What Prevents More Small Firms from Using Professional Business Services? An Information and Quality-Rating Experiment in Nigeria

Why do more small firms in developing countries not use the market for professional business services like accounting, marketing, and human resource specialists? Two key reasons may be that firms lack information about the availability of these services, and that they struggle to distinguish the quality of good versus bad providers. A brand recognition exercise finds that most small firms are unaware of most providers in this market, and a survey of service providers reveals that they largely rely on word-of-mouth and informal reputation mechanisms for acquiring customers. This study set up a business services marketplace that contains information about the different providers present in the market and used mystery shopper visits to develop a quality ratings system. A randomized experiment with more than 1,000 firms provided access to this marketplace to the treatment group and randomized whether firms received just information or also quality ratings. The provision of quality ratings information shifts small firms’ preferences over which provider they would like to use, increasing the average quality rating of their preferred providers by 0.2 to 0.4 ratings points out of 5. However, neither the provision of information nor these quality ratings had any significant impact on the likelihood that small firms go on to hire a business service provider over the subsequent six months. The results suggest that alleviating information frictions alone is insufficient to increase usage of professional business services.

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Bibliographic Details
Main Authors: Anderson, Stephen J., McKenzie, David
Format: Working Paper biblioteca
Language:English
Published: World Bank, Washington, DC 2021-04
Subjects:BUSINESS DEVELOPMENT SERVICES, FIRM SIZE, BUSINESS SUPPORT PROGRAM, PROFESSIONAL BUSINESS SERVICES, QUALITY RATING, SMALL AND MEDIUM-SIZED ENTERPRISES, SMALL FIRM GROWTH,
Online Access:http://documents.worldbank.org/curated/en/407751617722646649/What-Prevents-More-Small-Firms-from-Using-Professional-Business-Services-An-Information-and-Quality-Rating-Experiment-in-Nigeria
https://hdl.handle.net/10986/35409
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spelling dig-okr-10986354092024-12-18T03:35:48Z What Prevents More Small Firms from Using Professional Business Services? An Information and Quality-Rating Experiment in Nigeria Anderson, Stephen J. McKenzie, David BUSINESS DEVELOPMENT SERVICES FIRM SIZE BUSINESS SUPPORT PROGRAM PROFESSIONAL BUSINESS SERVICES QUALITY RATING SMALL AND MEDIUM-SIZED ENTERPRISES SMALL FIRM GROWTH Why do more small firms in developing countries not use the market for professional business services like accounting, marketing, and human resource specialists? Two key reasons may be that firms lack information about the availability of these services, and that they struggle to distinguish the quality of good versus bad providers. A brand recognition exercise finds that most small firms are unaware of most providers in this market, and a survey of service providers reveals that they largely rely on word-of-mouth and informal reputation mechanisms for acquiring customers. This study set up a business services marketplace that contains information about the different providers present in the market and used mystery shopper visits to develop a quality ratings system. A randomized experiment with more than 1,000 firms provided access to this marketplace to the treatment group and randomized whether firms received just information or also quality ratings. The provision of quality ratings information shifts small firms’ preferences over which provider they would like to use, increasing the average quality rating of their preferred providers by 0.2 to 0.4 ratings points out of 5. However, neither the provision of information nor these quality ratings had any significant impact on the likelihood that small firms go on to hire a business service provider over the subsequent six months. The results suggest that alleviating information frictions alone is insufficient to increase usage of professional business services. 2021-04-08T18:28:33Z 2021-04-08T18:28:33Z 2021-04 Working Paper Document de travail Documento de trabajo http://documents.worldbank.org/curated/en/407751617722646649/What-Prevents-More-Small-Firms-from-Using-Professional-Business-Services-An-Information-and-Quality-Rating-Experiment-in-Nigeria https://hdl.handle.net/10986/35409 English Policy Research Working Paper;No. 9614 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank application/pdf text/plain World Bank, Washington, DC
