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Small Business Training to Improve Management Practices in Developing Countries: Reassessing the Evidence for 'Training Doesn’t Work' (English)

Despite the popularity of business training among policy makers, the use of business training has faced increasing skepticism. This is, in part, fueled by the fact that most of the first wave of randomized experiments in developing countries could not detect statistically significant impacts of training on firms' profits or sales. This paper revisits and reassesses the evidence for whether small business training works, incorporating the results of more recent studies. A meta-analysis of these estimates suggests that training increases profits and sales on average by 5 to 10 percent. The author argues that this is in line with what is optimistic to expect given the relatively short length of most training programs, and the expected return on investment from the cost of such training. However, impacts of this magnitude are too small for most experiments to detect statistically. Emerging evidence is provided on five approaches for improving the effectiveness of traditional training by incorporating gender, kaizen methods, localization and mentoring, heuristics, and psychology. Training programs that incorporate these elements appear to deliver improvements over traditional training programs on average, although with considerable variation. Given that training delivers some benefits for firms, the challenge is then how to deliver a quality program on a cost-effective basis at a much larger scale. Three possible approaches to scaling up training are discussed: using the market, using technology, or targeting and funneling firms.

Details

  • Author

    Mckenzie,David J.

  • Document Date

    2020/09/21

  • Document Type

    Policy Research Working Paper

  • Report Number

    WPS9408

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    World,

  • Region

    The World Region,

  • Disclosure Date

    2020/09/21

  • Disclosure Status

    Disclosed

  • Doc Name

    Small Business Training to Improve Management Practices in Developing Countries: Reassessing the Evidence for 'Training Doesn’t Work'

  • Keywords

    development research group; business training; business practice; small and medium enterprise; increase in profit; business training program; good business practice; market interest rate; return to education; return on investment; human resource management; access to capital; types of firms; role of gender; small business training; lack of finance; access to finance; soft skills training; million people; return on capital; return to investment; cost of training; changes in outcomes; source income; source of income; small business support; vocational training program; impact on sales; skill development program; not statistically significant; confidence interval; firm owner; traditional training; point estimate; standard error; recent studies; first wave; classroom training; time horizon; business profit; traditional business; gender focus; different practice; firm profitability; firm sale; inventory management; treatment effect; Political Economy; profit increase; role models; treatment group; stock control; transport cost; record keeping; regular schooling; in school; train service; business performance; firm growth; active learning; input price; profit margin; market practice; new product; potential lender; local school; school year; course material; master trainer; microfinance client; government contract; binding constraint; remote area; freedom from; short term impact; short-term impact; management capacity; operations management; missing data; peer learning; information exchange; investment behavior; profitable business; new market; local network; external expertise; product differentiation; similar way; Agricultural Extension; business finance; standard accounting; business partnership; large bill; month period; short horizon; entrepreneurial skill; marketing campaign; positive impact; female entrepreneur; educated woman; business experience; business knowledge; entrepreneurial attitude; zero profits; youth program; informal firms; average profit; percent change; estimate impact; study including; individual study; small sample; weighted average; business skill; household finance; statistical significance; rural market; inventory level; manufacturing industry; industry cluster; steel construction; study estimate; local economy; local condition; local good; business information; classification code; policy question; teaching skill; cash grant; firm productivity; household enterprise; entrepreneurship training; private provider; microfinance organization; Research Support; development policy; open access; expected return; formal business; private benefit; public money; public policy; incorporate gender; alternative use; classroom setting

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Citation

Mckenzie,David J.

Small Business Training to Improve Management Practices in Developing Countries: Reassessing the Evidence for 'Training Doesn’t Work' (English). Policy Research working paper,no. WPS 9408 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/593081600709463800/Small-Business-Training-to-Improve-Management-Practices-in-Developing-Countries-Reassessing-the-Evidence-for-39-Training-Doesn-t-Work-39