Micro, small and medium-sized enterprises in today’s economy

In Mexico, micro, small and medium-sized enterprises (MSMEs) represented more than 95% of the established economic units, these being the central axis of the economy (Secretaría de Economía, 2018). MSMEs have a limited contribution in terms of added value, however, they contribute to a better distribution of income with the generation of jobs and growth with equity (^{Román-González, 2003}). MSMEs have helped to mitigate the effects of the crises that Mexico has gone through in recent decades, so they have an important social function that must be recognized because they are a livelihood alternative for the population, although many operate informally.

Globalization has generated economic, political and cultural transformations in several Latin American countries. In Mexico, this transformation has been profound due to the competitive environment in which MSMEs are immersed, with great challenges for their operation in an open economy, they have had to look for new strategies to stay afloat in the economy. This challenge has been greater for microenterprises under an informal economic scheme. The creation of microenterprises can be a means to combat poverty and at the same time, to generate local economic development (^{Rodríguez-Pose and Palavicini-Corona, 2013}).

In Mexico, there are several organizations with government programs that promote enterprises and self-employment, such as the National Support Fund for Enterprises, National Institute of Social Economy, MSME Fund of the Secretariat of Economy and some recent ones such as Youth building the Future, Tandas for Welfare (^{Presidencia de la República, 2019}), among others. According to ^{Remilien et al. (2018)}, the motivation that people have to self-employ is part of the new rurality and this has led to microenterprises undertaking different ways of doing business. People with low educational levels who with few resources start a business and seek family subsistence are known as entrepreneurs of interest.

Many rural enterprises base their operation on the interaction between relatives with their own resources with the aim of meeting their basic needs, generating social fabrics that reinforce their identity and their reproduction as an economic and social unit. Results such as those of ^{Segovia-Rodríguez (2013)}; ^{Arango-Jaramillo (2005)} have named these businesses as fami-enterprises to differentiate them from other types of family enterprises that have risen to levels where, for example, the enterprise’s workforce is salaried, does not come from family members, or has been transformed into a large enterprise, although a family maintains ownership of most of the shares.

In the south of Mexico City (CDMX) is the Xochimilco bororugh, it is one of the important amaranth-producing areas of Mexico. This rural area is characterized by its forms of family work. Particularly, in the town of Santiago Tulyehualco, there are families that have preserved their ancestral identities, among which the cultivation of amaranth and its transformation into the traditional alegrías (amaranth candies) and other products derived from amaranth stand out. The research carried out in this area showed the economic and cultural importance of this crop in the area.

Fami-enterprises vs family enterprises

The differentiation made by ^{Segovia-Rodríguez (2015)}; ^{Arango-Jaramillo (2005)} of the fami-enterprises with respect to other family enterprises is also done by other authors, such as ^{Castillo (2015)}, who points out that there is a great diversity of microbusinesses that can be found in the urban and rural environment, which have as main characteristics self-employment and family subsistence. The author visualizes these businesses as fami-enterprises, having in common that the main contribution of labor for their operation comes from members of the same family.

Other authors do not give it the name of fami-enterprises (^{Bañegil-Palacios et al., 2011}; ^{Ruiz-Perera, 2015}; ^{Quejada-Pérez, 2016}), but they agree with the previous authors on the characteristics of small family enterprises. ^{Ruiz-Perera (2015)} mentions that a family enterprise is not related to the size of the business but by the ties that a family shares in cultural aspects within a community, allowing them economic survival through the business. While ^{Quejada-Pérez and Ávila-Gutiérrez (2016)} mention that the role played by family enterprises is the generation of employment and wealth with generational continuity. ^{Bañegil-Palacios et al. (2011)} visualize the family enterprise as a social organization where an enterprise-family link is created, generating systems that interact with each other (property-enterprise-family) (Figure 1) (^{Tagiuri and Davis, 1996}).

Figure 1 Interaction of the family enterprise (^{Tagiuri and Davis, 1996}). 

