FACTORS AFFECTING THE USE OF PUBLIC ...

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Journal of Developmental Entrepreneurship Vol. 12, No. 2 (2007) 165–180 © World Scientific Publishing Company

FACTORS AFFECTING THE USE OF PUBLIC SUPPORT SERVICES BY SME OWNERS: EVIDENCE FROM A PERIPHERY REGION OF CANADA

JOSEE AUDET∗ and ETIENNE ST-JEAN Département de Management Faculté des sciences de l’administration Université Laval, Quebec, Quebec, G1K 7P4, Canada ∗[email protected] Received March 2006 Revised January 2007 Public authorities throughout the world, recognizing both the importance and fragility of SMEs, have over the years created agencies and set up numerous venture development support and assistance measures. Despite all these efforts, SME owner-managers do not appear to make maximum use of the services available. Results from a survey of 70 SME owner-managers show that the likelihood of an SME using public support services increases as the perceived usefulness of public agencies and their services increases, and as the level of knowledge of public agencies increases. Furthermore, the probability of using public support services decreases as the experience of the owner-manager increases. On one hand, many owner-managers do not seem to understand the utility or relevance of the services the agencies provide, while on the other, they do not seem to know enough about the agencies working in their region. However, most of the owner-managers who had used the agencies felt the services they had received were appropriate to their needs. Therefore, the problem appears to lie more with the perceptions of certain owner-managers than with the nature or quality of the services themselves. Keywords: Entrepreneurs; public support agencies; SME owner-managers; venture development support.

1. Introduction There is no doubt that small and medium-sized enterprises (SMEs) play a vital role in today’s world economy, namely by bringing new dynamism to it. However, SMEs are vulnerable and very few manage to survive for more than five years (Baldwin, Bian, Dupuy and Gellatly, 2000). Public authorities throughout the world, recognizing both the importance and fragility of SMEs, have created agencies and set up numerous venture development support and assistance measures (OECD, 2003). Despite these efforts, SME survival rates have barely improved, if at all. One reason for this may be that entrepreneurs and SME owner-managers do not make maximum use of the services available. For example, in a survey of Canadian nascent entrepreneurs, Gasse and his colleagues found that only one-third of respondents

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166 J. Audet & E. St-Jean

made use of public support agencies during venture start-up, when their firms were most at risk (Gasse et al., 2004). The situation appears even worse in the U.K., where support programs targeted at small firms rarely achieve more than a 10 percent take-up rate (Curran, 2000). It is important to find out why government services and programs fail to reach their target client group, namely SME owner-managers. The literature provides some possible answers concerning the barriers to public services, but little is known about those facing SME owner-managers in economically depressed regions. These owner-managers work in a particularly difficult business environment, typically characterized by remoteness from markets, depopulation, inadequate infrastructures and a heavy dependence on agriculture and natural resources. Under such conditions, how can public authorities bring these regions out of their downturn if SME owner-managers fail to use the support and development programs designed for them? The purpose of this research is to identify the factors likely to influence the decision of SME owner-managers in remote and economically depressed regions to consult public support agencies. Not only do we hope to identify these factors, but the methodology used will enable us to evaluate the relative importance of each with regards to making use of the public support agencies. This will add considerably to our knowledge of SME owner-managers, particularly those in remote areas about whom we know very little. This information may provide insights to public authorities on how to design and, more importantly, implement policies of support for SMEs in outlying regions. The study begins with a review of the literature, highlighting the factors likely to impact on an SME owner-manager’s decision to request outside help. This is followed by a description of the conceptual framework and methodology. The findings are then presented and discussed, and the paper concludes with some suggestions for further research.

2. Review of the Literature A number of reasons may explain the failure of SME owner-managers to use the public resources and services available to them. Curran and Blackburn (2000) identified five factors, including: (1) lack of confidence in support agencies; (2) services are of such poor quality that owner-managers do not access them; (3) a poor fit between the services available and the needs of small businesses; (4) poor marketing of services; and (5) rates that are higher than SME owner-managers are prepared to pay. The first three factors mentioned here are addressed together, under the general heading of owner-managers’ perceptions of support agencies. The fourth factor is examined in terms of the owner-managers’ knowledge of the services available. The fifth factor is not considered, since in Quebec (where this research was conducted), most support agency services are free of charge or heavily subsidized. A sixth factor — the owner-managers’ attitude to the possibility of requesting outside help — is also examined to set the stage for these other factors. Finally, as contextual factors related to the firm and its owner may also affect the use of support services, such factors will be addressed last.

