News and Announcements
"Last week, Innovations for Poverty Action’s SME Initiative brought together researchers and practitioners to discuss recent research on SMEs (Small and Medium Enterprises), mostly in the developing world." A brief summary of the conference.
On November 30, 2011, MIF General Manager Nancy Lee delivered opening remarks at the Innovations for Poverty Action SME Initiative Conference, co-hosted by IPA and the MIF and held at the IDB Headquarters in Washington, D.C. This annual event brings together a broad stakeholder group of researchers, practitioners, and policymakers to discuss the latest research on entrepreneurship and SME development in emerging markets.
- Dec 08/11 | From the newsroom |
The SME Initiative hosted its First Annual Conference on Entrepreneurship and SME Development on November 30, 2011. Co-hosted by the Inter-American Development Bank’s Multilateral Investment Fund, this event brought together over 130 researchers, practitioners and policymakers focused on entrepreneurship and SMEs in emerging markets. Presentations on past and ongoing research studies covered a range of topics related to access to managerial human capital, access to finance, and job creation with evidence from a number of countries, including Ghana, India, Mexico, Peru and Sri Lanka. Practitioner perspectives on each of these topical areas were also presented, to facilitate a dialogue between the worlds of research and policy. The event concluded with a panel discussion on “Why should we care about the ‘Missing Middle’?” Presentations from the event are available here.
IPA Research Affiliate Antoinette Schoar, who has conducted several studies in SMEs, was cited in an Economist article exploring whether the continuing economic recession has changed attitudes toward firm investment and financial decisions.
Past research has shown that exogenous shocks, such as recessions, can modify firm-level behaviour. This view is at odds with traditional theories which posit that firms base their financing decisions on sound economic analysis. But a firm is not a rational actor. It is shaped by its managers whose beliefs are coloured by past and present events. For instance, managers who lived through the Great Depression were scarred by the collapse in capital markets and preferred to rely on internal financing even when it was cheaper to borrow externally.
Interestingly, a firm’s aversion to capital markets can persist for decades after a recession. A recent paper by Antoinette Schoar and Luo Zuo, from MIT’s Sloan School of Management, concludes that managers who begin their career during a recession have a conservative management style when compared with their non-recession peers. The authors find that early career experiences are important and can influence firm-level decisions even decades later, when the “recession manager” becomes a CEO. The companies headed by these managers are reluctant to access public markets, have lower capital budgets and pay higher effective tax. If the pattern from previous downturns holds, then we can expect the next generation of business leaders to eschew capital markets in favour of self-sufficiency. Firms will invest less in capital-intensive projects and in research and development (R&D) to tightly control finances.
Check out the full article here.
Marketplace's Kai Ryssdal interviewed IPA Founder and President Dean Karlan on why people give.
Read an excerpt below, or watch and/or read the full interview here.
Ryssdal: So this is, perhaps, the most basic question of all when we're talking about philanthropy and charity, but why? Why do we give?
Karlan: You know, first of all, I have something fairly obvious to say, which is people do give for lots of different reasons. So there's some easy low-hanging fruit that do explain a lot of people's giving, which is to be part of something, to be part of a greater cause. And the striking thing about that and the tension that that creates is the question of whether people are giving simply to be part of a cause or because of what that cause actually accomplishes and how effective it is.
Civil Society's Fundraising section printed this article announcing GiveWell's recognition of IPA as a standout organization:
"Other charities recognised as 'standout organisations' include GiveDirectly which offers a method to send money directly to the poor, and Innovations for Poverty Action, which carries out research on aid primarily in the developing world and advocates its use in decision-making. KIPP Houston, Nyaya Health, Prathamand the Small Enterprise Foundation are also recognised as standout organisations this year."
IPA Research Affiliate John List was quoted in an article in Nonprofit Quarterly examining donor behavior.
John List, an economist at the University of Chicago has tested matching programs for their capacity to encourage people to give more. List found that a matching program did inspire more people to give, but offering a higher matching ratio decidedly did not lead to larger donations. People whose donations would be quadrupled gave the same amount as people whose donations would simply be doubled. “People get utility or satisfaction out of giving to a good cause. And they do not care how much public good is provided,” concluded List.
One theory about why people are less likely to give if they are more analytical has to do with what is termed here the “drop in the bucket effect,” or the sudden realization that one’s contribution pales in the face of overwhelming need. “If you really did the calculus,” List said, “my 25 dollars to the Sierra Club means nothing on the margins. So if I wanted to be really analytical about it, I’m not going to give.” List asserts that it follows that encouraging donors to give to the most efficient, best organizations might mean that less money actually gets donated.
John List, an IPA Research Affiliate, has been cited in a Boston Globe article exploring the psychological dynamics involved in people donating.
Another prominent theory to emerge from the research is that people give because of social pressure. [...] Those aren’t the reasons we like to think of ourselves as donating, but experimental research on charity tends to support the notion that donating and thinking occupy separate realms. Jonathan Baron, a psychologist at the University of Pennsylvania, asked a group of participants which charity they’d rather give to: one that achieved its goals so efficiently that it could spend 20 percent of its money on advertising, or one that required more money to do the same amount of good, and thus spent less on promotion. Though the first charity was technically more efficient, people tended to favor the latter: What mattered to them was seeing more of their own money at work, Baron concluded, rather than the amount of good it did.
This conclusion is bolstered by the findings of John List, an economist at the University of Chicago, who tested the effectiveness of so-called matching programs, in which a major supporter agrees to match the contributions of individual donors. List expected to find that matching programs enticed people to give, by creating the (correct) impression that their money would go further. But List’s results were curious: While charities that offered a matching program did inspire more people to give than charities that didn’t, he was surprised to find that a higher matching ratio didn’t lead to larger donations. People whose donations would be quadrupled — a huge increase in the power of their gift — didn’t donate any more money than people whose donations would simply be doubled. “People get utility or satisfaction out of giving to a good cause. And they do not care how much public good is provided,” List said.
Read the full piece, which contains many thought-provoking insights.
"Randomised trials could help show whether aid works"
IPA Research Affiliate David McKenzie is mentioned in this Economist news story on the effectiveness of randomized trials, calling back to the Millennium Villages Project that has stirred up some controversy in the development impact sphere this year. Relevant Excerpt:
Michael Clemens of the Centre for Global Development, a think-tank, and Gabriel Demombynes of the World Bank says that a randomised trial is needed to disentangle what the millennium programme is doing from what is happening anyway. In such a trial, each village would be paired with a similar one not getting the same help—and the results compared.
This stirred up a hornets’ nest. In a vitriolic letter to another critic, Mr Sachs calls the idea “that one can randomise villages like one randomises individuals…extraordinarily misguided”. Randomised trials cannot work in villages, he insists, because they are too complex and dynamic. Comparing a millennium village with a randomly chosen one “will add surprisingly little”; the proper comparison is with a region or a country as a whole.
David McKenzie of the World Bank then took up the cudgels. He pointed out that if the impact of the project were as great as its backers claim, it should be discernible even against a shifting background; that, in practice, randomised trials can be used to evaluate complex, dynamic processes, not just simple, static ones (though they have to be designed properly); and that comparing a favoured village against another after the intervention has started—which is being done—isn’t a randomised trial in the proper sense (properly, one should select pairs of villages, then choose one of the pair randomly as the subject of the programme).
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