Sustainable Development and Innovation Branch Ministry of Economic Development

Economists, with varying success, have often addressed the issue of interface between entrepreneurship and innovation. Recently, there has been an increased interest in this field, due to the realisation that entrepreneurs and entrepreneurship can contribute to society in various ways, including for example, economic growth (Hayek, 1948), business creation (Gartner, 1985), national identity (Bolton, 1971), and the innovation process (Schumpeter, 1934). The last point, on the contribution of entrepreneurs to the innovation process, is particularly critical to public policy making in small and open economies such as New Zealand. New Zealand is predominantly a nation of small and medium size enterprises (SMEs)- we often tend to describe ourselves as a nation of entrepreneurs and refer to "Kiwi ingenuity " as a typical feature of our country. In New Zealand, SMEs constitute the majority of all non-agricultural enterprises, for example, 84 % of enterprises employ 5 or less full time equivalent staff and 96 % of enterprises employ 19 or less staff, and as such are more predominant than in many other countries. In the New Zealand context, SMEs are viewed as the most critical source of flexibility and innovation, and make a significant contribution to economy, both in terms of their number and the proportion of the labour force they employed