Paradise lost? The case of technology-based small firms in New Zealand in the post global financial crisis economic environment

In this paper we draw on two studies that used face to face, qualitative interviews with technology-based small firms (TBSFs) and informal interviews with key informants. The interviews took place with two data sets of TBSFs, the first with 20 firms in 2011 and the second with 34 agri-business TBSFs in 2013. This allows some temporal comparisons of the funding environment for TBSFs in New Zealand, but this was not a longitudinal study as the two data sets were composed from the recruitment of different firms. However, all the TBSFs were located in New Zealand, a small open economy with a limited domestic market, a population of 4.4 million, GDP per capita of US$32,260 (2010) and arguably an immature and limited financial infrastructure. This environment is compounded for founding technology-based entrepreneurs, since to develop and stay in New Zealand means accepting being a long distance from major overseas markets, when in theory at least TBSFs have potential to be in global markets. Such TBSFs, therefore, face pressure to move overseas for markets and for finance and other resources; if successful they may make attractive takeover targets for overseas investors and MNCs. Despite these challenges, TBSFs have been promoted as key contributors to GDP and a way of closing New Zealand’s productivity gap (compared with Australia and other developed nations). Although we find evidence of the development of embryonic regional and specialised business angel networks (BANs) on the supply-side of finance, there is still a marked reluctance to undertake a search for external equity and evidence of discouraged borrowing and discouraged grant-based applications on the demand-side. New Zealand is sometimes described as “paradise ” due to its natural and outstanding beauty, but in our conclusions we suggest that the comparatively stable economic environment has not operated in favour of TBSFs.

18 months embargo.
"This is an Accepted Manuscript of an article published by Taylor & Francis in Venture Capital on 28/05/2015, available online: http://www.tandfonline.com/10.1080/13691066.2015.1021031."

Published online: 28 May 2015.
Online ISSN: 1464-5343, Special Issue: Financing Small and Medium Sized Enterprises: Meeting the challenges after the Global Financial Crisis. Guest Editors: Rob Baldock and Richard Harrison