Please use this form to submit your study for inclusion into our database. It will be checked by a member of the Innovation Growth Lab team, who may be in contact to ask for more information. Your email address * Your name * Title * The name of the study Short summary A management consultancy intervention in Mexico, focusing on firm growth, showed a positive impact on firm productivity in the short term and amount of employees (and overall wage bill) in the long term, as compared with the control group. A brief description of the project's goals and its current state Abstract <p>Using a randomized evaluation with 432 Mexican small and medium enterprises, this paper shows that access to management consulting led to better firm performance: one-year results show positive effects on return-on-assets and total factor productivity. Owners also had large increases in "entrepreneurial spirit" (an entrepreneur's' managerial confidence index). Using Mexican social security data, the analysis finds a large increase in the number of employees and total wage bill several years after the program. The paper documents large heterogeneity in the specific managerial practices that improved as a result of the consulting, but there is no singular mechanism as a panacea for all firms.</p> The full abstract of the study, if available Links https://doi.org/10.1086/696154 Links to any published papers and related discussions Authors * Affiliations Academic and other institutes that the authors of the study are members of Delivery partner Organisations involved in delivering the trial, if appropriate Year Year Year199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023202420252026 Month MonthJanFebMarAprMayJunJulAugSepOctNovDec Day Day12345678910111213141516171819202122232425262728293031 Journal Journal publishing the study, if available Publication stage * Working Paper Published Ongoing Research Forthcoming Discussion Paper Research theme * Entrepreneurship Innovation Business Growth Country Country or countries where this study took place. Topics What sort of topics does the study cover? Sample attributes Hypotheses / research question Does managerial capital affect the growth of enterprises? Can managerial knowledge be conveyed via a consulting intervention? Sample Trial population and sample selection Programme advertised in State of Puebla through media outlets to attract initial sample of interested micro/small/medium enterprises; 432 enterprises expressed interest via signed letter of interest. 150 of these were randomly chosen to participate in the programme. Of the 150, 80 chose to take up the consulting services; the rest declined despite initial interest. The 80 enterprises were then paired with consulting firms according to consultants' sector, expertise and geographical restrictions. Number of treatment groups Size of treatment groups 80 businesses (out of 150 selected into treatment group) Size of control group Unit of analysis Clustered? Yes No Cluster details Trial attributes Treatment description Consulting programme with intention to help firms reach next size category by end of programme. Consultants were asked to diagnose issues preventing growth, suggest solutions and assist in implementation. Over a year, the consultants dedicated on average 4 hours per week to each enterprise. The consulting firms were selected through a competitive bidding process. Rounds of data collection Baseline data collection and method A survey collected information on enterprise characteristics and performance, as well as on business practices and characteristics of the enterprise's principal decision maker. Data collection method and data collected Evaluation Outcome variables <p>Business Performance Measures: Monthly sales, profit (sales minus costs), enterprise productivity (residual from log sales on log employees and log business assets, and return on assets, number of employees, total wage bill). Business Processes: Developed new products during last year, attracted new clients during last year, implemented new process during last year, attracted new investors during last year, began process to register a patent during last year, began certification process for an international standard, made new marketing effort during last year, expanded installations during last year, remodelled installations during last year, human resources management index, keeps formal accounts. Entrepreneurial Spirit: 8 survey questions (e.g. I have professional goals), Kling et al. (2007) standardised index.</p> Results <p>Overall, the consulting services didn’t help firms to improve their business practices in the short run.</p> <p>Only marketing efforts and formal bookkeeping improved as a result of receiving consultancy support, while innovation, resource seeking and human resources practices remained unaffected.</p> <p>In the short run, the consulting services didn’t lead to higher employment, assets, sales or profits.</p> <p>However, supported firms used inputs more efficiently and increased their productivity.</p> <p>In the longer run, over the following five years, the programme led to important impacts on employment, with the number of full-time employees increasing by 57 per cent and the total wage bill by 72 per cent.</p> <p>Some of the firms continued to use the consulting services after the subsidy had ended.</p> <p>Annual return on labour didn’t need to be very high for the consulting service to be cost-effective.</p> Intervention costs The intervention was subsidised by the State of Puebla, in proportion to enterprise size. Unsubsidised cost of the service was on average $11,856 per firm for one year. Micro-enterprises paid only 10% of this, small enterprises 20% and medium-sized firms 30%. Cost benefit ratio Reference Bruhn, M., Karlan, D., & Schoar, A., 2018. The impact of consulting services on small and medium enterprises: Evidence from a randomized trial in Mexico. Journal of Political Economy, 126(2), 635-687. Citation for use in academic references