As exemplified by New Zealand, the nature of educational policy research is shaped by political and social factors that impinge upon the research environment. Following a description of the educational system and research funding methods, this paper analyzes three areas that affect policy research in New Zealand and addresses relevant social science research literature on public policy formation. In regard to the first area, responses from the central government indicate that the minister and his/her political party are able to alter the direction of policy research. The second area concerns the process of agenda setting within the department of education, which is determined by varying perceptions of priorities. Institutional arrangements can create a narrow concept of reform, which has been characteristic of New Zealand's centralized educational system. Policy researchers have neglected to recognize that inherent ethnocentrism in the knowledge legitimation process causes a disjunction among diverse cultural groups. Applied research in Maori culture should derive its focus and concepts from indigeneous interpretations of reality rather than from European academic assumptions. Finally, the operating environment and in particular the influence of labor organizations representing teachers affect research in various ways. The challenge for policy research is to maintain integrity of purpose through an understanding of influential factors. Appended are 26 references. (CJH)