The training focusing only on personal initiative outperforms the combined training in the short run, but neither approach has persistent effects on business performance.
Small business owners are offered 40 hours of training over a period of 10 weeks. The training starts with five sessions on personal initiative complemented by either a module on best business practices or an advanced module on personal initiative to go into more depth on the topic.
- To develop business owners’ skills
- To increase the adoption of good business practices
- To improve business performance
These interventions were tested in a country where the costs of doing business as a formal establishment are high. As a consequence, a considerable share of firms operate in the informal sector, and the non-agricultural informal sector captures 38 per cent of employment.
Micro business owners. 58 per cent are women, average age is 42 years old and 61 per cent have studied beyond secondary education. A majority of the participants (63 per cent) have parents who were also entrepreneurs, and 64 per cent report wanting to change something about their business. Levels of personal initiative, perseverance, locus of control and willingness to take risks are high among participants.
All businesses have five or fewer employees, and 70 per cent have no employees. Average monthly sales are US$680, but half of the businesses report monthly sales below US$230. About half are formally registered, 35 percent were created during the past year and only 61 per cent operated continuously during the past year. The businesses operate in a wide mix of industries, with the main ones being manufacturing (26 per cent) and retail (19 per cent). In terms of business practices, there’s room for improvement.
- Basic module on personal initiative: Five four-hour classes focused on developing a personal initiative mindset. The session approach is hands-on, using examples from the local context and exercises applied to the participants’ businesses. This module relates personal initiative to different steps in the entrepreneurial process such as identifying opportunities, setting goals, planning and overcoming barriers.
- Advanced module on personal initiative: Five four-hour classes going into more depth with the materials related to personal initiative. It focuses on concepts related to perseverance, including creative problem-solving, learning from mistakes, anticipating barriers, dealing with emotional setbacks and developing deliberate practice.
- Module on business practices: Five four-hour sessions covering strategic management, stocking, financial management, record-keeping, costing, customer care and business plan formulation.
The cost of the training is US$212 per participant, but there is no charge to those undertaking the training.
Some firms are offered:
- Personal initiative training: The basic module on developing a personal initiative mindset plus the advanced module on personal initiative to study this material in more depth.
- Combined training: The basic module on developing a personal initiative mindset plus the module on good business practices.
A third group is not offered any training.
- Being offered the combined training (business practices + personal initiative) didn’t lead to any positive changes in business practices or business performance for the participant firms in the short or longer run.
- One year after the programme, business owners offered the personal initiative training showed a more developed entrepreneurial mindset (perseverance, personal initiative, future orientation and capacity to overcome barriers).
- Three months after the training, the rate of adoption of recommended business practices was 20 per cent higher among firms offered the personal initiative training than for firms not offered any training.
- The firms offered personal initiative training were more likely to have introduced a new product or production technique and have higher sales and profits.
- The short-run effects of the personal initiative training on business practices and performance had vanished one year later. However, the short-run effects on profits alone compensated for the cost of the training (US$212 per participant) within three months.
- None of the training approaches had robust effects on the use of inputs or access to credit.
- Both men and women entrepreneurs offered the personal initiative training showed higher rates of business practices adoption three months after the training. However, the positive short-run effects on sales and profits were concentrated among men, with the training not triggering better performance for women-led businesses.
- Psychology-based soft skills training can help participants to develop an entrepreneurial mindset.
- The personal initiative training outperforms the combined hard and soft skills training in triggering the adoption of good business practices, but neither approach has persistent effects on business outcomes.