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Lecture 3: Management and Business Training with Jing Cai — Transcript

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0:18this
0:31is
0:36so uh welcome everyone uh my name is
0:39Dave Donaldson and along with David
0:41Atkin we've been um
0:43uh convening a series of PhD lectures on
0:46firms and development on behalf of bread
0:49and igc and uh we want to thank you for
0:51joining us today for lecture three uh
0:54lecture three will be given by Jing Kai
0:56Jing is a professor of Economics at
0:59University of Maryland and a genuine
1:02expert in this space of firms
1:04development and is in fact currently the
1:06co-chair of the firm sector in the j-pal
1:09organization so um Jing's going to talk
1:13today about uh as you can see uh the
1:15theme of management and business
1:16training so just briefly to kind of
1:19connect this to previous lectures and
1:20and also to Future lectures in this
1:23course
1:24um wanted to sort of highlight a couple
1:26things so in lecture one David and I um
1:29uh you know tried to organize a a bit of
1:34um
1:34a bit of uh you know introductory
1:37material on this topic around the sort
1:39of theme of uh understanding the
1:41Technologies and the sort of techniques
1:43that firms use for sort of producing
1:45what they have given a fixed number of
1:47inputs and then a sort of second matter
1:49of like well sort of you know are firms
1:52getting the right inputs and sort of
1:53that's uh that's a separate question
1:55that's more to do with the misallocation
1:57of inputs across firms so in lecture two
1:59uh Eric verhugen uh began sort of
2:03touching on the theme of kind of
2:04technology and techniques that firms use
2:07and sort of uh ways they can upgrade
2:09those those techniques and uh you know
2:11by and large Jing is going to continue
2:13that theme today but more in the topic I
2:15don't kind of management and how we can
2:16sort of you know attempt to improve uh
2:19you know techniques by into the theme of
2:21business training uh and then starting
2:23uh tomorrow uh we'll sort of dig more
2:26into the misallocation side of the uh of
2:29that um that organizing framework that
2:33um that I mentioned so with that
2:35Preamble uh done I uh nothing left for
2:38me to do other than hand it over to Jing
2:40it's all yours and thanks again for
2:41doing this Jing
2:43thank you Dave for the intro
2:45introduction and
2:46and Dave Barr invited me to give a
2:49lecture here
2:50um so today I'm going to talk about
2:52management and business training and
2:55here is our outline of today's lecture
2:58so in the first part I'm going to give
3:01you some introduction to the management
3:04literature and I'm going to talk about
3:06how to measure management and also show
3:09you some evidence about the impact of
3:12management from outcomes
3:14and then in the second part of the
3:16lecture
3:17um I'm going to
3:19introduce some strategies and
3:22methodologies used in business training
3:25I'll show you evidence about
3:27um like evaluations uh um on existing
3:31training programs and then discuss some
3:34alternative approaches to the standard
3:36business training
3:37and lastly I'm going to summarize what
3:40we have learned and then discuss some
3:42open questions in this area
3:46so as they've said from previous
3:48lectures we have learned that there are
3:51large and persistent differences in
3:54productivity both across firms and
3:57across countries
3:58for example in the U.S firms in
4:01Industries producing homogeneous Goods
4:04such as block Ice and oak flooring
4:07display 100 productivity spread between
4:10the 10th and 90th percentile and this
4:14productivity dispersion appears even
4:16larger in developing countries
4:19specifically the ratio of the native to
4:22the 10th percentile of the pfp is five
4:25in India and 4.9 in China
4:29and why there are can be manufacturers
4:32driving these productivity difference
4:36um one company cited reason for this
4:39difference is that in developing
4:40countries the adoption of advanced
4:44management practices is very low and
4:46there's a lack of
4:48managerial skills among business owners
4:52so why people Believe Management could
4:55make a difference so so firstly if we
4:58simply look at the correlation between
5:01management scores and control level GDP
5:04there's obviously a positive correlation
5:07and firm a management experience looks
5:10very much like tfp stress but even with
5:13those evidence there's still like a wide
5:16debate on
5:18um for a long time about like whether
5:20management is important so why um there
5:24are like some uh capitalism about the
5:27importance of management so the first
5:30reason could be that
5:32um profit maximization will lead firms
5:35to minimize costs as a result any
5:39residual variations in management
5:42practices will reflect from optimal
5:45response to
5:47um like different market conditions that
5:50they are facing so for example firms in
5:53developing countries may not adopt
5:56Quality Control Systems because the
5:59wages they are so low that repairing
6:02defects is very cheap as a result their
6:06management practices are not bad but
6:09it's just the optimal response to the to
6:11the low wages
6:13so in other words people firms are
6:16making actually optimal choices about
6:19whether to use some management practices
6:22or not another second reason for the
6:25doubt is that because of the complexity
6:27of management it's very difficult to
6:31measure uh management and as a result
6:35um it's also difficult to evaluate the
6:37impact of adopting management practices
6:40on firm outcomes
6:42so I forgot to say that feel free to
6:45unmute yourself and interrupt me if you
6:48have any questions
6:52um so in order to uh look into this
6:55issue the first step would be to develop
6:58some tools to measure management
7:01so Bloom and Bering then 2007 paper was
7:05among the first to develop survey tools
7:08to measure management and practices
7:11so they worked with over 300 firms in
7:15several countries like us UK France and
7:19Germany those are very big companies
7:21with median sites of brands of 600
7:24employees
7:26so in this project they firstly
7:29developed management practice scoring
7:33system and specifically they designed
7:36scorecards for 18 different management
7:39practices and then conducted about 45
7:42minutes from interview with uh managers
7:46of those firms
7:47and in order to get unbiased responses
7:51they conducted a double-blind interview
7:54in that
7:56interviewers do not know the company
7:59performance
8:00um before they they before before the
8:02phone interview and also managers are
8:05not informed in events that they will be
8:08scored on the management practices
8:11and they also spend some effort in order
8:13to like get firms to participate in the
8:15interview including
8:18um that they introduce this as a Link
8:20Manufacturing interview does not include
8:22any Financial questions and also the
8:25survey got endorsed by several
8:29government entities
8:33so let me give you one example of um uh
8:37how do they measure Management in this
8:41in this survey so one important element
8:44to matter here is uh is the monitoring
8:48um system or in other words how was the
8:50performance tracked in a company so
8:54there are a scores ranging from one to
8:56five so a company would receive a score
9:00of one if
9:02um the major structs do not indicate
9:05they're actually
9:06if our business objects is are are met
9:09and there are certain
9:12processes are not checked at all and
9:16companies would receive a score of a
9:18middle score of three if most of the key
9:21performance indicators are tracked
9:23formally and this tracking is overseen
9:26by Senior Management and they're going
9:28to receive a high school if performance
9:31is checked both tracked and communicate
9:34it
9:35to to employees in order to kind of
9:39facilitate further improvements based on
9:42the on the monitoring
9:44so this is one example
9:46um about their uh of their scorecard
9:49and they did like internal validation of
9:53the scarring by really interviewing a
9:55subset of the firms with different
9:57interviewers and managers and they find
10:00um a high and a positive correlation
10:04and after that that use these mention my
10:07score to estimate the impact of
10:10management
10:12um and several key like firm level
10:15performance measures
10:18and for this they use um some like
10:21accounting data
10:23with a range of like 11 years so from
10:27this table we can see that management
10:29seems to have a significant and positive
10:33impacts on a range of firm outcomes
10:37um but one thing to note is that this is
10:40uh just a correlation study without any
10:43causality but this correlation seems
10:48promising in a sense that we do see the
10:51management score has a positive impact
10:53on different types of firm outcomes
10:56so with this then um researchers started
10:59to think about like how to identify the
11:02quotes or impact of management on Farm
11:05outcomes
11:06so
11:08um for this I'm going to
11:10um uh talk in detail about Bloom at or
11:132000 and um and 13 paper which was the
11:18first experiment to a field experiment
11:21to evaluate the impact of management
11:24practices on
11:26um tfb and some other firm outcomes so
11:31this experiment was implemented with um
11:3520 plus in large multi-plant firms in
11:41India
11:42and they provided like um management
11:46consulting services to the treated plans
11:50and for the control plans they only
11:53receive a one month
11:56diagnostic treatments but without any
11:59Consulting Services
12:01and they collected weekly data on all
12:04plants for three years from 2008 to
12:072010.
