Business associations: their potential contribution to government policy and the growth of small and medium-sized enterprises

The author uses new survey evidence of sector business associations and local chamber of commerce services. He analyses the membership of these bodies by size and type of business. In the main part of the empirical analysis the author assesses association services in four categories: (1) individual services to members, (2) excludable collective services available only to members, (3) nonexcludable services available to all businesses, and (4) self-regulation. It is demonstrated that association services tend to develop in niche markets chiefly by diversification rather than by intensification. Most associations seek to develop excludable and individual services as their primary focus. Because of this inherent tendency, government policy is most likely to be successful if it works with the grain of these trends rather than against them. Hence, government policy is argued to have had too high an emphasis on using associations to develop the individual competitiveness of their members, rather than focusing on their role to improve collective industry standards and through this individual business performance. Failure to recognise the limitations of individual supports by associations may undermine the potential of the government's 1998 white paper on competitiveness.