An empirical study of usage of external business services by Chinese SMEs

Purpose - Adopting an evidenced-based approach, this paper seeks to examine the usage of external business services by small and medium-sized enterprises (SMEs) in China. Design/methodology/approach - The empirical data are based on the first large-scale survey of small businesses (around 500 in each city) and service providers (90-200 in each city) designed and organised by the authors in Chengdu, Lanzhou and Shenzhen between November 2005 and March 2006, as part of a DFID project. The three cities were selected to enable the market conditions to be assessed in cities that are at different levels of economic development. Findings - There is a variety of business services market in China. Using logistic models it is found that firm size, sector, exporter and growth-intention appear to be important factors influencing demand side of services. It is also indicated that professional staff, referral via local SME bureau and networking appear to be the main variables influencing supply-side behaviour. Research limitations/implications - In order to specify the nature of business service market, it is important to understand the needs of (small) firms and how these are currently being addressed. This will enable policy measures to be designed that meet the needs of businesses. Originality/value - This is an empirical study that utilises the logistic model to examine the relationship of service usage with demand variables and supply variables. In this context, the value of the research is to assess the supply-demand gap in a developing country.