12:10so here are some like uh let me let me
12:12go through their design in in more
12:15detail
12:16so the Consulting Services they provided
12:19was
12:20um
12:2138 specific practices tried to factory
12:25operations quality and inventory control
12:29and this Consulting treatment
12:32has uh three phases and the first phase
12:36is a diagnostic base and this lasts for
12:40one month and both the treatment group
12:43and control group received this phase
12:46and in this step they talk with the
12:50managers in each plant and ask them what
12:54kind of management practices are they
12:56are they using
12:57so this is basically an evaluation of
13:00the current management practice used by
13:03by each plant
13:05and the second stage is the
13:08implementation phase and and this step
13:11takes uh took a hormones and only in the
13:16treatment group received uh received
13:18this
13:19this space and in in those four months
13:22is the Consultants introduced some key
13:26management practices to for our managers
13:29and encourage those managers to uh to to
13:33use those practices in their in their
13:36operation
13:38and the last step is the the measurement
13:41phase in which they collected
13:44um performance and management data from
13:47both the the treaty and the control
13:50plans
13:52and in the
13:54um in the uh Consulting intervention
13:57they focused on five different areas of
14:01of management
14:04um so I won't be going to all the
14:05details but to give you some ideas of
14:08like what are the types of practices
14:10they're introducing here
14:13um the the first area is a factory
14:16operation so for example whether there's
14:21like regular maintenance of machines and
14:25recording the reasons for
14:27breakdowns and to learn from from
14:30failures and whether they they establish
14:34standard procedures for operation
14:37the second area is quality control in
14:41which
14:42um which means they should record
14:44quality problems and analyze those
14:48records frequently
14:50the third area is human resource
14:53management which is uh obviously very
14:57important for for their simple firms as
15:00those are very big companies and this
15:03includes to establish performance-based
15:06incentive system for both workers and
15:10managers and to provide
15:12well-defined job descriptions and tasks
15:16for both workers and managers
15:19and in addition to those they also have
15:22an um an area of inventory uh in which
15:26they encourage managers to keep um clear
15:31records of of inventory and also to uh
15:35make like electronic version of the
15:38imagery records and lastly they also
15:41covered sales and Order management
15:44such as like to check production on
15:48order by basis and to use design-wise
15:52efficiency analysis so that pricing can
15:56be based on actual rather the average
15:58production cost so those are what they
16:01recovered in the in the Consulting
16:04intervention
16:06so
16:08um there are simple firms are textile
16:11companies with uh
16:15um about like 100 to 1000 employees so
16:20with this um criteria they find 66
16:24eligible forms so they reach out to
16:27those firms and then 34 appsums
16:30expressed interest to participate in the
16:33in the in the project
16:36and then my further talking was about 34
16:38Farms 17 of those firms are going to
16:41commit like senior mention and time to
16:44the to the consulting services so in the
16:48end they have um it means they have a
16:50sample of 17 firms who are interested in
16:54participating in this um uh in this
16:58program
16:59so um I want to take a take a pause here
17:02and uh ask you a question which is uh
17:07um about this Tempo here so uh as uh
17:12explained here they have a sample of 17
17:16firms and all those firms are like
17:19interested to to join the Consulting
17:22program and would this
17:25um
17:26um induce any problem in the
17:29uh evaluation of this management of this
17:33Consulting program
17:36I saw one person raised tent
17:44Barbara
17:45can you unmute yourself
18:01you should be able to unmute yourself if
18:03you if you want to speak if you have a
18:06answer to jinx questions you want to
18:08re-ask the question again maybe
18:11yeah so uh my question is um about the
18:15sample the choice of sample here so
18:20um the the study involves 17 big firms
18:23who
18:25um who agreed to uh like who are
18:29interested in having their managers
18:31participate in the Consulting um
18:33intervention and how would that
18:35influence the evaluation of this um
18:39Consulting program
18:45so I I see
18:47two participants raised their hands
18:51um
18:53can you all mute yourself
19:08yeah hi I think the 17 seems very low
19:11for this type of
19:13um experiment
19:15um just because the the units that is
19:18treated is the entire firm so it seems
19:21like it's going to be hard to make
19:23convincing
19:24um convincing conclusion on a causality
19:27basis I guess
19:29and by the way I'm Eva nice to meet you
19:31and thank you for the conference
19:33yeah thanks Eva so
19:35um so you mean like um they they have a
19:38small sample problem in that there are
19:40only like 17 participants
19:42very good so that can be a problem and
19:46um I will discuss how did they solve the
19:49small sample issue
19:52uh are there any other thoughts on this
19:59uh I I saw many people raise the health
20:02of their five participants really stand
20:04but I can only
20:06I don't see all their names from them
20:10um hi am I Audible
20:13yes yeah I hear you I suspect there
20:16might be like a selection bias if you're
20:18only taking
20:20um you know 17 who have sort of agreed
20:22to be a part of the program out of well
20:25total of 66 firms so you know the
20:29results may be kind of biased basically
20:32very good yeah so uh you guys mentioned
20:34exactly the like two problems that I
20:37want to discuss here so one issue here I
20:40regarded about assemble is a selection
20:42bias so in order to
20:46um kind of deal with this issue the
20:48others surveyed some also also get some
20:51data on non-project firms and they made
20:55a comparison between the the product
20:57firms with non-project firms but they
21:00did not find any uh significant
21:03difference in observed like
21:05characteristics between between those
21:08two groups but we may still worry there
21:12are selections driven by unobservables
21:16and as you said there can be like um uh
21:20and this can can can bias the results
21:22and the the the device can be either
21:24upward or or downward so for example it
21:28can can buy the result upward if um
21:31firms that are
21:33moving to participate can potentially
21:37gain more from the from the Consulting
21:41treatment and it can be also um uh there
21:45can be also a downward bias if people
21:47like Farms with the most to gain from
21:50the concerning services are also like
21:54more skeptical about like what's the
21:57consultant is going to do and whether
21:58they're going to learn anything new from
22:01the from the treatment
22:03but even with those uh uh problems
22:07um the results should still be like
22:09policy relevant because typically
22:12um if government agencies are like ngos
22:16offer uh training um or management
22:19consulting services to firms
22:21um they're going to rely on firms
22:23voluntarily participate in in such
22:27programs
22:28so this is the first issue which is
22:30selection bias and the second problem is
22:33the small simple
22:35problem in that they only have 17 plus
22:39included in the in the study sample
22:43um but they have a small sample because
22:45uh the intervention is uh is very
22:48expensive so the cost is about
22:5275k each treated plant and this uh
22:57partial explained like why there were no
23:00um large firm management experiments
23:03before before this project
23:06um then the question is whether this
23:08sample is large enough to get some
23:11meaningful and um significant results so
23:16the the others try to
23:18um uh um they always this most simple
23:21issue
23:22um uh using several different strategies
23:25and so for example the the firms uh have
23:31a very similar type of production that
23:35are they were located in the same areas
23:36they're using the same technology in the
23:39in the Baseline and so that uh most of
23:43the external shocks should be able to
23:47controlled for with some with with time
23:49damage and they also have uh very uh
23:53detailed and frequent data high
23:56frequency data from machines and logs so
23:59that there's very little uh measurements
24:02Arrow so this was to like working with
24:05the homogeneous sample gets high
24:07frequency data and administered data to
24:11measure outcomes helps to improve
24:14improve power
24:16and in addition to that they also use
24:19the different uh strategies for
24:21statistical inference so for example
24:24they used a bootstrap from plaster stand
24:28errors
24:29um and they also used
24:31permutation tests to get the test
24:36statistics which does not rely on SM
24:39topics and lastly they also used a large
24:44TS negative from the 2009 paper and all
24:48those three matters give very very
24:51similar results and those are some like
24:54standard strategies to use if for
24:57example in your research there you also
25:00face a small sample issue
25:04um okay so so this figure plus the the
25:08main results of the uh I guess like the
