IDEAS home Printed from https://ideas.repec.org/a/bla/rdevec/v9y2005i3p434-447.html
   My bibliography  Save this article

Start‐up Capital, Microenterprises and Technical Efficiency in Mexico

Author

Listed:
  • Fausto Hernández‐Trillo
  • José A. Pagán
  • Julia Paxton

Abstract

Access to adequate start‐up capital has been identified as an important deterrent to microenteprise development and growth. Using firm level data from Mexico's National Survey of Microenterprises, we estimate a stochastic frontier production function with inefficiency effects related to the main sources of start‐up capital. Microenterprises utilizing bank loans, carryover business capital, moneylenders and credit from clients and suppliers are more technically efficient than those relying on family, friends and on own financial sources. Bank loans led to the highest degree of technical efficiency, indicating a well‐functioning screening process despite information asymmetries. Banks tend to offer the largest average loan size with the longest terms which are significant factors in allowing microentrepreneurs to overcome financing constraints.

Suggested Citation

  • Fausto Hernández‐Trillo & José A. Pagán & Julia Paxton, 2005. "Start‐up Capital, Microenterprises and Technical Efficiency in Mexico," Review of Development Economics, Wiley Blackwell, vol. 9(3), pages 434-447, August.
    • Handle: RePEc:bla:rdevec:v:9:y:2005:i:3:p:434-447
    DOI: 10.1111/j.1467-9361.2005.00286.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-9361.2005.00286.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-9361.2005.00286.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Ijaz Nabi, 1989. "Investment in Segmented Capital Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(3), pages 453-462.
    2. Seyoum, E. T. & Battese, G. E. & Fleming, E. M., 1998. "Technical efficiency and productivity of maize producers in eastern Ethiopia: a study of farmers within and outside the Sasakawa-Global 2000 project," Agricultural Economics, Blackwell, vol. 19(3), pages 341-348, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Beck, Thorsten & Lu, Liping & Yang, Rudai, 2015. "Finance and Growth for Microenterprises: Evidence from Rural China," World Development, Elsevier, vol. 67(C), pages 38-56.
    2. Rolando I. Valdez & Eder J. Noda Ramírez, 2018. "Determinantes del aumento o disminución de empresas: Análisis por entidad federativa y estrato de edad. (The Determinants of the Increase and Decrease in the Number of Firms: An Analysis by State and ," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(1), pages 77-98, May.
    3. Steven B. Caudill & Daniel M. Gropper & Valentina Hartarska, 2009. "Which Microfinance Institutions Are Becoming More Cost Effective with Time? Evidence from a Mixture Model," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(4), pages 651-672, June.
    4. Shahidur R. Khandker & Hussain A. Samad & Rubaba Ali, 2013. "Does Access to Finance Matter in Microenterprise Growth? Evidence from Bangladesh," Working Papers 15, Institute of Microfinance (InM).
    5. Sasan Bakhtiari & Robert Breunig & Lisa Magnani & Jacquelyn Zhang, 2020. "Financial Constraints and Small and Medium Enterprises: A Review," The Economic Record, The Economic Society of Australia, vol. 96(315), pages 506-523, December.
    6. Nichter, Simeon & Goldmark, Lara, 2009. "Small Firm Growth in Developing Countries," World Development, Elsevier, vol. 37(9), pages 1453-1464, September.
    7. Huang, Zuhui & Zhang, Xiaobo & Zhu, Yunwei, 2008. "The role of clustering in rural industrialization: A case study of the footwear industry in Wenzhou," China Economic Review, Elsevier, vol. 19(3), pages 409-420, September.
    8. Antonio Báez-Morales, 2015. "“Differences in efficiency between Formal and Informal Micro Firms in Mexico”," IREA Working Papers 201516, University of Barcelona, Research Institute of Applied Economics, revised Jun 2015.
    9. Lopez-Martin, Bernabe, 2019. "Informal Sector Misallocation," Macroeconomic Dynamics, Cambridge University Press, vol. 23(8), pages 3065-3098, December.
    10. Rajesh Natarajan & Malathy Duraisamy, 2008. "Efficiency and productivity in the Indian unorganized manufacturing sector: did reforms matter?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 55(4), pages 373-399, December.
    11. Idrees Khawaja & Nasir Iqbal, 2019. "Determinants of Expansion of Micro and Small Firms and State of Entrepreneurship in Pakistan," PIDE-Working Papers 2019:160, Pakistan Institute of Development Economics.
    12. Alhammadi, Abdulnaser & Shahadan, Faridah, 2014. "The Determinants of Growth Performance of Small Services Enterprises in Yemen," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 48(1), pages 35-48.
    13. Jeffrey Nugent & Grigor Sukiassyan, 2009. "Small Firms and Formality: The Influence of Judicial Efficiency and Regulation Costs," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(4), pages 349-371, June.
    14. Merima Ali & Jack Peerlings & Xiaobo Zhang, 2014. "Clustering as an organizational response to capital market inefficiency: evidence from microenterprises in Ethiopia," Small Business Economics, Springer, vol. 43(3), pages 697-709, October.
