We conducted a large RCT at the pan-African level to shed light on the impact of peer effects on innovation and entrepreneurship. The experiment involved around 5000 entrepreneurs (some established, others just aspiring) from 45 African countries. All those entrepreneurs completed an online business course; the treated individuals had the additional possibility of interacting with peers, within groups of sixty and according to one of three different setups: (a) face-to-face, (b) virtually “within” (where interaction was conducted through an Internet platform in groups of the same country), (c) virtually “across” (where the virtually connected groups displayed a balanced heterogeneity across countries). After two and a half months, all participants were asked to submit business proposals, the ones actually submitted being then graded by business professionals and senior investors. The latter also assessed them for possible funding. The resulting 1-5 grades – conceived as measuring entrepreneurship quality – defined one of our main outcome variables, i.e. the quality of submitted proposals; on top of this, the decision itself of whether to submit a business proposal in the first place determined another outcome variable of interest.
In the paper, first we outline our main results concerning the effect of the treatment on the two aforementioned outcomes, submission and quality (intensive margin).
As a second step in the analysis, we construct a social network in each group by defining a weighted directed link between two entrepreneurs as the amount of information (overall size of messages) written by one of them for which we can confirm that the other has been actively exposed to (and hence provided feedback on with some positive probability). Then, exploiting the network structure for the purpose of identification, we estimate the induced peer effects.
A combined consideration of the results reveals a rich interplay of treatment and peer effects. On the one hand, we may conclude that some group homogeneity – or face-to-face contact– bring about positive treatment effects while the group heterogeneity displayed under virtual-across interaction fails to deliver significant such effects on all three dimensions. In contrast, network-based peer effects deliver a quite different pattern. For, in particular, we find that under virtual-within interaction, entrepreneurs’ peers exert a significantly positive influence on submission and the extensive margin but not so on quality per se, i.e. on the intensive margin. A somewhat polar behavior arises in small countries, whose treated entrepreneurs only “interact across” in heterogeneous groups: they also enjoy positive and significant peer effects on extensive quality, but this is to be understood as a reflection of the impact on intensive quality, not submission. In this case, however, there is the third possibility of entrepreneurs of large countries interacting within heterogeneous groups. In a sense, these entrepreneurs appear to combine, in a dominant manner, the features of the other two contexts that, in each case, render peer effects non-significant on, respectively, submission and intensive quality. This, in the end, yields peer effects on extensive quality non-significant as well. The contrast between the nature and implications of the treatment effects and the network peer effects is interesting and deserves further investigation. A possible explanation could hinge upon the positive role that (national) homogeneity/familiarity may play as a source of encouragement (and hence participation), as opposed to the negative impact it could have in reducing novelty of ideas and/or highlighting the fear of competition (thus dis-incentivizing information sharing). To gain a good understanding of these issues, however, one needs the help of theory as well as a detailed investigation of on how communication actually unfolds in our context.
Both the development of a suitable theoretical framework and a a systematic semantic analysis of the vast flow of information exchanged by entrepreneurs (over 140,000 sentences) are part of ongoing research.