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New Zealand firms: Reaching for the frontier

The Productivity Commission has completed its inquiry into the economic contribution of New Zealand’s most productive “frontier” firms, and presented its final report with recommendations to Government (see Government response).

A white lighthouse on a cliff edge looking to the ocean Monitoring and evaluation Frontier Firms Inquiry

What did the inquiry find?

Productivity of New Zealand's frontier firmsThe productivity of New Zealand’s frontier firms lags on average up to 45% behind that of high-performing small advanced economies (SAEs). These countries provide a good benchmark for New Zealand, with their small domestic markets.

Frontier firms can increase national productivity and wellbeing by lifting their own productivity towards the global frontier, by scaling up and putting national resources to better use, and, indirectly, by diffusing innovation and best practice through the domestic economy.

New Zealand’s small domestic market and distant location makes it difficult and risky for firms to get the scale required to be world class in their industry.

Māori firms outperform other New Zealand firms on some dimensions associated with higher productivity and have unique features that support innovation. They offer valuable lessons for other New Zealand businesses.

Exporting specialised, distinctive products at scale is the best way to build world-leading firms. Scale, through large “anchor firms” and/or through collaboration among smaller firms, is needed to earn returns on investment in innovation and exporting.

Innovation is key. The Commission recommends learning from international experience and overhauling New Zealand’s innovation ecosystems to enable firms to innovate and export at scale.

Government investment should be focused on areas of existing or emerging economic strength and competitive advantage. A small country can excel in only a limited number of areas that can get to critical mass and support sustained world-class competitive performance. Rigorous monitoring, evaluation and review of strategies and of particular initiatives is essential for success.

The Commission’s final report presents 71 findings and 30 recommendations. Find out more: 

Frontier firms: Four industry case studies

The Commission conducted case studies to examine specific issues facing four significant industries in New Zealand’s economy: Dairy, Health technology, Horticulture and Software products and services.

This work compares the four industries and identifies significant opportunities for improving productivity, some industry-specific and some generic. The associated policy recommendations are in the inquiry’s final report.

Read: Frontier firms: Four industry case studies

He Manukura - Insights from Māori frontier firms

He Manukura Insights from Māori frontier firmsMāori frontier firms can leverage features of their business to create opportunities for innovation and growth.

This insights report summarises the findings of in-depth interviews with 17 experienced iwi and Māori business people. It explores the opportunities and challenges facing Māori businesses in relation to innovating, growing and lifting productivity.

Read He Manukura - Insights from Māori frontier firms.

Focused innovation policy: Lessons from international experience

Focused innovation policyFocused innovation policy is a key recommendation from this inquiry. It means for governments to work with industry, knowledge institutions and other stakeholders to realise the potential for productivity growth and export success in chosen areas of the economy.

Governments in most SAEs take a more deliberate approach to innovation policy than New Zealand. This working paper looks at the lessons that New Zealand can take from other SAEs.

Read Focused innovation policy: Lessons from international experience.

Government response

The final report has been presented to the House of Representatives and the Government's response was received in April 2022. Read the press release from the Economic Development Minister Stuart Nash. 

The Commission is an independent research and advisory body that does not have a mandate to implement any policies or programmes. However, by carrying out high quality, innovative research and evidence-based inquiries, we aim to influence and inform policy change and decision making.