Adoption of Best Business and Supply Chain Practices and Micro/small Firms' Performance: Evidence from Northern Peru

Abstract

Micro and small enterprises (MSEs) represent 99% of Peruvian firms, contribute 42% of Peru's Gross Domestic Product, and employ half of the country's labor force. Despite their relevance for the Peruvian Economy, they have low survival rates and are characterized by low productivity and processes inefficiencies. This chapter explores whether the adoption of Business and Supply Chain Management (SCM) practices influences MSEs' performance. We conducted a field study using data from 50 MSEs located in Piura, Peru, specifically from trade, service, and manufacturing sectors. We used the data collection guidelines from the MIT GeneSys to measure the firms' adoption of Business and SCM practices. Our results show that MSEs with higher adoption of Financial Planning, Supply Chain Planning, Supplier Relationship Management, Marketing, Procurement, and Stock Control practices are more likely to have higher revenue (i.e., sales). In addition, a multiple regression analysis reveals that while SCM practices do not seem to directly explain productivity growth in MSEs (as business practices do), they, however, seem to influence the performance of business practices, and, thus, have an indirect effect on the productivity growth of MSEs.