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Internalisation Strategy in “Plugging the Gap: An Internalisation Strategy” Analytical Essay


Brief Summary of Recommendations: “Plugging the Gap: An Internalisation Strategy”

This project purposed to come up with policy directions aimed at ensuring that New Zealand competes favourably in global markets mainly by undertaking internalisation performance improvement to accelerate growth in high value differentiated goods and services.

The study proposes that stakeholders should chip in to provide the much needed financial resources and human capital needed for New Zealanders to be able to penetrate international markets (Boven et al., 2010).

In accessing financial resources needed for internalisation, the study recommends:

  • revitalizing the evolving venture capital sector by instituting tax-based incentives to New Zealanders;
  • extension of tax incentives to private equity firms to enable them lend money to New Zealanders;
  • establishment of a revolving fund to assist the locals;
  • the establishment of a loan guarantee facility that provide greater leverage to banks in lending money to people interested in establishing international business ventures (Boven et al., 2010).

In accessing specialized skills and knowledge needed to venture internationally, the study recommends:

  • co-investment with international partners;
  • training in international entrepreneurship;
  • development of management competencies;
  • establishment of a national entrepreneurship approach to develop entrepreneurs;
  • establishment of world class institutes to undertake research on internalisation businesses;
  • providing subsidized internships; development of a panel of strategic advisors to provide guidance;
  • the establishment of an Innovation Council to monitor and report on the progress of international ventures (Boven et al, 2010).

Brief Summary of Findings: “Peculiarities and Relevance of Non-Research-Intensive Industries in the Knowledge-Based Economy”

This project purposed to ascertain the role played by low-tech and medium-low-tech (LMT) industries in spurring economic growth and innovativeness in selected OECD member countries.

Unlike popular belief held by policy makers and academics that much economic growth, new innovations, and employment opportunities are generated by high-tech research-intensive industries, the PILOT project revealed that these variables were indeed generated by LMT industries (Bender, 2006).

In particular, the study found that knowledge management, effective personnel policy, and the establishment of local and regional networks between organizations should be used to drive innovativeness and competitiveness rather than relying on technological superiority alone (Bender, 2006).

The study found no correlation between technological intensity of the industrial structure and overall economic growth among the selected OECD member countries, implying that different economies can follow different trajectories to achieve economic growth and prosperity.

The study revealed that much of the economic growth achieved by these countries emanates from internally transforming already existing industries rather than creating new sectors, and as such, policy makers and academics need to lay focus on the processes of innovation and creativity in organizations operating across all sectors, not just high-tech research-intensive organizations.

The findings not only portrays that an innovation policy can achieve effective outcomes when it is grounded on a more comprehensive comprehension of the relationship between research and development (R&D) and innovative ideas, but innovativeness must be based on a specific enabling configuration of resources that an organization owns rather than on the complexity or excellence of R&D alone (Bender, 2006).

Questions: Way Forward for New Zealand

New Zealand, in my view, should embrace the development of low-tech and medium-low tech (LMT) industries to spur the needed economic growth, prosperity and innovativeness.

Although the study by Boven et al (2010) argues that most small advanced economies succeed by undertaking the exportation of high value differentiated goods and services, it is the LMT industries that are at the core of developing these goods and services as can be observed in the empirical analysis done by Bender (2006).

LMT industries are indeed better placed to develop an innovation driven economy, not mentioning the fact that these industries provide many employment opportunities to New Zealanders than internalisation of businesses may offer.

The bottom-line for New Zealand is to promote local LMT industries with regional networks, which will in turn lead entrepreneurs to venture into international markets (Gould, 2008).

Evidence

There exists evidence suggesting that “…major improvements in [New Zealand’s] GDP/capita ratio over recent years have been achieved though labour utilization, in large measure through reduced unemployment” (Lange, 2006, p. 72).

According to Bender (2006), LMT industries create job opportunities to a large number of people than high-tech industries. This observation can best describe the reason why unemployment levels in New Zealand have been declining in the recent past.

Second, their exists evidence that although New Zealand is investing heavily in business R&D as an effective policy to enhance economic growth, policy makers in the country lays a greater emphasis on training and education programs that will enable employees to become innovative and creative once absolved in the LMT industries (Lange, 2006).

This is in line with Bender (2006) observation that knowledge management and the development of innovation enabling capabilities (IEC) through education and training play a pivotal role in stimulating economic growth and prosperity.

Drivers

The development and expansion of LMT industries as a growth policy is being driven by the need to remain profitable and sustain competitiveness in the ever-shifting business environment. The need to generate more job opportunities for New Zealanders is also driving this growth policy (Lange, 2006).

Lastly, the need to operate at a global level is driving LMT industries in New Zealand to develop effective networking competencies with the aim of sustaining competitiveness through the maintenance of a range of alliances and strategic collaborative partnerships (Freeman et al., 2006).

This policy initiative will be successful to the extent that it had been previously used by some advanced OECD member countries, and led to their economic growth and prosperity.

Roadblocks

Lastly the roadblocks preventing the implementation of the internalisation strategy for New Zealand lies in financial constraints, lack of the needed expansion capital, lack of experience in global business operations, lack of global connections, and lack of information on global markets (Boven et al., 2010).

Bender (2006) strategy of relying more on LMT industries to spur economic growth is faced with a number of bottlenecks, which include:

  • changing skills and competencies for workers;
  • lack of proper transition between skills and competencies that are becoming obsolete and new models of knowledge;
  • lack of appropriate policy to issues of curricula in training and knowledge management;
  • lack of financial aid from stakeholders to facilitate recruitment and integration of more workers;
  • inadequate policies aimed at supporting the development of innovation-enabling capabilities.

Reference List

Bender, G. (2006). Peculiarities and relevance of non-research-intensive industries in the knowledge-based economy. PILOT. Web.

Boven, R., Harland, C., & Grace, L. (2010). Plugging the gap: An internalisation strategy. Web.

Freeman, S., Edwards, R., & Schroder, B. (2006). How smaller born-global firms use networks and alliances to overcome constraints to rapid internalization. Journal of International Marketing, 14(3), 33-63. Retrieved from Business Source Premier Database.

Gould, B. (2008). Rescuing the New Zealand economy: What went wrong and how we can fix it. Nelson: Craig Potton Publishing.

Lange, T. (2006). Knowledge and innovation for New Zealand. Policy Studies, 27(1), 71-85. Retrieved from Academic Search Premier Database.

Matheson, T.D., & Oxley, L. (2007). Convergence in productivity across industries: Some results for New Zealand and Australia. International Review of Applied Economics, 21(1), 55-73. Retrieved from Business Source Premier Database.

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IvyPanda. 2019. "Internalisation Strategy in “Plugging the Gap: An Internalisation Strategy”." August 6, 2019. https://ivypanda.com/essays/internalisation-strategy/.

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IvyPanda. (2019) 'Internalisation Strategy in “Plugging the Gap: An Internalisation Strategy”'. 6 August.

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