Living on the edge: An anatomy of New Zealand’s most productive firms

Abstract

Theory and international evidence suggest that firms at the New Zealand productivity frontier may be especially important for the diffusion of knowledge from the global productivity frontier, acting as a conduit for new technologies and ideas to flow into the domestic economy. We identify the NZ productivity frontier in a novel way that is robust to some sources of measurement error, and to criticism that the frontier label is dependent on arbitrary assumptions. We show that economic activity is concentrated in the upper deciles of the productivity distribution, and that frontier firms are disproportionately important to aggregate output, even relative to firms just outside the frontier. Compared to laggard firms, frontier firms: employ a more skilled workforce concentrated in major Urban Areas (particularly Auckland); have superior human resource management practices; are more export intensive; are more likely to have up-to-date technology (including UFB use); and to be in markets with no competitors.