The present study considers an enterprise as a fami-enterprise when 50% or more of its employees are members of the family of the owner or owners (in first, second or third level of kinship), the main and management positions are occupied by the owners, the main purpose of the enterprise is to create a family wealth and inheritance that involves several generations and maintains the moral obligations with which it was created without limiting itself to possibilities of development and strengthening of the family economy, thus being able to be a source of employment for family members (^{Gallo, 2011}).

Authors such as ^{Trevinyo-Rodríguez (2014)} argue that, in the definition of the vision of family enterprises, it is almost always organized to work with family members to transmit to the new generations the family values from the processes of cohesion and foresee processes of generational succession to maintain and take care of the family patrimony. ^{Ruiz-Perera (2015)} suggests that it is not obligatory to integrate new generations into the family business or that most of the employees are from the family.

With this, the author shows that the founding members of the business can remain only as shareholders or partners to make the family patrimony grow more, although this may mean that the close link between the family and the enterprise is broken. However, this last vision is not shared in the present research because, from this perspective, the link between the enterprise and the family becomes exclusively of an economic nature, which would imply that the family enterprise ceases to be a fami-enterprise. An example of this are some multinationals considered as family enterprises because most of the shares are in the hands of members of the same family for generations, such as Walmart, Hilton, Ford and others, but they are definitely not fami-enterprises.

Certain characteristics are required to differentiate the fami-enterprise from other family enterprises, so that in this way a specific approach can be taken when conducting research and even more so when generating public policies that promote entrepreneurship and the permanence of MSMEs, especially in those in which families are involved as the main component. Next, the characteristics of family enterprises and fami-enterprises, which allow differentiating one from the other, as well as their similarities, are shown vis-a-vis.

Characteristics of the family enterprise

Family enterprises can be micro, small, medium and large enterprises. Their goal is profits and business expansion. Some may start with the basis of peasant economy but may move to market-focused economy. ^{Castillo (2015)}; ^{Quejada-Pérez and Ávila-Gutierrez (2016)}; ^{Remilien et al. (2018)} point out that family businesses can start their operation with their own capital for investment, with financing, with loans from banks or from partners (family members or non-family members). Formal or registered enterprises have the possibility of having access to financing from commercial banks or public financial institutions.

They care about technical and administrative training. They invest in advertising and propaganda to expand their market. Before operating, enterprises of this type conduct market studies to know the demand and preferences of potential customers to ensure market access. The enterprise is created to satisfy a market need with its products and obtain economic profits. The biggest concern is no longer that the members of the same family continue to occupy the managerial positions but the conservation of 51% of the enterprise’s shares. Therefore, management is not always exercised by the owner or by someone related to the owner. The work of the manager is evaluated for their efficiency in the performance of their functions and their accounting results.

Their employment depends on the evaluation of the profits of the enterprise or the value of the shares. Enterprises usually have fixed hours of operation. They keep administrative and accounting records. Their share capital may or may not be obtained from personal relationships of approximation. It has a focus on the search for minimization of production costs through the mechanization and efficiency of production processes. The raw material can be produced or bought where they can get it at a better price and in better conditions of supply. Cultural, social and local aspects are in the background, if it does not generate utility. Their conduct is governed by a predominantly corporate culture. The enterprise’s mission is guided by the increase in economic capital. Their vision is to grow the enterprise. The order of importance of the capital of the enterprise goes from the financial, the physical, the social and the human capital.

Characteristics of the fami-enterprise

The concept of family enterprise still does not have a consensus, much less that of fami-enterprises. This study adopts the concept of fami-enterprise created by Segovia-Rodríguez (2015), who points out that the fami-enterprise is a conjunction between living and open systems: family and enterprise, belonging to the popular economy, where the main objective is the survival of oneself and of the family, generating self-employment and occupation to the members of the family. Here, the concept referred to does not cover business families that may have large capital or microenterprises where their members may or may not belong to the same family.