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Factors Affecting the Use of Public Support Services by SME Owners 167

2.1. Perceptual factors 2.1.1. Owner-managers’ attitudes towards requesting outside help Many SME owner-managers appear to have a fairly negative perception of professional advisors. There are many reasons for this. They may believe the advice is not practical or tailored to their situation; that advisors charge too much for the results they achieve; or that support agencies do not understand small business (Dalley and Hamilton, 2000; Zinger et al., 1996; Curran et al., 1993). According to Lightfoot (1998), negative perceptions may have their roots in small business owners’ psychology, namely traits such as a strong commitment to personal autonomy and independence. Many venture creators refuse outside help because they prefer to remain absolutely independent (one of the principal reasons for venture creation) and fear that people around them may think they are incompetent (Curran and Balckburn, 2000). For example, in France, support is linked to the concept of failure or difficulty, contradicting the self-image that entrepreneurs try to project (Sammut, 1998). This aversion to asking for help may be even more prevalent among rural ownermanagers or those in remote regions who — simply due to their isolation — have a tendency to be even more self-sufficient and independent than their urban counterparts. For these owner-managers, they rely on “socially-oriented solutions” for which their local network of social contacts is the means of securing the needed resources (Meccheri and Pelloni, 2006; Ray, 2000; Winborg and Landström, 2001). When small business owner-managers decide to obtain outside help, the resources they call upon first are usually related to accounting, banking and legal issues (Boter and Lundström, 2005; Ho and Mula, 2004; Argirova and Michaelis, 2003; Jay and Schaper, 2003; Bennett and Robson, 1999). The reliance on accounting is probably due to the primordial importance of financial management for small business survival.

2.1.2. Owner-managers’ perceptions of public support agencies and their services What do small business owner-managers think of public support agencies? Public services do not seem to generate much enthusiasm, ranking systematically behind sources of advice from the private sector (from professional and technical specialists to more generalized consultants). In their survey of 1,002 Swedish SME owners, Boter and Lundström (2005) found that private support providers were more popular than public ones. Almost half the respondents revealed having regular contacts with private providers compared to less than 10 percent for public agencies, with more than 70 percent of the respondents having never contacted them. In Canada, Good and Graves (1993) observed that barely 10 percent of the 160 entrepreneurs surveyed had used the services of a public support agency. Low take-up rates appear to be the norm, as witnessed in several other countries (Stevenson and Lundström, 2001; Curran, 2000; Bennett and Robson, 1999). If we rely on these findings, there appears to be a fair amount of skepticism, given low usage levels. It is reasonable to think that agencies are victims of the owner-managers’

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general distrust of or aversion to the government apparatus (Mole, 2002). For example, Good and Graves (1993) found that SME owners blame most of their problems on the government, including paperwork and formalities, income tax and other tax requirements, and policies that discriminate against small business. If they associate support agencies with the government, their perceptions are bound to be negative. We might also wonder how useful small business owner-managers think the services will be. The handful of entrepreneurs from Good and Graves’ (1993) study who consulted public agencies felt the advice was helpful in 44 percent of the cases when the firm went out of business and in 52 percent of cases when the firm was still in business. In a survey of 279 Canadian entrepreneurs, respondents rated the importance of access to public support services during the start-up phase of a business. On a scale of 1 to 5 (1 = little or no importance and 5 = great importance), the mean value for access to services provided by small business centers was 2.19, while it was 2.06 for governmental services providing start-up expertise (Wyckham, Wedley and Culver, 2001). According to another Canadian study of 90 small business owner-managers, half of them felt the available government programs did not meet their needs (Zinger et al.,1996). This opinion is shared by owner-managers in Quebec (n = 196), where one-third felt the assistance given by support agencies was inadequate and did not meet their needs (Borges, Simard and Filion, 2005). In terms of impact on the performance of the firm, the advice received from governmentbacked bodies in England was given ratings ranging between 2.16 and 2.4 (1 = no impact and 5 = crucial impact), while ratings for private sources were significantly higher (Bennett and Robson, 1999). The situation appears to be somewhat different in the United States, in terms of the actual (not perceived) impact of services on business success. For example, Chrisman and McMullan (2004) studied a sample of American small firms that used the services of public support agencies and found they had a higher survival rate and better growth than firms that had not used these types of services. The authors proposed that support agencies provided tacit and explicit knowledge that entrepreneurs could use to create a sustainable competitive advantage, thus explaining the positive impact on the firm’s performance. Obviously, it is difficult to establish a direct causal link between agency services and business performance because of sampling problems, response bias, self-selection, and the difficulty of establishing proper control samples (Curran, 2000).

