Effects of a Business Incubator Experiment in Nigeria

Last registered on April 26, 2024
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Pre-Trial

Trial Information

General Information

Title
Effects of a Business Incubator Experiment in Nigeria
RCT ID
AEARCTR-0013435
Initial registration date
April 22, 2024

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published
April 26, 2024, 12:00 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

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Primary Investigator

Name
Yulu Tang
Affiliation
Harvard
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Other Primary Investigator(s)

PI Name
Rupali Kaul
PI Affiliation
INSEAD
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PI Name
Arinze Nwokolo
PI Affiliation
Lagos Business School
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Additional Trial Information

Status
On going
Start date
2022-04-15
End date
2025-03-01
Keywords
Firms & Productivity
Additional Keywords
JEL code(s)
Secondary IDs
Prior work
This trial is based on or builds upon one or more prior RCTs.
Abstract
Increasing the productivity of small and medium enterprises (SMEs) is a key challenge in emerging markets. While management training for SME owners might improve firm performance, existing research shows modest impacts. In this study, we further explore the impacts of management training, with a specific focus on peer interactions among entrepreneurs during accelerator and incubator programs. We aim to investigate two questions: (1) how do peer effects among startups affect future business growth and performance? (2) what are the mechanisms behind peer effects and heterogeneity on the basis of the gender of the entrepreneur and the stage of the business?
To answer these questions, we partner with Impact Hub Lagos to conduct a randomized controlled trial among firms participating in a business support program. These firms are either established startups participating in the acceleration program or non-established high-growth potential ventures at the idea stage participating in the incubation program. All firms will be assigned to chat groups within an online collaboration platform to stimulate peer interaction and feedback. Over two months, we will use an incentive scheme to encourage firms in the treatment group to ask and answer questions from each other regarding sales and financial management concepts covered during their programs. We will conduct two follow-up surveys at 2 months (short-term) and 12 months (long-term) after the baseline to collect data on firms' business outcomes. Furthermore, to test collaboration or competition between firms, we will run an award experiment offering a $500 prize at the end of the training. A random subset of entrepreneurs will be informed about this award. We will monitor award applications and survey responses to assess information transfer among entrepreneurs regarding the award, which helps gauge collaborative and competitive dynamics. We will also assess heterogeneity in award information sharing based on treatment status. Results from this study can provide policy-relevant guidance on supporting SMEs through peer-based business training models.
External Link(s)

Registration Citation

Citation
Kaul, Rupali , Arinze Nwokolo and Yulu Tang. 2024. "Effects of a Business Incubator Experiment in Nigeria." AEA RCT Registry. April 26. https://doi.org/10.1257/rct.13435-1.0
Sponsors & Partners
Experimental Details

Interventions

Intervention(s)
Our intervention takes two steps. In the first step (Training intervention), firms will be divided into three groups: (1) full treatment group, (2) semi-treatment group, and (3) Control group. For all firms in the full treatment group, and for half of firms in the semi-treatment group, we will use an incentive scheme to encourage firms in the treatment group to ask and answer questions from each other regarding sales and financial management concepts covered during their programs.
In the second step (Information experiment), we will run an award experiment offering a $1000 prize at the end of the training. A random subset of entrepreneurs will be informed about this award, but all firms are eligible to apply for the award. We will monitor award applications and survey responses to assess information transfer among entrepreneurs regarding the award.
Intervention Start Date
2022-07-15
Intervention End Date
2023-10-27

Primary Outcomes

Primary Outcomes (end points)
- firms' sales, the number of workers, the range of business activities, and ratings from experts
- firms’ knowledge of other participants and the intensity of their interactions with each other
- the list of firms that apply for the award
Primary Outcomes (explanation)
The main outcomes of interest will be firms’ business performances, including sales, the number of workers, the range of business activities, and experts’ ratings to measure whether firms improve during the process. We will also collect firms’ knowledge of other participants and the intensity of their interactions with each other. For example, to measure firms’ knowledge of and interactions with other firms, we will ask each firm to nominate firms whose main businesses they know about, and whom they chat with more than three times every week. In addition, we will let firms rate each other and compare their ratings with ratings from the expert to measure the difference. The main innovation of this project is that in this setting, firms are under pressure to compete for the same resources and potential external funding. For the information experiment, the main outcomes of interest include how many other firms entrepreneurs "in-the-know" inform about the award.
We also expect HTEs by baseline difference, such as gender, stage of the business, and more.

Secondary Outcomes

Secondary Outcomes (end points)
- firms' interactions with other participants in the program
Secondary Outcomes (explanation)
We will also analyze the rich chat history data collected from firms' WhatsApp groups. We aim to understand what information that firms share with each other. Furthermore, we will analyze whether information sharing differs when firms are in groups with other firms of the same or different industries.

Experimental Design

Experimental Design
The main goal of this project is to conduct a randomized controlled trial to study the impact of peer effects on the performance of startup firms in business accelerator programs. These accelerator programs usually have two main components. First, they provide these young firms with training on running businesses. Second, they connect entrepreneurs with potential investors. Therefore, participants in the same programs can both collaborate and learn from each other’s skill sets and compete with each other for potential funding opportunities. We aim to analyze and untangle the impact of these two forces on firms’ performance.

We will conduct two experiments: (1) training intervention and (2) Information experiment.

In the training intervention, all firms will be divided into three groups: (1) 133 firms in the full treatment group, (2) 69 firms in the semi-treatment group, and (3) 173 firms in the Control group.
For all firms in the full treatment group and for half of the firms in the semi-treatment group, we will randomly form WhatsApp groups of 3 firms and use an incentive scheme to encourage firms in the treatment group to ask and answer questions from each other regarding sales and financial management concepts covered during their programs. We will then conduct surveys and collect all chat history from WhatsApp to understand what type of information these firms share with each other and how peer interactions affect business performances.
Experimental Design Details
Not available
Randomization Method
We will prerandomize in office using a random number generator in Stata.
Randomization Unit
Individual
Was the treatment clustered?
No

Experiment Characteristics

Sample size: planned number of clusters
Treatment is assigned at the individual level.
Sample size: planned number of observations
355 individuals
Sample size (or number of clusters) by treatment arms
For the (1) training intervention: 133 individuals in the full treatment group, 69 individuals in the semi-treatment group: 69, and 173 in the control group
For the (2) Information experiment: number of people to be informed of the award: 120. From full treatment group: 37. From semi-treatment group: 23. From control group: 60.
Minimum detectable effect size for main outcomes (accounting for sample design and clustering)
Supporting Documents and Materials
IRB

Institutional Review Boards (IRBs)

IRB Name
Lagos School of Business Area IRB
IRB Approval Date
2022-05-23
IRB Approval Number
LBS-RSH-ETHAPP-19
Analysis Plan