Some authors ^{Amarís (2015)}; ^{Castillo (2015)}; ^{Remilien et al. (2018)} do not call fami-enterprises the family microenterprises they study, but they agree in the description of microenterprises emphasizing the close relationship with the family. Most fami-enterprises are informal or in the process of being formalized. The starting capital for the operation of the business is almost always only own or from partners of the same family, with no or little external financing support. They have limited possibility of acquiring a loan or financing from a formal institution. They make more use of their life experience and knowledge passed down from generation to generation.

They operate with little or no structured advertising about the products or services they offer, rely more on the physical advertising of their products (stands and fairs) and word of mouth. Almost none do market research. They are guided more by what is sold or not sold and by direct communication with customers. Enterprises are often created because the family produced agricultural products or raw materials that they can no longer sell in the market and choose to process those raw materials. Some enterprises sold their surpluses to the market. Their products change or improve by taking customer recommendations or copying the products that others offer in the market. More than 50% of employees are related to the owner’s nuclear family (father, mother, sons and daughters) or to their extended family (daughters-in-law, sons-in-law, cousins, etc.).

The manager or person in charge is almost always the owner who heads the family and the enterprise. Generally, the work of the manager or person in charge is not evaluated by their performance and when evaluated, it is based on the opinion of the relatives and not on the economic results. There are flexible and fixed working hours. Administrative and accounting records are incomplete or void. The predominant social capital is based on family and affective union and bonding. Frequently, production costs are high because the processes are artisanal or semi-artisanal with intensive use of family labor.

They use raw material that the family produces or collects, or they buy it in the same area where they live. They care about maintaining their cultural identity and the local environment. Their behavior is governed by a predominantly family culture. The mission of the enterprise is guided by economic and non-economic interests, considering the interests of both the owners and the rest of the family members. Their vision is to satisfy their basic needs and teach their children to live from the business to create a family patrimony for future generations.

Social, human and cultural capitals have the same degree of importance, which are often above the importance of financial capital (^{Amarís et al., 2015}; ^{Castillo, 2015}; ^{Quejada-Pérez and Ávila-Gutiérrez, 2016}; ^{Remilien et al., 2018}). ^{Pérez-Mendiguren and Etxezarreta (2015)} point out that this type of enterprises that do not follow the logic of capitalist production both in their production, organization and market can be studied from the perspective of the Social and Solidarity Economy.

Similarities between family enterprises and fami-enterprises

The similarities framed by the same authors (^{Amaris et al., 2015}; ^{Castillo, 2015}; ^{Segovia-Rodríguez, 2015}; ^{Quejada-Pérez and Ávila-Gutiérrez, 2016}; ^{Remilien et al., 2018}) are the following: They seek to preserve the values learned in the family nucleus. They seek to pass on political, economic or cultural rights to generations to come. They are born thinking about the sustenance of the family. For their continuity and development, unity, commitment and trust are required. They involve the nuclear and extended family.

As can be seen, there are differences between what is a family business and what is a fami-enterprise. For the purposes of this research, a fami-enterprise is defined as: ‘enterprise or production unit in which up to 50 people are working, of which 50% or more of them share a family relationship (first, second or third degree), seeking to preserve cultural and social traditions while satisfying the basic needs of their family. Its way of processing the products can be artisanal or non-artisanal, with its members having the enterprise as the main economic activity’.

General characteristics of fami-enterprises

The participating enterprises are classified as micro and small enterprises by the number of workers (^{H. Congreso de la Unión, 2002}). The highest number of workers was 21, but most had between 5 and 7 workers. Something very significant is that 11 of the 15 enterprises interviewed have more than 60% of workers who are part of the family, not only the nuclear family is involved in the activities of the enterprise, but there are also ties that go beyond, reaching to link in a labor way with the extended family as daughters-in-law, cousins, grandchildren, and other members of the extended family.

