Why Staying Small Could Be New Zealand's Secret Weapon in 2026

For decades, the narrative around New Zealand's business landscape has been dominated by the idea that firms choose to stay small for lifestyle reasons—often summed up by the "bach, boat and BMW" aspiration. This has been linked to the country's persistent productivity gap, with output per hour worked lagging behind other advanced economies.

Statistics show that nearly 97% of local businesses employ fewer than 20 people, and many remain small throughout their lifecycle. However, a global shift is emerging where smallness is no longer seen as a drawback but as a strategic advantage.

When Scaling Up Stops Being the Default

After a surge in venture capital in 2021, investment has contracted, with startup funding hitting its lowest point since 2018. This has prompted a reevaluation of the traditional "growth-at-all-costs" model, as capital becomes more selective.

Artificial intelligence (AI) is a game-changer, enabling small teams to achieve output once associated with larger organizations. AI systems automate tasks across coding, design, analysis, and administration, allowing small firms to punch above their weight in specialized fields like software, creative content, or digital services.

Moreover, climate disruptions and supply chain fragility have exposed weaknesses in centralized, high-volume models. Nimbler, modular operations with shorter supply chains offer greater resilience in the face of environmental and geopolitical volatility.

This trend points to a new form of entrepreneurship—anti-scale entrepreneurship—where firms focus on maximizing productivity, specialisation, and resilience rather than expanding staff numbers.

Why Strategic Smallness Suits New Zealand

Smallness can be a strategic choice that protects quality, speeds up innovation, reduces overheads, and fosters closer customer relationships. In digital markets, depth of expertise often matters more than organizational size.

New Zealand's productivity problem stems not from being small, but from being small without specialisation or technological leverage. Many firms operate as generalist service providers in a thin domestic market, with limited incentives to innovate.

Productivity is measured per worker, not per firm. A two-person, AI-enabled venture serving global customers can generate far more value than a 20-person domestic service firm. International comparisons with small, highly productive economies like Denmark, Finland, and the Netherlands show that specialising in global value chains can lead to success.

This aligns with New Zealand's structural constraints and offers a form of ambition that suits small countries, diverging from Silicon Valley's emphasis on rapid expansion.

Rethinking How We Support Ambitious Small Firms

Research suggests ventures perform best when their strategies match their environment. New Zealand's conditions can favour small, highly productive firms that rely on expertise, identity, and digital reach.

To realise this potential, institutions need to adjust long-standing assumptions. Policies that treat firm size as the primary marker of success risk overlooking small yet highly productive ventures.

Export programmes, innovation grants, and skills initiatives could be better aligned with small firms that specialise deeply and use technology to amplify output. Education could focus on helping entrepreneurs design firms for an optimal size.

Ultimately, the rise of anti-scale entrepreneurship suggests that some of the most innovative and resilient firms of 2026 may be those that remain deliberately small, use AI to expand capabilities, and build reputations in tightly defined global niches. The question for New Zealand is not whether its firms can grow larger, but whether they can grow better.