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.
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.
Business Performance Measures: No significant treatment effect found on employment, sales or profit in the short-term. There was a positive short-run impact on enterprise productivity (1/5 standard deviation increase compared to control). Average number of employees and average daily wage bill 2-3 years after programme were 45% and 55% higher in the treatment group than in the control group, respectively. Process variables: Only two business processes were significantly improved namely making new marketing effort and percent of enterprises that keep formal accounts. Entrepreneurial Spirit: Positive, statistically significant impact of the intervention on the 8 questions but not statistically significant impact using the Kling et al. method.