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

Author

Listed:
  • de Mel, Suresh

    () (University of Peradeniya)

  • McKenzie, David

    () (World Bank)

  • Woodruff, Christopher

    () (University of Oxford)

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.

Suggested Citation

  • de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2012. "Business Training and Female Enterprise Start-Up, Growth, and Dynamics: Experimental Evidence from Sri Lanka," IZA Discussion Papers 6896, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6896
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    References listed on IDEAS

    as
    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, vol. 1(3), pages 1-32, July.
    2. 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, vol. 88(1), pages 19-31, January.
    3. Nicholas Bloom & Benn Eifert & Aprajit Mahajan & David McKenzie & John Roberts, 2013. "Does Management Matter? Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 128(1), pages 1-51.
    4. repec:cup:apsrev:v:105:y:2011:i:04:p:765-789_00 is not listed on IDEAS
    5. Dean Karlan & Martin Valdivia, 2011. "Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 510-527, May.
    6. Huw Lloyd-Ellis & Dan Bernhardt, 2000. "Enterprise, Inequality and Economic Development," Review of Economic Studies, Oxford University Press, vol. 67(1), pages 147-168.
    7. Abhijit V. Banerjee & Esther Duflo, 2008. "What Is Middle Class about the Middle Classes around the World?," Journal of Economic Perspectives, American Economic Association, vol. 22(2), pages 3-28, Spring.
    8. Bruhn, Miriam & Karlan, Dean S. & Schoar, Antoinette S, 2012. "The Impact of Consulting Services on Small and Medium Enterprises: Evidence from a Randomized Trial in Mexico," CEPR Discussion Papers 8887, C.E.P.R. Discussion Papers.
    9. Gabriela Calderón & Jesse M.Cunha ; & Giacomo De Giorgi, 2013. "Business Literacy and Development: Evidence from a Randomized Controlled Trial in Rural Mexico," Working Papers 2013-24, Banco de México.
    10. David McKenzie & Christopher Woodruff, 2014. "What Are We Learning from Business Training and Entrepreneurship Evaluations around the Developing World?," World Bank Research Observer, World Bank Group, vol. 29(1), pages 48-82.
    11. 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, vol. 5(2), pages 232-266, June.
    12. 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, vol. 100(2), pages 125-129, May.
    13. Miriam Bruhn & David McKenzie, 2009. "In Pursuit of Balance: Randomization in Practice in Development Field Experiments," American Economic Journal: Applied Economics, American Economic Association, vol. 1(4), pages 200-232, October.
    14. 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, vol. 106(C), pages 211-226.
    15. Orazio Attanasio & Britta Augsburg & Ralph De Haas & Emla Fitzsimons & Heike Harmgart, 2011. "Group lending or individual lending? Evidence from a randomised field experiment in Mongolia," IFS Working Papers W11/20, Institute for Fiscal Studies.
    16. Miriam Bruhn & Bilal Zia, 2011. "The Impact of Business and Financial Literacy Training for Young Entrepreneurs in Bosnia-Herzogovina," World Bank Other Operational Studies 10096, The World Bank.
    17. Claudia Martínez A. & Esteban Puentes & Jaime Ruiz-Tagle, 2013. "Micro-Entrepreneurship Training and Asset Transfers: Short Term Impacts on the Poor," Working Papers wp380, University of Chile, Department of Economics.
    18. Emran, M. Shahe & Morshed, A.K.M Mahbub & Stiglitz, Joseph E., 2011. "Microfinance and Missing Markets," MPRA Paper 41451, University Library of Munich, Germany.
    19. McKenzie, David, 2012. "Beyond baseline and follow-up: The case for more T in experiments," Journal of Development Economics, Elsevier, vol. 99(2), pages 210-221.
    20. Kevane, Michael & Wydick, Bruce, 2001. "Microenterprise Lending to Female Entrepreneurs: Sacrificing Economic Growth for Poverty Alleviation?," World Development, Elsevier, vol. 29(7), pages 1225-1236, July.
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    More about this item

    Keywords

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

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training

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