People in charge are mainly men, however, women increasingly occupy a more important role to the extent that 46.7% of enterprises are run by a woman, which can be beneficial for the multiple culinary skills they have acquired in life and the conditions of gender equity exist. This contrasts with what ^{Chayanov (1974)} refers to, that in rural areas it is men who are mainly engaged in working the land while women are responsible for processing the products. More than half of the enterprises (53.3%) were founded before 2000.

The new generations that grew up processing amaranth reached adult ages, and some formed their own nuclear family, so 53.3% recognize themselves as founders of their own fami-enterprise, but the rest pointed out that the amaranth-processing enterprise was founded by their parents or grandparents. In general, the fami-enterprises that are formed in rural areas begin their enterprise with their own resources, taking advantage of family knowledge and marketable surpluses of their agricultural or livestock production, or with the aim of having a more stable extra income for the family.

Eighty percent of the owners or people in charge are proud of their roots when they stated that those who taught them to work with amaranth were their parents and pointed out that the reasons why they thought of forming an enterprise was mainly to self-employ and continue the local tradition of processing amaranth products. These reasons, although not economic, have allowed them to survive. This shows that this activity is already a local cultural tradition that will probably continue to be passed on to new generations.

Start of the fami-enterprise

Figure 2 shows that 46% of microenterprises started exclusively with own resources, solely from the owner or in association between several family members. It should be noted that 26% of them had a very significant support from government support for their foundation.

Figure 2 Origin of the resources to form the enterprise. 

Almost all amaranth-processing fami-enterprises started their activities in informality and even today, a third (33.3%) of enterprises continue to work in an informal environment. In this study a formal enterprise was considered to be one that has tax records for the payment of its taxes to the Secretariat of Finance and Public Credit (SHCP, for its acronym in Spanish), either as a natural person, cooperative or corporation. The formalization of some enterprises has allowed them to access government support and in one case, obtain credits from commercial banks. Tax formalization can be considered as a higher level of entrepreneurship.

The fami-enterprise as a business and family patrimony

The experience of the people who grew up among the amaranth cultivations favors those who are engaged in processing amaranth today, the pre-Hispanic history of the place and being one of the favored places to have amaranth cultivations in four of its colors (Red, purple, brick and green). This allows them to position themselves in the place with the highest production of amaranth candies in the entire Mexican Republic (^{Martínez-Salvador, 2016}). The first generations (great-grandparents, grandparents or parents) are recognized as the pioneers of the economic scheme characteristic of this amaranth-producing area.

Only 20% of the owners surveyed decided to venture to process amaranth without having ancestors who were engaged in the same, so it could be said that they adopted the customs and traditions of the place, while the remaining 80% have direct family with those who share the culture of the production of amaranth products, thanking those who bet on the rescue of this ancestral product. Family goals are almost always more important than commercial ones, but they don’t rival making money.

Fifty-three-point three percent of the owners are satisfied with the income they obtain from carrying out this activity and have taken advantage of the social environment to be able to combine the production of products with other sources of income. Only a third (33.3%) of the owners said that their fami-enterprise depends solely on the enterprise. The other two-thirds (66.7%) of owners have another source of income, but only 20% of them take that external income to inject into the business. The destination of the injected resources has different purposes: to make it grow, to correct losses or to level out in the low season (for payment of salaries or purchase of raw material).

Related to the above, they were asked about the factors that make an enterprise grow and make it successful. In Figure 3, it can be clearly seen that the most important factor is to reinvest part of the profits. Innovating and making higher sales (both 53.3%) were reasons that stand out in the response of the owners as success factors.

Figure 3 Factors that make an enterprise grow. 

Most owners or people in charge appreciate the production of amaranth products as a family patrimony, it is considered a good business because it allows them to work from home, preserve traditions and generate jobs for the family. Almost half (46.7%) of the owners involve their children in the activities of the enterprise and stated that they would like their children to study a university degree that allows them to grow the family business, the owners (53.3%) expect the enterprise to transcend their future generations, having amaranth as their main source of income.

