Growth Constraints and Management Consulting: the Case of SMEs in Peripheral Regions

Abstract

This study explores the factors that cause differences in employment growth between young SMEs in core urban and peripheral regions and whether the uneven distribution of resources requires peripheral firms to draw on management consulting to achieve growth. We applied a mixed methods approach that included a quantitative study of 155 Israeli new ventures and 10 in-depth interviews with experts from academia and experienced practitioners. The use of consulting services by the surveyed SMEs is significantly higher in peripheral areas, and it was found to have a positive effect on SME growth in these areas. Raising capital through bank loans has a positive and significant effect on business growth, but only in peripheral areas. Regression results show that management consulting was beneficial for SMEs growth only for those located in peripheral regions. SMEs funded by money from family members grew less than the other firms. The economic development of peripheral areas needs to be carried out by providing p...