Which SMEs seek external support? Business characteristics, management behaviour and external influences in a contingency approach

Abstract

To improve SME growth and competitiveness, governments often encourage business ownermanagers to make use of external sources of support. Whether they seek this depends on the degree to which they perceive themselves to need assistance. Additionally, its use can be constrained by market failures. In this paper, we model whether SME owner-managers seek information and advice from formal sources, including public and private providers. In 2011, the researchers conducted a telephone survey of 1202 SMEs (1-249 employees) in England to assess the use and non-use of external support between 2008 and 2011. Using a contingency approach, we model various influences on the use and non-use of formal support and identify those owner-managers who face more concerns but have less confidence in their capabilities. We find that the demand for support, especially from private providers, is fuelled by a firm's objective to grow and a size threshold, although this is moderated by various concerns which increase the likelihood of using public sources. The willingness to take informal advice can act as a stepping stone to using formal sources. Whilst market failures affected less than a fifth of firms, those with women directors were particularly affected as were newly founded firms.

Innovation, internationalisation and the performance of microbusinesses

“…Although our purpose here is not to evaluate R&D support policy, there are clear implications in these findings for the potential value of external business support. Other research shows that demand for formal business support and advice is correlated with growth motivation, and that business advisory programmes can be an important conduit for the dissemination of knowledge (Mole et al, 2017). External advice can increase strategic knowledge and improve competitiveness (Bennett and Robson, 2003).…”

Take-up and variation of advice for new firm founders in different local contexts

“…The asymmetric information problem in advice as mentioned in the introduction suggests that many firms have little awareness of advice available, how to access it, how to value the quality of advice or the benefits of the advice to them (see Mole, North and Baldock 2016). With asymmetric information in favour of the sellers or advisers, the expected benefits of advice are reduced by an amount to reflect the potentially uncertain outcomes; in consequence fewer businesses take advice (Wren andStorey 2002, Hjalmarsson andJohansson 2003).…”

“…The reasons that markets fail relates to the level of transaction costs (see Williamson 1981). A recent empirical article shows that firm managers link transactions costs with the market failure of business advice (Mole et al 2016). In a survey of SMEs, Mole, North and Baldock (2016) defined firms who were subject to market failures as those who reported both three or more concerns in their business and that they lacked the internal capability to deal with them fully, which identified approximately 1-in-5 firms as subject to market failures.…”

“…A recent empirical article shows that firm managers link transactions costs with the market failure of business advice (Mole et al 2016). In a survey of SMEs, Mole, North and Baldock (2016) defined firms who were subject to market failures as those who reported both three or more concerns in their business and that they lacked the internal capability to deal with them fully, which identified approximately 1-in-5 firms as subject to market failures. These firm managers stressed factors included in transaction costs: 42% of those firms mentioned search and information costs including that the advice is available at the market price; 42% mentioned bargaining costs, including the agreement with the adviser, defined as 'relationship issues'; 59% mentioned enforcement, i.e.…”

Samenwerking van MKB-ondernemers met buitenstaanders leidt tot een sterk positief effect op de verwachte omzetgroei

“…Ook Benito-Hernandez et al (2015) trekken de conclusie dat naarmate de ondernemingen groter zijn het gebruik van extern advies toeneemt. Mole et al (2013Mole et al ( , 2014 en Mole et al (2016) concluderen dat zodra een onderneming de drempel van 10 medewerkers bereikt de vraag om advies frequenter aan de orde is. Bennett and Robson (2003) melden dat voor alle categorieën adviseurs geldt dat middelgrote ondernemingen beduidend meer gebruik maken van de diensten van deze adviseurs dan kleine ondernemingen doen.…”