2.1.3. Owner-managers’ knowledge of support agency services Despite the large number of agencies and programs created to help small business, some owner-managers may not be aware of available programs to meet their needs. Good and Graves (1993) described 21 government support programs to a group of Canadian entrepreneurs and asked them if they had heard of the programs. Although 86 percent were aware of a basic start-up information program, only 18 percent had heard of the government guaranteed loan program. The average rate of awareness for all programs was around 39 percent. Argirova and Michaelis (2003) found that only 57 percent of owner-managers in their Scottish study knew about small business support programs, compared to 74 percent

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in England, 57 percent in Wales and 51 percent in Northern Ireland. In the United States, a study carried out in the state of Wisconsin revealed the existence of more than 400 business support programs offering more than 700 services, but entrepreneur respondents had only limited knowledge of them (Reynolds and White, 1997).

2.2. Contextual factors Depending on the type of services offered by the public agency (e.g., export development services vs. advice for business plans), the size of the firm will impact on the rate of use of services. For example, in Canada, most programs are aimed at the start-up phase of the firm, targeting a clientele of small firms that are newly created or in the process of being created. A recent survey of 103 Canadian nascent entrepreneurs reveals that 30 percent of them have made use of public support (Gasse et al., 2004), which is higher than normal take-up rates. This higher proportion of entrepreneurs seeking help can be explained by the fact that nascent entrepreneurs need and utilize more support resources in general (Birley and Westhead, 1992; Turok and Richardson, 1991). But it also reflects the current focus of Canadian governmental support programs. In the U.K., services seem to appeal to a different clientele of SMEs. Indeed, results from a large-scale survey show a rapid increase in use by firms as their size goes from very small (1–4 employees) to a medium size (50–99 employees) with a leveling-off afterwards (Bennett and Robson, 1999). The level of business experience of SME owner-managers is another contextual factor expected to influence their decision to consult public support agencies. The more experienced the owners are, the less likely they are to seek outside advice, relying instead on their own knowledge and expertise (Jay and Schaper, 2003).

3. Conceptual Framework The literature highlights both perceptual and contextual factors that explain the propensity of owner-managers to consult support agencies. We tested the following variables in relation with the use of public support services. Among the perceptual variables, the first one is the owner-manager’s attitude toward seeking outside assistance, the second is the ownermanager’s perception of the value of public support agencies and the services they offer, and the third is the level of the owner-manager’s knowledge of the agencies. Two contextual variables were also studied: the size of the firm and the level of business experience of the SME owner. The following research hypotheses were thus tested in the field: H1: A positive attitude to the idea of requesting outside help will increase the probability that the SME owner will use the services of public support agencies. H2: A positive perception of public support agencies and their services will increase the probability that the SME owner will use the services of public support agencies. H3: Greater knowledge of public support agencies will increase the probability that the SME owner will use the services of public support agencies.

