Training Entrepreneurs: Issue 4

There is now a growing evidence base that does provide guidance on the effectiveness of different ways of training entrepreneurs. This Lit summarises what we know to date, and highlights areas where much more work is needed. What has the most promise?

Traditional entrepreneurship training has modest but (across studies) significant effectson improving business practices and business outcomes for microenterprises, but no impact on employment. There is a lot of heterogeneity in both samples and results, so there is less guidance on which groups benefit most from traditional training.

Personal initiative and heuristic training can work well for subsistence entrepreneurs,although the quality of the trainers appears to matter a lot. It seems doubtful that medium-sized business owners lack drive and initiative.

Kaizen ​offers promise for smaller manufacturing firms above the subsistence level, although there are still fewer studies of this approach, and it has not been benchmarked against other training programmes.

Consulting ​appears to work, leading to improvements for both medium/large firms, and also for smaller firms with an average of 14 workers. However, consulting is expensive, and it is less clear how to scale such programmes. A group-based consulting approach offers potential.

Evidence on the effectiveness of ​incubators and accelerators ​in developing countries is still scarce, and it is unclear how much the training component matters, and which other non-monetary services have meaningful impacts.

Mentoring of subsistence firms ​does not appear to offer additional value beyond the cheaper in-person traditional training. Mentoring may work better as a substitute for training, particularly with more advanced firms looking to innovate, but evidence is limited. ​Matchingfirms with well-performing peers ​also offers promising results, although the impacts depend on the type of peer and only certain information will diffuse this way.

Online delivery of training and consulting is increasingly being used and shows some promise. The early evidence suggests smaller, subsistence level firms can also participate in such training, but have to date had only modest benefits from doing so. Impacts have been larger when training is coupled or replaced with one-on-one virtual consulting and is directed to larger and more growth-oriented firms. This is a fast-changing area, and the evidence base outside of the COVID-19 period remains limited. Television edutainment and SMS messages have not shown detectable impacts, while the potential of generative AI to offer customised and sustained scalable training and consulting still lacks evidence.

Five things we have learned:

• Entrepreneurship can be taught, and impacts can last for years.
• Better business practices matter for all sizes of enterprises.
• Training can at least modestly improve business practices for microenterprises.
• More intense consulting improves performance of larger firms and their subsequent growth.
• Innovating the content and delivery methods for training is important.

Five important knowledge gaps:

• What is the best way to screen and select entrepreneurs for training and consulting, so as to match them to the appropriate type and maximise impacts?
• How do we improve the cost-effectiveness and scalability of training and consulting, for example, by using online and generative AI approaches to training, or innovative forms of consulting?
• What are the factors that limit the adoption of proven beneficial business practices by entrepreneurs and managers?
• How do we make markets for training and consulting work better?
• How do we design and evaluate incubator and accelerator programmes?

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