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To propose and test a model about the business value of government electronic services (e‐government) to small firms. Two dimensions of e‐government use (search‐oriented and transaction‐oriented) are measured and the effects of three types of e‐government benefits on small firms' profitability are tested.

Survey of 100 small firms in three states of the USA (Maryland, New York, and Washington).

Small firms' information technology capabilities are positively associated with the use of e‐government services. Search‐oriented use of e‐government is positively related to enhanced intelligence generation, new business development, and time savings. The relationship between use of e‐government and profitability is mediated by firms' intelligence generation.

The study uses self‐reported data and was based on a sample of firms from three states of the USA. Thus results are limited by the specificity of this geographic context.

Small firms should use e‐government as an information source to enhance their market intelligence and build revenues. IT suppliers should emphasize e‐government services that link small firms to customers and collaborators, and facilitate access to key information resources. Government agencies should enhance their e‐government information services to improve small business performance and increase tax receipts.

The paper provides empirical evidence about the positive effect of use of e‐government services on the financial performance of small firms.