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H4: The smaller the size of the firm, the higher the probability that its owner will use the services of public support agencies. H5: The higher the level of business experience of the SME owner, the lower the probability that the owner will use the services of public support agencies. 4. Research Methodology 4.1. The sample The sample was selected from the population of small business owner-managers in Gaspé, the largest town in Quebec’s Gaspé Peninsula region with 17,000 inhabitants spread over a wide area. This coastal region, bordered by the St. Lawrence Gulf and Estuary, is located far from major cities. Its economy depends on natural resources (forests, mines and fisheries) and tourism. Its natural resources are currently in decline, mainly as a result of overexploitation, and the region is one of the most economically disadvantaged in Quebec, despite significant efforts to diversify the economy. This area was chosen for two reasons. First, preliminary studies by the Gaspé-Magdalen Islands Research Chair reported significant under-use of public business support services. Second, the region is extremely disadvantaged economically, suggesting that its ownermanagers and potential entrepreneurs would have much to gain by using the available services. Respondents had to meet two conditions. First, that each firm employed fewer than 250 people, and second, that it was located within the limits of the Town of Gaspé. There was no requirement as to the firm’s line of business. The Gaspé Economic Development Corporation supplied contact information for all the region’s firms. The owner-managers of the 172 firms that met the selection criteria were contacted. Of this number, 64 refused to take part in the study, 48 could not be reached and 70 agreed to participate for a total participation rate of 41 percent (13 for personal interviews and 57 for a telephone survey). Of the 70 respondents, 34 had used support agency services in the past, and 36 had not. 4.2. Data collection An interview guide was created for personal interviews (n = 13). It included a number of closed questions, followed by open questions to encourage respondents to explain their answers. The interviews lasted an average of 30 minutes. The information gathered was used to provide contextual understanding for future statistical analyses. The telephone survey was primarily multiple-choice questions, with most of the variables being measured on a five-step Likert-type scale. 4.3. Statistical analyses and model tested The model developed to test our hypotheses was as follows: Log(Pi /1− Pi ) = β0 +β1 EASE+β2 USEFUL+β3 KNOWL+β4 SIZE+β5 EXPER +ε,

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where βi (i = 0, . . . , 5) are the coefficients. Log (Pi /1 − Pi ) is the logarithm of the probability that the owner-manager uses the public support services relative to the probability that the same owner-manager does not use them, and ε is the error term. The independent variables used in this model are the followinga : EASE: USEFUL: KNOWL: SIZE: EXPER:

The attitude towards seeking outside help The level of perceived usefulness of public agencies and their services The level of knowledge of public agencies The number of employees in the SME The number of years of business experience of the owner-manager

Before using the model, we made sure a binary logit regression analysis was appropriate by checking for multi co-linearity problems and outliers. 5. Presentation and Discussion of Results 5.1. Descriptive data on the sample There were far more men (70 percent) in the sample than there were women. The overall level of managerial experience was high, with nearly two-thirds of respondents having over ten years of experience. The information obtained on the firms revealed that most had been in existence for more than ten years (74.3 percent) and employed fewer than five people; in fact, only 11.5 percent of the firms employed more than ten people. The sector with the highest representation was the general service sector (retail trade, hotels, personal services, etc.). The primary and secondary sectors accounted for 24.4 percent of the sample, which is fairly consistent with the general situation in the Gaspé Peninsula. 5.2. The role and importance of perceptual and contextual factors Results from the regression analysis are summarized in Table 1. The equation has a good predictive power, with 78.6 percent of correct predictions, meaning that the model classified nearly 79 percent of the SMEs into those that had used public agencies in the past and those that had not. The value of the Nagelkerke R 2 is 0.467, which is a very good result for this type of analysis. Moreover, the value of the likelihood ratio is 30.168, broadly outstripping the critical value of the chi-squared statistic with 5 degrees of freedom at the 1 percent level. In sum, it is clear that at least one of our variables is statistically significant to explain the use of public agencies’ services. To measure the importance of each variable in the equation to predict utilization of public services, the partial elasticity for the variables was calculated.b Results show that the highest elasticity coefficient from all statistically significant variables came from the perceived a See Appendix for a detailed description of the independent variables. b The following equation was used:

∂Z X (γ2 exp(−γ1 − γ2 X)) •X. • = ∂X Z (1 + exp(−γ1 − γ2 X))2

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Table 1. Estimated logit model of factors affecting the use of public agencies. Dependent Variable: No Use of Public Agencies/Use of Public Agencies Independent Variables Variables Intercept Attitude toward seeking outside help (EASE) Perceived usefulness of public agencies (USEFUL) Knowledge of public agencies (KNOWL) Number of employees (SIZE) Experience of owner-manager (EXPER)

Coefficients

β a,b

Partial Elasticity Exp(β)

−1.929

(0.291)

−0.216

(0.428)

