Transaction Costs and Standardisation in Professional Services to Small Business.

In the market of business services the easier segment of large business is being saturated. Therefore, suppliers of business services must seek to cater to the growing but more difficult segment of small business, if their growth is to be maintained. With appropriate extensions, Transaction Cost Economics can facilitate understanding of the nature of the difficulty involved. Due to effects of scale in transaction costs it is relatively more expensive to provide services tailored to the individual smaller firm. Standardisation of services may be required to make access to this market viable. The question arises whether such standardised methods should be stimulated by the government. To see how this issue is perceived by suppliers of various business services, a survey was conducted on a sample of 1.000 firms, with a response of 30%. The issue of economies of scale in transaction costs did emerge, but was not universally perceived as a problem. Many respondents confirmed the need for standardised modules. Opinions were sharply divided on the issue whether the government should step in to promote standardisation across suppliers. Cluster analysis shows that respondents fall neatly into a number of classes that conceptually and statistically are highly distinct. Just over half of the respondents were clearly against government intervention, and about one third of these ("radical market proponents") were of that opinion even though they granted that the scale issue constituted a problem of access to the small business market. Just under half of the respondents clearly favoured government intervention, and about half of those ("radical interventionists") were of that opinion even though they saw no great problem of access due to problems of scale, or were hesitant about that problem. Accountancy firms tended to be in favour of intervention, and business consultants tended to be against. The government might explore the matter further with accountants, while leaving the business consultants alone. [ABSTRACT FROM AUTHOR]