The influence of location on the use by SMEs of external advice and collaboration

Abstract

This paper provides an analysis of the influence of location on the extent of use and impact of external advice and collaboration on small and medium-sized enterprises (SMEs) in Britain. The analysis indicates that for private-sector advisers (accountants, consultants, etc.) and collaboration with suppliers and customers, the intensity of use does not vary significantly with location in most cases. Only the input of business friends and relatives is strongly locationally constrained, indicating the importance of personal trust processes operating in a different way from other influences. EU Structural Fund status of an area also has few major effects on use of private-sector advice. However, the impact of external advice and the extent of local collaboration between similar firms are influenced by location, with impact generally increasing with the size of business concentration, density and closeness to a business centre; i.e. there are positive effects of urban location and agglomeration economies. For public-sector support agencies (such as the Small Business Service Business Link, TECs/LECs, enterprise agencies and also chambers of commerce) the reverse is generally true. Levels of use are locationally influenced, but impact is not. Use tends to increase in EU-assisted areas, and in areas with lower levels of business concentration. This applies to most local agents, but for regional development agencies there is an additionally strong effect of highest focus of use and impact in the most rural and peripheral areas. Thus public agents appear generally to be most used and have greatest relevance to SMEs in more peripheral areas where they fill gaps in the market created by agglomeration effects.