IPPC Subsidised Consulting for SMEs — Puebla's Five-Year Productivity Trial

Between 2007 and 2015, Puebla's Institute for Productive Competitiveness (IPPC) and researchers Miriam Bruhn, Dean Karlan and Antoinette Schoar ran a randomised trial offering subsidised business consulting to small and medium enterprises across urban, semi-urban and rural areas of the state.

The trial tested whether subsidised, mentor-led business consulting improves SME sales, profitability and employment, and whether firms take up a heavily subsidised offer at all.

Of 432 firms that expressed interest, 150 were randomly offered a year of consulting — four hours a week with a mentor from one of nine local consulting firms, covering goal planning, marketing, HR, financial accounting and long-term strategy, with IPPC subsidising 70-90% of the cost depending on firm size. The remaining 282 firms served as the comparison group. Only 80 of the 150 offered firms took up the offer (53% take-up), most declines citing insufficient funds even for the subsidised share.

Among those treated, one year on, sales (adjusted for employees and assets) rose 0.21 standard deviations and return on assets rose 0.22 standard deviations versus the comparison group; treated firms were more likely to keep formal accounts (93% vs 85%) and to run marketing campaigns (57% vs 44%). Using Mexican social-security administrative data, the effects proved durable: five years after the intervention, treated firms had added 5.7 more employees on average (a 57% relative gain) and their total wage bill was 72% higher than in comparison firms.

Take-up was under 55% even with heavy subsidies, so the practice's real-world reach depends on solving the affordability and time-commitment barriers that kept roughly half of interested firms from starting the programme at all.