Many small firms lack the finance and marketing skills needed for growth. A standard approach is to train the entrepreneur in these skills. However, rather than requiring entrepreneurs to learn everything, an alternative is to move beyond the boundary of the entrepreneur and link firms to these skills in a marketplace through insourcing workers or outsourcing tasks to professionals. A randomized experiment is conducted a in Nigeria to test the relative effectiveness of these different approaches in improving business practices. Insourcing and outsourcing both dominate business training and do at least as well as business consulting at half the cost.
Improving Business Practices and the Boundary of the Entrepreneur: A Randomized Experiment Comparing Training, Consulting, Insourcing and Outsourcing
Both the individual and group-based management consulting are effective in improving management practices. The group-based scheme is clearly more effective than the individual intervention, with similar or better impacts achieved at a third of the cost. None of the schemes lead to increased firm productivity.
Anderson, S. J., & McKenzie, D., 2022. Improving Business Practices and the Boundary of the Entrepreneur: A Randomized Experiment Comparing Training, Consulting, Insourcing, and Outsourcing. Journal of Political Economy, 130(1), 157-209.