Small Business Training to Improve Management Practices in Developing Countries: Reassessingthe Evidence for 'Training Doesn’t Work'

Despite the popularity of business training among policy makers, the use of business traininghas faced increasing skepticism. This is, in part, fueled by the fact that most of the first wave of randomizedexperiments in developing countries could not detect statistically significant impacts of training on firms'profits or sales. This paper revisits and reassesses the evidence for whether small business training works,incorporating the results of more recent studies. A meta-analysis of these estimates suggests that trainingincreases profits and sales on average by 5 to 10 percent. The author argues that this is in line with what isoptimistic to expect given the relatively short length of most training programs, and the expected return oninvestment from the cost of such training. However, impacts of this magnitude are too small for most experiments todetect statistically. Emerging evidence is provided on five approaches for improving the effectiveness of traditionaltraining by incorporating gender, kaizen methods, localization and mentoring, heuristics, and psychology.Training programs that incorporate these elements appear to deliver improvements over traditional training programs onaverage, although with considerable variation. Given that training delivers some benefits for firms, the challenge isthen how to deliver a quality program on a cost-effective basis at a much larger scale. Three possible approaches toscaling up training are discussed: using the market, using technology, or targeting and funneling firms.