5  Main findings

This section of the paper presents the results of a comparative analysis of the following firm dynamics variables, in New Zealand and other OECD countries: firm size (Section 5.1); size of entering and exiting firms (Section 5.2); firm turnover (entry and exit) rates (section 5.3); employment turnover rates (Section 5.4); firm survival rates (Section 5.5); and firm growth rates (Section 5.6).

For each variable, comparisons are made initially with the OECD firm-level project data, normally with zero-employee and one-year firms removed from the New Zealand data. Comparisons are then made with the Eurostat data where appropriate (a comparison with the Eurostat data was not undertaken for all of the above variables, for reasons that are discussed further below). For Section 5.1 on firm size, some additional comparisons are also presented using publicly available data for the UK, the USA and Australia.

5.1  Firm size

Several studies have now concluded that New Zealand has a very high proportion of small firms (and correspondingly low average firm size) by comparison with other OECD countries. However, previous comparisons of firm size are likely to have been confounded by measurement differences, particularly the inclusion of zero-employee firms. Another measurement issue that may have affected some previous studies of firm size is the use of an FTE measure of employment in New Zealand’s BDS data. Use of an FTE measure would reduce apparent firm size relative to countries that use a head count measure, since two part-time employees would be counted as one employee under an FTE measure, but two employees under a headcount measure.

5.1.1  Comparison with OECD firm-level project

Proportion of small firms in the population

Table 1 shows the proportion of firms in the population that have fewer than 20 employees, in New Zealand and other OECD countries from the OECD firm-level project (Bartelsman et al, 2003). Zero-employee and one-year firms have been removed from the New Zealand data, in order to achieve comparability with the criteria used in the OECD project.[4] However the figure for New Zealand when these firms are left in the data is also shown for comparative purposes. The New Zealand figure is an average calculated for the 1994-2001 period, while the OECD data range across the period 1989-1994.

*Private sector only. Note that if public sector is removed from the NZ data, the proportion of small firms rises to 92.1%.

Sources: Statistics NZ and OECD/Bartelsman et al 2003

The comparison in Table 1 suggests that once zero-employee and one-year firms have been removed, the proportion of small firms in the New Zealand population is broadly within the OECD range. New Zealand has a lower proportion of small firms (90.7%) than do Finland (92.6%), Italy (93.0%), and the Netherlands (96.0%) – although it is not possible to be certain in the latter case, as zero-employee firms have been included in the Netherlands data. New Zealand does however have a higher proportion of small firms than Denmark, Portugal, USA, Germany and France. The size of the difference ranges from 2.6% (Denmark) up to 11.9% in the case of France. However, France appears to be something of an outlier, and this is probably due to the fact that the French business register applies a high turnover threshold – 3.8 million FFr per year in the manufacturing sector, and 1.1 million FFr per year in the services sector (Bartelsman et al, 2003). This high turnover threshold is likely to mean that many small firms would be excluded from the French data.

Proportion of employment in small firms

Table 2 shows the proportion of employment in firms with fewer than 20 employees, again for New Zealand and other OECD countries from the firm-level project. The New Zealand data has been adjusted in the same way as for the previous comparison.[5]

*Private sector only. Note that if public sector is removed from the NZ data, the proportion of employment in small firms rises to 32.5%.

Sources: Statistics NZ and OECD/Bartelsman et al 2003

This comparison presents a broadly similar picture to the previous one on the distribution of firms. New Zealand has a smaller proportion of employment in small firms (28.2%) than do Italy (38.1%), Denmark (30.2%), and the Netherlands (34.2%), but a higher proportion of employment in small firms than the remaining countries (Denmark, Portugal, USA, Germany and France). France again appears to be an outlier, with only 14.0% of employment in small firms, but this is likely to be related to the high turnover threshold discussed above. The USA also has a relatively low proportion of employment (17.3%) in small firms.