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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 Leads to Remarkable Growth of Women-Owned Small Businesses in Togo
(2018)
Standard business training programs aim to boost the incomes of the millions of self-employed business owners in developing countries, by teaching accounting, marketing and other basic business skills. However, research shows limited impacts of this traditional business training approach. Through an experiment in Togo, we introduced the personal initiative training program, a new and effective psychology-based entrepreneurship training that outperforms traditional business training. The personal initiative training increased firm profits in Togo by 30 percent relative to a control group, compared to no significant impacts from a traditional business training. Personal initiative training led to more than just a boost in profits for micro entrepreneurs. After the training business owners were more innovative, introduced new products, borrowed more and made larger investments. The personal initiative training was particularly effective for female entrepreneurs, for whom traditional training has often been in effective. Women who received personal initiative training saw their profits increase by 40 percent, compared to 5 percent for traditional business. This study’s findings make a strong case for the role of psychology in better influencing how small business training programs are taught in West Africa and beyond. It shows the importance of developing an entrepreneurial mindset in addition to learning the business practices of successful entrepreneurs. Based on these promising results, the personal initiative training is being implemented in programs in Mozambique, Mauritania, Ethiopia, Jamaica, and Mexico.
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.
While female entrepreneurship has important impacts on economic development, female-owned businesses obtain lower profits and lower growth rates than male- owned businesses. We conduct a randomized controlled field experiment with 1196 entrepreneurs in Lomé, Togo, to determine whether personal initiative training constitutes a way to enhance female entrepreneurs’ business success and to close this gender gap. Basing our argumentation on social role theory and the process model of entrepreneurial action, we argue that because of their social gender roles female entrepreneurs perceive that entrepreneurial action incurs higher risks and lower returns. We hypothesize that personal initiative training leads female entrepreneurs to decrease perceived risks of entrepreneurial action by increasing their entrepreneurial self-efficacy and error competence and to increase their perceived returns of entrepreneurial action by increasing entrepreneurial passion, which ultimately leads to female entrepreneurs’ business success. The results largely support our hypotheses. This study contributes to the literature on the gender gap in entrepreneurship and has important implications for entrepreneurial training interventions.