Limitations on Firm Size in a Tarascan Pueblo

Abstract

This paper examines the factors limiting the size and degree of specialization of furniture producing firms in Cuanajo, Michoacan, Mexico, where rapid modernization and mechanization of the furniture industry has resulted in a proliferation of small unspecialized firms rather than the growth of either a few large firms or small, highly specialized firms. A study of the internal rates of return on investment demonstrates that it is economically worthwhile to invest in some machinery; it is not worthwhile to add much capital and labor to mechanized shops. Thus it is impossible for owners to increase their incomes simply by adding labor and capital to their existing firms. A number of social and cultural constraints limit the options open to owners of these firms. They cannot attract and keep skilled labor due to the emphasis placed on independence. They lack managerial skill. The firms face an inefficient final product market and a relatively inefficient intermediate product market. The owners' Indian stat...