Working conditions in fami-enterprises

The working conditions of amaranth-processing fami-enterprises are very sui generis, starting with the schedules. Almost all (93.3%) have relatively flexible entry and exit hours, on average they work 6 days a week. The workshops are located within the same premises of the houses. Two families live in the houses, of which 86.3% of the cases are involved in the production of products. Employee pay is defined by the type of activities they perform (80%). In a few cases it is determined by piecework or that all employees have the same salary. Only two of the enterprises combine two forms of payment.

One of the distinctive characteristics of fami-enterprises, compared to other types of enterprises, is that there are often workers who are family members who do not receive a fixed salary like the rest of the employees. In Figure 4, it is highlighted that there is a significant proportion of enterprises that have some family members who are not paid a fixed salary (40%) or if they are paid it is symbolic. In these cases, there may be children of the owner who study and only work a few hours a week or relatives who occasionally help them in production.

Figure 4 Form of payment of salary to the employees of the enterprise. 

Tulyehualco is increasingly recognized by residents of other boroughs of the CDMX as a key point to buy different amaranth products. Sometimes there can be so much demand that enterprises must hire temporary workers (60%) who may be non-family members (2.1 workers on average) or seek help from some family members who do not normally work in the enterprise (1.3 workers on average) when the demand for their products increases in certain seasons. Temporary non-family workers are neighbors or people from the same area. The relationships of trust that exist between neighbors make it easier for them to get the required production, this encourages and allows them to strengthen the ties that unite them as a society (^{Bolívar-Espinoza, 2011}).

Human capital and capacity building

Every enterprise that starts its productive activities needs human capital that has certain capabilities and skills that they can acquire by different means to meet their productive objectives. In this research, it was found that most of the people (66.7%) who currently work in micro and small amaranth-processing enterprises learned to process it in the family from a young age, others learned from people outside their family, a third (33.3%) were trained by some educational institutions or took training courses (26.7%).

Among the trainings they have taken are those on administrative aspects, quality and sales (26.7% each) and in a smaller percentage that of organization (13.3%). The last aspect is a weak link, because a good organization can be used as a strategy to resolve or avoid family conflicts that can destabilize the enterprise (^{Bolívar-Espinoza and Elizalde-Hevia, 2011}).

A growing concern of owners is the lack of adequate administrative and accounting records of income and expenses. Eighty percent keep a general record of entries and exits; that is, what they buy and what they sell, but they do not do it in detail, so they do not have clear information that allows them to make decisions about the use of their resources to develop a business plan. This is a need that many owners recognize, but few have done anything to meet this need.

Shared responsibility

The amaranth-processing fami-enterprises appeared because the inhabitants have their ejido lands in the Teuhtli hill, where they sow amaranth since time immemorial. At some point they learned to process the seed and make the traditional alegría they consumed and then sold because they were in demand in the market. In this process, women played an important role in making candies to obtain an income extra to that of agricultural activities. Over time, the members of the family became involved and formed alliances that reinforced the social fabric that to this day has made the production of alegrías and other amaranth products a cultural identity element of Tulyehualco, Xochimilco Borough.

This is consistent with what ^{Amarís et al. (2015)} argue, that the family plays a very important role in economic and social aspects, where family cohesion is a factor that allows facing adversities in the business and in the family. This cohesion generates the capacity for restructuring, allowing one to see opportunities in times of crisis. The absence of family cohesion or the growth of the family encourages fami-enterprises to tend to split up rather than grow just one enterprise. The data obtained in the survey show that more than half (53.3%) of owners consider that they have the greatest responsibility for the enterprise to grow and become successful and only 26.7% believe that the responsibility lies with the employees.

On the other hand, 92.6% of employees recognize themselves as an important part of the enterprise for which they work by asserting that it is the responsibility of everyone and not only of the owners or workers. If a worker does not feel part of the place where they work, there is a risk that they, when seeking to satisfy their own needs, consider the possibility of looking for another job regardless of whether their family is working in the current one. If an employer does not value and recognize the work of their employees, they will feel excluded, breaking the family relationship.

