Innovations for Poverty Action (IPA) is a research and policy non-profit that discovers and promotes effective solutions to global poverty problems. IPA brings together researchers and decision-makers to design, rigorously evaluate, and refine these solutions and their applications, ensuring that the evidence created is used to improve the lives of the world’s poor. Since our founding in 2002, IPA has worked with over 575 leading academics to conduct over 650 evaluations in 51 countries. Future growth will be concentrated in focus countries, such as Myanmar, where we have local and international staff, established relationships with government, NGOs, and the private sector, and deep knowledge of local issues.
Differences in management quality are an important contributor to productivity differences across countries. A key question is how to best improve poor management in developing countries. This paper tests two different approaches to improving management in Colombian auto parts firms. The first uses intensive and expensive one-on-one consulting, while the second draws on agricultural extension approaches to provide consulting to small groups of firms at approximately one-third of the cost of the individual approach. Both approaches lead to improvements in management practices of a similar magnitude (8–10 percentage points), so that the new group-based approach dominates on a cost-benefit basis. Moreover, the paper finds some evidence that the group-based intervention led to increases in firm size over the next three years, while the impacts on firm outcomes are smaller and statistically insignificant for the individual consulting. The results point to the potential of group-based approaches as a pathway to scaling up management improvements.
Las pequeñas y mediana empresas son vistas como importantes motores de crecimiento en los países en desarrollo. Sin embargo, barreras al crecimiento tales como la dificultad para acceder a créditos impiden con frecuencia el desarrollo de ese potencial. Ante este panorama, un grupo de investigadores usó una evaluación aleatorizada para medir el impacto de introducir puntajes de crédito generados por computador sobre los niveles de créditos otorgados a las micro y pequeñas empresas en Colombia. La evaluación reveló que el programa incrementó significativamente la productividad en la aprobación de créditos y mejoró su asignación sin afectar el promedio de los montos autorizados ni las tasas de incumplimiento.
Evaluations of employment programs usually focus on direct impacts on participants, but potential indirect effects are rarely quantified. This paper analyzes the impact of a subsidized apprenticeship program in Côte d’Ivoire. The experiment simultaneously randomized whether apprenticeship positions opened by firms were filled by the program, and whether interested youths were assigned to a formal apprenticeship. This design allows for estimating whether individuals forgo other apprenticeship opportunities (windfall effects), and whether firms replace other apprentices with program participants (substitution effects). We find both effects to be moderate. A framework shows how they combine: overall, 0.74 to 0.77 apprenticeship position is created per subsidized apprentice. Short term impacts on youth earnings were not significant. However, the net value of work provided by apprentices in firms increased, pointing to large indirect effects of the program.
In Mexico, we have continued our global tradition of rigorous, applicable research by building foundational research capacity and conducting evaluations in areas of pressing national concern. Examples of our work detailed in this brief promising insights into everyday issues that affect the lives of people in Mexico.
We organized business associations for the owner-managers of young Chinese firms to study the effect of business networks on firm performance. We randomized 2,820 firms into small groups whose managers held monthly meetings for one year, and into a “no-meetings” control group. We find the following. (i) The meetings increased firm revenue by 8.1%, and also significantly increased profit, factors, inputs, the number of partners, borrowing, and a management score. (ii) These effects persisted one year after the conclusion of the meetings. (iii) Firms randomized to have better peers exhibited higher growth. We exploit additional interventions to document concrete channels. (iv) Managers shared exogenous business-relevant information, particularly when they were not competitors, showing that the meetings facilitated learning from peers. (v) Managers created more business partnerships in the regular than in other one-time meetings, showing that the meetings improved supplier-client matching.
Several field experiments find positive returns to grants for male and not female microentrepreneurs. But, these analyses largely overlook that male and female micro-entrepreneurs often belong to the same household. Using data from randomized trials in India, Sri Lanka and Ghana, we show that the gender gap in microenterprise performance is not due to a gap in aptitude. Instead, low average returns of female-run enterprises are observed because women’s capital is invested into their husbands’ enterprises rather than their own. When women are the sole household enterprise operator, capital shocks lead to large increases in profits. Household-level income gains are equivalent regardless of the grant or loan recipient’s gender.
A randomized control trial with 432 small and medium enterprises in Mexico shows positive impact of access to 1 year of management consulting services on total factor productivity and return on assets. Owners also had an increase in “entrepreneurial spirit” (an index that measures entrepreneurial confidence and goal setting). Using Mexican social security data, we find a persistent large increase (about 50 percent) in the number of employees and total wage bill even 5 years after the program. We document large heterogeneity in the specific managerial practices that improved as a result of the consulting, with the most prominent being marketing, financial accounting, and longterm business planning.