0.806

0.544

(0.003)***

1.723

0.233

(0.048)**

1.262

0.474

(0.158)

1.607

(0.019)**

0.282

−1.266

Measures of fit Number of cases Nagelkerke R 2 (pseudo R 2 ) χ 2 (d. f. = 5) Number of iteration before converging Percentage of correct predictions

70 0.467 30.168 5 78.6%

a Between parentheses indicate p-value. b * p < 0.10; ** p < 0.05; *** p < 0.01.

usefulness of public agencies, with a value of 1.723, meaning that a positive relative change of 10 percent in the index of that variable increases the probability of using public agencies by 17.23 percent. Therefore, if public authorities want to increase the likelihood that SME owner-managers will take advantage of their programs and services, they need to focus on changing SMEs’ perceptions. A 10 percent increase in an owner-manager’s perceived usefulness of public agencies and their services increases the probability by more than 17 percent that he or she will call on these resources. Furthermore, a positive relative change of 10 percent in the index of knowledge about public agencies enhances the likelihood of using them by 12.62 percent. Inversely, each time the experience of the owner-manager increases by a relative change of 10 percent, the probability that he or she will use public agencies decreases by 2.82 percent. It is worth noting that contrary to what we predicted, the size of the firm and the attitude towards seeking outside help do not have a statistically significant impact on the probability of the SME owner using public support services. To sum up, the two most significant barriers to a greater utilization of public support services are, first, the perceptions held by SME owners about their usefulness and, second, their level of knowledge about the agencies. Testing the hypotheses yielded the following results: H1: A positive attitude to the idea of requesting outside help will increase the probability that the SME owner will use the services of public support agencies. — Rejected.

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Factors Affecting the Use of Public Support Services by SME Owners 173 Table 2. Frequency of use of external support. Frequency Very often or often Sometimes Rarely or never

Account

Bank

Lawyer

Family

Customer

Supplier

22.8% 38.6% 38.6%

Consult

Public Agency

20.0%

7.1%

21.5%

21.4%

27.1%

18.6%

24.3%

25.7%

15.7%

8.6%

21.5%

27.1%

17.1%

17.1%

52.9%

74.3%

54.3%

52.8%

57.2%

74.3%

61.4%

When asked how comfortable they were in requesting outside help, 38.6 percent of respondents said they were very comfortable and 30 percent said they were fairly comfortable. This willingness to ask for help contradicts the stereotype of the staunchly independent owner-manager in outlying regions that is conveyed in the literature. According to our results, this rather positive attitude toward outside help in general has no effect on the rate of use of public support agencies. Data showed that most of the owner-managers had used some outside help in the past, although not on a regular basis (see Table 2). Accounting and banking services were among the most used while government agencies were far less popular, thus confirming findings from the literature review. Of all the listed sources of support and advice, lawyers and private consultants were ranked last, possibly due to the fact that most of the sample firms were very small and did not need or have the means to employ them. H2: A positive perception of public support agencies and their services will increase the probability that the SME owner will use the services of public support agencies. — Confirmed, significant at 0.01 level. Overall, the respondents thought business support agencies were rather useful. However, respondents from the group of SME owners who had never used public services had a far more negative perception than those from the other group. In fact, almost half of them rated the public support agencies as being not very useful (41.7 percent) or not at all useful (5.6 percent) (see Table 3). When questioned about the fit between their needs and the services offered, more than half the respondents thought the services were not suited to their needs (see Table 4). These results were mitigated by the group that had previously used agency services, as only 30

Table 3. Perceptions of public support agency utility.

Very useful Useful Somehow useful Not very useful Not useful

SMEs Who had Used Agency Services in the Past (n = 34)

SMEs Who had not Used Agency Services in the Past (n = 36)

Total sample (n = 70)

26.5% 41.2% 14.7% 14.7% 2.9%

8.3% 27.8% 16.7% 41.7% 5.6%

17.1% 34.3% 15.7% 28.6% 4.3%

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174 J. Audet & E. St-Jean Table 4. Owner-managers’ perceptions of the fit between their needs and the services offered by support agencies.