Marketing and market research

Rural enterprises generally do not conduct market research unless there is a professional in the family who wants to and can analyze their market before or during the life cycle of the enterprise. In Santiago Tulyehualco, this is not the exception, there, 80% have not carried out a market study; however, two thirds (66.7%) of owners believe they have the necessary experience to know the type of customer their product is aimed at. The owners consider that the direct contact they maintain with their customers allows them to know their needs and preferences that allows them to adapt to what the client requests.

Advertising is a resource that they use in a limited way, only sometimes they use media that does not generate a large outlay of money to carry out the propaganda of their products. Other means of approaching the customers they use is the exhibition of their products in the premises they have, considering that taste enters through the sight; others promote their products through poorly elaborate signs, social networks, non-owned websites, local or national fairs.

The owners consider that information propagated by word of mouth is the best way to advertise because a satisfied customer always buys more products again and recommends the product with a second customer and so on. Some combine strategies to publicize their products, emphasize that they sell more than an amaranth candy, sell history and culture, which allows them to attract customers.

Succession and continuity in fami-enterprises

All the above allows typifying the micro and small amaranth-processing enterprises that are located in Tulyehualco as fami-enterprises. This coincides with ^{Soto-Maciel (2013)}, who mentions that most of the family enterprises belong to the same family and one of the family members has control of the enterprise. In addition, there is a special concern for the generational succession of the business that allows preserving and strengthening family ties.

Studies such as that of ^{Bañegil-Palacios et al. (2011)} propose a conceptual model that can allow continuity to an enterprise (Figure 5). Their model focuses on the entrepreneurial spirit as a factor to start a family enterprise, they mention that when it exists in a member of the family, market conditions can take advantage of to become an entrepreneur, generating the opportunity to create a new enterprise that meets the needs of a sector. Professional management in the same way is seen as another primary factor that pursues the same goal and together, they favor the creation of strategic alliances that will allow an enterprise to continue in the market.

Figure 5 Conceptual model for the continuity of the enterprise. Based on the model of ^{Bañegil-Palacios et al. (2011)}. 

This differs from the model for a fami-enterprise, because a fami-enterprise is founded on family needs and not just from visualizing a business opportunity. In this case, alliances occur due to the social fabric in which the creators are immersed and later, if the offspring choose freely, they can give continuity to the enterprise, as ^{Gallo (2011)} affirms, the inheritance is not the enterprise itself but the reason why it was created.

Future perspectives for fami-enterprises

It is important to note that the needs of a family to create an enterprise are linked to the experience of the members themselves, 33.3% of the owners argued that they formed the enterprise to process the amaranth that at the time the parents and grandfathers produced in the area, 46.7%of these owners created them to continue with the tradition, even if they have to buy the raw material from neighboring states and have occupations that are not related to the enterprise (66.7%). The disinterest of young people in preserving traditions and search for economic gain is a factor that has made fami-enterprises vulnerable, leading to the disappearance of the family business without generational or economic significance.

The current trend of these fami-enterprises seems to lead some to become family enterprises, or enterprises with a single owner in order to survive, because in the new generations there are interests and needs different from those that motivated the founders, salaries and income are no longer so satisfactory for family successors. Although fami-enterprises have prevailed for many years in Santiago Tulyehualco based on family values as pillars of their operation, generational change shows worrying signs, the social and cultural values of the younger generations can transform fami-enterprises into family enterprises where commercial and market values prevail over family values as in any capitalist enterprise.

Some of these signs are, for example, the fact that very few enterprises produce their own amaranth as the main raw material, family jobs have been reduced by the employment of non-family people in order to increase production; the profits of enterprises are limited which is unattractive to young people, who seek better income, especially if they have high degrees of education, among others.