New Zealand’s small and medium-sized enterprises (SMEs) are very entrepreneurial and innovative, but few successfully internationalise their products, says a Massey University lecturer.
Dr Loren Stangl says New Zealand SMEs often underestimate the importance of building strong and varied networks if they want to develop products for export. These networks may include suppliers, customers, government agencies, universities, Crown Research institutes and even competitors.
“We need to quit being a country of independent operators if we are going to grow this economy,” she says. “To make internationally-appealing innovations you need to collaborate with a range of different networks, you need the cross-fertilisation of different industries and exposure to diverse people, ideas and cultures.
“No SME has the resources to do it all themselves – they need to learn to collaborate. New businesses, especially, want to protect their IP. Fair enough. But, this independent nature can hold them back.”
She says she became interested in the topic of SME networks because of the difference in performance between New Zealand and Scandinavian firms.
“The academic research says small businesses often form collaborative networks to commercialise their products internationally ¬– but most of that research is coming out of Sweden, Finland, Denmark and Norway,” she explains. “When I spoke with New Zealand companies I found that, in fact, they didn’t develop the breadth of networks the Nordic firms do, and especially not with organisations that could potentially be competitors.
“One part of my research focused on SMEs in the software industry, which is a knowledge-intensive industry with great growth potential in New Zealand. In countries with small domestic markets, like Sweden, Finland and New Zealand, these businesses have to go international to grow. I wanted to see how Kiwi companies could do it better because, by comparison, we are struggling.”
She believes the reasons are partly cultural. “Culturally, the Scandinavian firms are used to thinking as a team, as in ‘Finland Inc’. They are thinking long-term and about building their country and their industries.
“Here, being a small independent operator is a part of our culture. But I think New Zealand SMEs are starting to realise that although you can come up with a good idea on your own, you can’t commercialise it internationally on your own. That’s the difference between invention and innovation.”
In a comparison of 50 countries Dr Stangl found the level of exposure to international people and products had the greatest impact on SMEs’ ability to successfully export innovative products.This was more significant than other factors such as institutional support for innovation development and international commercialisation.
“In New Zealand there is good exposure to foreign cultures and people through immigration and travel,” Dr Stangl says. “Living and working overseas is extremely useful and it makes sense that this helps entrepreneurs learn what has potential to be an appealing product overseas.
“International experience can also be gained through recruitment and building good international networks, and my research shows these networks are more important than the regulatory environment in setting small, innovative companies up for success in exporting.”
That’s not to say government doesn’t have a role to play. Dr Stangl says policymakers can help firms develop networks in several ways. These include programmes that encourage social globalisation, inter-industry cross-fertilisation, and inter-organisational contact through such things as mentoring programmes.
“I think the government, through agencies like New Zealand Trade & Enterprise and local economic development agencies, does a good job. They provide a lot of resources for SMEs to utilise and there are some exciting new collaborative initiatives, like the Callaghan Innovation Institute being set up to support the high-tech sector.
“New Zealand has strong government support for small businesses, but SMEs still need to learn to collaborate better.”