Very good Fairly good Good Not very good Not good

SMEs Who had Used Agency Services in the Past (n = 34)

SMEs Who had Not Used Agency Services in the Past (n = 36)

Total Sample (n = 70)

5.9% 23.5% 41.2% 23.5% 5.9%

0.0% 8.3% 11.1% 50.0% 30.6%

2.9% 15.7% 25.7% 37.1% 18.6%

percent of this group felt the services were not very or not at all suited to their needs, and almost half of them rated them as fairly good (41.2 percent) or even very good (5.9 percent). This result is similar to that obtained by Borges and his colleagues (2005) with a sample of small business owner-managers from Quebec who had previously dealt with support agencies. Borges’ sample was drawn from all the regions and cities of Quebec, suggesting that being located in a remote region does not influence the owner-managers’ perception of the appropriateness of the services offered and received. It is worth mentioning that the negative perception of service suitability was much more marked among respondents who had never used a support agency, more than 80.6 percent of whom felt the services offered were not very or not at all suited to their needs. Taken together, these two dimensions of the perceived usefulness of the agencies explain the rate of use of their services. According to our model, the likelihood of an SME using such services increases significantly as the level of perceived usefulness increases. H3: Greater knowledge of public support agencies will increase the probability that the SME owner will use the services of public support agencies. — Confirmed, significant at 0.05 level. When asked about the three leading public support agencies in their region, one-third of the respondents admitted not knowing very much about them. Moreover, nearly 60 percent of the respondents who had never used a support agency knew very little or nothing at all about the agencies. This is a high percentage, given the fact that the Gaspé area is a small business community. An internal verification by Canada Economic Development (EDC)c regarding its Gaspé-Magdalen Islands Economic Support Program revealed that very few entrepreneurs were even aware that EDC had an office in Gaspé (Canada Economic Development, 2004). This confirms our findings. However, not all the Gaspé region entrepreneurs were in this position. Most SMEs who had used support agency services in the past were fairly well-informed about agencies and services in the region. Results from the regression analysis indeed confirm that the more SME owners know about the agencies and their services, the higher the probability they will use their services. c Canada Economic Development is an agency created by the federal government whose mandate is to promote the long-term economic development of the regions of Quebec, paying attention to those with slow economic growth and inadequate employment.

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H4: The smaller the size of the firm, the higher the probability that its owner will use the services of public support agencies. — Rejected. Contrary to our expectations, results show that the size of the firm is not related to the rate of use of public support agencies. As the sample contains a rather large number of small firms (54 percent have fewer than 5 employees), this can slant the result for that variable and make it non-statistically significant. Furthermore, many of the small firms in the sample were not newly created, which may also explain why a smaller size did not result in greater usage. H5: The higher the level of business experience of the SME owner, the lower the probability that the owner will use the services of public support agencies. — Confirmed, significant at 0.05 level. The regression analysis confirms that the more experienced the SME owner becomes, the less likely he or she is to seek help from public support agencies. This could indicate that owners prefer to rely on their own expertise and knowledge to solve their firms’ problems, in accordance with previous findings (Jay and Schaper, 2003). 5.3. Qualitative data and discussion of results The qualitative data collected during the interviews and telephone survey was used to qualify our findings. We saw earlier that nearly one-third of the respondents surveyed thought the support agencies were not very or not at all useful. In the interviews, the factors most frequently mentioned to support such a negative perception were the hierarchy-based structure of the agencies, the difficulty of deciding which agency to approach due to overlaps, program eligibility criteria that were too difficult to meet, and the time required to obtain a decision. Some respondents also felt the advisors working for the agencies were disconnected from the reality of small business, a complaint that seems to be often heard. This shows that SME owners are unique in how they view and use professional services, and need to be approached with caution and care as relationship building is of utmost importance. For business professionals to be accepted by SME owners, they need to adjust to the specific context of the entrepreneur in terms of culture, communication method and learning style (Dalley and Hamilton, 2000). For this, they must be familiar with the world of small business (Gibb, 2000). As far as service utility is concerned, many respondents thought the services offered by support agencies were not relevant to their line of business and were aimed mainly at start-up firms. Improvements suggested included programs that were better suited to rural economic development. Indeed, support agency managers are basically responsible for promoting and applying predetermined programs governed by conditions, criteria and requirements that have been devised centrally as opposed to in the field. As pointed out by Curran (2000), government tends to “favor standardized approaches easy to cost, administer and monitor . . . ignoring the heterogeneity of small firms or the specific characters of localities” (pp. 44–45). Individualized programs are rare. Civil servants may not have the expertise or authority to adjust services to the requirements of individual firms, especially in isolated regions where

