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• Section 3: Exporting

• Regulatory Policy

• Compliance Costs

• BCC Perceptions Survey

• BCC Survey Summary
• Perceptions of NZ Firms
• Media Statements

• Factors that Constrain Export Growth
• Responses by Survey Sub-Samples
  • Firm Size
  • Export Involvement
  • Firm Stage
  • Growth Intentions
  • Industry Type
• Summary

As noted in the introduction, one of the main concerns of this study was to gain an understanding of the consequences of compliance that are less easy to identify that those that can be measured in terms of time and cost. This was consistent with the OECD study,¹³ which noted that compliance is often discussed solely in terms of its direct "costs" (which refers to the actual costs incurred by individuals in meeting the requirements laid upon them in complying with a given regulatory structure).¹⁴ The OECD report goes on to make the point that gaining a clearer understanding of the indirect costs (which arise for example when regulations reduce a firm's level of productivity and innovativeness) is important if the full impact of compliance is to be assessed.

The full impact of compliance was the focus here, as was the way in which complying with regulations has the potential to divert the attention of managers, and to act as one of the factors that may prevent the firm from engaging in a variety of growth-oriented activities (such as exporting).

This section presents the results from Section A of the questionnaire (see Appendix B for the questionnaire text). Here we were concerned with identifying constraints to exporting. First we asked the relevant respondents (the 388 who are either exporting currently or who consider their products or service as being inherently capable of being exported) to identify "any one need or constraint (whether New Zealand based or based in the overseas market) that is uppermost in your mind in holding back or limiting growth in your exporting"? This question deliberately avoided mentioning the term compliance, in order to minimise the degree to which respondents were "primed" into framing their answers in ways that fitted the study's focus.

The question elicited a large number of detailed comments: A number of respondents were concerned with the practicality of representing the firm overseas, while other respondents were more concerned with the regulations imposed by overseas governments or the trading conditions in these countries. Some talked about growth and a number commented on New Zealand based regulations. Others had particular concerns about the impact of compliance on smaller firms or identified issues that were industry-specific, or which related to particular pieces of legislation.

The primary purpose of this question was to stimulate the respondents' thinking, before exposing them to the list of statements that was read to them in the next question. For this reason there is no analysis of these comments presented in this report.

Factors that Constrain Export Growth

Following the preliminary open-ended question, respondents were asked to comment on a number of factors and to consider whether these factors were restricting or slowing their export growth (or their ability to earn foreign exchange if this was more appropriate).¹⁵ Figure 7 presents the responses from the sub sample of 388, showing that the factors that were most commonly selected (where respondents answered "yes" and "yes significantly") were: G (conditions and regulations placed by overseas governments), A (the cost and time needed to represent the firm overseas), M (the effort and distraction of complying with regulations in New Zealand), N (the executive time and the expense of collecting information and researching a possible new overseas prospect) and L (getting identity and exposure for the firm or brand overseas).

Conversely, factors B (getting/maintaining patent protection), K (hassles at New Zealand borders), Q (getting a loan for working capital against an overseas order), E (level of technical skill among New Zealand workers) and C (New Zealand health and safety requirements) were indicated the least frequently (i.e. respondents answered "no" to the question of whether the factors restricted or hindered export growth).

Figure 7: Factors that Restrict Export Growth

→ Larger version of "Figure 7: Factors that Restrict Export Growth"

Responses by Survey Sub-Samples

While the identification of the "conditions and regulations placed by overseas governments" as the factor that is regarded by most respondents as restricting growth is heartening given the New Zealand government's recent efforts to reduce the burden of compliance facing firms as a result of its own policies and regulations, it is necessary to take a more detailed look at the data to understand the issues that are being signalled by the respondents. This shows that the different groups had distinctly different views on the relative importance (or lack of importance) of the various factors. The following section analyses the data in terms of the five groups, and using two techniques: 1) by ranking the issues in order, and 2) by indexing (explained later in the report).

Firm Size

The issues of most concern to firms of different size groups are ranked and displayed in Figure 8.¹⁶

Figure 8: Ranking of Factors That Restrict Export Growth (by Firm Size)

Further analysis of the responses was undertaken using the process of "indexing". This technique is useful in demonstrating the "order of difference" between groups that are of different sizes. A diagrammatic representation of this technique and an explanation of how the technique was carried out in relation to this question in contained in Appendix C.

