5 Policy Implications
While New Zealand’s regulatory hurdles to firms start-ups and growth may be low compared to overseas in absolute terms[21], they may have a high relative impact due to New Zealand’s unique characteristics. Regulation often adds to fixed costs. As has been discussed, fixed costs tend to have disproportionate impact on small firms. In recognition of this fact, many overseas countries exempt small businesses from certain regulations. Given the predominance of small firms in New Zealand, and given the problems we have already seen small business facing, it seems likely that any such regulatory hurdles are more important here than overseas.
The existence of fixed costs in the move into exporting and their disproportionate impact on small firms has other important implications for government policy. The existence of fixed costs of finding information about foreign markets is presumably part of the rationale for the existence of TradeNZ.
The difficulties of small firms dealing with fixed costs means that any attempts to assist these firms need to be simple, well designed and have low compliance costs to have the maximum impact. A recent survey by the University of Waikato indicates that
“…71.6 percent [of respondents] are not aware of the services provided by Industry New Zealand and 84 percent don’t have any professed knowledge of the assistance available from the Foundation for Research Science and Technology. Trade New Zealand is faring marginally better with a 43.7 percent awareness rating”.
NZ Business October 2001 page 43
Notes
- [21]According to most international surveys, regulatory hurdles to starting up businesses in New Zealand are low. Out of 29 countries the GEM report rated New Zealand 4th on both low regulation and taxation burden and low hurdles to market entry.
