We raise this question due to a provocative observation of Dr Kaj Storbacka during a presentation by Dr Storbacka and Dr Suvi Nenonen* “The Importance of Market Innovations for New Zealand” at a Law and Economics Association of New Zealand seminar on 27 August. Dr Storbacka noted that during his extensive management consulting and academic career, which has included working in a number jurisdictions, NZ businesses are the most competitive he has seen.
While Dr Storbacka considers that “competitiveness” in itself is arguably at least one key to success in a free and innovative market, he suggests that it can be a hindrance when it is blindly taken to an extreme. By extreme, Dr Storbacka means that NZ businesses frequently fail to take opportunities to legitimately collaborate with their rivals which would be beneficial to all participants in the broader market.
The reason according to Dr Storbacka is that NZ businesses often fall into the trap of not being able to see past the possibility of a rival doing slighter better as a result of the collaboration. This is despite the possibility that all parties are likely to be better off as a result of the collaboration Dr Storbacka’s observation may be able to be characterised as some form of game theory at work.
Dr Storbacka’s observations may have some merit. It could be argued that NZ’s low productivity rates are consistent with such an approach to collaboration.
If the mentality of “we’re not doing this if they do better out of it than us” dominates the approach NZ businesses take when considering opportunities to collaborate, then it is likely that significant benefits are being lost. The end result being that all parties fail to achieve any benefits on the basis of an approach that may be viewed as somewhat irrational. In many cases it may be practically impossible for each collaborating party to achieve an equal benefit and market forces may also play a role.
Dr Storbacka’s observations come at an interesting time for how NZ competition law applies to collaboration between competitors. The Commerce (Cartels and Other Matters) Amendment Bill, which would criminalise hard core cartel conduct, would also introduce a new exemption from the Commerce Act’s price fixing prohibition for “collaborative activities”. This exemption would replace the Act’s existing JV exemption and intended to cover (and arguably permit) a broader range of collaborative initiatives.
If NZ businesses are to fully exploit legitimate collaborative opportunities they may need to look abroad at how participants in similar industries approach collaboration. The Commerce Commission has released revised draft Competitor Collaboration Guidelines in anticipation of the new laws.
Drs Storbacka and Nenonen also noted the well documented failure of NZ to commercialise its inventions. New Zealander are the world’s most prolific inventors but have a relatively poor track record of turning innovation into successful global enterprises.
*Dr Storbacka is Professor, Markets and Strategy at the University of Auckland Business School’s Graduate School of Management. He has previously been a Professor at the Nyenrode Business Universiteit and at Hanken School of Economics in Finland. Dr Nenonen is Associate Professor at University of Auckland Business School and Associate Professor at Hanken School of Economics in Finland. Drs Nenonen and Storbacka are currently conducting a three-year research project for the Royal Society of New Zealand, funded by the Marsden Grant, titled ‘Is New Zealand betting on the wrong horse in the international innovation race?’ Image courtesy of Sira Anamwong at FreeDigitalPhotos.net.