Indexing the responses showed that respondents whose firms do not employ and respondents from firms that employ more than 11 FTEs were over-represented amongst the 22.9% of respondents answering "yes, significantly" in relation to "conditions and regulations imposed by overseas governments", while firms employing between 2-5 FTEs were under-represented amongst those giving this answer. Respondents whose firms do not employ and respondents from firms that employ more than 11 FTEs were over-represented amongst the 25.3% of respondents answering "yes, significantly" in relation to "cost and time needed to represent the firm overseas", while firms employing between 6-10 FTEs were under-represented amongst those giving this answer. Respondents whose firms that employ 2-10 FTEs were over-represented amongst the 21.9% of respondents answering "yes, significantly" in relation to the "effort and distraction of complying with regulations in New Zealand", while firms employing more than 11 FTEs and those that do not employ were under-represented amongst those giving this answer.

Export Involvement

The issues of most concern to firms that export (cf. those that are not currently exporting but which anticipate doing so) are ranked and displayed in Figure 9.

Figure 9: Ranking of Factors that Restrict Export Growth (by Export Involvement)

Indexing the data showed that respondents whose firms are exporting were over-represented amongst the 22.9% of respondents answering "yes, significantly" in relation to "conditions and regulations imposed by overseas governments". Respondents whose firms are not exporting were over-represented amongst the 25.3% of respondents answering "yes, significantly" in relation to "cost and time needed to represent the firm overseas". Respondents whose firms are exporting were over-represented amongst the 21.9% of respondents answering "yes, significantly" in relation to the "effort and distraction of complying with regulations in New Zealand".

Firm Stage

The issues of most concern to firms of different stages are ranked and displayed in Figure 10.

Figure 10: Ranking of Factors that Restrict Export Growth (by Firm Stage)

Indexing the data showed that respondents whose firms are neither "mature" nor "new" were over-represented amongst the 22.9% of respondents answering "yes, significantly" in relation to "conditions and regulations imposed by overseas governments", while firms that are mature and new were under-represented amongst those giving this answer. Respondents whose firms are "new" were over-represented amongst the 25.3% of respondents answering "yes, significantly" in relation to "cost and time needed to represent the firm overseas", while firms that are neither mature nor new and those that were mature are slightly under-represented amongst those giving this answer. Respondents whose firms are "mature" and "new" were over-represented amongst the 21.9% of respondents answering "yes, significantly" in relation to the "effort and distraction of complying with regulations in New Zealand", while firms that are neither "mature" nor "new" were under-represented amongst those giving this answer.

Growth Intentions

The issues of most concern to those with different growth intentions are ranked and displayed in Figure 11.

Figure 11: Ranking of Factors that Restrict Export Growth (by Growth Intentions)

Indexing the data showed that respondents whose firms that intend to grow strongly were over-represented amongst the 22.9% of respondents answering "yes, significantly" in relation to "conditions and regulations imposed by overseas governments", while firms that are contracting or consolidating were under-represented amongst those giving this answer. Respondents whose firms that intend to grow strongly were over-represented amongst the 25.3% of respondents answering "yes, significantly" in relation to "cost and time needed to represent the firm overseas", while firms that are contracting or consolidating were under-represented amongst those giving this answer. Respondents whose firms that intend to contract or consolidate were over-represented amongst the 21.9% of respondents answering "yes, significantly" in relation to the "effort and distraction of complying with regulations in New Zealand", while firms that are growing were under-represented amongst those giving this answer.

Industry Type

The issues of most concern to those involved in different industries are ranked and displayed in Figure 12.

Figure 12: Ranking of Factors That Restrict Export Growth (by Industry Type)

This shows that some sectors (for example, tourism) are on the whole not concerned with the impact of compliance. By contrast, respondents from the primary sector are concerned with a number of issues.

