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Teaching personal initiative beats traditional training in boosting small business in West Africa
(2017)
Standard business training programs aim to boost the incomes of the millions of self-employed business owners in developing countries by teaching basic financial and marketing practices, yet the impacts of such programs are mixed. We tested whether a psychology-based personal initiative training approach, which teaches a proactive mindset and focuses on entrepreneurial behaviors, could have more success. A randomized controlled trial in Togo assigned microenterprise owners to a control group (n = 500), a leading business training program (n = 500), or a personal initiative training program (n = 500). Four follow-up surveys tracked outcomes for firms over 2 years and showed that personal initiative training increased firm profits by 30%, compared with a statistically insignificant 11% for traditional training. The training is cost-effective, paying for itself within 1 year.
Personal initiative training—a psychology-based mindset training program—delivers lasting improvements for female business owners in Togo. Which types of women benefit most? Theories of dynamic complementarity would suggest training should work better for those with higher pre-existing human capital, but there are also reasons why existing human capital might inhibit training participation or substitute for its effects. We examine the heterogeneity in treatment impact according to different types of human capital. We find little evidence of either complementarities or substitutability, suggesting this new business training approach can work for a wide range of human capital levels.