctic Auckland Islands.


Information technology

The information and communications technology (ICT) sector contributed $6.2 billion (5.1%) to gross domestic product in 2007. There were around 8,800 companies – 8.5% had annual revenues of more than a million dollars.

ICT is an important growth industry, and also a vital ‘enabling technology’ for other industries. In a sparsely-populated country with many geographical barriers to communication, ICT offers ways for people to connect. ICT also helps people to connect with other countries and limits New Zealand’s isolation from markets.

Obama campaign

 

The website for Barack Obama’s 2008 US presidential campaign used software from a small Wellington company. Silverstripe was founded in 2000 by Sigurd Magnusson, Sam Minee and Tim Copeland. Wellington City Council’s small business enterprise centre helped them develop a content management system, and support from Google meant it could be used in various languages. When the US Democratic Party bought the Silverstripe system for their Obama campaign website, it opened doors to other work. Silverstripe now has offices in Australia and London.

 

Broadband connections

The growth of the ICT industry depends on improved broadband access. In 2006 nearly 65% of New Zealand households had access to the internet, but only a third had a broadband connection – the country ranked 13th out of 30 OECD countries for its rate of broadband subscribers.

In 2008 the government introduced a strategy to improve access. Broadband is especially important outside the main cities. Farms as well as factories need broadband technology to track markets and improve management.

ICT capital of New Zealand

Christchurch is the centre of the ICT industry in New Zealand. More than 200 software companies are based in the Canterbury region, responsible for 50% of New Zealand’s software development. About one in every 300 people in Christchurch writes software for a living.

Christchurch is also New Zealand’s largest manufacturing centre for ICT exports. Tait Electronics, set up in Christchurch in 1969, is a major international supplier of digital mobile radio systems. Around 95% of its products are exported to more than 130 countries. In 2008 the company employed 800 people worldwide.


Internet networks

Super-fast broadband

New Zealand researchers need very fast broadband in order to transfer large amounts of data at high speeds to each other and to people overseas.

The Kiwi Advanced Research and Education Network (KAREN, now REANNZ) can transmit data at speeds 1,000 times faster than current broadband. Through video streaming of high-resolution images and sound, REANNZ gives New Zealand researchers remote access to experiments involving large, high-cost facilities. For example, New Zealand geologists and geophysicists instantly receive data from faultlines around the world. Its members are the tertiary education institutions, Crown research institutes and the National Library.

ICT in remote communities

ICT has the potential to transform the future of some small and isolated communities. People living in Westport on the South Island’s West Coast can electronically consult a doctor in Greymouth, about 100 kilometres south. ICT combined with diagnostic equipment – to measure blood pressure, temperature and pulse rate – means doctors can provide after-hours emergency care, surgical assessments and scheduled outpatient clinics.

Back to the future

 

In the early 2000s the Māori tribe Tūhoe developed its own digital strategy to offer everyone in its remote, mountainous tribal area access to wireless broadband internet. The tribe developed the strategy in line with tribal custom to ensure that ICT supports and extends Tūhoe’s cultural heritage.

 

Upskilling users

Many Māori tribal areas are in remote and far-flung locations. The internet plays an important role in tribal communication.

Te Whānau-ā-Apanui tribe’s traditional land is strung along the coast in the Bay of Plenty. The tribe is offering all its high-school students training and qualifications in ICT to help the members of the tribe keep in touch, and to give young people more career choices.


External links and sources

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How to cite this page: Mark Derby, 'Knowledge-based industries', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/knowledge-based-industries/print (accessed 25 March 2019)

Story by Mark Derby, published 11 Mar 2010, reviewed & revised 5 Dec 2017