Explaining the levels of innovation and R&D in New Zealand's small and medium-sized enterprises : too many small firms?

This paper is concerned with explaining the levels of innovative activity in New Zealand's SMEs. It is arguable that New Zealand provides a special case where innovation and R&D levels are comparatively low in SMEs, yet, paradoxically, it is also a nation of high rates of entrepreneurial activity. This paper seeks to examine the factors that affect innovation levels in New Zealand SMEs from an analysis of panel data set of 1500 SMEs. We test research propositions based on existing theory and literature on innovation levels in SMEs and discuss our findings. Firm size is found to be significant; we argue that New Zealand has too few growth firms rather than too many small firms and we suggest that barriers to innovation, such as access to finance, remain an issue which should be a focus for government support.