What is R&D and why do it?
What is R&D?
R&D is about exploring the unknown - it aims to discover something new or solve unanswered questions. For a business to qualify for the RDTI, it must perform R&D activity which meets all the following requirements:
- Occurs in New Zealand
- Seeks to resolve scientific or technological uncertainty
- Follows a systematic approach
- Seeks to create new knowledge, or new or improved processes, services or goods
If all are met, the activity qualifies as “core research and development”. Further details about each of these requirements can be found in “What R&D activities are eligible for the RDTI?”
Examples of eligible R&D that may (if the tests above are met) qualify for the RDTI include research into artificial intelligence and data science, industrial manufacturing automation, optimising production processes through technology, new product design using science and technology, or the creation of new IP through cutting edge software and tools.
Why do R&D?
There are compelling reasons for businesses to consider doing more R&D:
- R&D is a good investment. A 2017 review of economic studies around the world found the long-term payback on R&D spend is in the order of 20% a year.
- New Zealand Productivity Commission research (2017) showed firms that adopt an ‘all-of-firm innovation mindset’ and focus on continually improving their internal processes and structures while also innovating through R&D, get exponentially better productivity outcomes than those that innovate in just one area.
- While there is no guaranteed return on investment (ROI) for a business that spends money on R&D, the RDTI can now help eligible businesses to mitigate some of this risk by reducing their income tax bill.
A business case for investing in R&D can be found in our News and Insights section. It provides further evidence that R&D creates opportunities for your business to gain a competitive advantage, helping it grow.