Small and medium enterprise (SME) support programs are a common feature of industrial policy in developing countries, but one whose effectiveness is not well known. Governments are motivated to support SMEs both because they make up the majority of industrial enterprises and contribute substantially to GDP, employment and earnings, and because SMEs are thought to be weaker than their larger counterparts. Few governments, however, have evaluated their SME programs rigorously so there is little empirical basis for rational allocation of resources to the well performing programs. The paucity of empirical evidence from rigorous impact evaluations also presents problems for multi-lateral and bilateral donors in deciding whether or not to provide lending or aid for such policy interventions to promote SME development. This study rigorously evaluate SME programs in four Latin American countries to gain insights into which programs perform better than others, and just as important, why. These countries Mexico, Chile, Colombia and Peru cover a wide range of enterprise support programs, including training, innovation and technology upgrading, quality control, market development, export promotion and network formation. Broadly comparable panel data on enterprises is used to investigate the net impacts of these SME interventions.

Poverty is a multidimensional phenomenon closely related to the low accumulation of human capital and scant economic opportunities for the poor. Government efforts to help households overcome poverty require actions on multiple fronts. The governments of Latin-America and the Caribbean are making important efforts to scale up innovative programs to increase the capabilities and economic opportunities of the poor. Increasingly, the implementation of these programs has been accompanied by significant efforts and resources to evaluate their impact and effectiveness. These evaluations have produced many useful lessons. This study reviews a set of rigorous impact evaluations, placing emphasis on extracting lessons to assess the development effectiveness and cost-effectiveness of these interventions. The results presented in this review show a mostly positive picture of the impact of the programs evaluated. Results of the evaluations have also proven to be useful for identifying program weaknesses, such as problems with targeting mechanisms or groups that are not reaping the full benefits of the program, and inducing the adjustments necessary to increase program effectiveness. The evaluation results and the experience in implementing these programs also raise various issues for the reform of social and fiscal policies in order to make public social expenditure more effective, pro-poor, and fiscally sustainable. Scaling up well-targeted programs is key to improving the distributive impact of spending.

Unlike social programs targeting individuals, few enterprise support programs have been rigorously evaluated, and existing evaluations have mostly been done in high-income countries such as the United States and Europe. Mexico spends a large share of government resources on small and medium enterprise programs each year. How effective these programs have been in achieving their objectives is unclear. In Mexico, impact evaluations of small and medium enterprise programs are rare, and most are qualitative in nature. This is the first paper evaluating these programs in Mexico using firm-level panel data. The continuous and ten-year panel data -- from the 1994-2005 period -- allow the authors to address selectivity bias and unobserved firm heterogeneity by applying a generalization of differences-in-differences models combined with propensity score matching methods. This study finds evidence that participation in small and medium enterprise programs is associated with improvements in key variables such as value added, gross production, and wages. Furthermore, the study finds evidence that some of the positive effects can take several years to realize. The results also call for streamlining and greater efficiency in Mexico's small and medium enterprise programs.

Abstract: Unlike social programs targeting individuals, few enterprise support programs have been rigorously evaluated, and existing evaluations have mostly been done in high-income countries such as the United States and Europe. Mexico spends a large share of government resources on small and medium enterprise programs each year. How effective these programs have been in achieving their objectives is unclear. In Mexico, impact evaluations of small and medium enterprise programs are rare, and most are qualitative in nature. This is the first paper evaluating these programs in Mexico using firm-level panel data. The continuous and ten-year panel data - from the 1994-2005 period - allow the authors to address selectivity bias and unobserved firm heterogeneity by applying a generalization of differences-in-differences models combined with propensity score matching methods. This study finds evidence that participation in small and medium enterprise programs is associated with improvements in key variables such as value added, gross production, and wages. Furthermore, the study finds evidence that some of the positive effects can take several years to realize. The results also call for streamlining and greater efficiency in Mexico's small and medium enterprise programs.

This book revisits skills development policies and points to new directions for making training programs more effective and responsive in increasingly competitive labor market.

Do cluster development programs work? Do they fundamentally encourage the essential inter-firm linkages and coordination? Do they lead to innovation and productivity, enterprise development, larger employment, and export growth, and if so, after how long? Do other firms benefit from these programs? This book offers insight into quantitative methods that help answer these questions. Cluster development is a form of modern industrial policy that is spreading across the world to help exploit the externalities emerging from geographical agglomeration and inter-firm coordination. Therefore, rigorous impact evaluations are necessary because they help policymakers understand better ways to design future programs and provide accountability for public resources. The chapters argue that enterprise clusters and the programs to support them are diverse and multidimensional processes that require a variety of instruments to be fully understood and assessed. The book as a whole gathers various methodological essays and quantitative tests of complementary tools and approaches, emphasizing their usefulness and effectiveness in coordination with one another. Most importantly, it asserts that policy evaluation is crucial, in particular when it comes to cluster development programs, to ensure the best use of public resources, the accountability of beneficiaries, and most of all to feed the necessary learning to improve the design and implementation of public policies for enterprise development.

The World Bank Group promotes small and medium enterprise (SME) growth through both systemic and targeted interventions. Targeting means focusing benefits on one size-class of firms to the exclusion of others. Targeted support for SMEs is a big business for the World Bank Group, averaging around $3 billion a year in commitments, expenditures, and gross exposure over the 2006-12 period. In the context of broader reforms, such targeted support can be a powerful tool. Targeting SMEs is not an end in itself, but a means to create economies that can employ more people and create more opportunity for citizens to achieve prosperity. A thriving and growing SME sector is associated with rapidly growing economies. A central challenge is to level the economic playing field by ensuring dynamic markets; strengthening market-support institutions; and removing constraints to participation. IEG found that financial sector development can have both a pro-growth and pro-poor impact by alleviating SMEs' financing constraints, enabling new entry of firms and entrepreneurs and better resource allocation. Layered on top of this are targeted forms of assistance; these interventions may build on a foundation of more systemic reforms, may come in tandem with them, or may in fact be a means to build systemic reforms from the bottom up. Any credible justification of targeted support to SMEs must be focused on establishing well-functioning markets and institutions, not simply providing a temporary supply of benefits to a small group of firms during a project's lifespan. Thus, targeted interventions need to leverage resources to produce broader benefits for institutions and markets. To make targeted support for SMEs more effective, the World Bank Group needs to do several things: Clarify its approach to targeted support to SMEs; Enhance the support's relevance and additionality; Institute a tailored research agenda; Strengthen guidance and quality control for such support; Reform MIGA s Small Investment Program.