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Why firm size matters: investigating the drivers of innovation and economic performance in New Zealand using the


  • Shangqin Hong
  • Les Oxley
  • Philip McCann
  • Trinh Le


The performance of the New Zealand (NZ) economy is something of an enigma. Although ranked one (of 144 countries) for four important ‘growth fundamentals’ NZ is ‘middle of the pack’ when it comes to economic growth, productivity and process innovation. Using four iterations (2005, 2007, 2009 and 2011) of the Business Operations Survey, this research seeks to shed some new light on this conundrum by using a multivariate probit regression (mvprobit) approach applied to pooled samples in excess of 22,000 unit record observations of NZ firms. The results suggest that factors including firm size, high perceived quality, investment/research and development (R&D) capability, major technology change, application of formal IP protection and new export markets are systematically and positively related to innovation; while many external issues, such as those related to geography, market structure, business environment, have little influence. At the firm level, innovations in NZ are highly dependent on the firms’ internal ability to develop new technologies and market demand. The (very small) size of firms does matter in NZ, which lacks a major ‘home market’ or a major trade block on its doorstep, such that ultimately, government may need to be involved to maintain a viable scale for domestic R&D.

Suggested Citation

  • Shangqin Hong & Les Oxley & Philip McCann & Trinh Le, 2016. "Why firm size matters: investigating the drivers of innovation and economic performance in New Zealand using the," Applied Economics, Taylor & Francis Journals, vol. 48(55), pages 5379-5395, November.
  • Handle: RePEc:taf:applec:v:48:y:2016:i:55:p:5379-5395
    DOI: 10.1080/00036846.2016.1178843

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    Cited by:

    1. Teimuraz Gogokhia & George Berulava, 2021. "Business environment reforms, innovation and firm productivity in transition economies," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(2), pages 221-245, June.
    2. Sumanjeet Singh, 2018. "The State of IP protection, Exploitation and Valuation: Evidence from Select Indian Micro, Small and Medium Enterprises (MSMEs)," Journal of Entrepreneurship and Innovation in Emerging Economies, Entrepreneurship Development Institute of India, vol. 4(2), pages 159-176, July.
    3. Ryota Nakatani, 2019. "Firm performance and corporate finance in New Zealand," Applied Economics Letters, Taylor & Francis Journals, vol. 26(13), pages 1118-1124, July.
    4. Askarany, Davood & Spraakman, Gary, 2020. "Regional diversification and financial performance through an excess-capacity theory lens: A new explanation for mixed results," Technological Forecasting and Social Change, Elsevier, vol. 156(C).
    5. Ali, Jabir & Reed, Michael R. & Saghaian, Sayed H., 2021. "Determinants of product innovation in food and agribusiness small and medium enterprises: evidence from enterprise survey data of India," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 24(5), May.
    6. Bergner, Sören Martin & Bräutigam, Rainer & Evers, Maria Theresia & Spengel, Christoph, 2017. "The use of SME tax incentives in the European Union," ZEW Discussion Papers 17-006, ZEW - Leibniz Centre for European Economic Research.
    7. Uwizeyemungu, Sylvestre & Poba-Nzaou, Placide & St-Pierre, Josée, 2022. "Back-end information technology resources and manufacturing SMEs’ export commitment: An empirical investigation," International Business Review, Elsevier, vol. 31(5).
    8. Sylvia Novillo-Villegas & Ricardo Ayala-Andrade & Juan Pablo Lopez-Cox & Javier Salazar-Oyaneder & Patricia Acosta-Vargas, 2022. "A Roadmap for Innovation Capacity in Developing Countries," Sustainability, MDPI, vol. 14(11), pages 1-20, May.
    9. Brache, Jose & Callagher, Lisa & Husted, Kenneth, 2022. "The effects of interfirm cooperation purpose on export performance: Choosing between local and overseas partners," Journal of Business Research, Elsevier, vol. 148(C), pages 12-22.
    10. Maya Vachkova & Arsalan Ghouri & Haidy Ashour & Normalisa Binti Md Isa & Gregory Barnes, 2023. "Big data and predictive analytics and Malaysian micro-, small and medium businesses," SN Business & Economics, Springer, vol. 3(8), pages 1-28, August.
    11. Xiuli Sun, 2022. "Human Capital, Market Environment, and Firm Innovation in Chinese Manufacturing Firms," Sustainability, MDPI, vol. 14(19), pages 1-20, October.
    12. Trinh Le & Adam B. Jaffe, 2017. "The impact of R&D subsidy on innovation: evidence from New Zealand firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 26(5), pages 429-452, July.
    13. Sylvia Novillo-Villegas & Patricia Acosta-Vargas & Christian Cruz-Boada & Mateo Garzon & Andre Marin-Dett & Wendy Anzules-Falcones, 2022. "Sustaining the Path for Innovation Capability from a Developing Country Perspective: A Conceptual Framework," Sustainability, MDPI, vol. 14(19), pages 1-26, October.
    14. Feng, Gen-Fu & Zheng, Mingbo & Wen, Jun & Chang, Chun-Ping & Chen, Yin E., 2019. "The assessment of globalization on innovation in Chinese manufacturing firms," Structural Change and Economic Dynamics, Elsevier, vol. 50(C), pages 190-202.

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