Small business service firms and the 1990s recession in the United Kingdom: Implications for local economic development

Abstract

During the 1990s recession, the UK experienced a dramatic growth in employment in information‐intensive business firms. This paper explores this growth with reference to small management consultancy and market research firms. Business service firms continued to be established and to grow during the recession because of three related attributes: professional expertise, an existing reputation and a network of client contacts. These attributes are related to the theoretical work of Granovetter (1973; 1982; 1985) who argues that “weak ties” operate to connect different groups of people together. The implications of these attributes for local economic development are considered. Success for all companies at the level of the local economy will be partially dependent on efficient and effective use of available business service expertise. The three attributes make it impossible to develop successful mechanisms to encourage the formation of business service companies in areas with underdeveloped service infrastructure. Mechanisms, however, may be developed at the local level to encourage the establishment of “weak ties” between local companies and regional and national providers of business service expertise.