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 randomised experiment with more than 1,000 firms provided access to this marketplace to the treatment group and randomised 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.
Knowledge or use of the market for business service providers.
Access to the marketplace didn’t get more firms to use business services, but it increased firms’ knowledge of the providers available in the market.
Access to the marketplace didn’t significantly change firms’ confidence in being able to find a provider if needed.
Firms that were provided information about the quality of the providers were more likely to choose higher quality ones (on average, with a rating of 0.2 to 0.4 stars higher) as the top three providers they would go for.
Quality ratings information worked to both increase the number of providers with the highest score chosen (by 7 to 11 percentage points) and reduce the number of bottom-ranked firms (by 9 to 15 percentage points).