The Innovation Imperative for Export Growth

New Zealand’s ambitious goal to double exports by 2034 hinges on a critical, frequently overlooked factor: innovation. While increasing the number of exporting businesses is a start, the real challenge lies in equipping them with the innovative capacity to compete on the global stage. Simply increasing the number of exporters isn’t enough. The real challenge is ensuring that firms have world-class products and services that can hold their own in global markets.

This situation mirrors challenges faced by many U.S. small and medium-sized enterprises (SMEs) striving to expand internationally. Like their New Zealand counterparts, U.S. SMEs frequently enough lack the resources and strategic focus needed to thrive in competitive global markets.

While small and medium-sized enterprises (SMEs) make up approximately 96 percent of New Zealand’s exporting firms, they contribute only 12 percent of the country’s total goods exports. Despite being far fewer in number, larger firms account for a considerably greater share of export volume.Moreover, SMEs are far less likely to export than larger firms – only 16 percent of all SMEs export, compared to 35 percent of firms with more than 250 employees.

This disparity highlights a critical need to support SMEs in developing innovative products and services that can compete globally. For U.S. companies, this could mean increased access to export financing, tailored training programs, and assistance with navigating international regulations.

Meanwhile, New Zealand’s research and progress spending is about 1.5 percent of GDP, well below the OECD average of 2.7 percent. This chronic underinvestment limits the ability of firms to develop high-value, competitive exports.

The U.S. faces similar pressures. While overall R&D spending is higher,concerns remain about ensuring that these investments translate into tangible benefits for SMEs and contribute to export growth. Streamlining the patent process and incentivizing collaboration between universities and businesses could help bridge this gap.

An emphasis on exporting alone risks pushing more firms, especially SMEs, into international markets without a clear internationalisation strategy and the innovation capacity they need to succeed.

Lessons from Canadian SMEs: Internationalization Strategies That Drive Innovation

A recent study examined 779 Canadian SMEs to understand which internationalization strategies contribute most to innovation. The findings offer vital lessons for New Zealand, where SMEs face similar challenges in innovation, productivity and global competitiveness.

The study found that the most innovative firms followed one of two internationalisation pathways: some scaled up rapidly in a few key markets, while others expanded their scope across multiple countries while maintaining moderate sales in each. These companies that expanded systematically introduced more pioneering innovations, invested more in research and advancement, and applied for more patents than those that remained domestic or expanded without a clear strategy.

This suggests that a purposeful and strategic approach to internationalization is crucial for fostering innovation. U.S. SMEs can learn from this by carefully selecting target markets and developing tailored strategies for each, rather than attempting to expand haphazardly.

The Canadian study also highlighted the importance of collaboration. SMEs that actively collaborated with universities, research institutions, and other businesses were more likely to innovate successfully. This underscores the need for governments to incentivize such partnerships through grants, tax breaks, and other support mechanisms.

For example, the U.S.Small Business Administration (SBA) offers various programs to support SMEs in their internationalization efforts. However, these programs could be enhanced by incorporating a stronger focus on innovation and collaboration. this could involve providing grants specifically for R&D projects aimed at developing exportable products or services, or facilitating partnerships between SMEs and universities to leverage their research expertise.

Consider the case of a small U.S. manufacturer of specialized medical devices. By partnering with a local university, the company was able to develop a new generation of devices with improved performance and functionality.This innovation allowed them to successfully enter new international markets and significantly increase their export sales.

A Call to Action: Prioritizing Innovation for Export Success

To achieve their ambitious export goals, both New Zealand and the U.S. need to prioritize innovation as a key driver of international competitiveness.This requires a multi-faceted approach that includes:

• Increased investment in R&D: Governments should increase funding for research and development, particularly in areas that are relevant to SMEs.
• Incentivizing collaboration: Policies should be put in place to encourage collaboration between SMEs, universities, and research institutions.
• Targeted training programs: SMEs need access to specialized training programs that focus on innovation, international market awareness, and export readiness.
• Streamlining regulations: Governments should simplify regulations and reduce bureaucratic hurdles to make it easier for SMEs to export.
• Access to financing: SMEs need access to affordable financing to support their innovation and internationalization efforts.

dr. Sharma, a leading expert in international business, emphasizes the importance of a thorough evaluation for SMEs. “For SMEs, it starts with a thorough evaluation. Conduct a detailed assessment of your current position, market research, and available resources.” She also recommends seeking mentorship and crafting internal strategies, and also working with government and industry organizations for export-readiness training. “Focus on building innovation capacity through R&D, product development, and improved processes,” Dr. Sharma advises.

The U.S. government has several programs in place to assist SMEs with exporting, such as the Export-Import Bank of the United States (EXIM) and the U.S. Commercial Service. however,these programs need to be better integrated and coordinated to provide a more extensive and effective support system for SMEs.

Furthermore, the U.S. needs to address the skills gap that is hindering innovation and export growth. This requires investing in education and training programs that equip workers with the skills needed to succeed in the global marketplace. This includes STEM skills, as well as language and cultural skills.

Consider the example of Germany, which has a highly successful apprenticeship system that provides young people with practical skills and training in a variety of industries. This system has helped Germany maintain its position as a leading exporter and innovator.

By adopting a similar approach, the U.S. can strengthen its workforce and enhance its competitiveness in the global marketplace.

Can Innovation Save New Zealand’s Export Dream? A Deep Dive into Global Competitiveness

New Zealand’s export ambitions, while significant, highlight a broader global trend: the increasing importance of innovation for economic success. Countries that prioritize innovation are more likely to attract foreign investment, create high-paying jobs, and improve their overall standard of living.

Though, innovation is not just about developing new technologies. It also involves finding new ways to improve existing products, processes, and business models. This requires a culture of creativity,experimentation,and continuous enhancement.

In the U.S., companies like Tesla and Apple have demonstrated the power of innovation to disrupt entire industries and create new markets. These companies have invested heavily in R&D, fostered a culture of innovation, and embraced risk-taking.

To foster a similar culture of innovation, the U.S. needs to create a more supportive ecosystem for entrepreneurs and startups. This includes providing access to capital,mentorship,and other resources that can help them succeed.

Moreover, the U.S. needs to address the challenges posed by globalization and technological change. This requires investing in education and training programs that prepare workers for the jobs of the future, and also providing support for those who are displaced by automation.

Ultimately, the success of new Zealand’s export ambitions, and the U.S.’s continued global competitiveness, depends on their ability to embrace innovation and adapt to the changing global landscape.

As Dr. Sharma aptly puts it, “The future of global competitiveness rests on the ability of countries like New Zealand and the U.S. to embrace innovation and to foster enduring internationalization strategies.”

The senior editor concludes, “Absolutely! What are your thoughts? Do you agree that innovation is the key to success in the global marketplace? Share your opinion in the comments below and let’s spark a conversation!”