To use an analogy, the university is like a foundation whose principle or endowment comprises the researchers, research equipment and library, and the dividends are research papers and students who have been trained to think and solve problems. A larger endowment means more dividends and a sustained investment over many years is required for dividends to follow. However, unlike a foundation, the dividends take a long time to come to fruition and arrive stochastically, not in a predictable, linear fashion. History has proven that innovation is best achieved in individual laboratories where scientists and graduate students are allowed to follow their own intuition. Often the greatest advances come from the most risky research projects.
Research is also the life-blood of sound teaching.
The quest for knowledge is essential for teachers and mentors who are wishing to stimulate students. For example if medical research was absent or of poor quality at a Medical School, then the staff would not be at the forefront of their subject. Rather the latest developments would have to be 'imported' or 'purchased' from overseas, and only after a considerable delay because poorly equipped staff may not even understand the new developments. The reputation of New Zealand institutions would rapidly deteriorate in the eyes of the international community as a result and the standards of our graduates would not be of the first order. A similar argument holds for technology.