Entrepreneurial Experimentation Hypothesis

Picture this

Think of a home cook given a free set of fancy commercial kitchen tools and a high-end chef's recipe book. The cook tries the new tools and complex recipes to see if they can run a catering business. When the meals take too long, cost too much, and fail to generate income, the cook realizes the expanded setup is unprofitable and goes back to basic home cooking.

What the evidence says

Initial adoption of business practices increased management scores by 5.65 percentage points at 6 months (p < 0.01) and capital grants increased short-run investments by 179 cedis (p < 0.10). However, treatments led to non-positive or negative income shifts (capital treatment reduced stated income by 45.43 cedis, p < 0.05), causing microentrepreneurs to abandon new business practices and revert back to baseline scale within 1 to 2 years.

Who was studied

N = 160 urban microenterprise tailors and seamstresses (human subjects with five or fewer employees) in Accra, Ghana.

How

Randomized Controlled Trial (RCT) featuring four experimental arms (Control N=45, Consulting N=41, Capital Grant N=36, Both N=36) evaluated across 8 survey rounds over two years (2008–2011).

What to do

Evaluate microenterprise intervention outcomes over a multi-year post-treatment horizon rather than relying on short-term adoption metrics.

From the source

"In response to relaxed constraints, the tailors experiment with new techniques, learn that they are not profitable, abandon the techniques and return to their previous scale."

8dfcee5c-2a63-4460-a220-837509002b85-Consulting and Capital Experiments with Microenterprise Tailors in Ghana.pdf

Tags

• entrepreneurship
• microenterprises
• experimentation