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Doing business at the edge of the world: Die Wirtschaftskrise aus Sicht von Kleinunternehmen in Neuseeland. Dr Martina Battisti & Prof David Deakins New Zealand Centre for SME Research Massey University, New Zealand m.battisti@massey.ac.nz University of Applied Sciences Vorarlberg
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Doing business at the edge of the world:Die Wirtschaftskrise aus Sicht von Kleinunternehmen in Neuseeland Dr Martina Battisti & Prof David Deakins New Zealand Centre for SME Research Massey University, New Zealand m.battisti@massey.ac.nz University of Applied Sciences Vorarlberg 25 Maerz 2010
within approx. 900 km. radius of Wellington, you will meet: 4 million people and no other country
With approx. 900km. radius of Dornbirn, you will meet: 340 million people and about 20 countries
Besides the 4 million people you will meet: - 45 million sheep - 10 million cattle & - 68,000 pairs of penguins
New Zealand’s economy • NZ is one of the most geographically isolated countries in the world. • NZ is a small economy with a small domestic market. • NZ economy relies heavily on • Agriculture & • Tourism • Consistently ranked as one of the world’s most liberalised countries.
A research programme The aim of BusinesSMEasure is to examine how SMEs in NZ develop over time: • longitudinal research • that allows to undertake in-depth analysis of a large number of firms, through a mixed method approach: • Module I: site visits & interviews with the firm’s owner-managers • Module II: longitudinal survey • and be responsive to emerging issues
Module I: Site visits & interviews To date we have visited and interviewed 400 firms in NZ in 8 studies with 50 interviews each. The interviews covered the following topics: • Access to finance • Business growth • Business assistance • Employee learning • Management development • Export • Sustainability
Module II: Longitudinal survey The longitudinal survey was launched in 2007 • annual survey • approx 1400 SMEs in the panel • aim is to explore the factors that influence SME development • Focus is on firm characteristics and on owner-manager characteristics • topics covered so far: • Collaboration, Succession, Innovation, Research & Development, Sustainability, Finance, Management Development, Managing under Recession
Survey 2009 Firm Size by employees (FTEs) Firm size by turnover
Selected Business Demographics Location1 Sector Gender 1. Definitions as per Statistics New Zealand categories
The context • 2008-9 was the deepest recession facing the world economy since the 1930s (World Bank, 2009), affecting both demand & the availability of credit. • NZ was the first country to be hit by the recession, but due to domestic factors rather than global impact. Overall recession was the longest, but also the shallowest, because of relatively sound financial system and commodity exports. • Crisis has impacted on companies of all sizes • Conventional wisdom is that SMEs are particularly vulnerable
Key Questions • How has the economic crisis impacted on small firms? • How have firms responded?
Managing under recession Little literature directly related to strategic adaptation under recession conditions 3 broad types of strategic adaptation: • retrenchment • investment • ‘ambidextrous’ Vulnerability hypothesis: Small firms’ limited resources affects ability to scan, analyse & respond to environmental shocks Resilience hypothesis: Small size may enable a flexible approach – permitting rapid adjustment of resource inputs, processes, prices & products
Impact of The Recession: Timing Note: significant effect re timing and location, urban firms felt it earlier in 2007 and 2008, rural firms felt it stronger in 2009
The Impact of the Recession Change in Firm Performance 2007-09
Type of Recession Impacts Finance related effects Respondents indicating negative effect
SME Strategies – Top 10 Selected reported actions to increase or maintain performance
Conclusions I • Despite overall deteriorating firm performance over the last three years, not all firms were equally affected by the recession. The silver lining is that roughly one quarter of firms reported increased turnover and increased profitability. • Negative finance related effects were less pronounced than expected especially with regard to availability of bank loans/overdrafts. • We even found positive effects that were related to the changes in labour market.
Conclusions II • Diversity of experiences were mirrored in the actions small firm owner-managers took to maintain or increase their firm’s performance. • Small firms per se are neither vulnerable nor resilient, it is the decisions of the owner-managers and the actions they set that influence a firm’s performance. • Majority of respondents increased personal finances, instead of using external finance. But firms become more vulnerable the fewer resources they are able to mobilise. As such we expect to see an increased effect of the global recession in 2010 as firms exhaust personal resources or exhaust cost cutting measures.
