Public Assistance Programs and Small Business Performance

Shapiro et al.'s (1996) states, that assistance programs implementation begins by transferring inputs from the assistance program to the client, then through a series of intermediate steps, actions are taken by the client that subsequently lead to business and economic development outcomes. It is therefore possible to regard the assistance program (i.e. the consultant), its gist and input, as one party, where the other party includes the client (i.e., the firm), its capabilities, aspirations and willingness. The assistance program’s effectiveness relies on both parties as well as the quality of interaction between them.

The Program and Performance

A number of studies examined the assistance program’s effect on firm performance while noting, in general, that the only difference between small businesses that receive assistance and those that don’t is the assistance itself (Felsenstien et al., 1999; Chrisman, 1999; Chrisman and Mcmullan, 2000). Chrisman (1999) found that performance in firms that received assistance from the Small Business Development Center (SBDC) in the US was significantly better than performance in firms that were part of the control group that did not participate in any kind of assistance program.

Several Studies examined the components of assistance provided by the assistance program . Jang and Lee (1998) have indicated the consultant’s capacities, and the manner of consultation: defined objectives; and structural procedures. Kaplan et al. (2000) examined the following: full seminar days a business was allotted; the number of workshops; visits accorded to the firm and the number of formal and informal consultations. Rice (2002) examined the following: nature of instruction; amount of time allotted to assistance; intensity of assistance (i.e. its frequency and each encounter’s length); range of implemented assistance operations; and whether consultation was reactive or proactive. Wren and Story (2002) found that of three assistance components – the grant rate available to the firm; the cost of consultation per day; and number of consultation days – the last had a significant effect on performance. Chrisman and Mcmullan (2004) found significant positive correlation between the number of consultation hours provided to small businesses during the initial phases of their foundation, and their capacity for survival. Chrisman et al. (2005) found a positive, low-significance correlation between the number of consultation hours provided and performance.

Some studies examine the differentiation between various types of assistance course. Ehlen (2001) presents three feasible courses of assistance program: business activity consultation; technical consultation centering on new products and procedures; and staff instruction. Assistance components utilized within the framework of various assistance courses included: improvement of procedure; improvement of quality; financial planning; and the implementation of electronic commerce. Luria and Wiarda (1996) note that improvement in performance achieved by firms, which participated in consultation assistance course (three were examined), but here also statistic significance was low.

The studies surveyed enable to differentiate between technical and material characteristics. Technical characteristic can be define as a list of tasks detailing the type of assistance. Such tasks may generate from the firm’s own framework of activity, alternately they may result from the incorporation of the assistance program, for example - loan assistance, tax consultation, insurance consultation, consultation regarding government offices. Material characteristic can be define as such, if it is capable of indicating at the manner in which assistance is given, for example - the period of time allotted to assistance, the intensity of assistance, the range of implemented assistance activities, the consultant’s capabilities.

The possible effect an assistance program has on firm performance is more evident where there are differences in the material characteristics of assistance components from one course to another. It is possible that the fact that previous studies’ findings are not conclusive stems from examinations of the various courses of assistance that have not been detailed enough so as to determine the comprehensive nature of those parameters that affect firm performance .

The assistance program’s material characteristics can be distinguished in accordance with two dimensions. Quantitative assistance components - evaluates the extent of assistance components, such as: number of days allotted to assistance; intensity of assistance; and the range of activities covered by the assistance program. Qualitative assistance components - evaluates the quality of assistance, such as: consultant’s capabilities; manner of consultation; location of consultation.

It is possible to predict that the extent of quantitative assistance components will have a positive effect on the firm’s performance. More means of external assistance to strengthen those aspects in which the small business lacks will raise the level of performance. Moreover, It is probable that there is a positive relation between the level of qualitative assistance components and the small business’ performance. The higher the quality of the consultant and the consultation process is more precise, ordered, well-defined and active, the higher will be the level of performance.

The Client and Performance

A theoretical study by Jang and Lee (1998) enumerates three fundamental parameters, which affect the success of the management of consultation: consultants’ capabilities; manner of consultation; and organizational characteristics of the client. According to Fleming (1989), key to a successful consultation process is the successful implementation of the outcomes of the consultation process, and the abilities of the client. Shapiro et al. (1993) assert that successful implementation of the assistance program depends on the level of cooperation between consultant and client. Rice (2002) found that entrepreneurs that evinced a greater willingness to cooperate were more influenced than others in the process of business support.

The client’s objective is the success of the consultation process and as derived from it, contributing to a higher level of performance. The quality of consultation management is the means to that end.

Program–Client Interaction and Performance

According to Rice (2002), an interaction between client and consultant is the result of the quantitative and qualitative contents contributed by each of the parties participating in the process of the assistance program. It is therefore to be asked whether an examination of those quantitative and qualitative contents is enough for the purpose of learning about the effectiveness of the assistance process?

An answer to this question may be found in psychological and sociological research centering on the interaction between consultant and client. Luborskt et al. (1997) found that a measurement of the intensity of interaction depends on an analysis of both the interaction and its outcomes. It is impossible to learn of the intensity of interaction by means of measuring only the contents provided to it by the participating parties (Smith and Glass, 1977; Garfield, 1988; Shapiro, Firth-Cozens and Stiles, 1989).

How does one measure an interaction? Sharpley at al. (2000) resorted to the level of rapport that the client experienced. The basis for choosing this estimation is a wide agreement in literature, where therapeutic alliance is of paramount importance in the client’s assessment of the consultation as successful.

Horvath and Greenberg (1989) disassembled the therapeutic alliance into three components: Bond is one of them - level of trust and emotional closeness experienced by both client and consultant.

As the subject under discussion is a relationship motivated by human parameters, there is considerable importance to the intensity of that relationship, derived from both affinity and friction between the participants in the assistance process, The greater the intensity of relationship, the better becomes the assessment of the quality and intensity of the interaction in process.