Consolidation Research Initiative
On Entrepreneurship and Business Growth
The Small and Medium Enterprise (SME) Program at IPA brings together a global network of leading researchers and decision-makers to identify, test, and scale-up effective solutions to the constraints that affect SME growth and entrepreneurship in developing countries.
In this new initiative, we seek to build on what we have learned so far by recognizing the contribution of innovators and supporting effective solutions in their path to scale. The vast majority of impact evaluations of business development interventions to date have been at the “proof of concept” stage. However, if we want these solutions to affect thousands—or millions—of people, we need more rigorous evaluations that can validate and adapt the original ideas to different contexts and eventually bring them to scale. This initiative aims to develop a consolidation research agenda to start moving innovative ideas from a proof-of-concept stage to having a more widespread impact at scale.
Path to Scale Award
For High-Potential Innovations in SME Development
The Path to Scale Award for High-Potential Innovations in SME Development was set up to recognize innovative ideas proven to be effective at addressing key constraints faced by entrepreneurs and SMEs in developing countries. Its purpose is to promote replication efforts to test these ideas in a new context and support them in their path to scale. This award was made possible through the support of the Templeton World Charity Foundation, Inc.
Following the review process detailed below, the prize committee selected the study “Teaching personal initiative beats traditional training in boosting small business in West Africa” to receive the award. This research in Togo found that a training focused on personal initiative skills, such as self-starting, future-oriented, and persistent behavior was more successful than traditional business training at increasing sales and profits. The authors of the paper—Francisco Campos, Michael Frese, Markus Goldstein, Leonardo Iacovone, Hillary Johnson, David McKenzie, and Mona Mensmann—were recognized for their work at the SME Program’s 10th Working Group Meeting on November 15, 2019, with a cash prize of $10,000 dollars, which they will be using to return to the entrepreneurs again to see if the training has led to sustainable growth and more employment in the long run.
The Path to Scale award process had three stages:
Stage 1: Call for nominations and selection of high-potential ideas
(December 2018 - April 2019)
The SME Program launched a call for nominations in December 2018 to identify potential candidates for replication. We sought solutions that demonstrated innovativeness, cost-effectiveness, rigorous evidence of impact, and the potential to be sustainably scaled up.
In order to be nominated, ideas needed to meet the following criteria:
- Innovativeness: Address a key constraint faced by SMEs and entrepreneurs in developing countries (i.e. limited access to finance, poor managerial skills, lack of access to markets, etc). Innovative ideas may apply to product or process design, technology, service delivery, or business model. We also considered cases where the novelty does not lie in the solution per se but on the evidence of its impact (i.e. an intervention that has been implemented for some time already but whose impact has only recently been demonstrated by a rigorous impact evaluation). Nominated solutions must count on a clearly defined theory of change.
- Evidence of impact: Have rigorous evidence showing the impact on key outcomes of interest (RCTs will be a preferred methodology). Impact evaluations must have already been conducted by the time of nomination, with results finalized and a working paper available.
- Cost-effectiveness. Solutions that have proven to (or could potentially) be better, faster, or cheaper than its alternatives, delivering high impact at low cost.
- Replicability/Scalability: Has the potential to be replicated in different contexts and eventually scaled up to reach thousands of SMEs in the developing world.
Stage 2: Exploration of replication opportunities
(April - October 2019)
With input from a group of external reviewers, including leading researchers in the sector, the Award Committee shortlisted five promising ideas to move on to the next stage in the process. These ideas were recognized for their innovativeness, evidence of impact, cost-effectiveness, and replicability/scalability. The papers listed below describe in detail the five shortlisted ideas and show their high potential for impact:
- Business plan competition with cash grants
- Original paper: McKenzie (2017) "Identifying and Spurring High-Growth Entrepreneurship: Experimental Evidence from a Business Plan Competition"
- Entrepreneurial mindset training
- Original paper: Campos et al (2017) "Teaching personal initiative beats traditional training in boosting small business in West Africa"
- Business networking program
- Original paper: Cai and Szeidl (2018) "Interfirm relationships and business performance"
- Business consulting services for SMEs
- Original paper: Bruhn et al (2018) "The Impact of Consulting Services on Small and Medium Enterprises: Evidence from a Randomized Trial in Mexico"
- Heuristics-based financial literacy training
- Original paper: Drexler et al (2014) "Keeping It Simple: Financial Literacy and Rules of Thumb"
Through this process, we identified several exciting project leads. We will continue to support their development beyond this stage through our broader replication agenda and pipeline.
At the end of this stage, opportunities that had fully developed into concrete proposals were submitted to the Award Committee for consideration of the larger replication funding.
Stage 3: Prize award
(October - November 2019)
Based on the final replication plans and the prospects of opportunities explored, one study was selected to receive research funding from the SME Program’s replication fund: “The Impact of an Online Entrepreneurial Mindset Training for Youth in Ecuador."
The aim of this replication study will be to better understand the mechanisms through which entrepreneurial mindset training is effective and identify which components of the intervention are crucial for success when implementing it across different contexts. This randomized controlled trial was designed to test a variety of relevant research questions to broaden our understanding of its effectiveness, replicability, and scalability.
The Path to Scale award has kickstarted a process to identify innovative ideas proven to be effective at addressing key constraints faced by entrepreneurs and SMEs in developing countries. Through the process, we have developed a pipeline of promising replication opportunities and will continue to work with researchers and IPA’s country offices to develop them into full studies. These activities will feed into the next stage of the SME Program where we will continue growing this replication agenda, scaling up successful ideas, and supporting them in their path to scale.