Public advisory service to SMEs is a multibillion pound activity throughout the industrialized world. Yet very little research has been done on the theoretical basis for this field. This paper proposes some elements in a theoretical understanding of the rationale behind public measures. The authors argue that public intervention should be considered at two levels, as a public market intervention and as a consultant-client relation at the micro level. At the market intervention level, public advisory service is seen in the perspective of economic theory, comparing neo-classical and neo-Austrian theory. Two different kinds of services are identified and discussed: operational and strategic. At a micro level, the concepts of client identity and clientifying power relations serve to understand the small business manager's way of responding to services. In combining both levels - the market perspective and the micro level - it is argued that the neo-classical theory is connected to operational/expert services and objectifying power technologies. The neo-Austrian theory corresponds with the empirical findings at the micro level showing strategic services embedded in a subjectifying power technology. With the neo-Austrian perspective the rather symmetrical relations between client and consultant at the micro level is comprehensible.
