Our study, despite general doubts, aims to deliver answers to how exactly growth of microenterprises is possible. Our proposed experiment combines different aspects of recent studies that found positive effects on growth. We thus want to set our study in the context of a larger, new strategy in development economics, proposed by Banerjee and Duflo in “Poor Economics”: “the accumulation of a set of small steps, each well thought out, carefully tested, and judiciously implemented”.
Through a global economic perspective, it is striking that some countries are very rich and some countries are very poor. In order for poor countries to catch up, their economies have to grow. This growth can be generated through foreign companies in developing countries or firms run by local elites.
However, these comprise the dangers of profits not staying in the country and of strengthening corrupt of oppressing elites. An alternative way lies in the generation of growth of very small enterprises. The incomes they generate are more likely to reach the poorer part of the population (e.g. by creating employment) or to be reinvested generating further growth than when money flows to local elites or abroad.
We thus see the generation of growth for microenterprises as crucial in terms of the economic development and alleviation of poverty in poor countries. However, we agree with Easterly, that it is wrong to ask “the question of what the end of poverty requires” (Easterly, 2006, p. 11). Instead, it is important to look at more concrete problems and find ways to solve them. We see growth of microenterprises as one of such problems, as it is inhibited by a number of constraints. Some researchers even raise “doubts that microenterprises can generate general economic growth” (Fiala, 2013).
Even the young, widely implemented phenomenon of microfinance has not changed much in terms of growth. In Poor Economics, Banerjee and Duflo write about microfinance: “”We cannot count on it to be a stepping-stone for larger business to be created”, and that this would be “the next big challenge for finance in developing countries” (Banerjee & Duflo, 2012).
Table of Contents
1. INTRODUCTION
2. LITERATURE REVIEW
2.1 FINANCIAL CAPITAL
2.2 HUMAN CAPITAL
2.3 BEHAVIORAL CHARACTERISTICS
3. EXPERIMENT DESIGN
3.1 SAMPLE SELECTION
3.2 BASELINE SURVEY
3.3 TREATMENT
3.4 FOLLOW UP SURVEYS
3.5 MEASURING GROWTH
4. DISCUSSION
Research Objectives and Core Themes
This study aims to investigate how microenterprise growth can be fostered in developing countries by evaluating the efficacy of different training interventions tailored to the specific behavioral characteristics of entrepreneurs. The research seeks to determine whether accounting-focused training or rule-of-thumb heuristic training better drives business performance and long-term sustainability.
- Analysis of financial and human capital as constraints to microenterprise growth.
- Evaluation of business training interventions: accounting techniques versus rule-of-thumb heuristics.
- Examination of the role of personal characteristics, such as competitiveness and risk preference, in entrepreneurial success.
- Longitudinal assessment of business performance through multiple follow-up surveys.
Excerpt from the Book
3.2 Baseline Survey
The baseline survey will be conducted among all participants prior to treatment. Initial demographic data(age, sex, time with MFI) will be acquired from the MFI prior to the survey. The survey consists of several components: A questionnaire assessing the motivations of the microentrepreneur to grow their enterprise, an assessment of business knowledge, and a behavioural experiment. For a detailed schedule of surveys and follow ups, please see appendix A.
Research by Fiala (2013) suggests that the intention of the entrepreneur to grow their enterprise may be a good indicator of microenterprise growth. We will gather ordinal data regarding the participant’s level of interest taking a larger loan with the intent of growing their enterprise. The function of this short questionnaire is not to exclude participants from our sample, but to analyze tentative differences in purpose and their consequent post-treatment outcomes.
Business knowledge will be studied through a set of incentivized questions on best practice in business, covering topics such as customer care, employee management, time management, and definitions of sales, profits, variable costs and working capital. In the follow-up survey, a separate set of non-incentivized questions will be asked on the profit concept. We will measure a client’s business knowledge by the number of correct answers he or she had in these tests.
Summary of Chapters
1. INTRODUCTION: This chapter highlights the crucial role of microenterprise growth in poverty alleviation and outlines the study's objective to test training effectiveness despite existing academic skepticism.
2. LITERATURE REVIEW: The section reviews the impact of financial and human capital on enterprise development, emphasizing the need for targeted behavioral insights in microfinance.
3. EXPERIMENT DESIGN: This chapter details the methodology for sample selection, the implementation of diverse training treatments, and the longitudinal approach to measuring business growth.
4. DISCUSSION: The final chapter reflects on the study's potential for identifying optimized training matches for specific personality types and discusses the limitations of the experiment.
Keywords
Microfinance, Microenterprise, Economic Growth, Financial Capital, Human Capital, Behavioral Characteristics, Accounting Training, Rule-of-thumb, Entrepreneurship, Poverty Alleviation, Randomized Experiment, Business Performance, Risk Preference, Competitiveness, Developing Countries
Frequently Asked Questions
What is the primary focus of this research?
The research focuses on identifying effective methods to stimulate growth in microenterprises within developing countries, specifically by comparing accounting training with rule-of-thumb training.
What are the core thematic fields of the work?
The work covers development economics, microfinance, entrepreneurial behavior, business education, and quantitative experimental design.
What is the main research question?
The research asks how microenterprise growth is possible and whether specific training treatments work more effectively for entrepreneurs with certain personal characteristics.
Which scientific methods are utilized?
The study utilizes a randomized controlled trial (RCT) design, involving baseline surveys, incentivized behavioral experiments, and longitudinal follow-up assessments.
What topics are discussed in the main body?
The main body covers a literature review on capital constraints, a detailed design for training interventions (accounting vs. rule-of-thumb), and a methodology for measuring long-term business performance.
What are the key descriptive terms for this study?
Key terms include microfinance, business heuristics, randomized evaluation, human capital, and entrepreneurial motivation.
Why is the "rule-of-thumb" training considered as a treatment?
It is tested because simpler, heuristic-based financial management techniques have shown significant potential in improving business results for entrepreneurs compared to traditional, complex accounting courses.
How does the study intend to measure confidence and competitiveness?
The study uses a behavioral experiment where participants make choices regarding competition and performance, providing quantifiable data on their willingness to compete and their level of self-assessed confidence.
How are the follow-up surveys structured?
Performance surveys are conducted at 3 weeks, 6 weeks, 3 months, 6 months, and 1 year to track income, profit, employment, and the sustained application of taught business practices.
- Citar trabajo
- Leon Freytag von Loringhoven (Autor), Federico Guss (Autor), Carson Kadas (Autor), 2016, Boosting Microenterprise Growth. The Importance of Human Capital and Microentrepreneurs’ Characteristics, Múnich, GRIN Verlag, https://www.grin.com/document/322338