25:12the first main results of the of the of
25:14the paper uh which looks at like um the
25:18impact of the
25:20um Consulting intervention on the
25:23adoption of uh management practices over
25:26time so in this figure the plus uh the
25:30plot the adoption the adoption rate of
25:35the 38 management practices that were
25:38introduced in the in the Consulting
25:41treatment and they plots the adoption
25:44rates over time like 10 months before
25:46the treatment and uh until like one year
25:49after the
25:51um the intervention for three types of
25:54plants this include the trading plants
25:58the control plans and the
26:00non-experimental plants in treatment
26:04firms
26:05so
26:07by looking at this figure uh
26:11what do you think we can learn from from
26:14this result
26:18I think maybe I can leave you 10 or 20
26:23seconds to look at this figure and tell
26:26me
26:28what evidence it's true is this video
26:31showing
26:34um Samuel
26:39uh Samuel do you have a question or do
26:41you once want to answer my question
26:44oh here we go did that go through
26:48yeah nice I'm Sam from Vanderbilt fourth
26:51year uh thanks it looks like there's
26:54definitely early adoption in the treated
26:56plants but it also looks like there's
26:58slower to other plants perhaps they're
27:01observing The increased uh productivity
27:04of their fellow competitors
27:08um it's also cool to see the spillovers
27:10within firms so the non-experimental
27:13plants and treated firms
27:16um so it seems like adoption of new
27:19technologies
27:20um yeah that benefits everyone
27:24thanks
27:25yes as demos that
27:28um the firstly the initial adoption the
27:32Baseline adoption of those practices are
27:36uh uh very low among all types of plants
27:41here so we can see that before the
27:43intervention the average adoption of the
27:46of those practices was below 30 percent
27:50and then as we see that there's
27:55obviously a treatment effect because
27:58um after that once the intervention
27:59started we see that treated plants
28:03um uh significantly increased the
28:06adoption of those practices
28:08but it's also spillover effects as um
28:12now is we also see an increase of
28:15adoption among non-experimental plants
28:18in in treatment firms so this could be
28:21driven by the fact that managers in
28:24those non-experimental plants learned
28:26from the like managers
28:30of of the treated plants
28:34any other evidence that you noticed from
28:37this figure
28:45so another evidence I want to mention
28:48here is that
28:50um although we see an increase in the
28:52adoption among the treatment plans you
28:56might notice that
28:58um they are not this the adoption rate
29:02is not 100 right so uh why about one
29:07year after the intervention the Twitter
29:10pounds adopted about 60 percent of them
29:13uh of the of the practice statuses that
29:16were introduced and we look at like what
29:20types of practices
29:22um do they adopt those forms appears to
29:25adopt the practices that were the
29:28easiest to um to implement or had the
29:32like largest perceived short-term
29:34payoffs such as like um uh practices
29:39related to their quality inventory and
29:43efficiency review meetings so they are
29:46actually making choices among the
29:48management practice introduced and
29:51chose the ones that are more relevant
29:54for them
29:56um
29:57I think someone have a question
30:04uh there are two questions can you um so
30:07can you unmute yourself
30:09directly and
30:13we're having a problem on meeting
30:17our stuff so I'm promoting them to a
30:19panelist so that they'll be able to do
30:22that because attendees typically aren't
30:24able to so if you okay depend on this
30:27invitation that you should be able to
30:28make your comments
30:39oh
30:44hi Susan we can hear you oh hi I I
30:47wondered if there was how much variance
30:49there was among the treatment plants
30:52um in terms of their rate of adoption of
30:54these various practices perhaps that's
30:57something you're going to come on to
31:00yeah uh so I uh I I don't uh have the
31:04exact number uh here but uh um there are
31:08some variations but not huge variations
31:10around the trade it so in general
31:13majority of the 3D plants there's a
31:16significant increase in the adoption
31:23are there any other questions
31:29oh I think there are two more or two
31:33more questions
31:42okay can can you hear me and yes okay
31:48thank you
31:50um I have one question on
31:55issues related to the cost of adopting
31:58those practices because
32:00as you were rightly mentioned here the
32:04the treatment effect
32:06after a seemingly after six months
32:11is declining in Red so it seems that the
32:15cost matters I mean adopting those
32:18practices depends on how costly those
32:22practices are so can you tell us
32:24something they did about the the cost of
32:27adopting those practice
32:30yeah
32:31um
32:33yeah so I guess the standard kind of
32:36types of cost of adopting practices
32:38would include like um uh it takes time
32:42for managers and workers to get used to
32:46the new practices right so there might
32:48be some shots around negative impacts on
32:52productivity
32:54yeah so you're right there that that
32:57might be one reason of like why they are
33:00uh I mean a lot of the firms are choose
33:03to
33:04adopt practices that are easy to
33:07implement right yeah
33:11um and and when you say that the
33:13treatment effects decreases over time
33:15it's actually driven by the fact that
33:18some of the uh control plans started to
33:21also adopt uh some of the practices but
33:24among the treated plans the increase in
33:27the uh adoption uh was actually
33:30persistent
33:32um at least one year after the treatment
33:44any other questions uh let me take one
33:46more question and then we'll let's move
33:49on
33:50hi am I Audible
33:53so just a small question about the
33:56non-experimental plants in treatment
33:58firms
33:59um like how do we explain the trend in
34:03these plants like is this some sort of a
34:05spillover effect or uh like how come
34:08they are having uh adoption rates which
34:11are increasing with you know the number
34:13of months after the treatment and
34:15they're kind of exceeding the the
34:18control plants in the end so just a bit
34:20confused
34:22yeah the uh the others actually uh
34:25looked uh exactly specifically at the
34:28the five uh non-experimental plans which
34:31in which they they see adoption of some
34:33of the practices
34:35um and they they show that this increase
34:37occurred because the directors of the
34:41um of the treatment plants copied the
34:44um the the new practices from their
34:46experimental plants over to their other
34:49plants so uh meaning that there are like
34:53higher level
34:54um like managers who
34:57um supervised both plants so they see
35:00the effectiveness of those practices in
35:033D upon so that they encourage adoption
35:06in the in the non-experimental plants
35:09thank you
35:12okay so
35:14um uh so the the previous figure shows
35:17uh basically a very strong first stage
35:20in that the Consulting intervention
35:23um actually increased adoption of
35:25management practices in the second part
35:28of the paper they then
35:31estimate the impact of this improved
35:34management practices on on a
35:37comprehensive set of firm outcomes and
35:40the key outcomes include some quality a
35:45quality outcome which is measured by the
35:48quality defects index and inventory
35:51measure output product and the product
35:55productivity
35:57so they firstly do uh intend to treat
35:59estimation in which they regress
36:02outcomes on a dummy variable indicating
36:05whether a plant received the treatment
36:08or not and I see that they show that the
36:12intervention has a big and significant
36:17impacts on improving uh the quality of
36:20the products and outputs and and tfp
36:25and then they then to OS and IV
36:28estimation but the results are in
36:29general consistent with intend to treat
36:32effect
36:34so the results so far shows that
36:38um those managers in large firms are
36:42actually thoughtable like if we explain
36:45it to explain
36:48um advanced management practices to them
36:50they are willing to adapt and to the
36:53adoption of those practices seems to be
36:56beneficial to to their firms so then one
37:00question is uh why Rose from did not
37:03improve themselves like why did they use
37:06those practices
37:07um before the intervention so there can
37:11be two reasons depending on the types of
37:14management practices that we think about
37:17so there can be some like common
37:19practices that a lot of firms already
37:22know about those practices but the
37:25reason why they did not adopt they did
37:27not use it could be like the
37:29underestimated to the potential benefits
37:33of doing so
37:35and some for some other management
37:38practices maybe there's a lack of
37:40information issue like managers do not
37:43do not know like the existence of those
37:46practices so that they were unable to um
37:49do it by themselves
37:52um
37:54any question about this I saw two people
37:57raise their hands
37:59hi my name is Michelle Brock I just um
38:02thanks also from my sites on your
38:05lecture today
38:06um quick question about the outcomes and
38:09in previous lectures one of the
38:11questions around upgrading
38:15um and what how firms manage upgrading
