Complementing Managerial Capital with Business Information: A Field Experiment on International Consulting for Entrepreneurs in Uganda and Rwanda.

This research seeks to address a significant constraint to growth among businesses in developing countries: managerial capital. Managerial capital refers to the capabilities and confidence associated with managing cash, customers, competition, capital and constraints within businesses (cf. Bruhn, Karlan and Schoar 2012). 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. In this research, we examine how managerial capital might help entrepreneurs in developing countries to transform their businesses: from micro- to small-sized enterprises and from small- to medium-sized enterprises. Despite the importance of this transformation for economic growth, few researchers so far have examined this phenomenon empirically.

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 programs to a broad mix of entrepreneurs, the majority of whom are self-employed out of necessity and would prefer jobs in the formal sector. Greater selectivity in the recruitment of candidates for managerial capital programs might offer greater potential for impact. In addition, to the best of our knowledge, no study has delivered a consulting program to micro sized enterprises or one in which the participants concentrate on a single business function (e.g. finance or marketing). Prior interventions have also tended to focus on improving finance/accounting practices (e.g. book keeping) or efficiencies in operations (e.g. quality control), either of which can lead to improvements in bottom-line profits. Little emphasis has been placed on the enhancement of marketing and sales practices, which have the potential...