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.
Policy implications
Management consulting services can generate high returns in terms of productivity and growth for SMEs, and they can be well worth the cost.
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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.