38:18is whether or not they achieve it with a
38:20staff tone turnover or if it's just kind
38:23of training and improving things so I
38:25was wondering if um Bloom the co-authors
38:27looked at layoffs or turnover to figure
38:31out aside from this know-how issue
38:34whether or not firms were achieving
38:36these um
38:37improved outcomes as a result of either
38:40upgrading individual staff members or
38:43just getting rid of the people either
38:45they voluntarily leave or they're fired
38:47sometimes Consulting teams will tell you
38:49to fire people for example so uh did
38:52they look at that that's a very good
38:53yeah that's a very good question uh uh
38:57so I I don't think they looked at
39:00outcomes like Tom over yeah that might
39:04be some interesting thing to to explore
39:07um yeah but to over actually it matters
39:10for the the longer term impacts of the
39:13of the of the project so I I think that
39:16the others actually come back to those
39:18plants
39:19um maybe 10 almost 10 years after the no
39:23less than eight maybe eight years after
39:25the intervention to see whether it is
39:26lasting effects
39:28um but they they find that
39:30um the most of the treated firms stopped
39:33using the those new management practice
39:36and the primary reason is that is a lot
39:39of turnover amount managers so once the
39:42the treated managers leave the new
39:45manager stopped using the the practice
39:47they adopted before
39:51so yeah another question
39:55Victor
40:02a quick question I I was wondering if
40:06in this case it's possible to think that
40:09the three rate firms cannot compete the
40:12the control firms so I don't know if
40:14that can be like a an issue in this type
40:18of experiments
40:20so you mean like weather competition
40:22could
40:23um drive out the better management firms
40:26that they offer yes you can have some
40:28exit and so
40:31onwards the the high productivity firms
40:34that are the ones that are in the 3D
40:35group
40:36yeah actually that's the that's the
40:40question that I want to talk about next
40:41so as you said uh like if um there are
40:46some problems with with good management
40:48practices whether they're uh uh no like
40:52whether if there's like sufficient
40:54competition right essentially those uh
40:57firms with uh with bad management
40:59practices should be competing out of the
41:02out of the markets if the uh those
41:05management practice can truly improve um
41:08uh improved from outcomes so I guess
41:12that did not happen in this uh context
41:15because
41:16um
41:17um because some like a very content
41:20specific reasons so
41:22um one reason that's the discussed um in
41:25detail in the paper is that there
41:28there's very limited decentralization
41:30among those uh those sample firms and um
41:35specifically the the owner in most of
41:38those sample firms the owner of the firm
41:40take almost all decisions because
41:44there's lack of trust on mid-level
41:47managers they work for a long time
41:51um every week and and because they did
41:55not like trust
41:58other people making decisions
42:01and only uh in this case like only
42:04members of the only family can have
42:07positions with some like real
42:08decision-making power and this is many
42:11driven by the the weak rule of law in
42:14India and because of this uh what
42:18influences uh from size is is like the
42:22manufacturer influencing the size of
42:24farm is the number of male family
42:26members rather than vectors such as
42:30management scores and so and in this
42:34this lack of trust issue substantially
42:36limited the the potential growth of
42:40those families of those firms and as a
42:43result those unproductive firms are
42:45likely able to
42:47um still survive because uh more
42:50productive firms cannot cannot expand
42:53and for the same reason entry is is also
42:57Limited
42:59um so this answers like why those deadly
43:02manager Brands were not
43:04um uh drive out of the market by
43:07competition
43:09Barbara do you have a question
43:11yes um thank you so um I wanted to ask
43:15if perhaps the cost of adoption
43:18could be one reason why these firms went
43:21left to themselves and not adopting some
43:25of these practices
43:26or if the cost of practices are just
43:31zero
43:33I I don't know yes Glenn
43:35yeah yeah uh you were talking about like
43:38whether
43:40um cost of adoption is one reason of why
43:44you're not using all the properties yes
43:49right I think someone asked a similar
43:52question before
43:54um
43:55um uh there's obviously some costs of of
43:59adopting a new new practice
44:02um and I I believe that can be one
44:04reason of why they are not using all the
44:07all those new practices and actually
44:11that is showing the data that most
44:14programs choose to use the the practice
44:17that can be like a cheapest or easiest
44:19to implement so I think you're right
44:22that this can be one reason
44:25um of why like there's not no 100
44:27adoption among the traded jobs
44:32any other questions
44:38um
44:41Okay so
44:45um what we have learned so far
44:48um includes the fact that it's very big
44:51heterogeneity in management practices
44:55and better mentioned firm seems to
44:58perform better and management practices
45:02can be improved with uh interventions
45:05and improving management practices could
45:09generate positive impacts on Farm
45:11outcomes
45:13so so far the the both of those uh that
45:16the papers we we have discussed focuses
45:19on very big firms but um a majority of
45:23the labor force in low-income countries
45:25is employed in much smaller Enterprises
45:29with uh fewer than five workers or some
45:32of them even do not have um do not have
45:35any employees so the next question is uh
45:39um even if management matters for uh for
45:42big companies whether it actually
45:44matters for those like like smaller
45:47micro Enterprises in in developing
45:49countries
45:51so firstly the management practices uh
45:53that's uh that's used in small farms can
45:57be very different from what I have shown
45:59before so some examples of practices
46:03used for small farms include to separate
46:07household and business accounts uh
46:09monitor in monetary intervention
46:11inventory record keeping Financial
46:14Planning and uh and the marketing
46:16meaning whether they use discounts or
46:19like better prices to attract clients
46:23so
46:24um the existing literature shows that
46:26even smaller firms for smaller firms if
46:30they use better management practices
46:32they can grow faster and can be more
46:34productive
46:36but similar as the case that we observed
46:39in bigger Farms many firms many of those
46:42most of those small firms fail to adopt
46:44better management practices
46:47and the most popular approach to like
46:52encourage smaller firms to adopt uh
46:55management practices is by business
46:58training which will be our next topic
47:01so uh maybe let me let me pause a bit
47:04here
47:05um and see if there's any
47:08um questions that I think I should
47:10answer in the Q a
47:19hi
47:21um we we've had a few but there's been a
47:24a bit of a break I think since the last
47:26ones were asked so I'm not sure how far
47:29back uh you want to go right now but I
47:32think there is one live if you want to
47:35do that also
47:37sure
47:39hi so it's Michelle again
47:41um one of the things that comes to mind
47:43uh when we were talking about the the
47:45turnover problem is that there's a
47:48negative externality for firms on there
47:51than what they spend on training so they
47:53train somebody and then that person can
47:55leave so and if training is not offered
47:57widely across all firms then it's not a
48:01cost of firm necessarily wants to bear
48:04um Business Schools can be one way for
48:07the government to address that either to
48:09put some of the training costs on the
48:11individual worker or some of it on the
48:13government and I'm wondering if anybody
48:16in in the management literature
48:18um aside from the business training
48:20stuff or maybe maybe that's where it is
48:22has looked at you know the role that
48:25Business Schools or other types of
48:27um institutions play for helping to
48:30solve some of these problems thanks yeah
48:33there's definitely some papers on that
48:35and I I believe some more are in the in
48:39in the reading list that I shared on the
48:41website
48:43um so for example there are papers
48:44discussing like for example as you said
48:47because of the turnover issue right if
48:49you train someone and they quits that
48:51generates a cost on the company
48:53um so so that's there's a for example
48:56studies looking at uh different types of
48:59trainings so for example there are
49:02training programs which teach you skills
49:04that can be used uh in general like even
49:08if they move they can apply the skills
49:12they learned in other companies but they
49:14also there's also training which is more
49:16specific to the to the products or tasks
49:20that's um that's needed in them for for
49:24the input for the current employer
49:26um and they I mean compare the cost
49:28effectiveness of those different types
49:30of trainings and I'm happy to send you
49:34um the specific papers on this if you
49:37are interested
49:40thanks
49:44hello
49:46yeah
49:47yeah yeah so my my name is from Ghana
49:50and I have a question on