The Small and Medium Enterprise (SME) Program at IPA discovers and promotes effective solutions to the constraints faced by entrepreneurs and SMEs in developing countries. SMEs are the largest generators of employment in the developing world, creating nearly 60% of new jobs. They also generate a myriad of opportunities across sectors and geographic areas, and employ broad and diverse segments of the labor force. SMEs in developing countries, however, face constraints that are disproportionately large compared to those faced by larger firms and by SMEs in developed countries. Limited access to finance, low levels of human capital, and difficulty accessing markets stand out as some of the most challenging barriers to business growth.
We use a field experiment to show referral-based hiring has the potential to disadvantage qualified women, highlighting another potential channel behind gender disparities in the labor market. Through a recruitment drive for a firm in Malawi, we look at men's and women's referral choices under different incentives and constraints. We find that men systematically refer few women, despite being able to refer qualified women when explicitly asked for female candidates. Performance pay also did not alter men's tendencies to refer men. Additionally, women did not refer enough high quality women to offset men's behavior.
This paper studies the impact on well-being and business outcomes from teaching stress-management practices to small firm owners in Bangladesh. Female owners were randomly assigned either to a treatment group that received a 10-week Cognitive Behavioral Therapy (CBT) course featuring priority-setting and relaxation techniques, or to a control group exposed to Empathic Listening. CBT leads to large initial reductions in owner stress, but no initial increase in firm profits. Six months after receiving CBT, owners in sectors with a low concentration of women show large and significant effects on stress, and their firms show increased profits. By contrast, owners in female-dominated sectors experience a short-lived reduction in stress, and firms show no changes in profits. The large post-treatment differences in well-being and profits between industries suggest that the ability to manage stress is malleable, and that industry choice proxies for traits that are strongly correlated with returns to training.
IPA Zambia is pleased to share its second quarter bulletin of 2017. This bulletin features updates on our research projects on improving public services by improving staff allocation; trust, spontaneous clusters, and the growth of urban small- and medium-sized enterprises; and interpersonal communication to encourage use of the Maximum Diva Woman's Condom. This bulletin also highlights IPA Zambia's presentation of preliminary results from the Girls Negotiation study in early May.
We conduct a randomized experiment that generates exogenous variation in the access to foreign markets for rug producers in Egypt. Combined with detailed survey data, we causally identify the impact of exporting on firm performance. Treatment firms report 16–26% higher profits and exhibit large improvements in quality alongside reductions in output per hour relative to control firms. These findings do not simply reflect firms being offered higher margins to manufacture high-quality products that take longer to produce. Instead, we find evidence of learning-by-exporting whereby exporting improves technical efficiency. First, treatment firms have higher productivity and quality after controlling for rug specifications. Second, when asked to produce an identical domestic rug using the same inputs and same capital equipment, treatment firms produce higher quality rugs despite no difference in production time. Third, treatment firms exhibit learning curves over time. Finally, we document knowledge transfers with quality increasing most along the specific dimensions that the knowledge pertained to.
In Burkina Faso, Côte d'Ivoire, and Mali, we have continued our global tradition of rigorous, applicable research by building foundational research capacity and conducting evaluations in areas of pressing national concern. Examples of our work below offer promising insights into everyday issues that affect the lives of the Francophone West African poor.
Over the past five years, the SME Program at IPA has grown from an ambitious idea to a thriving, prolific, and influential initiative. It is with great enthusiasm that we share this report highlighting some of our accomplishments—which would not have been possible without the collaboration and support of so many of you.
Our work began at the end of 2010, when we sat down with leading practitioners and academics working on entrepreneurship and SME growth in developing countries, and assessed the most pressing knowledge gaps in the sector. At the time, only a handful of impact evaluations had been conducted on SME support programs in developing countries, and there was an urgent need for evidence to help guide decision-making.
Following that initial event, IPA launched the SME Program (formerly known as the “SME Initiative”), with the goal of addressing the existing knowledge gaps and generating evidence on the most effective solutions to the constraints SMEs face in developing countries. Since then, our network of researchers and practitioners has continuously expanded, and has regularly come together at our conferences, working group meetings, roundtables, and workshops. New partnerships have emerged from these gatherings and from the SME Program’s support in identifying and promoting new research opportunities.
Over the past five years, IPA’s research portfolio in the SME sector has grown to include more than 85 studies in 32 countries, leading to valuable lessons learned that can inform the design of more effective policies and programs. Our hope is to see this research used to help SMEs succeed and generate sustainable livelihoods.
In this report, we present some highlights from the SME research portfolio, lessons learned in each of our program’s focus areas, details about the events we have hosted, and information about what we do to support, create, and promote evidence in the SME sector.
The relationships we have built and the evidence we have helped generate over the past five years have already started to make a difference in the SME sector. These achievements would not have been possible without the commitment, passion, expertise, generosity, and hard work of our research affiliates, partners, donors, and IPA staff across the world. To all of them, we are deeply grateful.
Many important questions remain unanswered and there is still much to be done to bridge the gap between the worlds of research and practice. We are eagerly embarking on the next phase of bringing a culture of evidence-based decision-making to the SME sector.