Dynamics of Start-up Enterprises in Latin America

Leadership Drives and Management Practices

Start-up enterprises (SUEs) in Latin America, which have emerged as the feeder institutions for large companies in providing innovation and infrastructural support, are growing as the foundation of the regional economy. These enterprises have limited capital and human resources and they use localized business models. 

SUEs have also emerged as disruptive organizations, which adapt the 5T model of organizational functions that emphasize task, territory, target, time, and thrust. These organizations focus on innovation and technology as a part of the 5T organizational model and serve to bridge the gap in the existing business models. SUEs are largely evolved from family business in Latin America and they follow self-leader styled administration. However, they suffer from multi-layered complexities in terms of building a contemporary work culture, incubating generic innovations, and developing convergence with the need-based deliveries within the industry. Therefore, a radical change has been observed in these enterprises for reforming leadership styles from transactional to a transformative pattern. In following such a radical shift in the leadership pattern, most SUEs have shown limping behavior towards structural adjustments within the enterprise and hierarchical linkages among the business-to-business transaction segments. Consequently, they suffer from limited collaboration and socio-economic regional inequality towards recognizing their capabilities and competence.

Public policies in Latin America widely support the economic growth of SUEs through subsidies and financial stimulus. However, the shifts in the operational patterns of SUEs suffer from the problems of sharing control within the organization and developing homogeneity in the business model across territory and industry segments. 

These enterprises eventually suffer from the lack of problem solving techniques and fail to address proactively the contemporary business models to reach out to industrial communities and consumer segments to overcome the hidden challenges within organizations. SUEs today are employing hybrid management techniques to expand their outreach and serve industrial and consumer touchpoints through frugal innovations adapting to the sustainable development goals. Organizational diversity has become central to the management pattern of SUEs, as successful entrepreneurs in competitive marketplaces promote continuous innovation and control over the supply of new products and services to the industry and consumer segments. Therefore, the existing and new SUEs are planning to lead dyadic growth converging their business models with the shifts in industrial and societal consumption patterns. Consequently, leadership in these enterprises is growing as a social process beyond the traditional hierarchical power-grid.

Though the management of SUEs in Latin America has not yet grown beyond the bottom-of-the-pyramid industrial hierarchy, it has been evident that these enterprises have developed collaborative mindsets and are prepared to follow hybrid business models to get close to the growing competition. The general effectiveness of SUEs is limited to niche markets due to power distance in leadership and conventional organizational practices affected by the individualistic leadership styles and home-grown philosophies. These institutions need to develop a dynamic organizational culture to enable change to take place and to adapt to team-work culture leading to collective decisions. As Latin American countries have low trust work culture, they need to build high levels of employee engagement and integrity among market players.

The successful inter-sectoral entrepreneurship model requires a shift in leadership mindset, organizational culture, and business model. Accordingly, the SUEs in Latin America may drive initiatives towards experimenting new business approaches involving civil societies, the private sector, and public policies. SUEs can integrate place, people and behavior as an organizational motto in their work culture, and develop inter-relational attitude and values to manage organizations. Such mindset requires collective awareness, transformational leadership, and business values integrated with societal and industrial goals. Such transformation in leadership and management style may help not only in resolving conflicts, but also in cooperating with future dimensions within and outside industry.

Ananya Rajagopal holds a PhD in Entrepreneurship with focus on Marketing Strategies from EGADE Business School. She has ample experience in the financial industry in Mexico City since 2006. She has published several papers in international journals of repute and contributed research works in international conferences and edited books. Currently she is working as Professor at Anahuac University, Mexico City, Mexico. Ananya Rajagopal's latest book Managing Startup Enterprises in Emerging Markets is available at palgrave.com