New Zealand Commercial Service Exporters: First Evidence from the Longitudinal Business Database

June 2010

Commercial services, in this analysis defined as services excluding travel; transportation; insurance; and government services, are becoming an increasingly important component of world trade. The sector has the potential to play a key role in lifting New Zealand’s export and economic performance given the growing global demand for expertise and specialised services and the lack of typical natural resource constraints (i.e. land availability and environmental pressures). Little is known, however, about the commercial services sector in NZ. MFAT is looking to bridge, at least part, of this knowledge gap by undertaking research on commercial service exporters using Statistics New Zealand’s prototype Longitudinal Business Database. The initial research has raised some interesting insights on the characteristics and performance of NZ commercial service exporters, including:

• Service exporters are more productive than non exporters: service exporters are bigger both in terms of average employees and sales; have higher levels of labour productivity and are more likely to have some foreign ownership.
• The better performing firms export both goods and services: firms that export both goods and services are significantly larger and have higher performance levels (sales, value added, and profitability) than firms that export only services and those that only export goods. Despite being smaller in number, firms that export both goods and services account for a majority of services exports.
• Trade, employment, sales, value added, and profit is concentrated among a few service exporters: among ‘service only exporters’, the top 10 percent accounted for: 64.8 percent of total exports; 38.8 percent of all employment; 53.6 percent of value added; and a fifth of all sales.
• There is a high degree of foreign ownership among the top exporters: out of the 78 firms that represented the top 10 percent of exporters in the ‘service only exporter’ group, 39 firms (i.e. 50 percent of all firms) had some level of foreign ownership. Similarly, foreign ownership among the top 25 percent of ‘goods and service’ exporters was 82.6 percent.
• Service exporters exported to a narrower range of markets: the median ‘goods only exporter’ exported to three markets compared with just one market for the ‘service only exporters’. About 25 percent of all service export receipts were generated by firms exporting to either one or two markets. This contrasts with goods exporters where only 4 percent of all export receipts were generated by firms exporting to either one or two markets.
• Firms that export several services types or to several markets account for a disproportionate share of exports, employment, sales, value added and profitability.
• Even with diversification into new markets and service types, firms continued to derive a large fraction of their export receipts from their most important market and/or in the most important service type.
• Australia is by far our biggest services export market by count of firms and value of trade: 65 percent of all service exporters in our sample exported to Australia and Australia accounted for 29 percent of total services exports in 2005. US and China were the second and third biggest export markets by value of trade.
• The most important commercial service export sectors, by value, are merchanting, other telecommunication services and IT design and development services.

The full report is available below in PDF:

• New Zealand Commercial Service Exporters - First Evidence from the Prototype Longitudinal Business Database, June 2010 (PDF 690KB)

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