Improving the Survival Rate of Small Firms in Latin America: A case study in Aguascalientes, Mexico

Publication Date: May 2018

Authored By: Mirna J. Arizaleta Valera, Xiaohan Zhu

Advisor(s): Josué C. Velázquez-Martínez ,Cansu Tayaksi

Micro and small firms represent the largest percentage of the businesses operating in Latin America having a high employability contribution and a high potential Gross Domestic Product (GDP) impact on the region. However, depending on the context of the country, region and sector nearly one out of four companies fail to develop into a high-growth firm every year.

nt the largest percentage of the businesses operating in Latin America having a high employability contribution and a high potential Gross Domestic Product (GDP) impact on the region. However, depending on the context of the country, region and sector nearly one out of four companies fail to develop into a high-growth firm every year.

The focus of this research is to identify the critical Business and Supply Chain practices that improve micro and small firms’ survival rate considering the managerial qualities involved in the development of the firm. To conduct this analysis, we propose a model as result of the deep dive with companies in Aguascalientes, MX. This model classifies companies within a Survival or Success Stage based on the delegation level of the organization, main challenge of the firm, and the main activity driver for managers. From this model, we conclude that most firms in Aguascalientes, MX are in Survival Stage despite its years of existence. As part of a larger project developed by the Center of Transportation and Logistics at MIT, we analyze the existing data from small firms in Bolivia, Colombia, and Peru by applying the modified version of our first model to identify the critical practices. In addition, we conducted two workshops in Aguascalientes, MX where we gain insights about that main challenges of small firms. Based on further analysis, we identify Financial Planning and Operations Management as the critical practices with the highest gap of adoption (15%) compared to firms in Success Stage. Moreover, we conclude that the managerial qualities of the owner have an important impact on the development of the firm.