Publication
Advice and SMEs: Who Takes it and What Happens Thereafter?
Published: 31 October 2024
ERC Research paper 112
Associated Themes
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Innovation -
Management and Leadership
The role of business advice or so-called “guided preparation” on business performance in small and medium-sized enterprises (SMEs) has become a topic of perennial interest within entrepreneurship research. Despite a sizable body of work on this topic, the evidence remains mixed about the impact business advice has on SME performance. Using a unique longitudinal dataset, this study examines the impact of both day-to-day and strategic advice on firm-level innovation and productivity in UK SMEs. This research therefore responds to a lively recent debate about the “benefits” and “teachability” of entrepreneurship by showing that entrepreneurs not only can be taught to make better decisions but also that the use of this approach is associated with superior business performance. Our findings reveal that firms that used external advice see an average increase in their labour productivity by 22.1% compared to firms that did not use external advice. We find that strategic advice appears to play a central role in unlocking the innovative potential of firms which then ultimately leads to productivity enhancing behaviours. Policy frameworks need to become better attuned at informing SMEs of these powerful positive spillovers from seeking external advice rather than generically advertising different sources of advice per se. The particular importance of strategic advice is a key takeaway from this study and one which may need further prioritisation within current public policy frameworks.
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