In Simple Words
Imagine a small bicycle repair stand. A growth program provides the owner with a large cash grant to buy advanced hydraulic tools and one year of personal business mentoring to set up complex marketing and accounting systems. If the underlying local demand for bicycle repair is fixed or the owner's capacity to manage employees is limited, giving them a massive simultaneous push does not turn the shop into a regional factory; once the temporary support ends, the business shrinks back to its original manageable scale.
Tailors with small businesses
- Neither grant nor consulting
- Group used for comparison
- Consulting, then a grant
- No lasting average profit advantage
Two selected groups from a four-group trial in Ghana. Consulting began in January 2009; the grant followed in October, about eight months later. The profit finding compares groups over the follow-up. It does not mean zero profit or prove identical results, and is not a prediction for an individual tailor.
See source →Research question
Canonical theories of poverty traps suggest that severe credit and managerial capital constraints inhibit enterprise growth, and that providing a simultaneous large infusion ("big push") of financial and managerial capital can transform microenterprises into growing small-to-medium enterprises.
Participants
160 microenterprise tailors in Accra, Ghana (45 control, 36 capital grant only, 41 consulting only, 36 combined grant and consulting).
Study Design
Randomized controlled trial delivering 200 cedi cash grants (~US $133, doubling baseline working capital) and 1 year of intensive Ernst & Young management consulting (averaging 10 hours per firm) tracked over 24 months across 8 survey rounds.
Results
Neither individual nor combined "big push" treatments produced persistent profit increases; pooled stated income effects were 0.905 cedis for consulting only (p > 0.10), -45.43 cedis for capital only (p < 0.05), and -23.23 cedis for capital plus consulting (p > 0.10) relative to a control mean of 111.9 cedis.
Takeaway
Reject universal "big push" capital and consulting grants as a mechanism for force-scaling microenterprises into formal medium-sized firms without screening for firm demand and managerial capacity.
Source and citation
See source →Read alongside the research
Plain-English glossary
Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.
- Baseline
The starting measurements in a study. Researchers use these to compare what participants were like at the start with what happens later.
ExampleBefore a training programme starts, researchers measure workers’ earnings. That first measurement is the baseline.
GET-IT glossary · Baseline characteristics ↗Read more about baseline →- Randomized controlled trial
A study that uses chance, like drawing lots, to decide who receives each option being compared. Researchers compare the groups’ outcomes to estimate the effect of those options.
ExampleA lottery assigns volunteers to a training programme or a comparison group. Researchers then compare their outcomes.
GET-IT glossary · Randomized study ↗Read more about randomized controlled trial →