49:52why the films were not I mean uh what do
49:56you call it
49:57involving yourself in the intervention
49:59and you raise one of the first point was
50:01that like it could be that the famous I
50:04have they're aware about the
50:06international but they maybe they think
50:07it might not be profitable to them and
50:10the second one was maybe there's maybe
50:12they don't have the information about it
50:13so my question now is
50:21hello
50:25sorry Andrew I think we lost you
50:28um
50:29we'll give you a sec but if not I know
50:31to show him has had his hand up for a
50:34while
50:39um
50:40they should I should I move on or should
50:42I wait
50:43for
50:46um
50:47yeah I can hear you now someone who's
50:50not having the information about the
50:52integration and also if
50:58I think he just dropped off entirely
51:01um so maybe okay yeah so yeah yeah if if
51:06you rejoin you can uh re-ask the
51:07question
51:09um sorry I lost my my network
51:11I'm back okay sorry I lost my question
51:15was how can we separate films that are
51:18not have information
51:19about the intervention also those who
51:21have information about the information
51:22but are not willing to participate it's
51:25very complex to handle here so I mean
51:28after he said how can you handle that
51:30thing
51:31your analysis oh so you mean how did
51:33they figure out some firms do not have
51:35the information about that practice
51:37yes
51:39I guess uh there must be some survey
51:42questions in the Baseline asking like
51:45whether you know this practice
51:49thank you thank you
51:53okay uh so given the time let's let's
51:56continue with uh with our second topic
51:59which is uh business training
52:03um
52:04so because because with the evidence
52:06that uh better management practices
52:09could improve firm outcomes there's a
52:13lot of uh training for business training
52:15programs provided in um in different in
52:19different uh in both developing and
52:21developed countries especially
52:22developing countries and so to give you
52:26some sense of like how many training
52:28programs are there
52:30um at least one billion US dollars is
52:32spent annually on business training
52:34programs in in developing countries and
52:38because the vast majority of firms in
52:40developing countries are micro
52:42Enterprises and those micro Enterprises
52:45are an important source of income for
52:47many pro households so a majority of
52:50those training programs are offered to
52:53micro Enterprises
52:55and the most prevalent forms of business
53:00training aims to help potential
53:02entrepreneurs to start firms and also to
53:05help those already running those firms
53:08to earn more income
53:09and but with this there are still like
53:11different types of training programs
53:13provided to achieve this goal and so the
53:17first type let's see here which will be
53:19the focus of our lecture is the
53:22traditional training programs which aims
53:25to do to like teach a package of
53:29different business practices
53:31the second approach attempts to like
53:33simplify the training by teaching a few
53:37of them or the most relevant or
53:39important practices
53:42and the third type is more different so
53:44rather than attempting to teach firm
53:47owners how to carry out specific
53:49practices it aims on changing the
53:54aspirations and mindset of business
53:57owners and such personal uh initiative
54:01training has shown some promise in
54:03improving performance through creating a
54:06more proactive mindset so in this
54:09lecture I'm going to focus on the the
54:11first type of training which is
54:13traditional small business training
54:15provided to micro Enterprises
54:19and specifically want to discuss like
54:22whether show you evidence on whether
54:23business training can improve business
54:26outcomes and also how to improve the
54:30cost Effectiveness and delivery of of
54:34such training programs
54:39um so the classroom Based training is uh
54:43in basic like business practices is the
54:47most common approach to uh to training
54:50small scale Enterprise entrepreneurs
54:53and although um there's a wide variety
54:55of classroom business training programs
54:58and approaches a typical program
55:01involves a trainer teaching a group of
55:0515 to 40 participants over a period of
55:08three to Twelve Days
55:11so there can be courses for potential
55:14entrepreneurs which
55:17focuses on like topics like generating a
55:20business idea how to generate a business
55:23idea have developed a business plan how
55:26to get permits and how to do pricing and
55:29budgeting there's also courses for
55:32owners of existing firms who looks to
55:36like grow further and such programs
55:40normally cover topics such as record
55:43keeping accounting marketing human
55:46resources and hiring workers and
55:50operations management
55:52so because there's a large number of
55:56such training programs provided there's
55:59also a big number of evaluations on this
56:01type of training so here let me give you
56:04uh one example of the randomized
56:08evaluations of of such a training
56:11program uh which is the demand at all
56:142014 paper so in this paper the others
56:18conduct randomized experiments in Sri
56:20Lanka to test the impact of business
56:22training and the program the evaluating
56:25was the IRS siyb training program which
56:28is the most commonly used program
56:31worldwide
56:32but in this project they not only
56:36included uh uh training but also have a
56:40treatment of treatment arm of uh
56:42introducing the training and at the same
56:45time provide
56:47grants for in order to help firms
56:50implementing some of the practices
56:54and for example they not only include
56:57existing business but also potential
56:59entrepreneurs so that they can look at
57:01like whether the impact is different or
57:04it is different on those two types of
57:06groups
57:08and they also measure outcomes uh uh
57:12using like multiple follow-ups in order
57:15to increase a sentence of power and to
57:18look at the Dynamics of the effect
57:21so this table shows you the findings
57:25about the impact of those training
57:28programs on the adoption of business
57:30practices so they show that for both the
57:34training only and the training plus cash
57:37Grant
57:39groups they see that there's a
57:42significant increase in the in the
57:45adoption
57:47for for both groups so this again
57:50similar as the bloom out of paper shows
57:53that the business training can actually
57:55improve business owners knowledge about
57:58those practices and and as a result
58:01increase the adoption rate
58:04but we look at the impact on from
58:07outcomes and in this case I'm showing
58:10you a figure which
58:12elucidates the impact on on profits
58:16where you see that this uh there are
58:19three lines here plotting the
58:21um the real monthly profit
58:25month is after the intervention for the
58:28control group the training owning group
58:31and the training plus Cash Cash program
58:35so this figure shows that there are some
58:38increases at the at the beginning but
58:42then
58:44there's no persistent effect and we look
58:47at the point estimation the impact on on
58:51profits was not statistically
58:53significant so this actually
58:56this kind of results is very typical of
58:59many of the evaluations or similar types
59:01of business training programs in that
59:04people see significant improvements in
59:07some measures of business practices but
59:10they don't see a significant impact on
59:13cells or profits and in many cases the
59:16magnitude of impacts on sales of profits
59:19was not was not small but is that it's
59:23just like the sample size is not big
59:25enough to uh to to detect significant
59:28impact
59:30so in this uh figure uh which is from
59:34the McKenzie 2020 paper we summarized
59:37the impact on training programs on cells
59:41from different studies so we look at the
59:44numbers here see that if we look at
59:47those studies separately we see that the
59:49confidence intervals of the impact of
59:52training in many of those studies are
59:54large and include zero and I guess I
59:58said this this is because most of those
59:59studies do not have sufficient settings
1:00:02of power to detach effects of of this
1:00:05magnitude
1:00:06moreover they seem to be a big
1:00:09heterogeneity in the magnitude of
1:00:12findings
1:00:14um in the founding different training
1:00:16programs provided in different contexts
1:00:19so McKenzie 2020 estimates
1:00:22um a random effects meta-analysis and
1:00:26find that training has a significant
1:00:29positive average effect on both profits
1:00:32which is the 10 percent increase and
1:00:35also on sales in which it can increase
1:00:38sales by about
1:00:414.4.7 percent
1:00:43then the question is why um doesn't
1:00:46traditional training have a larger
1:00:50effect especially given the big cost
1:00:54um incurred in those training programs
1:00:58so this is managed driven by two issues
1:01:01the first one is that the low adoption
1:01:05rate of practices after training so that
1:01:08many firms after training they did not
1:01:10actually adopt those practices or even
1:01:14if they adopt but it's not like
1:01:16persistent the adapter is not persistent
1:01:19and the second issue
1:01:23um uh is that there's a lot of variation
1:01:25in the quality of training and the
