Promoting High Impact Entrepreneurship in Mexico: A Randomized Evaluation

Photo: Staff of Artemistas, a producer of leather goods and beneficiary of the INADEM High-Impact Entrepreneurship Program.

Investigator: CDEP Co-Director Eric Verhoogen, David Atkin of MIT, and Leonardo Iacovone and Alejandra Mendoza of the World Bank.

One of the most popular policy ideas for promoting innovation in the developing world is matching grants, through which a firm receives a grant after committing to contribute or raise other funds. The World Bank, for instance, has invested close to $1.2 billion dollars in matching grants for more than sixty projects targeting small and medium enterprises (SMEs).

But still little is known about how effective these programs are and how they might be better designed. One important issue is the process for choosing beneficiaries of the grants: it is better to rely on industry experts, who are well informed about the environment firms are operating in but may have conflicts of interest, or government officials, who have fewer conflicts of interest but also possibly less information about which firms have potential? 

In this project, the investigators are working with the Mexican government to evaluate an existing program that offers matching grants to small and medium enterprises, and also implement a pilot program in which firms are evaluated by industry experts as well as government officials. The program is the High Impact Entrepreneurship Program (HIEP) of the National Institute of the Entrepreneur (INADEM in Spanish). Through an application process, the HIEP identifies and provides matching grants of up to $170,000 in funding for start-up firms and $280,000 for firms looking to scale. In 2016, the program expects to fund 150-200 firms among 1,000 applicants.

The project is ongoing, and preliminary results are expected in early 2018.

This project is part of CDEP's Firms and Innovation Initiative.