Learning from Māori frontier firms

The New Zealand Productivity Commission today released its draft report on frontier firms. Frontier firms are the country’s most productive firms, and they play a vital role in shaping national productivity. However, New Zealand’s frontier firms lag significantly behind their counterparts in other small advanced economies.

“Innovation is the key to New Zealand’s economic future,” says Commission Chair Murray Sherwin. “Successful small advanced economies have large companies that export specialised, distinctive products at scale”.

The inquiry’s terms of reference asked the Commission to take a particular look at Māori firms. Research for the inquiry found that Māori frontier firms are able to leverage features of their business to create opportunities for innovation and growth.

For example, the desire to serve multiple bottom lines (such as commercial, environmental, social, cultural and political objectives) can be a strong driver of ambition, which can also flow through to expectations on suppliers.

And, high shareholder ambition, together with a long-term view, can spur innovation and experimentation, provided the underlying assets are not put at risk.

This appetite for innovation is reflected in statistics which show that rates of innovation and R&D are higher for Māori businesses, compared to all New Zealand businesses.

“The successes of Māori firms offer valuable lessons for other New Zealand firms”, says Sherwin. “Taking a long-term view and managing multiple bottom lines do not need to be seen as trade-offs to innovation and productivity. In fact, they can be complementary”.

“Long investment horizons are important for supporting experimentation and innovation, and long-term value creation. Innovation requires patient investors who are prepared to stay the course. This contrasts with a short-term focus on financial performance and shareholder returns that can dominate the focus of company boards and management.

“Innovation is also key to serving multiple bottom lines, as innovative solutions are required to solve many of the environmental and social challenges facing New Zealand. The Commission’s previous work on transitioning to a low-emissions economy explored one of these major challenges,” notes Sherwin.

Many Māori firms are already involved in exporting. Māori cultural values such as kaitiakitanga, manaakitanga and whanaungatanga help differentiate Māori goods and services and provide added brand value overseas. They also closely align with growing global consumer demand for products with strong environmental and social credentials. This presents export growth opportunities for kaupapa Māori firms and collectives.

Today’s report highlights a number of ways in which the Government could help foster Māori frontier firms. It also makes recommendations for significant changes to broader innovation policies, regulations and investments.

The Commission is inviting public review and feedback on the report via submissions. A final report will be presented to the Government in March 2021.

For further information, contact Louise Winspear, Communications, on 021 511 140 or [email protected].

Notes for editors

1. The draft report New Zealand firms: reaching for the frontier is available at: https://www.productivity.govt.nz/frontier-firms/draftreport (This link will be live at 00:01 on Friday 4 December 2020.)

2. The Commission seeks public feedback on its findings and recommendations to help finalise this work. Submissions can be made at https://www.productivity.govt.nz/have-your-say/make-a-submission/

3. An important measure of productivity is the amount of value created per hour worked. Improving productivity is about getting more from less. One way to think about productivity is working smarter, rather than harder.

4. New Zealand’s productivity record is poor. New Zealand’s living standards are only managing to avoid falling further behind other advanced nations, rather than catching up. And to achieve this people are working harder rather than smarter.

5. The Government asked the Productivity Commission to undertake this inquiry into maximising the contribution of New Zealand’s frontier firms. See inquiry terms of reference here.

6. The New Zealand Productivity Commission – an independent Crown entity – was established in April 2011 and completes in-depth inquiry reports on topics selected by the Government, carries out productivity-related research, and promotes understanding of productivity issues.

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