The Logic of Local Business Associations: an Analysis of Voluntary Chambers of Commerce

This paper seeks to assess how far local business organisations, such as Chambers of Commerce, are maintained chiefly by the factors hypothesised by Mancur Olson as the forces being behind collective action: the costs and benefits of business services. The paper reviews the theoretical arguments to support this hypothesis and then assesses the case of UK Chambers of Commerce using empirical evidence from surveys of businesses and Chambers. The UK Chambers are a purely private law voluntary structure, unlike many European counterparts. The analysis demonstrates that in such a system the overwhelming motive for business membership is to access services with specific rather than collective benefits. In turn Chamber managers tend to respond by financing services chiefly through service fees rather than flat rate subscriptions. In an Olsonian world with purely voluntary Chambers, few businesses will pay for general collective goods (such as lobbying, representation or support to government) that others can consume at no cost. The paper also demonstrates strong differences between types of Chambers: large Chambers being largely service and fee oriented, small Chambers being more often collective action bodies. Overall, however, local Chambers have features common to other business organisations of being variable in size and resources, most are small, and the structure is fragmented. Conclusions are drawn from these findings for government policy.