99291 Finance & PSD Impact SEPTEMBER 2015 The Lessons from DECFP Impact Evaluations ISSUE 33 Our latest note highlights the results of a large-scale national business plan competition in Nigeria, which shows how assistance to entrepreneurs can grow companies well beyond the typical subsistence and micro size. Creating jobs through a Business Plan Competition: Evidence from Nigeria’s YouWiN! competition David McKenzie The modal firm size in most a four-day business plan training course. developing countries is one worker, 4,510 business plan applications were consisting of only the owner of the firm. received and scored, and 1,200 winners were Amongst the firms that do hire additional selected to receive prizes averaging workers, most hire fewer than ten. In Nigeria US$50,000 each. survey data indicate that 99.6 percent of firms have fewer than 10 workers. This is in sharp Impact Evaluation Design and Data contrast to the United States, where the The top 300 scores were chosen as modal manufacturing firm has 45 workers national winners, and 180 winners were then Are there constrained entrepreneurs in chosen as top in their respective regions. developing countries with the ability to grow Then for reasons of fairness, operational a firm beyond this ten worker threshold? If practicality, and to enable a rigorous impact so, this raises the questions of whether such evaluation, the remaining 720 winners were individuals can be identified in advance, and chosen randomly from a pool of 1,841 semi- of whether public policy can help them finalists. Our impact evaluation uses this overcome these constraints to firm growth? randomized experiment to compare winners I investigate these questions through to this control group. the context of an evaluation of the impact of Three rounds of annual follow-up a national business plan competition in surveys were taken at 1, 2, and 3 years after Nigeria. the application. Response rates for the experimental sample were 79%, 92%, and The Competition 85%, with results robust to bounding The Youth Enterprise With Innovation in exercises for attrition. Nigeria (YouWiN!) program is a business plan competition for young entrepreneurs in Results Nigeria. It has the stated objective of I estimate results separately for those encouraging innovation and job creation proposing to start new firms, and for those through the creation of new businesses and who applied with existing firms that they expansion of existing businesses, and was wanted to expand. launched by the President of Nigeria in  For new firms, winning results in a 37 October 2011. percentage point increase in the To be eligible for the program likelihood that the individual is applicants had to be Nigerian citizens aged 40 operating a firm three years later; a 23 or younger, proposing the creation of a new percentage point increase in the or expansion of an existing business venture likelihood the firm has 10 or more within Nigeria. workers (Figure 1); more innovation; 23,844 applications were received, and a 23 percent increase in profits. with the top 6,000 getting selected to receive Do you have a project you want evaluated? DECRG-FP researchers are always looking for opportunities to work with colleagues in the Bank and IFC. If you would like to ask our experts for advice or to collaborate on an evaluation, contact us care of the Impact editor, David McKenzie (dmckenzie@worldbank.org) Figure 1: More New Firms Reach the 10 compares favorably to stimulus worker threshold programs in the U.S., and to Impact on the Likelihood of a New Applicant vocational training, business training, having 10+ workers wage subsidy, and small grants to 0.5 microenterprise programs in 0.4 developing countries. 0.3 Policy Implications 0.2 Business plan competitions have 0.1 become increasingly popular policies around the world, and are now included in several 0 World Bank projects in sub-Saharan Africa. Round 1 Round 2 Round 3 Control Treatment However, to date there has been little evidence on the effectiveness of such programs, raising questions of whether they are able to identify potential high  For existing firms, winning results in performance entrepreneurs, and whether they a 20 percentage point increase in spur more growth than would have naturally survival over three years; a 21 occurred. percentage point increase in the The results of this evaluation show likelihood the firm has 10 or more that a business plan competition can be workers (Figure 2); more innovation; successful in identifying entrepreneurs with and a 25 percent increase in profits. the potential to use the large amounts of Figure 2: More Existing Firms Reach the capital offered as prizes, and that these 10 worker threshold individuals appear to be otherwise Impact on the Likelihood of an Existing Firm constrained from realizing this potential. The having 10+ Employees prize money generates employment and firm 0.6 growth that would not have otherwise 0.5 happened. 0.4 However, the results also highlight 0.3 the difficulties of picking winners. Conditional on reaching the semi-finalist 0.2 stage, neither the scores for the business 0.1 plans, nor individual and business 0 characteristics have much predictive power Round 1 Round 2 Round 3 for predicting which firms will grow faster or Control Treatment benefit most from the program. This remains an area for active research, but also highlights  The implied real return on capital is the inherent riskiness of entrepreneurial 1.5 percent per month. activity.  By the end of year 3, the 1,200 winners are estimated to have generated more than 7,000 new jobs. The cost per-job-year generated For further reading see: McKenzie, David (2015) “Identifying and Spurring High-Growth Entrepreneurship: Experimental Evidence from a Business Plan Competition”, World Bank Policy Research Working Paper no. 7391 Recent impact notes are available on our website: http://econ.worldbank.org/programs/finance/impact