Local context, local solutions: increasing returns from municipal policies supporting SMEs

This study examines how local contextual characteristics influence the effectiveness of municipal support mechanisms for small and medium-sized enterprises (SMEs). Drawing on survey data from 513 SMEs in Israel and applying structural equation modelling, we analyze whether population size, socioeconomic status, and demographic composition moderate the relationship between municipal service provision, SME owners’ satisfaction, and municipal economic outcomes. While population size shows limited overall moderating role, socioeconomic status and demographic composition significantly shape satisfaction and related economic returns. These findings challenge the assumption of policy uniformity and underscore the need for differentiated place-based strategies in SME policy design and local economic development.