Research and development (R&D) is one of the most powerful drivers of innovation and economic growth. While Kiwi businesses are known for their ingenuity, our investment in R&D still trails much of the OECD. This article explores where we stand — and what we can do to catch up.
New Zealand has a proud and proven track record of innovation—rooted in resilience, resourcefulness, and a willingness to do things differently. From the number eight wire mentality that sparked clever, practical solutions, to globally respected breakthroughs in AgriTech, aerospace, and software, Kiwi businesses have long demonstrated world-class ingenuity.
Companies like Xero, a global leader in cloud accounting; Rocket Lab, redefining access to space; and Fisher & Paykel Healthcare, an innovator in medical technology, are just some of the examples that showcase our inventive spirit.
But innovation isn’t about past successes—it's defined by what comes next.
Innovation, by nature, doesn’t sit still. And while our track record is strong, the data tells a tougher story: New Zealand continues to lag behind much of the OECD when it comes to business R&D investment. If we want to keep pace globally—and continue to build future-focused, competitive businesses—we need to invest more intentionally in the systems that drive true innovation.
This article takes a closer look at how New Zealand’s business R&D investment compares with other OECD nations—and why tools like the R&D Tax Incentive (RDTI) are essential if we want to close the gap and future-proof our economy.
How We Stack Up: New Zealand vs. the OECD
We have a proud tradition of innovation in New Zealand, but when it comes to investment in R&D, we lag behind much of the developed world.
Our total R&D investment currently sits at 1.54% of GDP, well below the OECD average of 2.7%, with leaders like Israel (5.6%), South Korea (4.8%), and Denmark (3.0%) significantly ahead.
More specifically, business R&D—R&D undertaken by private sector companies to create new products, improve processes, or develop competitive technologies—represents approximately 0.97% of GDP. That’s well below the 2–3% levels typical of high-performing innovation economies.
The Good News: Investment is Growing
While we have ground to make up, the trajectory is encouraging. Business R&D investment in New Zealand has grown steadily in recent years—rising from $3.1 billion in 2022 to an estimated $4.0 billion in 2024. That’s a 29% increase over two years, and a clear signal that more Kiwi companies are beginning to treat R&D as a strategic priority.
This uplift reflects a growing recognition across industries that innovation is essential to long-term competitiveness, resilience, and growth. More businesses are investing in the development of new technologies, products, and capabilities—not only to solve current challenges, but to seize future opportunities.
We’re heading in the right direction. But to fully realise the benefits, this momentum must be supported, sustained, and scaled.
What's Holding Us Back?
Despite recent growth, several factors continue to constrain New Zealand’s R&D performance—especially when compared with more innovation-intensive economies.
First, uptake of available support remains low. Although thousands of New Zealand businesses conduct R&D, we estimate that less than 20% of eligible businesses are utilising the R&D Tax Incentive (RDTI). That means a significant portion of eligible companies are missing out on a key mechanism designed to lower the cost and risk of innovation.
Second, many businesses—particularly SMEs—struggle to build R&D into their growth strategies. Limited time, talent, and resources often mean R&D takes a back seat to more immediate commercial pressures. In some cases, innovation is happening informally or at the margins of operations—without the structure or investment needed to scale it meaningfully.
Finally, New Zealand’s innovation system is still developing the depth and integration seen in more mature ecosystems overseas. In countries like Germany, Sweden, and South Korea, industry-led R&D is more tightly connected to public research institutions, long-standing incentive frameworks, and coordinated national innovation strategies.
These systems are designed to balance both “science push” (academic, blue-sky research) and “science pull” (industry-driven, near-to-market innovation)—ensuring discovery feeds commercial outcomes and vice versa.
In contrast, New Zealand’s system is still evolving. Many firms are navigating this landscape for the first time, and the broader science and innovation ecosystem is currently undergoing major reform, aimed at improving connectivity, capability, and commercial impact. While that work continues, the challenge remains: bridging the gap between great ideas and scalable business-led R&D.
If we’re serious about lifting our game, we need to make R&D investment more accessible, more visible, and more embedded in how we grow businesses.
Why the RDTI Matters
One of the most important tools New Zealand has to lift business R&D investment is the R&D Tax Incentive (RDTI). Introduced in 2019, the RDTI provides a 15% tax credit on eligible R&D expenditure—effectively lowering the cost of innovation for Kiwi businesses.
Compared to similar schemes overseas, New Zealand’s RDTI is still in its early stages. Countries like Canada, the UK, and Australia have had R&D tax incentives in place for decades. These longer-standing programmes are deeply embedded in their business environments, with high awareness and consistent uptake across industries. In New Zealand, by contrast, the RDTI is still finding its footing—with many businesses either unaware of its benefits or unsure how to access them.
But the potential is clear—and the global evidence backs it up.
According to the OECD, R&D tax incentives are proven levers for increasing R&D activity. Their research shows that for every $1 of tax support provided, businesses invest $1.40 of their own funds into R&D. This 1.4x “incrementality ratio” proves that these incentives don’t just reduce costs—they actively encourage companies to invest more, take risks, and pursue new ideas that drive growth.
The RDTI is more than a financial mechanism—it’s a signal. A sign that innovation is something we value, reward, and expect in Aotearoa. As the programme matures, it has the potential to become a cornerstone of New Zealand’s innovation system—but only if more businesses are equipped and empowered to use it.
👉 Case Study: Discover how MARS Bioimaging—creators of groundbreaking 3D colour X-ray technology—unlocked over $500,000 in R&D support through the RDTI and R&D Loss Tax Credit, helping them accelerate their innovation
How Swell Helps Kiwi Businesses Access R&D Funding
At Swell, we see the value of the RDTI every day. We work with some of New Zealand’s most innovative companies—across manufacturing software, clean energy, medical technology, and more—and we’ve seen first-hand how R&D funding can accelerate product development, fuel growth, and extend cash flow runway.
But we also know that navigating the RDTI isn’t always straightforward.
Our mission is to make it simple, clear, and accessible. We take the complexity and compliance burden off our clients’ shoulders—so they can focus on innovating, building, and scaling. From identifying eligible R&D activities to managing the claim process and documentation, we work closely with businesses to ensure they get the support they’re entitled to.
Because at the end of the day, unlocking more business-led R&D is how we close the gap. It’s how we strengthen our economy, lift productivity, and ensure New Zealand innovation continues to thrive on the world stage.
👉 Interested in unlocking R&D funding for your business? Get in touch with the team at Swell—we’d love to help you explore what’s possible.