Speaker: Leonardo Iacovone , World Bank
Title: Teaching personal initiative beats traditional business training in boosting small business growth
Can business training best help small businesses to grow by equipping owners with a set of business practices like accounting and marketing skills, or instead by transferring soft skills inducing a more entrepreneurial personality in business owner? We conduct a randomized experiment in Togo to answer this question. Microenterprise owners were randomly assigned to a control group (N=500); a first treatment group which received standard training on how to improve business practices (N=500); and a second treatment group which received personal initiative training aimed at helping them become more pro-active and resilient to obstacles (N=500). Four follow-up surveys track firm outcomes over two years and show the PI training increases firm profits by 31 percent, compared to a statistically insignificant 11 percent for traditional training. The training is cost-effective, paying for itself within one year. These results suggest that the soft skills personality-based training program had greater impact than traditional training, resulting in higher sales and profits. In particular, it is only for female entrepreneurs that the impact of the soft skills personality-based training on performance is statistically different than the impact of the traditional training. We examine the mechanisms behind this result, and find that especially for female entrepreneurs the improvements are driven by an increased number of workers, investment and access to external finance – additionally entrepreneurs who received entrepreneurial personality training work longer hours and introduce more new product.