Please use this form to submit your study for inclusion into our database. It will be checked by a member of the Innovation Growth Lab team, who may be in contact to ask for more information. Your email address * Your name * Title * The name of the study Short summary . A randomized experiment is conducted a in Nigeria to test the relative effectiveness of these different approaches in improving business practices. A brief description of the project's goals and its current state Abstract <p>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.</p> The full abstract of the study, if available Links https://doi.org/10.1086/717044 Links to any published papers and related discussions Authors * Affiliations Academic and other institutes that the authors of the study are members of Delivery partner Organisations involved in delivering the trial, if appropriate Year Year Year199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023202420252026 Month MonthJanFebMarAprMayJunJulAugSepOctNovDec Day Day12345678910111213141516171819202122232425262728293031 Journal Journal publishing the study, if available Publication stage * Working Paper Published Ongoing Research Forthcoming Discussion Paper Research theme * Entrepreneurship Innovation Business Growth Country Country or countries where this study took place. Topics What sort of topics does the study cover? Sample attributes Hypotheses / research question Why do more firms do not use a marketplace for business services on their own? Sample Trial population and sample selection The experiment works with firms that attended induction workshops held in Abuja and Lagos from March to December of 2016. To qualify for the programs in the experiment, firms needed to pass a second screening step demonstrating they: (i) were not already insourcing or outsourcing both their marketing function and finance function; (ii) had between 2 and 15 workers; and (iii) received a score of 5.0 to 8.0 (out of 10) in terms of their baseline business practices. Number of treatment groups Size of treatment groups Size of control group Unit of analysis Clustered? Yes No Cluster details Trial attributes Treatment description Each firm is only offered one of the four support schemes: business training for the entrepreneur, one-on-one consulting to the entrepreneur, support to hire a new worker (insourcing) or support to contract an external specialist (outsourcing). A fifth group doesn’t receive any support. Business training: A mix of 25 hours online and 12 days of classroom-based business training covering five core modules on financial management, general operations, writing a business plan, marketing management and human resources. Optional modules are also available on enterprise governance, personal productivity and tourism/hospitality. All business trainers have some form of skill certification, 82 per cent have postgraduate education and an average over 15 years of work experience. Trainers don’t directly carry out any activities for the firm but instead try to increase the entrepreneur’s skills. One-on-one consulting: The government pays for business consultants to provide 11 days (88 hours) of personalised consulting to the entrepreneurs. The support starts with an initial visit to review the current business situation and propose a list of business areas upon which the consultant can advise. These areas are tailored to each firm based on their needs, but they typically focus on management, finance and accounting, marketing and sales, operations and human resources. Ten more meetings follow over a period of six to nine months and at least once a month. The consultants are from local companies that applied to work with the GEM project. They are screened based on qualifications and expertise, then given 5 to 10 days of training on value-added consultancy support. Consultants average over 12 years of work experience, are highly educated, with 88 per cent having postgraduate degrees, and most of them have some formal skill certification (80 per cent). Insourcing: The firm is given access to an online marketplace where they can choose a human resources (HR) service provider to help them recruit an accounting or marketing specialist to join the firm as a full-time employee and carry out the relevant business function. If the firm decides to hire a worker, it receives an initial subsidy to cover the HR provider’s service fee plus monthly subsidies to support, at a decreasing rate, the worker’s wage during eight additional months. Insourced workers are much younger on average (around 29 years old), have less work experience (3.5 years) and are less likely to possess a postgraduate degree (32 per cent) or formal skills certification (24 per cent) than the professionals in the other support schemes. Outsourcing: The firm is given access to an online marketplace where they can choose an accounting or marketing service provider who can be contracted to perform tasks in the respective functional area. If the firm decides to contract a service provider, it receives a declining monthly subsidy over nine months of the same value as the subsidy provided in the insourcing intervention. The external professional is required to spend at least one day a week doing these tasks. The outsourced specialists are similar to the business consultants in terms of experience, although they’re less likely to have a postgraduate degree (59 per cent) or formal skills certification (67 per cent). Rounds of data collection Baseline data collection and method After applying online, a first screening was done to ensure firms met three eligibility criteria: (i) operated in a targeted sector; (ii) had between 2 and 100 employees; and (iii) provided all necessary information. They were then invited on a rolling basis in batches to attend the induction workshops. Here firms were administered a more detailed diagnostic questionnaire that determined which programs they were eligible for. This also doubles as the baseline survey. Data collection method and data collected Evaluation Outcome variables <p>Business Practices and Firm Growth.</p> Results <p>Both the individual and group-based consulting support led to similar improvements in management practices, with adoption of structured management practices increasing from 56 per cent to 64–66 per cent.</p> <p>The improvements in management practices occurred across all five areas of interest and persisted for at least one year after the intervention ended.</p> <p>Only the group-based scheme resulted in firm growth, with the number of employees employment increasing by 10–12 per cent and sales by 8–9 per cent. </p> <p>Number of employees effects persisted for at least three years after the intervention ended.</p> <p>None of the schemes had an impact on firm productivity, as measured through sales per worker.</p> <p>Peer learning within groups seemed to be driven by co-ordinated experimentation and learning, not by group members taking existing best practices from other group members into their own firms.</p> <p>The group-consulting scheme paid for itself in just over a year.</p> Intervention costs All four treatments were offered free to firms. The cost of offering each treatment was designed to be approximately the same (US$2,000) for business training, insourcing and outsourcing, while business consulting was anticipated to be twice this (US$4,000). Cost benefit ratio Reference 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. Citation for use in academic references
