Training Entrepreneurs: Issue 3

Aid agencies and governments spend more than a billion US$ on entrepreneurship training annually. What have we learned about the effectiveness of training? We review the current understanding of enterprise training. Firms and entrepreneurs are not all the same, and many programmes are targeted to specific types of businesses. Our review is modular, designed so that readers interested in one particular topic do not need to read the entire review. We summarise the state of knowledge in each section as follows:

Traditional entrepreneurship training has modest but (across studies) significant effects on improving business practices and business outcomes for microenterprises. There is a lot of heterogeneity in both samples and results, so there is less guidance on which groups benefit most from traditional training.

Personal initiative and heuristic training can work well for subsistence entrepreneurs, although the quality of the trainers appears to matter a lot. It seems doubtful that medium-sized business owners lack drive and initiative.

Kaizen offers promise for smaller manufacturing firms above the subsistence level, although there are still fewer studies of this approach, and it has not been benchmarked against other training programmes.

Consulting appears to work, leading to improvements for both medium/large firms, and also for smaller firms with an average of 14 workers. However, consulting is expensive, and it is less clear how to scale such programmes. A group-based consulting approach offers potential, and more work is needed on ways to improve the market for consulting services.

Evidence on the effectiveness of incubators and accelerators in developing countries is still scarce, and it is unclear how much the training component matters, and which other non-monetary services have meaningful impacts.

Mentoring of subsistence firms does not appear to offer additional value beyond the cheaper in-person traditional training. Mentoring may work better as a substitute for training, particularly with more advanced firms looking to innovate, but evidence is limited. Matching firms with well-performing peers also offers promising results, although the impacts depend on the type of peer and only certain information will diffuse this way.

There is a need for further experimentation with alternative delivery methods, particularly online training, while television edutainment and SMS messages have not shown detectable impacts.

Creating employment is often a key goal of policymakers. Training programmes for microenterprises tend to only increase the employment prospects of the entrepreneur themself and not generate new jobs for others, while more expensive consulting programmes for larger firms have had some positive impacts on employment, although they may take time to materialise.

This review will be updated as new information becomes available. Our hope is that by facilitating a dialogue between governments, practitioners and researchers, the reviews will generate new research that helps fill knowledge gaps.

Training Entrepreneurs (Issue 3): Presentation of key takeaways

For our launch event, David McKenzie and Chris Woodruff joined us to present the key takeaways from this VoxDevLit, highlighting policy relevant results from recent economic research on training and developing entrepreneurs.