PRIME is a research partnership between Wageningen Economic Research, Erasmus School of Economics, PUM and the Centre for the Promotion of Imports from Developing Countries (CBI). It was established in 2013 to develop and implement a methodology to monitor and evaluate the real-time impact of private-sector development support to SMEs by PUM and the Centre for the Promotion of Imports from developing countries (CBI).
The data below is based on end report PRIME using data from survey multiple years and case studies.
PUM has generated positive changes in SMEs’ knowledge and business practices
The results show that PUM has contributed to one or more changes in knowledge and business practices for 90% of the businesses they support. PUM’s contributions were most significant in three areas: (1) efficient ways of organising the business, (2) leading, planning and organising the business, and (3) ideas about new products and services. Furthermore, PUM experts were much appreciated for their technical expertise on production processes and knowledge on market requirements, and for their ability to generate new ideas for investments and business organisation. The data show a correlation between PUM’s perceived contribution to business knowledge and the number of business practices adopted, confirming PUM’s assumption that the knowledge acquired by PUM experts helps to improve SMEs’ business practices. PUM’s perceived contribution to better practices is quite evenly distributed in terms of business size and sector, with only small differences between sectors and business sizes.
Theory of change
PRIME has developed a data collection system and an innovative mixed methods design to verify the assumptions behind PUM’s theory of change. The PRIME partnership has developed a data collection system that makes it possible to verify the assumptions behind PUM’s theory of change and assist PUM in monitoring progress on its objectives. PRIME uses an innovative parallel mixed method design that integrates the quantitative analysis of administrative data and online surveys with the qualitative analysis of interviews held with PUM beneficiaries, experts and stakeholders in five countries: Peru, Bolivia, Uganda, Bangladesh and Indonesia. The evaluation focuses on the impact of PUM missions to SME knowledge (immediate outcomes), practices (intermediate outcomes) and performance (ultimate outcomes). PRIME collected data over the period between 2014 and 2017.
PUM’s contribution to better practices has helped to improve SMEs’ performance.
The data show that the support PUM provides to improve business practices has translated into better business performances. The number of SMEs reporting an increase in profit is on average two to three per cent higher for those benefitting from PUM’s contribution to better practices than for those who did not receive support from PUM. Typically, a company’s sales increased by about €11,000 (34%) following PUM support compared to sales before PUM support. The effect of PUM’s support on employment varies according to the focus of the missions. Missions that focus on efficient ways of organising the business increase employment in the business by 33%, while missions that focus on financial management reduce employment by 18%. However, missions that focus on financial management target companies that have financial problems and have to cut costs.
PUM’s impact on SMEs’ performance differs significantly between sectors and country income group. The data show that sales and employment growth is stronger in the tourism & catering sector than in the agriculture & horticulture and food & beverage sectors. The sales for a typical SME operating in the tourism & catering sector doubles following PUM missions, while the increases in sales of SMEs in the food & beverage and agriculture & horticulture sectors are about 32% and 48% after PUM missions. Moreover, PUM missions are more successful at improving the sales performance of businesses in least-developed countries. Following PUM missions the sales of a median PUM firm from a least-developed country increases by 61% compared to the sales before PUM missions, while this increase is 25% for the median PUM firm from a lower middle-income country.
The effectiveness of the support depends to a large extent on the qualities of the expert, the timing of the mission, and the communication between the expert and the SME manager. PUM’s interventions are not always successful in boosting a firm’s performances. During the cases studies, several firms indicated that the expert that was dispatched did not have the specific knowledge or expertise to help the firm with the particular problem it was facing. In other cases, the language barrier prevented effective communication.
The lack of (advanced) Spanish-speaking experts was mentioned by both SMEs and local representatives as a major issue that impacts the effectiveness of PUM experts in Latin America.
Results from this study vary significantly between different type of companies and under different conditions, pointing to important enablers of PUM’s effectiveness. Some conditions seem to be more enabling for larger impacts, and some types of firm seem better suited to the support modalities used by PUM. Important enablers of PUM’s effectiveness are the presence of strong business support organisations (BSOs). BSOs work to improve the business environment for public sector policy and investment programmes. According to the supported firms, another key enabler was access to finance to implement certain changes in business practices. Finally, both PUM’s staff and policymakers consider more coordination with other Dutch private- sector support organisations to be important enablers of effectiveness.
PRIME results confirm PUM’s theory of change as they demonstrate PUM’s contribution to knowledge transfer and better practices, which have increased exports, profits and employment. Summarising the results of this study, we can conclude that PUM positively influenced knowledge transfer and better business practices among firms supported by PUM. Not only do the improved knowledge levels correlate with improved business practices, but the data also show that better business practices improve business performances. Firms supported by PUM have significantly increased their sales and profits, and the missions that have focused on improving business organisation have had a positive effect on employment. PUM’s support has also proven to complement existing support: the level of expertise offered by PUM experts is considered to be unavailable in the local market.
Prime does not observe an overall significant increase in employment levels after PUM missions have taken place. The missions that focus on efficient ways of organising the business increase employment, but the missions that focus on financial management reduce employment. PUM support, therefore, does not always increase employment. The lack of an increase in employment following PUM missions combined with an overall increase in sales as explained below implies that PUM’s support did help to increase labour productivity. This result corresponds with recent findings which indicate that the effect on employment seem to come last, and non-existent or negative effects on employment can even be good news because this helps firms to become more profitable
Businesses sales grow after PUM missions have taken place
Before receiving PUM support, the annual sales of a typical firm supported by PUM was about €37,000, while the average company employed 29 employees. After PUM provided support, the sales of a typical company increased by about €11,000 (34%) when compared to sales before PUM provided support –- keeping the year, sector, country fixed effects and the year of the PUM mission constant in the regression – and our econometric analysis shows that this increase in sales is statistically significant at a 90% significant level.