1:01:27selection of participants and because of
1:01:31this this McKenzie estimate might be
1:01:34upper belt of the like the average
1:01:37effects of training programs because
1:01:40um those studies included here are all
1:01:43training programs
1:01:45um a lot of them are designed by
1:01:46researchers and were implemented
1:01:49carefully so overall the quality of
1:01:52those training programs can be higher
1:01:55than than the average
1:01:57so this uh um uh of course another
1:02:02question like how can we which is a
1:02:05question about uh targeting like how how
1:02:08can we find the uh um uh appropriate
1:02:14training programs for the right set of
1:02:17participants
1:02:19to kind of improve the cost
1:02:22effectiveness of the of the training
1:02:25program
1:02:26so um here I actually want to have a
1:02:29little discussion here
1:02:31um so uh if possible I want to hear some
1:02:34of your ideas about how to improve
1:02:38targeting when implementing such
1:02:42business training programs
1:02:44you guys have any ideas about how can we
1:02:47improve the targeting here
1:02:53hello
1:02:55yes
1:02:56uh can you hear me
1:02:59yes I can hear you so one thing I was
1:03:02wondering like you know is there a sense
1:03:04of some local market based targeting
1:03:09like I as a firm owner if I think that
1:03:12my competitor is sort of like doing
1:03:14something and that may have some
1:03:16positive fact I would be more motivated
1:03:19to do it
1:03:22um as compared to just somebody coming
1:03:25up to me and trying to sort of like you
1:03:27know change my old practices which I
1:03:31might not be reluctant because of
1:03:33inertia or any other reason
1:03:35sort of like just targeting at a sort of
1:03:38like a not that the unit is not sort of
1:03:41like a firm but some sort of like
1:03:43defined local market
1:03:46has people tried that
1:03:49yes uh we are I'm actually going to uh
1:03:53show you some evidence on that
1:03:55um so this is uh like one kind of
1:03:58alternative uh training methods so
1:04:01instead of uh like a classroom training
1:04:04there's also programs that provides uh
1:04:07like peer interactions or like uh
1:04:10mentoring programs which may be able to
1:04:13give firms more uh like like if
1:04:16information that specifically relevant
1:04:18for their business
1:04:24okay
1:04:25yeah
1:04:26um okay I may come in uh also in terms
1:04:29of uh you know it's one thing to train
1:04:31an individual but how much uh impact
1:04:34does homophili have in in the selection
1:04:36of a cohort of training
1:04:38because there's also the network effect
1:04:40there's also the peer learning aspect
1:04:42that becomes very critical when it comes
1:04:43to entrepreneurs so the exposure to the
1:04:46right kind of network is that one route
1:04:48to targeting as well
1:04:55mixture
1:04:57and yeah yeah I was wondering how the
1:05:00the targeting
1:05:01yeah what about some type of vouchers
1:05:04system where you allow the people to
1:05:08they have a budget the the entrepreneurs
1:05:11and they can spend in the type of
1:05:14training that they think it's better for
1:05:16them
1:05:20mm-hmm
1:05:21yeah so you mean like uh do not make the
1:05:24training free right but let's let's no
1:05:27in some way it's gonna be free for them
1:05:29but they're gonna choose the type of
1:05:31training that they think is more
1:05:33effective for them so let's let people
1:05:35choose the programs that they want to
1:05:37participate
1:05:38yep
1:05:42Luis
1:05:44hi
1:05:46um
1:05:48can I go
1:05:49yeah okay yeah I was thinking I don't
1:05:53know how feasible this is but what comes
1:05:56to mind is an analogy with Agricultural
1:05:59Extension as far as I know when you're
1:06:01trying to diffuse best practices in
1:06:03agriculture right usually you it's
1:06:06people self-select but because it is in
1:06:10this uh I'm thinking of modern
1:06:12communities like the other people who
1:06:13didn't choose to be part of we can see
1:06:16whether it works or not and then slowly
1:06:18but if it works and like they will
1:06:21eventually adopt it especially because
1:06:22they trust each other I mean they know
1:06:24each other
1:06:26um and and even though let's say
1:06:28manufacturing and other more urban uh
1:06:31studies it's not exactly the same in
1:06:34like some some SEC that we could take
1:06:37advantage of the fact that some
1:06:39industrial sectors are collectored in
1:06:42geographically like let's say like I
1:06:45mean I'm from Lima Peru like they're
1:06:47like most of the textiles are in this
1:06:49particular place so maybe you maybe it
1:06:51wouldn't be impossible to do something
1:06:53like that like you could like open up
1:06:55for certain firms and then those who
1:06:57didn't uh apply May later see that those
1:07:00new practices are actually paying off
1:07:02and then slowly adopt it something like
1:07:05that thank you yeah yeah yeah I think
1:07:07you mentioned a very interesting an
1:07:10important idea which is to to think
1:07:12about whom should we choose to provide
1:07:15the training right so maybe
1:07:18um it's actually someone that affirms
1:07:20trust would be would be like uh helping
1:07:23to improve the effects uh and another
1:07:26related idea is that uh uh rely on like
1:07:31uh institutions like agricultural
1:07:33extensions they might have better
1:07:35knowledge about like the local firms and
1:07:38who might be benefiting from the from
1:07:41such trading programs so using this
1:07:43local information might also be helpful
1:07:46in improving the targeting let's take
1:07:49one more and then we'll move on yeah
1:07:54my my name is
1:07:56so we can also use uh effective
1:07:59communication packages to improve the
1:08:02value of the training for example
1:08:03nowadays people are adopting what they
1:08:06call message framing to change the
1:08:08people's perception towards the role of
1:08:11the training and I think if you also
1:08:13adopt that you can also improve the
1:08:15target yeah
1:08:18very good so all those are very
1:08:21interesting ideas to improve training
1:08:23and I think so uh you mentioned many of
1:08:26those that I listed here including using
1:08:29Community Information and maybe use like
1:08:32a price to elicitate the winning is to
1:08:35pay for the uh for the training and also
1:08:38there are projects flowing whether
1:08:40machine learning can be used to improve
1:08:42the Improvement targeting and another
1:08:45question here is like how how can we
1:08:47move to the like Market Solutions in
1:08:51providing the training programs because
1:08:54most of those almost all of those
1:08:56existing rcts are providing trainings
1:08:59for free but there can be a lot of
1:09:01issues of doing so including
1:09:04um the fact that this might not be
1:09:06sustainable in the in the longer term
1:09:09and this could also potentially crowd
1:09:11out Market providers of business
1:09:14trainings
1:09:15and uh so so I guess there are some
1:09:19projects looking at like whether price
1:09:21can be used as a screening mechanism in
1:09:24that whether those who are willing to
1:09:26pay more prices could be those that have
1:09:29higher returns so this can be used as a
1:09:31strategy to uh to screen
1:09:34um uh training participants
1:09:39about the
1:09:41training which is the classroom room
1:09:43training so this type of like
1:09:45traditional training have the advantage
1:09:48of like people can reach a lot of
1:09:50audience and maybe easier to um to be
1:09:54scared up in uh in different in
1:09:57different contexts but there are also
1:09:59some limitations
1:10:00of such programs so for example
1:10:05um there can be like limited
1:10:06adaptability of the training content to
1:10:10individual business and to in that sense
1:10:15maybe providing like mentoring programs
1:10:18and peer interactions could uh improve
1:10:21that as uh uh it might help firms to
1:10:25learn information that's more relevant
1:10:26to their business and the second issue
1:10:30is that it's uh very costly to deliver
1:10:32training classroom settings and because
1:10:36of the like things like travel costs it
1:10:38could be inconvenient for entrepreneurs
1:10:41to attend so I'm going to show you
1:10:43evidence of some alternative delivery
1:10:46mechanisms such as online training
1:10:48training through SMS messages and voice
1:10:52messages
1:10:54so firstly let's look at
1:10:57um uh
1:10:58offering like a peer training or
1:11:01mentoring programs as a different
1:11:04training strategy so I'm going to talk
1:11:07about two papers here the first one is
1:11:10the Brooks at our 2018 paper which
1:11:14conducted a field experiment in Kenya
1:11:17slums with young and female micro
1:11:20entrepreneurs so the main treatment is
1:11:23that the the treated business owners
1:11:26were randomly assigned to meet with
1:11:28successful local business owners so
1:11:31those those mentors are actually that's
1:11:35profitable as they are compared with the
1:11:37average and 10 years more I was 10 years
1:11:40more experienced
1:11:43and book in order to compare these types
1:11:45of mentoring program uh with the the
1:11:48standards like traditional training
1:11:50programs they also have a treatment arm
1:11:52in which they offered the standard
1:11:55business training classes and then they
1:11:58compare this with the both the control
1:12:00group as the mentoring program
