Does Small Business Training Help Entrepreneurs in Developing Countries? – Small Business Trends

Does Small Business Training Help Entrepreneurs in Developing Countries? – Small Business Trends

National governments, non-profit organizations, and international development agencies have invested considerable resources in programs to train developing country entrepreneurs in the hope that these efforts will improve small business performance in these nations.

An article (PDF) published last year in the World Bank Research Observer by two excellent development economists – Chris Woodruff of the University of Warwick and David McKenzie of the World Bank — indicates that these efforts are not as successful as policy makers have hoped.

The authors reviewed 16 randomized experiments – the gold standard for research designs — that they found have been conducted to examine the effect of business training on the performance of entrepreneurs in developing countries.

Most of this training was conducted by banks or microfinance organizations to borrowers or would-be borrowers, though the providers varied across studies, as did the format, content, and length of training.

The authors found that training:

  • Increases the probability that people will start companies, though the effect might be to accelerate the formation of businesses by entrepreneurs who would have started their companies anyway.
  • Boosts the use of business practices – such as keeping financial records – that are thought to improve business performance.
  • Does not improve the survival of women-owned businesses, and has a limited effect on the survival of men-owned companies.
  • Does little to increase the sales, profitability, or employment of the businesses.

Why does careful scholarly research find so little evidence that business training improves the performance of developing country entrepreneurs and would-be entrepreneurs?

Being academics, the authors’ explanation is largely focused on the limitations of the research itself. Small samples, high rates of attrition, limited time horizons, and great variation in kinds of training conducted, entrepreneurs participating and outcomes measured, make it difficult to find evidence of the benefits of business training, the authors explain.

As an academic myself, I am sympathetic to the authors’ need to be cautious in a scholarly publication. It’s difficult to conclude that something does not work from null findings because errors in measurement can always be the reason.

However, in a blog post, I can ask the question: Is the reason that business training has so little effect on the performance of developing country entrepreneurs because small business training doesn’t work? What do you think?

Training Seminar Photo via Shutterstock

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