CAN PUBLIC POLICY PROMOTE MICRO-ENTERPRISES SUCCESS IN THE CONTEXT OF ECONOMIC DOWNTURNS?

Montevideo

Congreso; 9th Arnoldshain Seminar; 2009

International Society for Comparative Economic Studies (ISCES)

The paper introduces the question of micro enterprises success in Argentina, in the context of an international crisis that overlaps with the lagged effects of the previous? severe?economic downturn of 2001-2002. Following the episode of economic disruption and social polarization that peaked in 2001-2002, a number of public policy efforts emerged at the national and sub-national level, to provide support to the unemployed and the most vulnerable sectors in society, thus aimed at facilitating their re-entrance to the labor market. A key element in this policy was the promotion of micro enterprise initiatives among the unemployed through a variety of mechanisms like training courses, subsidies, loans and coaching activities such as public investments in ?incubator? like initiatives. The paper concentrates in three aspects of this new intertwining between the micro enterprise and the policy framework. In explaining this relationship, the entrepreneurial profile of the firm-owner will play a substantial role, an aspect that have not been sufficiently studied in the literature on emerging economies. An original contribution of the paper was the development of a performance index based on the perception of the entrepreneurs about the following aspects of the evolution of their business: sales turnover, earnings, number of employees, and image or social prestige of the enterprise, and to what degree the activity makes it possible to meet living expenses. This index played a central role in the analysis of the three aspects in which this paper concentrated: first, cluster analysis was used to produce a taxonomy of the micro enterprises; second co-variables explaining enterprises success were examined through a lineal regression model; and finally, the characteristics of the micro-enterprises who benefited from the public policies are discussed using the logistic regression technique. The study makes use of data collected from a special random sample of micro enterprises conducted to this purpose. A sample of 294 microenterprises was drawn from a special registry of 4200 units located in the Province of Córdoba, Argentina, covering all economic sectors of production. The research results suggest that four groups of micro enterprises could be identify in the population under study based on the personal characteristics of the micro-entrepreneur and the micro enterprise performance. Micro enterprises managed by males as well as those managed by females, had a higher performance index when the motivation for their creation was scarcely associated to unemployment. In the micro enterprises led by women, the participation of family members is more significant than in those managed by males. The performance of the micro enterprises is directly related to entrepreneur?s degree of dedication to the micro enterprise, and inversely related to condition of being previously unemployed. The public policies analyzed were found to be pro-poor biased, and consisted in supporting micro enterprises arising from unemployment, which were less innovative and were localized in the Capital city, and which proved to be less successful in relation to the micro enterprise performance.