1  Introduction

This paper analyses the process of firm growth from small and medium sized enterprises (SMEs) to multi-national enterprises (MNEs). It does so by drawing upon an array of New Zealand qualitative research. New Zealand’s relatively small domestic market size means that expansion into international markets is a critical factor for firm growth in the tradable sector. This paper therefore places particular emphasis on the move into exporting.

The benchmark for this investigation is whether New Zealand firms face circumstances vis-a-vis growth that are different to those faced by firms overseas. This paper will use the term “hurdles to firm growth” as shorthand for any additional difficulties faced by New Zealand firms over overseas firms.

This paper will begin by looking at recent New Zealand firm growth and exporting. It will then discuss fixed costs and risks associated with the move into exporting, and whether these are likely to have any peculiar impact on New Zealand firms. It will then investigate how New Zealand firms move into export markets, comparing this with overseas models. The purpose of this comparison is to see if there are any systematic differences between the strategies of New Zealand and overseas firms during the move into exporting, which may indicate the existence of hurdles unique to New Zealand. This paper will examine possible causes of these supposed hurdles. The paper concludes with a brief discussion of policy implications.

Conclusions in this paper are drawn entirely from qualitative surveys.

Qualitative research … covers a wide range of approaches, but by definition, none of these approaches relies on numerical measurements. Such work has tended to focus on one or a small number of cases, to use intensive interviews or depth analysis of historical materials, to be discursive in method, and to be concerned with a rounded or comprehensive account of some event or unit.

King, Keohane & Verba (1994) p.4

Qualitative analysis takes a detailed look at many aspects of the subject under investigation. This involves investigating many non-tangible aspects of a firm, as well as strictly numerical, quantifiable aspects. The additional detail offered by qualitative research necessarily entails using a smaller sample than that used for a quantitative study. However, this is compensated for by the additional detail that qualitative analysis provides. Qualitative analysis can, if done systematically and thoroughly, be as useful as quantitative analysis[1] (King, Keohane & Verba (1994)). This is particularly the case for identifying the process around an issue, rather than simply observing the measured outcome.

I find some indication of two key hurdles to exporting, the actual move into exporting, and an ongoing hurdle to expansion. The first hurdle is the fixed costs and risks of entering into exporting. The ongoing hurdle relates to issues of distribution economies, the difficulties of establishing brands, marketing, distribution networks, and an appropriate range of products for a new country. I argue that these issues are more of a problem for New Zealand firms (than overseas firms) because of three key factors. Firstly New Zealand has a small domestic market and is distant from foreign markets. Secondly there are issues with the ability of a capital market to function effectively in New Zealand’s small domestic market. Finally, relatively large fluctuations in the real exchange rate may also be an issue.