Factors Influencing the Effectiveness of Business Associations: a Review

This chapter addresses the factors that influence the effectiveness of business associations, focusing on their role as producers of economic services. Using British material from surveys of associations and Small- and Medium-sized Enterprises (SMEs), it demonstrates the existence of internal economies of scale and the existence of a ‘critical mass’ threshold to achieve significant market penetration for representation and services use, or to have major service impact on their business members. Internal economies of scope are also demonstrated to exist as a result of service ‘bundling’. External economies of scale also exist in some specific contexts. The economics of service production is demonstrated to influence the extent of membership, use of services and service impact of business associations. Other factors influencing associations are the environment and diversity of the sector covered by the association. These factors together are also shown to have a strong relationship with how sector associations operate in Europe. In the case of lobbying, sector diversity and association character both influence the choice between company ‘direct’ lobbying, use of the ‘national route’ through national business associations, or use of a ‘European association’ route. Implications are drawn for association managers, government and the European Commission.