Business advisory services and innovation during crises: Evidence from small businesses in Chile

Abstract

State-sponsored business advisory services face pressure to demonstrate value-added effects among their assisted enterprises. We employ a unique survey to measure the effectiveness of a business advisory program in promoting innovation in small businesses in Chile during the COVID-19 pandemic. We also seek to determine the role of innovation in mitigating the negative effects of the pandemic on enterprises’ closure, sales, and job creation. We observe a large likelihood of innovation and a lower likelihood of closure by assisted enterprises. We also find a reduction in sales and employment during the pandemic. However, these negative effects are mitigated in enterprises that implemented innovations such as online sales, delivery, commercialization through internet channels, and the creation of new products and/or services during the pandemic. The effects of the pandemic and induced innovation are more pronounced in family businesses than in non-family businesses. This finding suggests small family firms are both more vulnerable to crises but benefit more from crises-induced innovation.