A paradox in paradise - NZ blessed but blighted

By JAY BARNEY

Every time I visit New Zealand, I confront what might be called the "Kiwi Paradox". On the one hand, I am always impressed by the natural resources that bless this land. Some of these are obvious: your world-class harbours, dense forests and mountains that are among the most beautiful in the world. Other resources are man-made and economic in character, but no less important for understanding the underlying strength of this nation. These include your educated population, your schools and universities, roads, even your reliable electric power.

Many countries in the world do not have these incredibly valuable natural resources.

But none of these come close to the most impressive natural resource this country possesses in abundance - its people.

I am always impressed by the competitiveness, the optimism and the drive for excellence that seem to characterise most Kiwis I meet.

Whether it is in the universities of Hamilton and Wellington, the businesses of Auckland or the adventure activities at Waitomo, Rotorua, and Queenstown, it is the people of New Zealand who are its most impressive natural resource.

And yet, despite what might be called this Kiwi spirit, conversations I have with New Zealanders about Kiwi-led innovation and entrepreneurship are more often than not characterised by a sense of futility, hopelessness and resignation. "New Zealand is too small", or "New Zealand is too far away", or "New Zealand has no history of international and entrepreneurial success" - this is the language that dominates my conversations about economic growth in this great land.

This is the Kiwi Paradox - a land blessed with all the resources necessary to play a major role in the world economic scene but with many residents - including many business leaders - sceptical about New Zealand's ability to realise this potential.

This paradox is all the more mysterious when one recognises that the supposed economic shortcomings of this country have not prevented other countries with much worse natural resources from assuming their place in the world economy. India is much farther away from some of its critical markets, including the United States, and yet has become a major supplier of software development in the world.

For nearly 50 years innovation and entrepreneurship was a criminal offence in China, and yet China is emerging as a major trade partner with much of the rest of the world.

So why not New Zealand?

Allow me to suggest some ways to begin to answer this difficult question.

I am convinced that the people of New Zealand are not the problem. In this land of nearly four million people - people characterised by competitiveness, optimism, and a drive for excellence - it is inconceivable that there aren't at least 10,000 with the desire and ability to create an entrepreneurial firm. And of these 10,000 potential new businesses, it is hard not to believe that at least 10 per cent will be economically viable - this is the success rate of entrepreneurial firms in many developed economies. Of these 1000 viable businesses, it is not hard to believe that at least 10 per cent will ultimately be scalable at an international level. Even this pessimistic vision imagines 100 international companies founded in and operating from New Zealand.

And this can happen every few years. It has happened before - in Singapore, India and China.

It could happen here.

For this to occur, 10,000 Kiwis must create businesses to realise the value associated with their entrepreneurial ideas. Apparently, this is not happening. So, why might an otherwise creative and entrepreneurial people fail to act on their entrepreneurial instincts?

One answer may be Government policy.

High interest rates, high taxes on profits from entrepreneurship, high personal income taxes - all of these can reduce the likelihood of entrepreneurial success and, just as importantly, can reduce the payoff to entrepreneurs for their risky actions.

All the Government-sponsored conferences on innovation, entrepreneurship and the "Knowledge Wave" will do less for innovation and entrepreneurship in this country than lowering interest rates and tax rates on the financial fruits of entrepreneurial activity. It is this entrepreneurial activity that creates the kinds of business that ultimately will help New Zealand realise its economic potential overseas.

I can think of no country in the world - including Ireland - better positioned to create such an "economic miracle".

Given the resources in this land, this really wouldn't be such a miracle, would it?

* Jay Barney is an honorary visiting professor at the Waikato Management School. He is professor of management and holder of the Bank One chair for excellence in corporate strategy at the Max M. Fisher College of Business at the Ohio State University.