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Identifying and spurring high-growth entrepreneurship : experimental evidence from a business plan competition

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  • Mckenzie,David J.

Abstract

Almost all firms in developing countries have fewer than 10 workers, with the modal firm consisting of just the owner. Are there potential high-growth entrepreneurs with the ability to grow their firms beyond this size? And, if so, can public policy help alleviate the constraints that prevent these entrepreneurs from doing so? A large-scale national business plan competition in Nigeria is used to help provide evidence on these two questions. The competition was launched with much fanfare, and attracted almost 24,000 entrants. Random assignment was used to select some of the winners from a pool of semi-finalists, with US$36 million in randomly allocated grant funding providing each winner with an average of almost US$50,000. Surveys tracking applicants over three years show that winning the business plan competition leads to greater firm entry, higher survival of existing businesses, higher profits and sales, and higher employment, including increases of over 20 percentage points in the likelihood of a firm having 10 or more workers. These effects appear to occur largely through the grants enabling firms to purchase more capital and hire more labor.

Suggested Citation

  • Mckenzie,David J., 2015. "Identifying and spurring high-growth entrepreneurship : experimental evidence from a business plan competition," Policy Research Working Paper Series 7391, The World Bank.
  • Handle: RePEc:wbk:wbrwps:7391
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    References listed on IDEAS

    as
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    1. Links round-up
      by Ranil Dissanayake in The CSAE Blog on 2016-06-02 16:46:05

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    Cited by:

    1. David McKenzie & Christopher Woodruff, 2015. "Business Practices in Small Firms in Developing Countries," NBER Working Papers 21505, National Bureau of Economic Research, Inc.
    2. Geoffrey Barrows, 2018. "Do Entrepreneurship Policies Work? Evidence From 460 Start-Up Program Competitions Across the Globe," Policy Papers 2018.02, FAERE - French Association of Environmental and Resource Economists.
    3. Cai, Jing & Szeidl, Adam, 2016. "Interfirm Relationships and Business Performance," CEPR Discussion Papers 11717, C.E.P.R. Discussion Papers.
    4. repec:eee:wdevel:v:105:y:2018:i:c:p:400-415 is not listed on IDEAS
    5. Thomas Farole & Yoonyoung Cho, 2017. "Bangladesh Jobs Diagnostic," World Bank Other Operational Studies 28498, The World Bank.
    6. Pierrick Baraton & Florian Léon, 2016. "Financial Constraint, Entrepreneurship and Sectoral Migrations ," CREA Discussion Paper Series 16-09, Center for Research in Economic Analysis, University of Luxembourg.

    More about this item

    Keywords

    E-Business; Business Environment; Microfinance; Competitiveness and Competition Policy; Business in Development;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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