Purpose -The purpose of this paper is to examine the entrepreneurial behaviour of small tourism businesses and their ability to contribute to regional development in the context of a transitional economy. Design/methodology/approach -The research, by combining in-depth interviews and a survey, reports on a case study of Wairarapa, a region of New Zealand that has recently seen a large expansion in the tourism sector. Findings -The paper identifies a number of important criteria for the effective interaction of private-public sectors as well as illustrating how small tourism firm owners are facing challenges in one of the most liberal economic environments whilst taking action to ensure periphery endurance. Originality/value -Inductive theory or a bottom-up model for regional development provides the conceptual structure for the research. The paper argues that the related paradigm is increasingly underpinned by entrepreneurial behaviour of a multiplicity of stakeholders in rural localities where tourism is seen as a key agent for regional rejuvenation on the demise of traditional economic activities.