The Impact of Publicly Funded Small Business Advisory Services: Firm Take-up and Performance in the United States
This paper studies the impact of geographic proximity to and utilization of publicly funded advisory services offered to US small businesses on firm take-up and performance. We leverage a novel administrative dataset from the Northern California Small Business Development Center (SBDC) Network covering all firm-center interactions from 2006-23. To address endogeneity in firm engagement with centers, we exploit exogenous variation in center-firm geographic proximity generated by center closures and openings. We instrument for paired center-firm consulting time with changes in distance resulting from these organizational shifts. A one standard deviation reduction in distance between a firm and corresponding center (20 miles) increases expected annual consulting time by 0.15 hours (7.5%); each additional consulting hour raises average firm annual revenue and employment by 3.6-5.2% and 1.6-2.9%, respectively. Back-of-the-envelope calculations suggest advisory services are cost-effective. This study provides novel causal evidence on take-up and effectiveness of small business advisory services in the US using quasi-experimental variation in geographic proximity. Our findings highlight the importance of both physical distance and localized expertise in shaping small business outcomes.