institution Banco Mundial
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country Estados Unidos
countrycode US
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region America del Norte
libraryname Biblioteca del Banco Mundial
language English
topic BUSINESS DEVELOPMENT SERVICES
FIRM SIZE
BUSINESS SUPPORT PROGRAM
PROFESSIONAL BUSINESS SERVICES
QUALITY RATING
SMALL AND MEDIUM-SIZED ENTERPRISES
SMALL FIRM GROWTH
BUSINESS DEVELOPMENT SERVICES
FIRM SIZE
BUSINESS SUPPORT PROGRAM
PROFESSIONAL BUSINESS SERVICES
QUALITY RATING
SMALL AND MEDIUM-SIZED ENTERPRISES
SMALL FIRM GROWTH
spellingShingle BUSINESS DEVELOPMENT SERVICES
FIRM SIZE
BUSINESS SUPPORT PROGRAM
PROFESSIONAL BUSINESS SERVICES
QUALITY RATING
SMALL AND MEDIUM-SIZED ENTERPRISES
SMALL FIRM GROWTH
BUSINESS DEVELOPMENT SERVICES
FIRM SIZE
BUSINESS SUPPORT PROGRAM
PROFESSIONAL BUSINESS SERVICES
QUALITY RATING
SMALL AND MEDIUM-SIZED ENTERPRISES
SMALL FIRM GROWTH
Anderson, Stephen J.
McKenzie, David
What Prevents More Small Firms from Using Professional Business Services? An Information and Quality-Rating Experiment in Nigeria
description Why do more small firms in developing countries not use the market for professional business services like accounting, marketing, and human resource specialists? Two key reasons may be that firms lack information about the availability of these services, and that they struggle to distinguish the quality of good versus bad providers. A brand recognition exercise finds that most small firms are unaware of most providers in this market, and a survey of service providers reveals that they largely rely on word-of-mouth and informal reputation mechanisms for acquiring customers. This study set up a business services marketplace that contains information about the different providers present in the market and used mystery shopper visits to develop a quality ratings system. A randomized experiment with more than 1,000 firms provided access to this marketplace to the treatment group and randomized whether firms received just information or also quality ratings. The provision of quality ratings information shifts small firms’ preferences over which provider they would like to use, increasing the average quality rating of their preferred providers by 0.2 to 0.4 ratings points out of 5. However, neither the provision of information nor these quality ratings had any significant impact on the likelihood that small firms go on to hire a business service provider over the subsequent six months. The results suggest that alleviating information frictions alone is insufficient to increase usage of professional business services.
format Working Paper
topic_facet BUSINESS DEVELOPMENT SERVICES
FIRM SIZE
BUSINESS SUPPORT PROGRAM
PROFESSIONAL BUSINESS SERVICES
QUALITY RATING
SMALL AND MEDIUM-SIZED ENTERPRISES
SMALL FIRM GROWTH
author Anderson, Stephen J.
McKenzie, David
author_facet Anderson, Stephen J.
McKenzie, David
author_sort Anderson, Stephen J.
title What Prevents More Small Firms from Using Professional Business Services? An Information and Quality-Rating Experiment in Nigeria
title_short What Prevents More Small Firms from Using Professional Business Services? An Information and Quality-Rating Experiment in Nigeria
title_full What Prevents More Small Firms from Using Professional Business Services? An Information and Quality-Rating Experiment in Nigeria
title_fullStr What Prevents More Small Firms from Using Professional Business Services? An Information and Quality-Rating Experiment in Nigeria
title_full_unstemmed What Prevents More Small Firms from Using Professional Business Services? An Information and Quality-Rating Experiment in Nigeria
title_sort what prevents more small firms from using professional business services? an information and quality-rating experiment in nigeria
publisher World Bank, Washington, DC
publishDate 2021-04
url http://documents.worldbank.org/curated/en/407751617722646649/What-Prevents-More-Small-Firms-from-Using-Professional-Business-Services-An-Information-and-Quality-Rating-Experiment-in-Nigeria
https://hdl.handle.net/10986/35409
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