Attracting entrepreneurs to New Zealand sounds like a good idea. The country needs innovation, economic growth, greater productivity and more jobs.

Turns out, it’s not that simple.

In August last year, the government closed the Entrepreneur Work Visa to new applicants and announced a new Business Investor Visa aimed at people willing to invest in and operate established New Zealand businesses.

The previous scheme, according to the government, had seen low application numbers, high decline rates and had not delivered strong economic impacts.

The Business Investor Visa aims instead to attract experienced business people who can bring in capital and help run and grow existing firms.

Migrants under this visa must invest at least NZ$1 million in an established local business. Investing NZ$2 million provides a faster pathway towards residence.

But the shift of emphasis raises an important question: did the problem lie in the applicants New Zealand attracted, or in what happened to entrepreneurs after they arrived?

Frustration and disappointment

In our research on high-skilled immigrant entrepreneurs, we interviewed 22 people about their experiences of settling and building businesses in New Zealand.

Participants had arrived through a range of migration pathways, including student and work visas, the Entrepreneur Work Visa and the Global Impact Visa (also now closed).

Three of the entrepreneurs we talked to later left New Zealand. Many others were considering leaving because they felt they could access better business support and opportunities in other countries.

Many arrived with substantial business experience, international networks and ambitions to grow their ventures. But we found they often struggled to build legitimacy and gain access to funding, customers and business partnerships within New Zealand’s entrepreneurial ecosystem.

Consequently, they increasingly turned to their international networks to access skilled workers, raise capital, find business partners and reach larger markets.

For many, accessing this support from outside New Zealand was easier than accessing it locally. One entrepreneur described his frustration this way:

"It’s such a conservative culture when it comes to innovation […] we lose that innovation to overseas very quickly. If I was in Australia, I would be able to do this at a much bigger scale because I could leverage the support ecosystem that’s over there […] Your tank is empty before you get to the point where you need to be able to grow."

As entrepreneurs tried to scale their businesses, they increasingly looked at what other countries could offer. Some began to question whether remaining in New Zealand was the right decision. As another told us:

"I’m very disappointed in the support we’re getting from New Zealand businesses, to the point where I’m thinking about just pulling the plug. If we look at our competitors, they’re able to accelerate much faster in the US."

For some, these disappointments eventually led to what our research describes as “strategic exit” towards countries where they believed funding and market opportunities were easier to access.

As their businesses became less dependent on New Zealand, leaving the country also became easier. Some eventually relocated overseas, while many others were considering doing so.

These experiences suggest attracting entrepreneurs through a visa alone will not necessarily mean they will go on to build successful businesses and contribute to the country’s productivity.

Lessons for the future

The Business Investor Visa may help established firms access capital, experienced management and international connections. But investors and entrepreneurs play different roles.

Entrepreneurs create new businesses, products, technologies and markets. This distinction matters for New Zealand, where the OECD says productivity remains weak and stronger innovation, investment and technology adoption are needed to improve economic performance.

Immigrant entrepreneurs don’t just contribute capital, but also knowledge, experience and international networks.

Across 25 OECD countries, migrant entrepreneurship was estimated to have contributed almost four million jobs between 2011 and 2021. The same report states that “immigrants tend to disproportionately contribute to innovation given their higher likelihood of being entrepreneurs”.

For a small, geographically distant economy, these international connections can be especially valuable.

A stronger focus on investors may help address New Zealand’s need for capital. But it does not replace the contribution entrepreneurs can make through new firms and innovation.

The government itself appears to recognise this distinction. Announcing the Business Investor Visa, it said work was underway on a separate pathway for startup entrepreneurs with scalable and innovative business ideas.

When a new entrepreneur pathway is introduced, the big lesson from the previous system is that visa design alone will not be enough.

New Zealand will also need to provide stronger support to help immigrant entrepreneurs build local networks, access investors and customers, and develop successful businesses that don’t leave.

(This was first published in The Conversation. Farzana Adeel is Professional Teaching Fellow, Management & Intl Business, University of Auckland, Waipapa Taumata Rau.)