1:12:02and specifically they want to ask like
1:12:05whether the peer tree the training uh
1:12:08whether the mentoring program uh could
1:12:11influ improve from outcomes and who
1:12:14benefit more from such programs and
1:12:17whether it is mentoring program could be
1:12:20better than the the traditional
1:12:23classroom training
1:12:26um so they have about
1:12:29378 uh business owners in the sample
1:12:32which were randomized into three groups
1:12:35like to control the classroom training
1:12:36and the mentoring uh um the mentoring
1:12:40group the classroom treatment is very
1:12:43similar as the the traditional business
1:12:46training programs that we have described
1:12:48which includes like two hour classes
1:12:50each week and lasts for four weeks and
1:12:54for the mentorship uh treatment the
1:12:57mentees were told to meet with the
1:12:59mentors weekly for uh four weeks and the
1:13:03mentors were chosen to match the mentee
1:13:06business type so that's the the mentor
1:13:09and mentee are working on the same uh
1:13:11the same industry but conditional on the
1:13:15business type mentees were randomly
1:13:18assigned to uh to mentors and they did a
1:13:21follow-up six months after the
1:13:23intervention to evaluate the impacts
1:13:26so the main findings of the paper is
1:13:29that there's a a big short-term impacts
1:13:33of the mentoring program on on Prime
1:13:36performance in that it's increased
1:13:38profits of mentees by about 20 percent
1:13:43uh but in contrast there's no
1:13:46significant impact generated by the
1:13:48traditional classroom training program
1:13:51however while they see a big effects in
1:13:55the short term the effects actually
1:13:57disappeared about a year after the
1:14:00intervention and when they look at the
1:14:02the reason of this um uh uh the
1:14:05dimension results they find that once
1:14:08they stop providing incentives to the to
1:14:12the mentors it's very hard for them to
1:14:14maintain this Mentor mentee relationship
1:14:17and because the market information
1:14:19changes over time so once the mentees
1:14:22lost the connections with their mentors
1:14:24they no longer have access to the
1:14:26relevant information and this is why
1:14:28they don't see any effects in the longer
1:14:31term
1:14:34um so different from the like Mentor uh
1:14:37uh mentorship program firms may also be
1:14:41able to improve their business and
1:14:43management practices through learning
1:14:45from each other so this is uh uh What uh
1:14:49uh the next paper that I'm going to talk
1:14:51about uh trying to estimate so this is a
1:14:54a paper of my written with my called
1:14:59Adam Seidel in which we organized uh
1:15:02monthly business meetings for random
1:15:04selected groups of
1:15:07managers in China
1:15:09so we have a sample of
1:15:122800 young firms interested in business
1:15:15meetings and we randomized them into
1:15:18like either a treatment or control group
1:15:21in the treatment group we have um
1:15:251480 randomly selected managers and
1:15:29those people were randomized into small
1:15:31business groups with about 10 managers
1:15:34each so for each of those business
1:15:36groups they are expected to meet with
1:15:39their group members once a month for a
1:15:43year and those meetings were very
1:15:45intensive in that those all the group
1:15:49members would visit the the farm of a
1:15:53group member and then spend hours
1:15:54discussing business issues then
1:15:57and the control group for the control
1:15:59group there were no business groups uh
1:16:01formed and no business meetings
1:16:06um so let me show you that first let me
1:16:08show you the impact of the meetings on
1:16:10foreign performance so in this figure we
1:16:14we showed we showed the impact on three
1:16:17main outcomes sales employment and uh
1:16:20and the profit and here the the blue
1:16:24partials to you the trench in control
1:16:26firms in bit line and end line and the
1:16:30red area shows you the additional change
1:16:32in uh in traded firms so basically it
1:16:35tells us that the meeting seems to be
1:16:37over or beneficial in that we see big
1:16:40and significant improvements in all
1:16:42those um all those three outcomes and we
1:16:45also see that there's a big Improvement
1:16:47in uh in management scores uh indicating
1:16:52that participating in meetings might
1:16:54facilitate learning from each other and
1:16:56improve the management skills
1:16:58but two more in order to more like
1:17:01specifically identify the mechanism of
1:17:04learning from peers we did um additional
1:17:07information experiments in which we
1:17:10distributed information to randomly
1:17:12selected managers about two products the
1:17:16first product is a founding opportunity
1:17:18for the firm which is a cash Grant of up
1:17:22to 200 000 RMB so this is actually a big
1:17:26range for this size of the the size of
1:17:29our sample fraps and these opportunity
1:17:32is highly competitive because each year
1:17:34only around 150 firms are selected to
1:17:38receive funding
1:17:40the second product is a saving
1:17:42opportunity for the manager which offers
1:17:44an annual return of almost a seven
1:17:46percent it's also Limited in Supply but
1:17:50less much less Salient so the key
1:17:53difference between those two products is
1:17:55that the first product is more content
1:17:57competitive and the first product is uh
1:18:01is for the firm while the second product
1:18:03is for the business owners themselves
1:18:07so we then created a variation across
1:18:09groups in the share of informed managers
1:18:12and we want to look at the diffusion of
1:18:15the information among group members
1:18:18depending on the types of of products
1:18:22and also the degree of competitiveness
1:18:25so in order to measure the degree of
1:18:27competitiveness we ask the managers who
1:18:30are their competitors in the group so
1:18:32that we can create a indicator for
1:18:35groups being competitive or not
1:18:38so we find a very interesting result in
1:18:41that this information diffusion of both
1:18:45types of products but the diffusion was
1:18:48much weaker for the products that's
1:18:52relevant for for the firms if there are
1:18:56a lot of competitors in those groups why
1:18:59we don't see similar like um halogenity
1:19:03by the degree of competitiveness for the
1:19:05saving product Which is less competitive
1:19:08and for the business owners so this
1:19:10tells us that peers can actually learn
1:19:14from each other but there's more
1:19:17learning if um
1:19:20if if they are not directly competing
1:19:23with each other
1:19:24so to further
1:19:27um explore like how to what kind of
1:19:30group compensation could maximize uh uh
1:19:33the positive impacts of peer interaction
1:19:36we randomized firms into different types
1:19:39groups and this includes some like
1:19:42homogeneous groups where firms are
1:19:43having similar sites and and in the same
1:19:47industry and also some kind of
1:19:49halogenous group where they are have
1:19:51like different sites and in different
1:19:53um industry
1:19:55and in this figure we show you the
1:19:58evidence of like the impact of having 10
1:20:01larger peers on uh for from performance
1:20:05and we show that interacting with the
1:20:09larger peers remaining firms that have a
1:20:12bigger size uh could generate a bigger
1:20:15impact of the of the meetings program
1:20:20and I'll say that the program is very
1:20:22cost effective as the average profit
1:20:25again is about five times of the
1:20:27manager's wage cost of participating in
1:20:30the in those meetings but a few key
1:20:33things generated like the success of the
1:20:36program including firstly there's a
1:20:39selection of Istanbul in that we only
1:20:41included firms that indicate that they
1:20:43are interested in
1:20:44participating in such business groups
1:20:48and the second one is that uh peer
1:20:51quality matters as we see that those
1:20:55peers introduction is more effective in
1:20:58improving firm outcomes if they have a
1:21:01better performing peers in the in the in
1:21:03the in the group and also who are not
1:21:06direct competitors to their own business
1:21:09and lastly the meetings intensity is
1:21:12also important as it's important for
1:21:15them to meet frequently so that they can
1:21:17establish Trust on each other so that
1:21:19they can start sharing information and
1:21:22also establish partnership with each
1:21:24other
1:21:25so what we have learned from those two
1:21:28papers is that it seems like the
1:21:31matching with the rights peers is is
1:21:34important as I said the peer interaction
1:21:37can be more effective in improving uh
1:21:40communication if firms are matched with
1:21:42similar but better peers who are not
1:21:45close competitors
1:21:47but both papers actually indicate that
1:21:50peer learning may not happen
1:21:52automatically like you need to provide
1:21:54some incentive for example to for
1:21:58um for the mentors to provide
1:22:00information to mentees and also in this
1:22:04uh peer interaction paper
1:22:06um those firms also need some incentives
1:22:08to participating in the program so that
1:22:11they can start peer interaction
1:22:16um okay so another type of alternative
1:22:19training strategy
1:22:22is by some like online instructions or
1:22:25uh through messages through smsf
1:22:29messages or voice messages and this have
