Entrepreneurship and small businesses are widely promoted as vehicles for economic growth. However, little rigorous research has been done to support this premise or answer the critical question of what factors constrain small and medium enterprises (SMEs). Managerial capital or training may be one factor limiting the efficiency and growth of firms. This evaluation measures the impact of business training on targeted businesses to determine whether it has the intended multiplier effects for economic welfare by leading to job creation, faster firm growth and stronger supplier or customer networks.
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This project targets self-employed small business owners in urban Accra-Tema and Kumasi with modest levels of formal schooling and substantial experience running businesses. Rather than focusing on a few large businesses, the project aims to identify a greater number of self-employed entrepreneurs, each with the potential to create a small number of new jobs. These individuals are not likely to be operating cutting-edge businesses but are great in number and provide products and services that are fundamental to the functioning of the local economy.
To implement the business training, the researchers partnered with CDC Consult Limited, an Accra-based consulting company, and the National Board for Small-Scale Industries (NBSSI).
A sample was identified through the publication of a business plan competition by radio, newspaper, and door-to-door marketing in neighborhoods containing large numbers of small businesses (as determined from census data). To participate in the competition, applicants submitted a form gathering basic information to ensure compliance with eligibility criteria. Eligible entrepreneurs had to be between the ages of 20 and 55 years and be owners of a business that had been in operation for at least one year with two to 20 employees.
Three hundred thirty five applicants were invited to participate in a three day program, offered by CDC Consulting Limited, designed to guide them in writing a basic business plan. The 141 entrepreneurs who completed the training were asked to submit a business plan and then were invited to present it to a panel of four successful entrepreneurs. The panelists reviewed the business plans and interviewed each entrepreneur, rating each candidate. Based on the panel ranking, each entrepreneur was assigned a probability of being provided with further, more extensive group training and individualized consulting. Half of the ranked entrepreneurs were chosen to receive more intensive follow-on training. The selection was random with probabilities increasing with the panel ranking. This second round of training by NBSSI consisted of a six-day group course based on the International Labor Organization‘s (ILO) “Improve Your Business” model. CDC Consult Limited provided individual consulting advice after this course.
A baseline survey was conducted before the initial three-day business plan training course. The baseline gathered information on the history of the business and the owner and enterprise-level data on assets, sales and revenues, as well as current employees, including apprentices and unpaid family workers. The survey also included measurements of risk aversion, numeracy, logical skills, personality diagnostics, and other measures from the entrepreneurial psychology literature. These measures allow us to identify the characteristics of the entrepreneurs rated most highly by the panel members. After the completion of the group training and individualized consulting, a follow-up survey was conducted to track changes in the business. At least one further follow-up survey was conducted in 2012.
Results forthcoming.