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the needs are very different from cities (Tödtling and Wanzenböck, 2003). Therefore, the challenge facing public authorities is a sizeable one. Respondents also wanted accessible, efficient and fast services. Among the improvements proposed most frequently was the creation of a central agency with a “one-stop shop” system. This last suggestion is rather surprising since such “one-stop” services are widely available in Canada, mainly by way of toll-free lines, email or fax-back systems, interactive Web services, and websites. However, it must be pointed out that physical one-stop shops are few and far between, with only ten of them throughout Canada. It appears that very few respondents are aware of the existence of the various “one-stop shop” services available to them, or they desire a local economic development office with “real people” to meet face-to-face for support and advice. Interestingly, these findings echo the recommendations made by the Organization for Economic Cooperation and Development in its report on entrepreneurship and local economic development in its member countries (OECD, 2003). Among other things, the OECD recommended: (1) easy access to a single agency where all the necessary documents and forms could be obtained during a single visit; (2) shorter waiting times and procedures for advisory services; (3) easy-to-understand contact directories and service guides; and (4) access to consultants with in-depth knowledge of the local community. Because some people associate free services with poor quality, we checked to see whether free government services affected the respondents’ perceptions of these support agencies. The data suggests that a large percentage (nearly half) of the respondents ascribed a great deal of importance to the fact that the services were free. However, they did not associate lack of payment with poor quality. In all, 88.6 percent said they did not think government services were less good because they were free. A study from the Quebec Order of Chartered Administrators (2000), based on a sample of 206 small business owner-managers, found that cost was one of the main obstacles to using outside consulting services. This supports government’s role of offering subsidized services to small firms, at least if it wants to maintain or increase usage rates. Within the Gaspé region, support services were utilized primarily for financial assistance. In nearly 80 percent of cases, respondents had consulted agencies to request subsidies or financial assistance. This was to be expected since securing financing has been identified as the most important area of support that public agencies can provide (Wyckham et al. 2001; Shanklin and Ryans, 1998). In our survey, training ranked a distant second. When asked for what type of services they might eventually consider approaching a support agency, respondents who had never used such services said it would mainly be for financial assistance. It is worth mentioning that this group was significantly more interested in training and advisory services than the other group.d In short, it appears that the only services fully utilized by the region’s owner-managers are related to financing. It is not surprising that government agencies are perceived as “subsidy providers” rather than business development advisors. It d To test the differences between the needs of users/non-users of public agencies, a χ 2 (Phi) analysis was performed

and the difference between groups was statistically significant at the 0.05 level.

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seems unlikely that owner-managers wanting training or advice would approach the region’s public support agencies. We also explored how owner-managers learned of the agencies’ existence in their region. They typically heard about the agencies through acquaintances or other personal means, and to a lesser extent from the agencies’ promotional initiatives (media, employees or solicitation). If owner-managers have to take steps to obtain information about the agencies, many may not bother because they have limited time. The Gaspé region’s support agencies should therefore revamp their promotional and communication strategies to more effectively reach end-users. This exposure problem does not appear to be unique to the Gaspé region, as evidenced in the literature. The OECD study (2003) previously mentioned found that many entrepreneurs in OECD member countries were unaware of available support services. The study highlighted the importance of support agency visibility and suggested: (1) using the local media to publicize the agencies and their programs; and (2) providing large numbers of access points in places used by businesspeople. In addition, other stakeholders working with entrepreneurs (e.g., bankers, lawyers, accountants, chamber of commerce representatives, etc.) should be encouraged to recommend public support services. The fact that the OECD’s findings and recommendations for small business support programs are consistent with our own (namely, importance of increased visibility of agencies and programs adapted to local needs) suggests that the problem, while perhaps not universal, is one that extends well beyond the Gaspé region. Strong marketing efforts may increase utilization of governmental programs, but they may not be sufficient to reach the whole target market. Some SME owners never use outside expert services simply because they do not perceive or understand a need for such services (Gibb, 2000). This segment of the market will not respond to informational means alone. An awareness of the need for services must be developed first (Hurmerinta-Peltomäki and Nummela, 1998). It is up to public authorities to demonstrate the value of their programs and services to improve uptake. And even then, there will always be firms that do not really need any services.

