2 Background
2.1 New Zealand firm size and survival rates
New Zealand is in the lower end of the OECD distribution in terms of average firm size. This is chiefly due to New Zealand’s many small firms (below five employees). The proportion of small firms has also been increasing in the 1990’s. The predominance of small firms in New Zealand has raised the question of whether there are hurdles to firm growth in New Zealand.
Comparing survival rates[2] of New Zealand firms (see Figure 1) with international data (Bartlesman, Scarpetta and Schivardi (2001)) indicates that New Zealand firms survival rates are low although not unusual by world standards. Other countries such as Finland, the United Kingdom and Canada also share survival rates of about 40% after four years of business operation[3].
The high proportion of small New Zealand firms does not seem to be caused by unusually low firm survival rates. This implies that the growth rates of firms becomes the most likely cause. If expansion into foreign markets represents a key step towards expansion, then factors influencing the ability of firms to export will have an important influence on the growth process of firms.
