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 ser...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Subjects: | |
| 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 http://hdl.handle.net/10986/35409 |
| Summary: | 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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