Evaluating the Effect of Soft Business Support to Entrepreneurs in North Jutland

Gabriel Pons Rotger and Mette Gørtz

We evaluate by means of the matching method the effect of two types of soft business support measures, i.e. basic counselling before start and extended start-up counselling for entrepreneurs from North Jutland, Denmark. Due to a change in the programme in 2004, we perform the analysis separately for the periods 2002-2003 and 2004-2005.

We find for the 2002-2003 cohorts that basic counselling provided by private-sector advisors enhanced the two-year survival rates of new firms by 8%, the three-year survival rate by 6% and the four-year survival rate by 5%. Basic counselling also enhanced subsequent job creation and sales, but it had no significant impact on the growth of new ventures. During 2002-2003, the other evaluated programme, extended start-up assistance, further enhanced the two-year and three-year survival rates by 7.6%, and the four-year survival rate by 6.4%, and contributed to job creation and sales of new ventures. Unlike basic counselling, extended start-up assistance also enhanced the growth rate of businesses. In the subsequent evaluated period 2004-2005, we find that basic counselling contributed to a minor extent to survival rates of new firms, while at the same time extended start-up assistance increased its average effectiveness on survival rates.

We further explore the observable heterogeneity of the counselling impacts, and we find that the survival effect was higher than average for firms in the construction and hotel and restaurants sectors. At the same time we also find that the programme was most effective for those entrepreneurial projects which at the participation time were most advanced. In our study it turns out that the socioeconomic characteristics of the business owners like their education, age, experience or gender play a minor role in terms of effectiveness of counselling. Finally, we also find for the case of extended start up assistance during 2002-2003 that this advice was most effective for those entrepreneurs who used their full allocation of business advice hours in basic counselling.