Indexing the data showed that respondents whose firms are from the food and primary industry sectors were over-represented amongst the 22.9% of respondents answering "yes, significantly" in relation to "conditions and regulations imposed by overseas governments", while firms from the software and business service industry, the tourism industry and the non-food sector were under-represented amongst those giving this answer. Respondents whose firms are from the software and primary industry sectors were over-represented amongst the 25.3% of respondents answering "yes, significantly" in relation to "cost and time needed to represent the firm overseas", while firms from the tourism and non-food sector were under-represented amongst those giving this answer. Respondents whose firms are from the food, tourism and primary sectors were over-represented amongst the 21.9% of respondents answering "yes, significantly" in relation to the "effort and distraction of complying with regulations in New Zealand", while firms from the software and business service industry and the wholesale, retail and manufacturing sectors were under-represented amongst those giving this answer.

Summary

When asked to comment on a number of factors, and to consider whether these factors were restricting or slowing their export growth (or their ability to earn foreign exchange if this was more appropriate), the 388 respondents (those who were already exporting or felt they had the potential to do so), most commonly identified:

• The conditions and regulations placed by overseas governments (over 60% said this was a factor that restricted their export growth, or had the potential to do so, compared to 37% who said that this factor was not a concern).
• The cost and time needed to represent the firm overseas (over 60% said this was a factor that restricted their export growth, or had the potential to do so, compared to 37% who said that this factor was not a concern).
• The effort and distraction of complying with regulations in New Zealand (over 54% said this was a factor that restricted their export growth, or had the potential to do so, compared to 45% who said that this factor was not a concern).
• The executive time and the expense of collecting information and researching a possible new overseas prospect (54% said this was a factor that restricted their export growth, or had the potential to do so, compared to 45% who said that this factor was not a concern).
• Getting identity and exposure for the firm or brand overseas (51% said this was a factor that restricted their export growth, or had the potential to do so, compared to 48% who said that this factor was not a concern).

However, the factors were not raised to the same degree by the five different groups that were surveyed. The key differences between the groups in relation to the top three factors shows that:

• Respondents that answered "yes, significantly" in relation to the "conditions and regulations placed by overseas governments" were most likely to be from firms that: employ more than 11 FTEs, export, are neither "mature" nor "new", intend to grow strongly and come from the food and primary industry sectors.
• Respondents that answered "yes, significantly" in relation to the "cost and time needed to represent the firm overseas" were most likely to be from firms that: do not employ and that employ more than 11 FTEs, do not export, are new, intend to grow strongly and are from the software and primary industry sectors.
• Respondents that answered "yes, significantly" in relation to the "effort and distraction of complying with regulations in New Zealand" were most likely to be from firms that: employ 2-10 FTEs, export, are "mature" and "new", intend to contract or consolidate, and are from the food, tourism and primary sectors.

Viewing the entire set of factors from the perspective of the groups themselves, there were also visible differences:

• In terms of firm size, all groups identified the "cost and time needed to represent the firm overseas" and the "conditions and regulations placed by overseas governments" as factors that restrict growth. Firms with fewer staff were more likely to identify the "effort and distraction of complying with regulations in New Zealand" as a factor.
• In terms of export involvement, both groups (i.e. those that are currently exporting as well as those that are not), identified the "cost and time needed to represent the firm overseas" and the "conditions and regulations placed by overseas governments".
• In terms of firm stage, all three groups identified the "cost and time needed to represent the firm overseas" as a factor. However, recently established firms noted "getting identity/exposure for firm overseas" and "time/expense re possible new overseas prospect" as factors.
• In terms of growth intentions, all three groups identified the "conditions and regulations placed by overseas governments". Respondents from firms that are contracting identified "New Zealand's requirements for health/safety at workplaces" the "effort and distraction of complying with regulations in New Zealand" as factors.
• In terms of industry type, almost all groups identified the "conditions and regulations placed by overseas governments" and the "cost and time needed to represent the firm overseas". However, the other answers demonstrate the varied nature of the New Zealand business population, and the variance in the impact of compliance on different industry sectors.

¹³OECD. (2001). Businesses' Views on Red Tape: Administrative and Regulatory Burdens on Small and Medium-Sized Enterprises. Paris: OECD.

¹⁴Sandford, C. T., Godwin, M., & Hardwick, P. (1989). Administrative and Compliance Costs of Taxation. Bath: Fiscal.

¹⁵This list of factors was derived from those identified in the international literature as well as those that were derived from earlier New Zealand studies and the focus groups.

¹⁶The ranking was done after totalling the percentage of the respondents who answered "yes" and "yes significantly". Where the totals came to 50% or more the factor was ranked.