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4.4  Binding barriers - Reasons for exit

Finally, we turn to those barriers that are known to bind on firms' ability to generate overseas income. Specifically, we consider the reasons that firms give for exiting - either from specific offshore markets or from overseas income generation in general.

It is important to note at this stage that item non-response rates are very high for firms that have had overseas income in the past but not in the last financial year. This appears to be due to recall difficulties - almost all of the firms that failed to give a reason for (complete) exit also failed to answer questions on when they began and ceased earning overseas income and the source of that income, but many of these firms successfully answered the question on their future plans.[33] This suggests that some respondents are aware that the firm has had overseas income in the past but are not aware of the details, perhaps because they were not at the firm in the relevant period. In contrast, their current knowledge of the firm allows them to indicate whether there are plans to be involved in future. For this reason, reasons for exit are reported despite the very high rate of missing responses, as the reported reasons may still provide a reasonable indication for the subset of firms with recent overseas income.

Table 14 summarises each of the eight possible responses for why firms had ceased some, or all, overseas income generating activities. Firms that have exited specific markets but maintain some overseas income generation tend to report a greater number of reasons in total, and the relative prevalence of each reason also differs. Exit from specific markets is most commonly associated with increased competition or falling market demand, a response given by almost half the respondents. Other important factors included the exchange rate level and lower-than-expected profitability (around 30 percent of respondents in each). In contrast, the most common response among firms that exited completely was that they had completed the specific orders or jobs in which they had been engaged (29 percent), perhaps suggesting a more passive approach to overseas income generation. Exiting firms also reported difficulties with falling demand or increased competition, and a substantial proportion noted that none of the options fitted their circumstances (around 25 percent of respondents in each). Other commonly reported reasons for complete exit were a “change in ownership or strategic direction” and “profitability lower than expected”.

Table 14: Reported reasons for exit, firms with current or past overseas income
  market exit total exit
exchange rate volatility   0.239 [0.047]  0.080 [0.029]***
exchange rate level   0.315 [0.055]  0.114 [0.033]***
low demand/high competition   0.479 [0.058]  0.255 [0.057]***
foreign regulations/tariffs   0.084 [0.021]  0.019 [0.010]***
change in ownership/direction   0.118 [0.029]  0.221 [0.060]
specific order completed   0.193 [0.044]  0.285 [0.051]
profitability lower than expected  0.286 [0.061]  0.221 [0.054]
none of the above   0.097 [0.027]  0.255 [0.057] **
N. firms(raw) 192   165
N. firms (weighted) 714   1,128

Item non-response: 1.5% for market exit, 27.2% for complete exit. Firm counts random rounded base three as per Statistics New Zealand confidentiality requirements. *; **; *** indicate that proportions for market exit and total exit are significantly different at the 10%; 5%; and 1% level respectively.

Definitions: low demand/high competition: increased competition or falling market demand. foreign regulations/tariffs: increased overseas government regulations or tariffs (eg, import duties, product standards). change in ownership/direction: change in ownership or strategic direction. specific order completed: specific orders or jobs completed. Other categories described as per survey.


  • [33] For a small number of firms we were also able to use past BOS responses to consider whether failure to respond was correlated with recency of past exports. This provided some support to the assumption that recall issues may be important for historical exporters.
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