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Business Training and Female Enterprise Start-Up, Growth, and Dynamics: Experimental Evidence from Sri Lanka

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Author Info

  • de Mel, Suresh

    ()
    (University of Peradeniya)

  • McKenzie, David

    ()
    (World Bank)

  • Woodruff, Christopher

    ()
    (University of Warwick)

Abstract

We conduct a randomized experiment in Sri Lanka to measure the impact of the most commonly used business training course in developing countries, the Start-and-Improve Your Business (SIYB) program. In contrast to existing business training evaluations which are restricted to microfinance clients, we consider two more representative groups: a random sample of women operating subsistence enterprises, and a random sample of women who are out of the labor force but interested in starting a business. Both samples are randomized into three groups: a control group, a group invited to attend training, and a group invited to receive training and who receive a cash grant conditional on completing training. We track impacts over four rounds of follow-up surveys taken over two years and find that the short- and medium-term impacts differ. For women already in business, we find that although training alone leads to some changes in business practices, it has no impact on business profits, sales or capital stock. In contrast the combination of training and a grant leads to large and significant improvements in business profitability in the first eight months, but this impact dissipates in the second year. For women interested in starting enterprises, we find that business training speeds up the process of opening a business, and changes the selection of who operates a business by making the entrants less analytically skilled, but leads to no increase in net business ownership by our final survey round. Receiving a grant results in poorer women opening businesses, but again does not increase net business ownership. Training appears to have increased the profitability and business practices of the businesses started up, suggesting it may be more effective for new owners than for enhancing existing businesses.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6896.

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Length: 42 pages
Date of creation: Oct 2012
Date of revision:
Publication status: published in: Journal of Development Economics, 2014, 106: 199-210
Handle: RePEc:iza:izadps:dp6896

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Related research

Keywords: business start-up; randomized experiment; female self-employment; business training; trajectory of treatment effects;

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References

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  1. Suresh de Mel & David McKenzie & Christopher Woodruff, 2009. "Are Women More Credit Constrained? Experimental Evidence on Gender and Microenterprise Returns," American Economic Journal: Applied Economics, American Economic Association, American Economic Association, vol. 1(3), pages 1-32, July.
  2. Bloom, Nicholas & Eifert, Benn & Mahajan, Aprajit & McKenzie, David & Roberts, John, 2011. "Does management matter ? evidence from India," Policy Research Working Paper Series 5573, The World Bank.
  3. McKenzie, David & Woodruff, Christopher, 2012. "What Are We Learning from Business Training and Entrepreneurship Evaluations around the Developing World?," IZA Discussion Papers 6895, Institute for the Study of Labor (IZA).
  4. Miriam Bruhn & Bilal Zia, 2013. "Stimulating managerial capital in emerging markets: the impact of business training for young entrepreneurs," Journal of Development Effectiveness, Taylor & Francis Journals, Taylor & Francis Journals, vol. 5(2), pages 232-266, June.
  5. de Mel, Suresh & McKenzie, David J. & Woodruff, Christopher, 2009. "Measuring microenterprise profits: Must we ask how the sausage is made?," Journal of Development Economics, Elsevier, Elsevier, vol. 88(1), pages 19-31, January.
  6. Fafchamps, Marcel & McKenzie, David & Quinn, Simon & Woodruff, Christopher, 2014. "Microenterprise growth and the flypaper effect: Evidence from a randomized experiment in Ghana," Journal of Development Economics, Elsevier, Elsevier, vol. 106(C), pages 211-226.
  7. McKenzie, David, 2012. "Beyond baseline and follow-up: The case for more T in experiments," Journal of Development Economics, Elsevier, Elsevier, vol. 99(2), pages 210-221.
  8. Esther Duflo & Abhijit Banerjee, 2008. "What is Middle Class About the Middle Classes Around the World?," Working Papers id:1363, eSocialSciences.
  9. Kevane, Michael & Wydick, Bruce, 2001. "Microenterprise Lending to Female Entrepreneurs: Sacrificing Economic Growth for Poverty Alleviation?," World Development, Elsevier, Elsevier, vol. 29(7), pages 1225-1236, July.
  10. Bruhn, Miriam & Karlan, Dean & Schoar, Antoinette, 2013. "The impact of consulting services on small and medium enterprises: evidence from a randomized trial in Mexico," Policy Research Working Paper Series 6508, The World Bank.
  11. Miriam Bruhn & David McKenzie, 2009. "In Pursuit of Balance: Randomization in Practice in Development Field Experiments," American Economic Journal: Applied Economics, American Economic Association, American Economic Association, vol. 1(4), pages 200-232, October.
  12. Attanasio, Orazio & Augsburg, Britta & De Haas, Ralph & Fitzsimons, Emla & Harmgart, Heike, 2011. "Group lending or individual lending? Evidence from a randomised field experiment in Mongolia," MPRA Paper 35439, University Library of Munich, Germany.
  13. Erica Field & Seema Jayachandran & Rohini Pande, 2010. "Do Traditional Institutions Constrain Female Entrepreneurship? A Field Experiment on Business Training in India," American Economic Review, American Economic Association, American Economic Association, vol. 100(2), pages 125-29, May.
  14. Emran, M. Shahe & Morshed, A.K.M Mahbub & Stiglitz, Joseph E., 2011. "Microfinance and Missing Markets," MPRA Paper 41451, University Library of Munich, Germany.
  15. Claudia Martínez A. & Esteban Puentes & Jaime Ruiz-Tagle, 2013. "Micro-Entrepreneurship Training and Asset Transfers: Short Term Impacts on the Poor," Working Papers, University of Chile, Department of Economics wp380, University of Chile, Department of Economics.
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Cited by:
  1. Cho, Yoonyoung & Honorati, Maddalena, 2014. "Entrepreneurship programs in developing countries: A meta regression analysis," Labour Economics, Elsevier, Elsevier, vol. 28(C), pages 110-130.
  2. McKenzie, David & Woodruff, Christopher, 2012. "What Are We Learning from Business Training and Entrepreneurship Evaluations around the Developing World?," IZA Discussion Papers 6895, Institute for the Study of Labor (IZA).
  3. Gabriela Calderon & Jesse M. Cunha & Giacomo De Giorgi, 2013. "Business Literacy and Development: Evidence from a Randomized Controlled Trial in Rural Mexico," NBER Working Papers 19740, National Bureau of Economic Research, Inc.
  4. Gine, Xavier & Mansuri, Ghazala, 2014. "Money or ideas ? a field experiment on constraints to entrepreneurship in rural Pakistan," Policy Research Working Paper Series 6959, The World Bank.

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