Diseconomies of Scale: A Study of Development Constraints in Small Tourism Firms in Central New Zealand

Abstract

Small tourism firms (STFs) in both industrialised and developing countries, are a rapidly expanding and dynamic sector of regional tourism industries. Small firm development is being touted as the path for enhancing local economies and delivering more appropriate development to marginal and/or peripheral social, cultural and physical environments. Small firms have been also linked to creative product development and innovative entrepreneurship. Ironically, the small scale of operation, the essence of its vibrancy, also acts as a severe and debilitating constraint to development with potential negative implications for the quality and consistency of the wider regional product. Attempts to improve performance and managerial expertise within the STF sector have often proved misguided and misdirected largely due to poor understanding of the issues affecting owner/managers. This paper examines the range of influences in the external institutional environment that affect the development of small tourism firms. These include government agency roles, policy infrastructure, managerial support, and relationships with the financial sector. The discussion draws on a study of the Centre Stage macro region of New Zealand to contribute to a more integrated conceptualisation through which effective policies that enhance rather than constrain the activities of STFs can be conceived and implemented.