Encouragement Policies and Productivity Indicators for Colombian SMEs Using Data Envelopment Analysis and Malmquist Indexes

Abstract

Purpose: This study aimed to characterize the performance of Colombian Micro, Small, and Medium-sized Enterprises (MSMEs) in recent years, along with the legal framework and central public policies governing and promoting this business segment. In addition, it sought to design, validate, and implement a dynamic system of productivity indicators to help these companies improve their efficiency and competitiveness in the short, medium, and long terms. MSMEs represent approximately 99% of the business sector in Colombia, accounting for nearly 80% of national employment.  Design/Methodology: In the initial descriptive–analytical phase, using secondary sources, an analysis was conducted on the performance and current situation of Colombian MSMEs, as well as the main legal provisions regulating and contributing to their development. The subsequent phase (of an applied nature) involved estimating and validating a dynamic system of productivity indicators using Data Envelopment Analysis (DEA) and Malmquist indexes for 2 samples of SMEs. Findings: After conducting the DEA, a significant decrease was observed in the productivity of the MSMEs, particularly in terms of technical efficiency in both the Constant Returns to Scale (CRS) and Variable Returns to Scale (VRS) models. This means that, evaluated both under the CRS and VRS modes, these enterprises use more inputs than necessary for the amount of goods produced. In addition, the Malmquist indexes showed that, during the period under analysis, technical efficiency related to changes in innovation exhibited a positive behavior, attributed to the incorporation of technological changes for improving their productivity. Conclusions: Despite the development of public initiatives and institutional support in recent decades, Colombian SMEs still face adverse conditions that affect their competitiveness and limit their potential in the national economy. The proposed system of indicators, which is based on DEA techniques and Malmquist indexes, holds promise in helping these businesses to improve their productivity.  Originality: This study makes a significant contribution to the fields of economics and business management in the region by providing a critical and updated evaluation of the efficiency of MSMEs in Colombia. Additionally, it examines their performance and current situation and summarizes the main legal provisions regulating and contributing to their development in the country.