Day 1: Research Session – Entrepreneurship

Professor Imran Rasul (University College of London) and Professor Greg Fischer (London School of Economics) chaired the session on entrepreneurship.

The session focused on the causes that determine the growth of entrepreneurship and its impact on the level of economic activity in poor areas and on the wellbeing of lower income strata.

Professor Rasul introduced the importance of entrepreneurship as powerful tool in a poverty alleviation strategy. Recent evidence from developing countries proved that enhancing entrepreneurship and private sector development led to job creation, innovation and helped to move households away from risk and uncertain forms of risk income generating activities as agriculture.

For the first presentation, Prof. Stephen Anderson Macdonald (London Business School) presented a randomized control trial on the impact of marketing skills on firm performance that took place in South Africa.

The study explores a new approach to stimulating entrepreneurship in emerging markets. The investigators measured the different impact on high-growth potential firm performance of a management education programme providing an intense intervention that focused on few key practices rather than on a general approach. The beneficiary firms were divided in two different groups receiving only one aspect of business management (finance versus marketing), and combining this with improved access to business information. The study sample comprised of 830 firms across sectors who received training for over 10 weeks.

Six months and twelve months after the graduation from the programme, evidence proved the survival rate grew up for both the treatment groups compared to the control. Similar results were also evident from the increasing number of employees, proving the impact of the managerial programme on the job market. In terms of across treatment comparison, sales rate proved to be larger for marketing group respect to the finance groups, while the finance trained group proved a more efficient input-output ratio and a the dramatic cost reduction, clearly disentangling the role of specific knowledge endowments on the different business outcomes. The endline results also showed that financially trained firms proved to be more stable in the market rather than firms trained in the marketing treatment group.

For the second presentation, Professor Mushfiq Mobarak (Yale University) presented the study on manufacturing growth in Bangladesh and the effect on the lives of girls and women. The study investigates the effects of the dramatic growth in the Bangladeshi ready-made garments industry (RMG) on the lives on Bangladeshi women.

The RMG sector represents a fundamental sector for Bangladesh employing 4 million workers, whose 80% are female workers. In fiscal year 2008-09, it accounted for 79% of exports and 14% of Bangladeshi GDP. Moreover, according to expert projections, this growth is expected to continue in the near future.

The study compares the marriage, childbearing, school enrollment and employment decisions of women who had closer access to jobs in the garment industry to women living further away from factories.

The data in the survey comes from a survey of 1,395 households conducted by the authors in sixty villages in four sub-districts of Bangladesh. These villages are in a peri-urban area outside of Dhaka city. To evaluate the effect of the proximity of the garment factory the study relied on a garment manufacturer’s association estimates that categorized 44 of the study villages as within commuting distance of a garment factory and 16 as not within commuting distance.

The presence of the RMG sector increases returns to education as one year more of education increases the wage in the garment sector by 3% and parents respond by keeping daughters in school longer. Also, access to factory jobs significantly lowers the risk of early marriage and childbirth for girls in Bangladesh, and this is due to both the girls postponing marriage to work in factories, and the girls staying in school at earlier ages.

Professor Blattman (Columbia University) discussed Professor Mobarak’s work presenting some preliminary results on the immediate welfare effects of industrialization in Ethiopia. The preliminary findings, an analysis of the impact of a randomized control trial where job applicants to a sweatshop factory were randomly offered or refused the job, proved to be controversial. In fact, according to Professor Blattman, it is not clear whether those applicants that got refused the job application are worse off in terms of health and income respect to those that were hired by the factory.

Finally, the presenters and the discussants advocated for more research on the role of private sector development and industrialization and its effect on worker wellbeing.

By Filippo Sebastio, Country Economist, IGC Bangladesh