This research seeks to address a significant constraint to growth among businesses in developing countries: managerial capital. Managerial capital refers to the skills associated with the management of customers, money, operations and people within businesses (Bruhn, Karlan and Schoar 2010). Improvements in managerial capital offer the possibility of improved growth and prosperity. However, there exists substantial evidence that it is not abundant among micro and small businesses – and those in developing countries in particular. The limited empirical work that has used experimental interventions to improve managerial capital has been inconclusive as to whether such interventions have an impact on firm growth, job creation or poverty alleviation. One potential issue is that existing studies typically involve offering business skills training to a broad mix of entrepreneurs, the majority of whom are self-employed out of necessity and would prefer jobs in the formal sector (i.e., subsistence entrepreneurs). Greater selectivity in the recruitment of candidates for management skills training might offer greater potential for impact. Prior training interventions have also tended to focus on building finance and accounting skills, which can lead to improvements in bottom-line profits. Little emphasis has been placed on the development of marketing and sales skills, which have the potential to increase top-line revenues and, in turn, stimulate firm growth and job creation.
We seek to address these limitations by focusing on a more homogeneous group of firms, using a more intense intervention, and providing training programs that focus on only one dimension of managerial capital per course. In part 1, a screening tool will be implemented to identify a homogenous sample of 900 ‘high growth potential’ micro and small enterprises in five locations across the greater Cape Town area of South Africa. Next, in part 2, participants will be exposed to a high quality training intervention. The mini-MBA training programs are provided by Business Bridge and combine online e-learning content with face-to-face classroom teaching sessions in an innovative approach that reduces dropouts, enhances learning, and improves real-world implementation. The course structure also allows us to study the impact of providing ‘specific’ business skills training programs (e.g. marketing skills versus finance skills) as opposed to more general business training. Participants will be randomly assigned into one of three groups. 300 participants will receive the “Marketing and Sales training” intervention through an 8-week intensive course that covers topics such as value creation, customer segmentation, pricing, competitive differentiation, and selling strategies. 300 participants will receive the “Finance and Accounting training” intervention that includes classes on separation of personal and business finances, cash-flow management, business investments, and record keeping (e.g. income statements, balance sheets, etc). 300 participants will be assigned to a control group that does not receive any training but can continue to use the services of our local partner. Prior to the training program launch, a baseline survey will be conducted on all entrepreneurs in the sample (n=900). Following the training, all participants will have their business practices and performance outcomes measured using post-intervention surveys over the next year.
Through this research, we hope to offer insights on how transformational entrepreneurs can be identified and nurtured. We also hope to learn more about the extent to which the effects of managerial capital development depend on the specific training received (marketing vs. finance) and firm size (micro vs. small). In addition, examining the interaction of marketing or finance skills with various individual background characteristics can provide further insights on who benefits more from different types of managerial capital programs.