Political Aspects of Innovation in the New Zealand Dairy Industry

Topics: Milk, Dairy, Innovation Pages: 49 (11052 words) Published: December 10, 2013
Paper to be presented at the Summer Conference 2010
on
"Opening Up Innovation:
Strategy, Organization and Technology"
at
Imperial College London Business School, June 16 - 18, 2010

POLITICAL ASPECTS OF INNOVATION IN THE NEW ZEALAND DAIRY
INDUSTRY
Stefan Arne Kesting
Auckland University of Technology
stefan.kesting@aut.ac.nz
Jerry Courvisanos
School of Business, University of Ballarat
Corresponding author: j.courvisanos@ballarat.edu.au
Philippa Wells
University of Ballarat
p.wells@ballarat.edu.au

Abstract:
The Political Aspects of Innovation (PAI) approach developed by Courvisanos (2009) stresses the importance of innovation in the struggle for control over the distribution of profits over the period of the business cycle. This study demonstrates the usefulness of this theoretical perspective in understanding the history and development of R&D and innovation in the New Zealand dairy industry. The concept of transformative innovation, directed towards ecological sustainability, is contrasted with the economic growth-oriented type of evasive innovation. Both concepts plot two distinct trajectories of future economic development which are evaluated in the context of this significant industry.

JEL - codes: O29, O32, P16

Political Aspects of Innovation in the New Zealand Dairy Industry

Abstract
The Political Aspects of Innovation (PAI) approach developed by Courvisanos (2009) stresses the importance of innovation in the struggle for control over the distribution of profits over the period of the business cycle. This study demonstrates the usefulness of this theoretical perspective in understanding the history and development of R&D and innovation in the New Zealand dairy industry. The concept of transformative innovation, directed towards ecological sustainability, is contrasted with the economic growth-oriented type of evasive innovation. Both concepts plot two distinct trajectories of future economic development which are evaluated in the context of this significant industry.

JEL Classification: O25; O32; P16; Q16
Keywords: Innovation policy, Innovation management, New Zealand dairy industry, Kaleckian economics, National systems of innovation

1

1. Introduction
The rise of neo-liberal policies in the 1980s and 1990s in New Zealand (NZ) – as in most western economies - resulted in greater emphasis being shifted to the market (Kelsey, 1995; Easton, 1997). With this came deregulation of industries and the demotion of fiscal policy and protection. Consequently, attention turned to innovation as a means of stimulating economic activity and advancement, a policy continued by subsequent administrations of NZ governments of whatever political affiliations. This study examines dairy innovation in the context of this political economy background.

Quarterly NZ Gross Domestic Product (GDP) data by industry for 2003-2009 shows that agriculture contributes around 5% (Statistics New Zealand, 2009). One might therefore reasonably conclude that the primary sector as a whole, and the dairy industry as a component part, have only limited significance for this tiny, open, diversified and developed economy in the South Pacific. However, the agrifoods industry, through which value is added to commodities, is NZ’s largest manufacturing sector. Moreover, the country’s chronic current account deficit implies that boosting exports is one of the main objectives of economic policy (Fallow, 2006). In this context, the dairy industry is immensely important as it accounts for 22% of NZ’s export receipts (Ministry of Agriculture, 2009). This position of dairy in the economy has been assisted by surging, albeit at times volatile, commodity prices (The Economist, 2007; Hembry, 2009a, Hembry, 2009b); a favourable cost leadership position; farmer payout system based on milk solids; and guaranteed take up of all supply by the dairy processing companies. Other things being equal, the proportion of total exports from...

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