Sector Variations in SMEs’ Use of External Business Advice

Abstract

This paper uses employer survey data to identify whether and why the probability that a firm uses external advice varies across sectors. The results suggest that the probability of a firm using external advice does vary across sectors and these sector differences can be explained by differences in inherent problems, managerial aspirations and location. Policy makers should not be sector-blind when encouraging firms to use external advice.

Notes

¹ To take account of personal characteristics of the owner-manager we follow Clark et al. (2001) by including indicators such as the degree of formal planning in the organisation.

² The survey data do not allow us to distinguish between different sources of advice.

³ Furthermore, Bennett et al. (2000) found that firms located in densely-populated urban areas are more likely than others to be able to access the advice services that they require.

⁴ Of interest is the significant negative coefficient for ‘problems filling vacancies’ for manufacturing firms. When the coefficient for the ‘standard’ is added to the coefficient for the ‘compound’ the overall effect is negative. However, the standard error suggests that this is not significantly different from zero. Hence, the interpretation of the ‘problems filling vacancies’ for the manufacturing sector is simply that the enhancing effect that appears to be the case of firms in all other sectors does not apply to firms in the manufacturing sector; indeed it appears to have no effect.