IDEAS home Printed from https://ideas.repec.org/a/kea/keappr/ker-20200701-36-2-04.html

Limited Impact of Business Development Programs on Entrepreneurs’ Profitability in the Presence of Ambiguity Aversion

Author

Listed:
  • Dmitry Shapiro

    (Seoul National University)

Abstract

This paper develops a theoretical framework to explain the limited effect of business development programs (BDPs) on entrepreneurs’ profits. We argue that a mismatch between a BDP’s narrow focus on business-promoting strategies and the wider context in which micro entrepreneurs operate can limit the impact of business training. In our framework,entrepreneurs are ambiguity-averse and have multiple sources of income (e.g., business and wage incomes.) We show that for a sufficiently ambiguity-averse entrepreneur with multiple income sources, efficient training can result in a decline in expected profit. Notably, when the wider context (multiple income sources, ambiguity-aversion) is considered, the business training impact is limited and can result in a post-training expected profit decline. This limited impact is caused by the diversifying role that the business income plays in household finances.

Suggested Citation

  • Dmitry Shapiro, 2020. "Limited Impact of Business Development Programs on Entrepreneurs’ Profitability in the Presence of Ambiguity Aversion," Korean Economic Review, Korean Economic Association, vol. 36, pages 377-413.
    • Handle: RePEc:kea:keappr:ker-20200701-36-2-04
    as

    Download full text from publisher

    File URL: http://keapaper.kea.ne.kr/RePEc/kea/keappr/KER-20200701-36-2-04.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Abhijit Vinayak Banerjee, 2013. "Microcredit Under the Microscope: What Have We Learned in the Past Two Decades, and What Do We Need to Know?," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 487-519, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. González-Uribe, Juanita & Reyes, Santiago, 2021. "Identifying and boosting “Gazelles”: Evidence from business accelerators," Journal of Financial Economics, Elsevier, vol. 139(1), pages 260-287.
    2. Thorsten Beck & Patrick Behr, 2017. "Individual versus Village Lending: Evidence from Montenegro," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 67-87, November.
    3. Di Giannatale, Sonia & Roa, María José, 2016. "Formal Saving in Developing Economies: Barriers, Interventions, and Effects," IDB Publications (Working Papers) 8107, Inter-American Development Bank.
    4. Maitra, Pushkar & Mitra, Sandip & Mookherjee, Dilip & Motta, Alberto & Visaria, Sujata, 2017. "Financing smallholder agriculture: An experiment with agent-intermediated microloans in India," Journal of Development Economics, Elsevier, vol. 127(C), pages 306-337.
    5. Ölkers, Tim & Liu, Shuang & Mußhoff, Oliver, 2023. "A typology of Malian farmers and their credit repayment performance - An unsupervised machine learning approach," 97th Annual Conference, March 27-29, 2023, Warwick University, Coventry, UK 334547, Agricultural Economics Society - AES.
    6. Marshall Burke & Lauren Falcao Bergquist & Edward Miguel, 2019. "Sell Low and Buy High: Arbitrage and Local Price Effects in Kenyan Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(2), pages 785-842.
    7. Jonathan Fu & Annette Krauss, 2024. "Preparing fertile ground: how does the quality of business environments affect MSE growth?," Small Business Economics, Springer, vol. 63(1), pages 51-103, June.
    8. Mohamed, Toka S. & Elgammal, Mohammed M., 2023. "Credit risk in Islamic microfinance institutions: The role of women, groups, and rural borrowers," Emerging Markets Review, Elsevier, vol. 54(C).
    9. Catalina Martinez, 2015. "Doing Well by Doing Good? Empirical Evidence from Microfinance," CFD Working Papers 06-2015, Centre for Finance and Development, The Graduate Institute.
    10. Ahlin, Christian & Gulesci, Selim & Madestam, Andreas & Stryjan, Miri, 2020. "Loan contract structure and adverse selection: Survey evidence from Uganda," Journal of Economic Behavior & Organization, Elsevier, vol. 172(C), pages 180-195.
    11. Boulier, Bryan & Emran, M. Shahe & Hoque, Nazmul, 2021. "Access to Credit, Education, and Women’s Say in the Household: Evidence from Bangladesh," MPRA Paper 109009, University Library of Munich, Germany.
    12. Belard, Amandine & Farolfi, Stefano & Jourdain, Damien & Manyanga, Mark & Pedzisa, Tarisayi & Willinger, Marc, 2025. "They know each other, but do they trust each other? Social capital and selected beneficiaries of community-based development projects: A lab-in-the-field in rural Zimbabwe," World Development Perspectives, Elsevier, vol. 40(C).
    13. Nakano, Yuko & Magezi, Eustadius F., 2020. "The impact of microcredit on agricultural technology adoption and productivity: Evidence from randomized control trial in Tanzania," World Development, Elsevier, vol. 133(C).
    14. Olga Gorelkina & Ioanna Grypari & Erin Hengel, 2019. "One strike and you’re out! The Master Lever’s effect on senatorial policy-making," Working Papers 201906, University of Liverpool, Department of Economics.
    15. Tim Ölkers & Shuang Liu & Oliver Mußhoff & Xiaohua Yu, 2025. "Patterns and heterogeneity in credit repayment performance: Evidence from Malian farmers," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 47(2), pages 694-722, May.
    16. Jie Bai & Ludovica Gazze & Yukun Wang, 2019. "Collective Reputation in Trade: Evidence from the Chinese Dairy Industry," NBER Working Papers 26283, National Bureau of Economic Research, Inc.
    17. Shapiro, D.A., 2015. "Microfinance and dynamic incentives," Journal of Development Economics, Elsevier, vol. 115(C), pages 73-84.
    18. Christopher Blattman & Mathilde Emeriau & Nathan Fiala, 2018. "Do Anti-Poverty Programs Sway Voters? Experimental Evidence from Uganda," The Review of Economics and Statistics, MIT Press, vol. 100(5), pages 891-905, December.
    19. Emran, M. Shahe & Shilpi, Forhad, 2021. "Microfinance, Moneylenders, and Economic Shocks: An Assessment of the Bangladesh Experience," MPRA Paper 111159, University Library of Munich, Germany.
    20. Gonzalez-Uribe, Juanita & Reyes, Santiago, 2021. "Identifying and boosting “gazelles” evidence from business accelerators," LSE Research Online Documents on Economics 103145, London School of Economics and Political Science, LSE Library.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • D1 - Microeconomics - - Household Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kea:keappr:ker-20200701-36-2-04. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: KEA (email available below). General contact details of provider: https://edirc.repec.org/data/keaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.