6. Conclusion As this paper shows, there appear to be certain barriers that prevent SME owner-managers from making maximum use of public support services available in remote regions. The paper’s greatest contribution is its use of a prediction model that enables us to quantify the relative impact of these barriers on the probability of seeking public agency assistance. The negative perception of government support agencies shared by a large number of SME owners has been shown to be the greatest obstacle to their taking advantage of these services. Too many SME owners simply do not seem to understand the utility or relevance of the agencies or their services. This perception is not necessarily supported by reality since the opinions of the respondents who knew and had consulted the agencies were generally favorable. We believe public authorities should ensure that their programs and services are relevant to the clientele they were designed for and then promote them aggressively. Our findings

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suggest that support agencies need to improve their image and publicize their services among their target client groups. Even in an area as small as Gaspé, the message does not appear to be getting through. This is paradoxical, since logic would suggest that agencies would have a higher profile in small communities, especially in remote areas. Therefore, the low level of awareness highlighted in our study is another very significant contribution to our knowledge of SME owners from remote areas. Perhaps agencies are not promoting their services because they wrongly presume that small business owner-managers are aware of their existence. Obviously, putting together support programs tailored to the needs of specific regions is not enough to improve the economic conditions of the targeted regions. Public authorities also have to build awareness among SME owners and find ways to attract them and catch their attention. And even then, they can expect resistance and skepticism, if not indifference. Steps should be taken to ensure that more small firms are able to take advantage of government services. This may improve survival rates and stimulate development in lagging areas. This is not to suggest that small business support services are themselves sufficient to bring about recovery in an economically disadvantaged region. On the contrary, we share the view of Lichtenstein and Lyons (2001), who said, “entrepreneurs do not start businesses because services are available; services are demanded and used as the result of the existence of entrepreneurs. Although services are necessary, they are not sufficient to transform a region’s economy into a dynamic force.” (p. 5) Obviously, the research described here has limitations. First, it does not include an objective assessment of the programs and services offered. We are therefore unable to determine to what degree the SME owner-managers’ perceptions correspond to reality. Second, the opinions of support agency staff were not obtained, which could have tempered SME owner-managers’ complaints against them, or at least defined the context. These limitations constitute avenues for future research to supplement the findings of this study. Moreover, although the regional specificity of the sample did not enable us to apply the results across the board to all SME owner-managers, this specificity had the advantage of clarifying the problems faced by owner-managers in remote areas.

Appendix. Description of Independent Variables used in the Binary Logit Model Variable

Type of Variable

Size (number of employees) (SIZE)

Ordinal, 4 categories

Business experience of owner-manager (EXPER)

Ordinal, 3 categories

Attitude toward seeking outside help (EASE)

Scale, 5 categories

Details 1 = less than 5 2 = from 5 to 10 3 = from 11 to 25 4 = more than 25 1 = less than 5 years 2 = from 5 to 9 years 3 = more than 9 years Likert-type, from 1 = “Not comfortable asking for outside help” to 5 = “Very comfortable asking for outside help”

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Factors Affecting the Use of Public Support Services by SME Owners 179 (Contiued) Variable Knowledge of public agencies (KNOWL)

Type of Variable

Details

Index, 3 items, calculated with the sum of each scale

Each item is a Likert-type scale, rated from 1 = “Do not know” to 5 = “Know very well.” Respondents were asked to rate their level of knowledge of Centre Local de Développement (CLD), Service d’Aide au Développement des Collectivités (SADC) and Développement Économique Canada (DEC), the three most important public agencies in their region

Cronbach α = 0.815

Perceived usefulness of public agencies (USEFUL)

Index, 2 items, calculated with the sum of each scale

Cronbach α = 0.677

Both items are Likert-type scales. The first one measures the perceived usefulness of public agencies in general (from 1 = “Useless” to 5 = “Very useful”) and the second measures the extent to which they perceive public support services to meet their needs (from 1 = “Not at all” to 5 = “Very well”)

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