An interesting new World Bank study –
Mckenzie, David J. 2015. Identifying and spurring
high-growth entrepreneurship: experimental evidence from a business plan
competition. Policy Research working paper; no. WPS 7391; Impact Evaluation
series. Washington, D.C.: World Bank Group.
ABSTRACT
Almost all firms in developing countries have
fewer than 10 workers, with the modal firm consisting of just the owner. Are
there potential high-growth entrepreneurs with the ability to grow their firms
beyond this size? And, if so, can public policy help alleviate the constraints
that prevent these entrepreneurs from doing so? A large-scale national business
plan competition in Nigeria is used to help provide evidence on these two
questions. The competition was launched with much fanfare, and attracted almost
24,000 entrants. Random assignment was used to select some of the winners from
a pool of semi-finalists, with US$36 million in randomly allocated grant
funding providing each winner with an average of almost US$50,000. Surveys
tracking applicants over three years show that winning the business plan
competition leads to greater firm entry, higher survival of existing
businesses, higher profits and sales, and higher employment, including
increases of over 20 percentage points in the likelihood of a firm having 10 or
more workers. These effects appear to occur largely through the grants enabling
firms to purchase more capital and hire more labor.