No.147 Can Efficient Provision of Business Development Services Bring Better Results for SMEs?: Evidence from a Networking Project in Thailand

Recent systemic reviews on the impact of business development services (BDS) on small and medium enterprises (SMEs) reveal mixed effects on various outcomes. For example, the effects on improving skills or practices are often found to be positive while those on employment creation are modest and those on financial outcomes are weak. While there are many BDS providers in developing countries, SMEs’BDS usage is still very low. Studies have attributed this to reasons such as a lack of information about BDS, a shortage of credits, and the limited availability of BDS.

However, most of the existing literature focuses on impacts of demand-side interventions, and empirical evidence about BDS providers is still lacking. We focus on the supply-side constraints of BDS. We take a case from Thailand in which the government, in collaboration with the Japan International Cooperation Agency, implemented a project to establish a formal network among the existing BDS providers with the aim of enhancing their effectiveness in supporting the SMEs. Using the primary data of SMEs and BDS providers, we find that the BDS providers in project provinces increased their interaction with SMEs and improved their BDS practices. SMEs’network and interactions with BDS providers also increased. We also find some positive evidence that SMEs have more contracts and more certified products on average, and provincial heterogeneous impacts on increasing profits and the percentage of domestic sales in some provinces. These together suggest that networking BDS providers improves the performances of both BDS providers and SMEs. A policy implication follows that an efficient delivery of public services can bring tangible results.

Keywords: SME, BDS, network, impact evaluation, Thailand