Drawing on the Longitudinal Small Business Survey (LSBS) undertaken by the UK’s Department of Business and Trade, this report provides new insights into the benefits of different kinds of business advice and how this affects the levels of innovative and productivity within UK SMEs. [...] The primary independent variables of this study relate to the receipt and types of formal, external business advice, defined as external advice or information on matters affecting the business in the form of more than a casual conversation. [...] The counterfactual outcome—what what would have occurred in the absence of the treatment—is captured by the Average Treatment Effect on the Treated (ATT), which is calculated as the average difference in outcome variables between the treated group and the matched counterfactuals. [...] To see the full picture of the effects, our analysis focuses on the Average Treatment Effect on the Treated (ATT) for four categories of advice: firms that used any form of external advice, firms that used day-to-day advice only, firms that used strategic advice only, and firms that used both forms of advice. [...] For the treatment variables, the problem of uneven attrition between the treated and untreated groups in the long-term analysis is detected using a probit model, where the dependent variable is a dummy equal to 1 if a firm exits during the 5-year period, and 0 otherwise.
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- Pages
- 42
- Published in
- United Kingdom
Table of Contents
- CONTENTS 4
- Non-Technical Summary 5
- 1.Introduction 8
- 2. Literature Review 9
- 2.1 Theoretical Issues: Why Advice Matters 9
- 2.2 Empirical Studies on Advice and SME Performance 11
- 2.3 Hypothesis Development 13
- H4: Strategic advice substantially enhances labour productivity by fostering radical product innovation 15
- 3. Data and Methods 15
- 3.1 Data and variables 15
- Following others (Saridakis et al, 2019), we use data from the UK LSBS between 2016 and 2022, a large-scale survey of the owners and managers of small UK businesses (businesses with fewer than 250 employees), commissioned by the Department for Busines... 15
- Table 1 reports the definition of the variables used in this study. Labour productivity is defined as sales per employee. We also use sales and employee as alternative performance outcome measures widely used in the literature (Brouwer et al, 1993). ... 15
- Besides firm size (employment and sales), we further control for other measures of business demographics and operating activities that are commonly found to be associated with productivity. Firm demographic measures include firm age, sector and region... 16
- 3.2 Methodology 16
- 4. Findings 20
- 4.1 Descriptive statistics 20
- 4.2 Estimated Impacts on Innovator Status 21
- 4.3 Estimated Impacts on Labour productivity, employee, and sales 21
- 4.4 Mediation Test 24
- 5. Discussion and Conclusions 25
- References 27
- Appendix 33
