catalytic lead Characteristics of catalytic firms are having the resources, vision, incentives, and commitment to address industry-wide constraints and drive upgrading investments They can be a VC participant or service provider They recognize the crucial role that small firms play Lead firm has the power to set the terms and conditions of transactions, set product and service specifications, have access to key end-markets, and market information Lead firm may/may not be catalyst firm We are interested in working with lead firms when they are also catalyst firms informal formal Income Generating Activities Self employed No Reinvestment No fixed assets Traditional technology Seasonal employment Mixed with household No written records Microenterprises 1-9 employees Limited reinvestment Limited fixed assets Outdated technology Part time employment Limited written records Small Enterprises 10-49 employees Reinvestment Fixed assets Modern technology Full time employment Written records Medium Enterprises 50-250 employees Large Enterprises 250 and up employees

Characteristics of catalytic firms are having the resources, vision, incentives, and commitment to address industry-wide constraints and drive upgrading investments

They can be a VC participant or service provider

They recognize the crucial role that small firms play

Lead firm has the power to set the terms and conditions of transactions, set product and service specifications, have access to key end-markets, and market information

Lead firm may/may not be catalyst firm

We are interested in working with lead firms when they are also catalyst firms

Self employed

No Reinvestment

No fixed assets

Traditional technology

Seasonal employment

Mixed with household

No written records

1-9 employees

Limited reinvestment

Limited fixed assets

Outdated technology

Part time employment

Limited written records

10-49 employees

Reinvestment

Fixed assets

Modern technology

Full time employment

Written records

50-250 employees

250 and up employees

MATURE & COMPETITIVE Facilitate industry leadership through industry leader(s) Identify win-win strategies from collective action Support the formalization of industry, and/or trade groups and associations CLEAR INDUSTRY LEADER NO INDUSTRY LEADER(S) MARKET STRUCTURE MARKET CONDUCT ATOMISTIC COLLECTIVE ACTION LESS MATURE Include broader section of stakeholders Move from short term to longer term results activities Shift facilitation from activities to vision focused EMERGING Use VCA to identify interventions with the greatest leverage Bring together subgroups of stakeholders key to the success of the leveraged intervention Facilitate activities with short term win-win results Build on positive experience to increase incentives to collaborate VALUE CHAIN WITH LEADER Facilitate lead firm investment in industry upgrading Consider marginal gains from working principally with leader Support industry leader in increasing competitiveness of MSE-lead firm linkages. Competitiveness

MATURE & COMPETITIVE

Facilitate industry leadership through industry leader(s)

Identify win-win strategies from collective action

Support the formalization of industry, and/or trade groups and associations

LESS MATURE

Include broader section of stakeholders

Move from short term to longer term results activities

Shift facilitation from activities to vision focused

EMERGING

Use VCA to identify interventions with the greatest leverage

Bring together subgroups of stakeholders key to the success of the leveraged intervention

Facilitate activities with short term win-win results

Build on positive experience to increase incentives to collaborate

VALUE CHAIN WITH LEADER

Facilitate lead firm investment in industry upgrading

Consider marginal gains from working principally with leader

Support industry leader in increasing competitiveness of MSE-lead firm linkages.

ISSUES IN WORKING WITH LEAD FIRMS Confidentiality Ownership of learning Establishing/honoring commitments Ensuring MSEs benefit (causal model, monitoring, performance contracts) Replication beyond lead firm Understanding incentives Market distortions

Confidentiality

Ownership of learning

Establishing/honoring commitments

Ensuring MSEs benefit (causal model, monitoring, performance contracts)

Replication beyond lead firm

Understanding incentives

Market distortions

WORKING WITH LEAD FIRMS: ONE OR MULTIPLE? One Firm When only one lead firm is willing to be a catalyst When assisting one “winner” will successfully integrate smallholders When intervention will likely result in other lead firms replicating the model Multiple Firms Whenever you can When one lead firm fails to offer adequate advantages When one lead firm fails to honor commitments When progress toward your competitiveness strategy cannot be achieved working with a single lead firm

One Firm

When only one lead firm is willing to be a catalyst

When assisting one “winner” will successfully integrate smallholders

When intervention will likely result in other lead firms replicating the model

Multiple Firms

Whenever you can

When one lead firm fails to offer adequate advantages

When one lead firm fails to honor commitments

When progress toward your competitiveness strategy cannot be achieved working with a single lead firm