1:22:32the advantage that they can like greatly
1:22:34reduce the cost of um of providing the
1:22:39training and also reduce the cost for
1:22:41participants to to attend the training
1:22:45so there are um uh two papers that I'm
1:22:48showing here which used uh SMS messages
1:22:51and voice messages to deliver training
1:22:54so for the first one call at all 2019
1:22:57paper they sent weekly voice messages
1:23:02to Farmers in India and they find modest
1:23:06improvements in business practices but
1:23:08there's no
1:23:10significant changes in the in the in the
1:23:14firm outcomes and the second paper work
1:23:17with mobile money agents in Tanzania and
1:23:20send daily personalized recommendations
1:23:23on inventory levels but find no impacts
1:23:28um there's not much other like studies
1:23:31on this area yet so I guess uh although
1:23:34the existing evidence does not show any
1:23:36like promising results of such uh uh
1:23:39strategies but maybe uh more
1:23:43um uh like uh projects is needing in
1:23:46order to see like whether there's better
1:23:48ways to deliver such such strategy
1:23:52and uh
1:23:54um lastly
1:23:56especially with the kovitch pandemic
1:23:59like everyone use or use meetings via do
1:24:03meetings by Zoom another question is
1:24:05like whether we can do online training
1:24:07which obviously would reduce the uh the
1:24:10cost substantially
1:24:12so there's one uh um paper on this uh to
1:24:17give you one example on this uh this uh
1:24:20this is a paper by uh genius one 2021
1:24:24paper in which they actually carry out a
1:24:27very big scale experiment with over 700
1:24:31000 sellers on the largest e-commerce
1:24:33platform in in China so we should
1:24:36randomized one quarter of those firms to
1:24:38offer task-based online training and
1:24:42they showed that taking up the training
1:24:44increases uh so significantly by about
1:24:486.6 percent but as I said it's very
1:24:51limited study in this area yet so more
1:24:55analysis is needed in order to see like
1:24:57whether
1:24:58um the impacts or can be different
1:25:00across context and maybe
1:25:03um the the best way to kind of implement
1:25:05online training can be uh can be also
1:25:08contact specific
1:25:10okay let me give it a time let me
1:25:12quickly summarize and then um uh
1:25:15hopefully we will have a couple of
1:25:16minutes for uh last sets of questions
1:25:20so what we have learned in this uh uh
1:25:24the main things that we learned in this
1:25:25in this lecture includes super firstly
1:25:29um different sites of primes
1:25:32seems to can be like a benefit from
1:25:35adopting management practices
1:25:39and second the traditional business
1:25:41training programs has a modest but
1:25:44significant impacts on improving
1:25:46management and outcomes for small farms
1:25:50however the impact is very heterogeneous
1:25:53across Temple and context
1:25:56and given this is important to find out
1:25:59like ways to Target the right set of
1:26:01participants and also to like innovate
1:26:04the content and delivery matters for
1:26:07business training but there are also
1:26:09some like open questions in this area
1:26:12including for example how to improve the
1:26:15targeting of training how to match
1:26:19appropriate training programs to
1:26:22specific entrepreneurs how can we
1:26:25improve the cost effectiveness of
1:26:27training for example good online
1:26:29training programs offer like promising
1:26:34impacts on business outcomes
1:26:37and in addition to that why firms will
1:26:40not adopt beneficial business practices
1:26:43even after training and lastly how can
1:26:46we make markets for training work work
1:26:49better
1:26:51um yeah that's all I have and let's see
1:26:53if there are any questions
1:27:04yeah uh so are there any studies think
1:27:08which of which kind of explore the the
1:27:10duration of training right quite often
1:27:13we when someone for a one day training
1:27:15program and it's too short a time to
1:27:17come back to the training actually to
1:27:19behavior change over time so a
1:27:21comparison between training programs
1:27:23that are like shorter versus some that
1:27:25are slightly more longer do you think
1:27:27that is a variable that can be studied
1:27:30right so um so among the like uh
1:27:33evaluations uh that I showed in the
1:27:36summary table I believe there's a lot of
1:27:38variation in the in the duration of
1:27:40training
1:27:41um that I'm not aware of any paper like
1:27:45um specifically randomizing the the
1:27:48duration of training
1:27:50ah thank you
1:27:57uh test home
1:28:00yes thank you um
1:28:04thank you for the nice presentation just
1:28:07I went to uh
1:28:11I I wanted to share my realization uh
1:28:15that just for the large service that
1:28:18that the level of adoption of management
1:28:21practice is why today is same and I have
1:28:24a good enhancement for decimal reference
1:28:27just as as we see that just the level of
1:28:31business trading training impact is that
1:28:36targeting especially with a peer quality
1:28:40and beating intensity have give energy
1:28:44quality in addition to that just small
1:28:48Pharmacy usually have a low access to
1:28:51finance so that uh
1:28:54cash Grant is
1:28:57shall we consider
1:28:59or is a financial access or growing is
1:29:04considered analysis with this research
1:29:08that is what I wanted to
1:29:11raise raise yeah of course so I guess um
1:29:15yeah firms I mean lack of adoption of
1:29:19management practice is not the only like
1:29:22growth barriers for firms right so there
1:29:26are a lot of other pairs such as credit
1:29:28constraint as you you mentioned so yeah
1:29:31you're right like in some cases maybe
1:29:33combining uh those programs could make
1:29:37um make things more effective
1:29:39uh so I'm not sure if we can still take
1:29:43one more question or should we stop here
1:29:45okay yeah you cannot take my question
1:29:49okay
1:29:52can I ask my question
1:29:54yes so this is wonderful presentations
1:29:56and in your presentation I learned two
1:29:58things right we have realized that I
1:30:00mean training it really I mean brings
1:30:02about effective I mean changes in firms
1:30:05performance and also we have also
1:30:07realized that when the if uh I mean you
1:30:10don't adopt the right procedure of it
1:30:13sometimes I mean the purpose might not
1:30:15or for example the case study you
1:30:17presented from Kenya so my question now
1:30:20is I mean having known the importance of
1:30:22training what are the motivations that
1:30:25we can use to improve I mean or to
1:30:27ensure that at least firms enter into
1:30:30training programs
1:30:34uh sorry can you repeat your question
1:30:37well yes
1:30:39you mean how to encourage firms to
1:30:41participate
1:30:43yeah so how to encourage yes first to
1:30:46participate in training programs
1:30:50um
1:30:59yes someone wanted to ask a question to
1:31:01ask something to my question oh
1:31:04yo my question is that like my question
1:31:07is that we are presented to us and we
1:31:09have now gotten to know that I mean
1:31:11training programs really impact
1:31:12infection performance but sometimes too
1:31:15if the right I mean procedures are not
1:31:17put in place it can discourage firms to
1:31:19not participate and sometimes you even
1:31:21highlight some of the reasons why they
1:31:23did not participate because maybe they
1:31:24did not see any profit in that so my
1:31:27question now is what motivations can we
1:31:29put in place to encourage firms to
1:31:31participate or to enter into training
1:31:32programs yeah yeah so I guess there are
1:31:35two issues here firstly like whether we
1:31:38we should encourage all all types I mean
1:31:41every Farm to participate right and the
1:31:44answer is obvious no because uh
1:31:47so some firms might do not have the like
1:31:50potential to to to succeed even with the
1:31:54training right and that's realized with
1:31:56the with the question about targeting
1:31:58right how can we target the right set of
1:32:02firms to Chen and among those targeted
1:32:05firms that can be uh some of them are
1:32:07not interested uh in the in the in the
1:32:11training and uh so questions like then
1:32:14the question is like how how can we how
1:32:17can we motivate them and I can see
1:32:20strategies that has been used so far
1:32:22includes for example to reduce the the
1:32:25cost of training making access to
1:32:28training easier
1:32:30um and maybe also to to use peers right
1:32:33as I think one of the students said if
1:32:36you see some of your peer firms
1:32:39participate in in training or adopting
1:32:42some practices it might give you
1:32:44yourself more incentive to do so
1:32:47okay thank you
1:32:51great we should probably wrap up uh
1:32:53there
1:32:56um should we just remind everyone uh
1:32:58thank you very much King that was a
1:32:59wonderful uh lecture uh tomorrow's
1:33:01lectures at 11 30 uh uh EST uh which is
1:33:05at 4 30 uh UK time so just a reminder
1:33:08the time's different just for tomorrow's
1:33:10lecture which is on misallocation by
1:33:12Pete clanow so we really hope you'll all
1:33:13join us there and Jing thank you once
1:33:16again uh um for for um giving uh such a
1:33:20wonderful lecture to everyone today
1:33:22and my pleasure thanks everyone for
1:33:25participating

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