SME manufacturing

Startups in developing countries tend to grow more slowly on average than those in high-income countries, but the reasons why are not well understood. Researchers analyzed data on all manufacturers with more than 10 employees in Colombia and the U.S. over a period of 30 years to compare employment growth among manufacturers in each country.

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Expanding credit access to small- and medium-sized agricultural producers is an important policy challenge, given the millions of livelihoods affected along its supply chain. Researchers used data on loans to coffee processors across 24 developing countries to study credit and insurance constraints in the coffee sector and assessed whether relationships between lenders and coffee mills could mitigate strategic default.

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Entrepreneurs in Bogota working with Agruppa

Microenterprises such as produce vendors face disadvantages compared to larger firms in sourcing inventory because they must travel frequently to restock and pay higher costs when doing so. Researchers evaluated Agruppa, a mobile phone-based technology service, which creates virtual buyer groups to buy more cheaply in bulk. The evaluation found that initial demand for the service was high, saving business owners time and expense, and increasing profits on certain staple goods.

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Do low levels of trust limit the spread of ideas and knowledge among small-scale firms in African cities? A new study provides micro-level descriptive evidence on the spatial patterns of economic activity among small business owners in one of the fastest-developing cities in southern Africa: Lusaka, Zambia. Innovations for Poverty Action worked with researchers to collect new survey data to investigate the relation between knowledge sharing, trust, and business agglomeration within the city.

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When small or informal firms are invisible or inaccessible to large buyers, including governments, these firms cannot grow and reach their full potential.  Innovations for Poverty Action is working with researchers to evaluate whether a bid training provided by Building Markets that intends to teach businesses how to find, apply for, and win larger contracts can help small businesses grow.

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A fertilizer retailer in Tanzania

Small farm productivity in sub-Saharan Africa lags behind that in Asia and other parts of the world. One reason for this may be low rate of adoption of inputs such as fertilizer. In Tanzania one reason for this may simply be the absence of local retailers, especially in more remote areas. Researchers are testing if their absence may be because of the costs of entering these markets or demand, with interventions targeted to each.

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A used clothing trader and his stock in Lagos, Nigeria

A large theoretical literature suggests that public information can substitute for formal contract enforcement – businesses concerned about maintaining a good reputation will be more inclined to follow through on commitments. However, little is known about the extent to which reputation helps enforce informal business agreements in practice, or about the channels through which information of this type impacts trade.

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For small and medium firms everywhere, the lack of access to buyers can often mean higher transaction and input costs and few incentives to improve efficiency. Governments, however, have strong buying power and increased government purchasing from these firms may help with this constraint. This study uses procurement auctions by Brazil’s federal government to test if the added demand from government improved the performance of winning firms.

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Small and medium enterprises (SMEs) are often important parts of developing country economies, but many programs designed to spur their growth have been unsuccessful. In Egypt, researchers offered small-scale rug manufacturers the opportunity to export to high-income countries. They found that SMEs offered export opportunities increased both their profits and product quality relative to firms in a comparison group.

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Previous research suggests that in many developing countries businesses are less productive on average than their counterparts in developed countries. Additionally, productivity across firms varies more in developing countries than in developed countries. These market characteristics suggest that the forces of competition, growth, and innovation that tend to drive productivity in developed countries may be weaker in developing countries.

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Improving access to credit is thought to help small- and medium- sized businesses participate in international trade, but existing evidence on the link between financing and exportation is mixed. This study evaluated the impact of credit constraints on exporting firms by examining two policy changes in India—one in 1998 that extended subsidized credit to businesses, and another in 2000 that revoked the subsidized credit for a portion of these businesses.

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Despite the prevalence of female entrepreneurs in developing countries, recent research suggests that women do not benefit from loans and grants in the same way that men do, leading to questions about the value of offering financial services to female entrepreneurs.

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