Despite the prophecies forecasting their probable disappearance or annihilation, small-scale enterprises have persisted in the Brazilian industrial structure since 1950. To account for the survival of small firms in Brazil, specifically in the state of Sao Paulo, a study examined 100 small firms in three industrial sectors: clothing, mechanical goods, and electronics. Information was gathered on the characteristics of the firms included in the study sample; the socioeconomic characteristics, educational level, and professional experience of the entrepreneurs who run them; the characteristics, background, mobility, and earnings of their employees; and their operational and personnel management practices. Other small- and medium-sized firms were perceived as being a greater threat to the survival of the firms studied than were larger or clandestine firms. Maintaining a high-quality product, meeting customers' needs rapidly, keeping their prices low, and constantly updating or renewing their models were mentioned as the top four strategies of surviving in the marketplace. Perhaps the biggest factor in these companies' ability to survive is their considerable operational flexibility, which they exercise in their selection of a geographic location, their work force, their personnel management policies, and their methods of organizing work. (Appendixes include 59 tables on education, training, and employment patterns in Brazil; the survey instruments used; information on the data used in the study; and a classification of the subsectors of the three industries studied.) (MN)