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The Impact of Consulting Services on Small and Medium Enterprises: Evidence from a Randomized Trial in Mexico

  • Mariam Bruhn

    ()

    (World Bank)

  • Dean Karlan

    ()

    (Economic Growth Center, Yale University)

  • Antoinette Schoar

    ()

    (Massachusetts Institute of Technology)

Registered author(s):

    We test whether managerial human capital has a first order effect on the performance and growth of small enterprise in emerging markets. In a randomized control trial in Puebla, Mexico, we randomly assigned 150 out of 432 small and medium size enterprises to receive subsidized consulting services, while the remaining 267 enterprises served as a control group that did not receive any subsidized training. Treatment enterprises were matched with one of nine local consulting firms and met with their consultants once a week for four hours over a one year period. Results from a follow-up survey, conducted after the intervention, show that the consulting services had a large impact on the performance of the enterprises in the treatment group: monthly sales went up by about 80 percent; similarly, profits and productivity increased by 120 percent compared to the control group. We also see a significant increase in the entrepreneurial spirit index for the treatment group, a set of questions designed to illicit the SME owners’ confidence in their ability to manage their business and deal with any future difficulties. However, we do not find any significant increase in the number of workers employed in the treatment group.

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    File URL: http://www.econ.yale.edu/growth_pdf/cdp1010.pdf
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    Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 1010.

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    Length: 29 pages
    Date of creation: Feb 2012
    Date of revision:
    Handle: RePEc:egc:wpaper:1010
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    1. Nicholas Bloom & John Van Reenen, 2010. "Why Do Management Practices Differ across Firms and Countries?," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 203-24, Winter.
    2. Nick Bloom & Carol Propper & Stephan Seiler & John Van Reenen, 2010. "Management practices in the NHS," CentrePiece - The Magazine for Economic Performance 305, Centre for Economic Performance, LSE.
    3. Nicholas Bloom & Christos Genakos & Raffaella Sadun & John Van Reenen, 2012. "Management Practices Across Firms and Countries," NBER Working Papers 17850, National Bureau of Economic Research, Inc.
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