    15. Raccanello, Kristiano, 2016. "Do Microenterprises’ size and status matter to access informal finance?./ ¿El tamaño y el registro de las microempresas permite el acceso a los mercados financieros informales?," Panorama Económico, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 12(23), pages 123-152, Segundo s.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Markose Chekol Zewdie & Michele Moretti & Daregot Berihun Tenessa & Zemen Ayalew Ayele & Jan Nyssen & Enyew Adgo Tsegaye & Amare Sewnet Minale & Steven Van Passel, 2021. "Agricultural Technical Efficiency of Smallholder Farmers in Ethiopia: A Stochastic Frontier Approach," Land, MDPI, vol. 10(3), pages 1-17, March.
    2. Mirza Hammad Hassan & Hussain Haroon & Sarwar Ghulam & Habib Haroon, 2024. "Corporate Internationalization and Uncertainty of Cash Holdings: Evidence from an Emerging Market," Zagreb International Review of Economics and Business, Sciendo, vol. 27(1), pages 79-95.
    3. Harris, John R. & Schiantarelli, Fabio & Siregar, Miranda G., 1992. "How financial liberalization in Indonesia affected firms'capital structure and investment decisions," Policy Research Working Paper Series 997, The World Bank.
    4. Poon, Winnie P. H. & Firth, Michael & Fung, Hung-Gay, 1998. "Asset pricing in segmented capital markets: Preliminary evidence from China-domiciled companies," Pacific-Basin Finance Journal, Elsevier, vol. 6(3-4), pages 307-319, August.
    5. Gelos, R. Gaston & Werner, Alejandro M., 2002. "Financial liberalization, credit constraints, and collateral: investment in the Mexican manufacturing sector," Journal of Development Economics, Elsevier, vol. 67(1), pages 1-27, February.
    6. Ajibefun, Igbekele A., 2006. "Linking Socio-Economic and Policy Variables to Technical Efficiency of Traditional Agricultural Production: Empirical Evidence from Nigeria," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25535, International Association of Agricultural Economists.
    7. Thierry Tressel, 1999. "Financial Intermediation and Growth: Long Run Consequences of Capital Market Imperfections," CSEF Working Papers 20, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    8. Medhin, Haileselassie A. & Köhlin, Gunnar, 2008. "Soil Conservation and Small-Scale Food Production in Highland Ethiopia: A Stochastic Metafrontier Approach," RFF Working Paper Series dp-08-22-efd, Resources for the Future.
    9. Dimitris Christopoulos & Margarita Genius & Vangelis Tzouvelekas, 2021. "Farm and non-farm labor decisions and household efficiency," Journal of Productivity Analysis, Springer, vol. 56(1), pages 15-31, August.
    10. Phu Nguyen-Van & Nguyen To-The, 2016. "Technical efficiency and agricultural policy: evidence from the teaproduction in Vietnam," Review of Agricultural, Food and Environmental Studies, INRA Department of Economics, vol. 97(3), pages 173-184.
    11. Bozoglu, Mehmet & Ceyhan, Vedat, 2007. "Measuring the technical efficiency and exploring the inefficiency determinants of vegetable farms in Samsun province, Turkey," Agricultural Systems, Elsevier, vol. 94(3), pages 649-656, June.
    12. Olli-Pekka Kuusela & Maria S. Bowman & Gregory S. Amacher & Richard B. Howarth & Nadine T. Laporte, 2020. "Does infrastructure and resource access matter for technical efficiency? An empirical analysis of fishing and fuelwood collection in Mozambique," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(3), pages 1811-1837, March.
    13. Jevgenijs Steinbuks, 2008. "Financial constraints and firms' investment: results of a natural experiment measuring firm response to power interruption," Working Papers EPRG 0823, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    14. Basanta R. Dhungana & Peter L. Nuthall & Gilbert V. Nartea, 2004. "Measuring the economic inefficiency of Nepalese rice farms using data envelopment analysis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 48(2), pages 347-369, June.
    15. Rajesh Natarajan & Malathy Duraisamy, 2008. "Efficiency and productivity in the Indian unorganized manufacturing sector: did reforms matter?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 55(4), pages 373-399, December.
    16. Jan Lietava & Risa Morimoto, 2019. "Regression tree analysis of soil fertility and agro-economic practices and the effects on yield in Tanzania," Working Papers 218, Department of Economics, SOAS University of London, UK.
    17. Nelson Mango & Clifton Makate & Benjamin Hanyani-Mlambo & Shephard Siziba & Mark Lundy & Caroline Elliott, 2015. "A stochastic frontier analysis of technical efficiency in smallholder maize production in Zimbabwe: The post-fast-track land reform outlook," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1117189-111, December.
    18. Athukorala, Wasantha & Lee, Boon L. & Wilson, Clevo & Fujii, Hidemichi & Managi, Shunsuke, 2023. "Measuring the impact of pesticide exposure on farmers’ health and farm productivity," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 851-862.
    19. Lien, Gudbrand D. & Kumbhakar, Subal C. & Hardaker, J. Brian, 2008. "Determinants Of Part-Time Farming And Its Effect On Farm Productivity And Efficiency," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain 6701, European Association of Agricultural Economists.
    20. Samuel, Cherian, 1996. "Stock market and investment : the signaling role of the market," Policy Research Working Paper Series 1612, The World Bank.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:rdevec:v:9:y:2005:i:3:p:434-447. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1363-6669 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.