Teaching personal initiative beats traditional training in boosting small business in West Africa

Standard business training programs aim to boost the incomes of the millions of self-employed business owners in developing countries by teaching basic financial and marketing practices, yet the impacts of such programs are mixed. The hypothesis tested is whether a psychology-based personal initiative training approach, which teaches a proactive mindset and focuses on entrepreneurial behaviors, could have more success. A randomized controlled trial in Togo assigned microenterprise owners to a control group (n = 500), a leading business training program (n = 500), or a personal initiative training program (n = 500). Four follow-up surveys tracked outcomes for firms over 2 years and showed that personal initiative training increased firm profits by 30%, compared with a statistically insignificant 11% for traditional training. The training is cost-effective, paying for itself within 1 year.

Policy implications

Attributes like proactiveness that are often assumed to be innate can be taught through psychology-based mindset training. Business training programmes should care about developing business owners’ entrepreneurial mindset, as it can lead to innovation and improved firm performance.

Additional information

Hypotheses/research question

Does a psychology-based personal initiative training approach, which teaches a proactive mindset and focuses on entrepreneurial behaviors, have more success?

Study design

Multiple treatment with stratified randomization

Microbusiness owners. Participants’ average age is 41 years, 53% are women, and average schooling is 9 years. Their initial level of personal initiative is already reasonably high (4.2 points on a five-point Likert scale). All businesses have been operating for at least 12 months, are not formally registered and on average have three employees. Mean monthly profits are about USD 199, and half of the microfirms make less than USD 84 a month. They operate in a broad mix of sectors (27% manufacturing, 48% commerce, 25% services). Participant businesses have significant scope for improvement in terms of business practices.

Cost benefit ratio

The training is cost-effective, paying back the cost within approximately one year. The lower bound on the return on investment (ROI) is 82%, and then, using different assumptions on how quickly the benefits might disappear beyond our sample period, ROIs are estimated ranging from 140% to 393% over a ten-year period. In contrast, the traditional training cost $718 per person offered training, and yielded a statistically insignificant average increase in monthly profits of $23 per month over the first two years.

Rounds of data collection

In addition to the baseline survey, four rounds of follow-up surveys were collected between September 2014 and September 2016, enabling to track business outcomes for up to 2 years and 5 months after the training took place.

Baseline data collection and method

The baseline survey lasted approximately 3 hours and included questions on the business, the entrepreneur, and the entrepreneur’s household. The survey was administered face-to-face using paper questionnaires, and translated into three languages: French, Ewe and Kabiye.

Data collection method and data collected

The first follow up survey was a short survey focusing on key outcome variables, participation in the training and mentoring program, and knowledge of principles taught in the training. The following follow-up surveys also included measures of innovativeness.

Unit of analysis

Firms

Stratification

By gender, by sector and by baseline profits.

Delivery partner

World Bank and International Finance Corporation (IFC)

Reference

Campos, F., Frese, M., Goldstein, M., Iacovone, L., Johnson, H. C., McKenzie, D., & Mensmann, M. , 2017. Teaching personal initiative beats traditional training in boosting small business in West Africa. Science, 357(6357), 1287-1290.

Teaching personal initiative beats traditional training in boosting small business in West Africa

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