For decades, we have heard a familiar story about why New Zealand’s firms choose to stay small. Business owners prefer comfort, control and lifestyle over ambition, summed up in the old notion of the “bach, boat and BMW” being the height of aspiration.

The statistics show this pattern clearly. New Zealand’s productivity has lagged other advanced economies for years, with output per hour worked sitting below the OECD average.

This gap is often blamed on the fact that nearly 97% of local businesses employ fewer than 20 people and many stay small their entire life cycle. Yet a fast emerging global trend suggests smallness is no longer a drawback.

Across software, design, digital media and specialist manufacturing, a growing number of international firms are choosing to stay small. Their aim is not to avoid ambition, but to preserve quality, identity and resilience in a transformed economic environment.

This year, that shift may offer important lessons – and opportunities – for tackling New Zealand’s productivity challenge.

After the global surge in venture capital in 2021, investment contracted sharply. Startup funding fell in both 2022 and 2023, with the latter being the weakest since 2018.

While signs suggest activity has stabilised at a lower level, capital is now far more........

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