Behavioural perspectives on subsistence entrepreneurship in an emerging market

This dissertation consists of four chapters devoted to work at the intersection of Development and Behavioural Economics. Chapter 1 provides a review of recent contributions to aspirations theory in the context of the literature on behavioural development economics. It discusses the promise of aspirations theory to usefully contribute to addressing the puzzle of low investment levels at high returns among households and microenterprises in developing countries. The three following chapters study the business practices and growth aspirations of microenterprises using data from a randomised controlled trial conducted among traditional retail businesses in Jakarta, Indonesia. Chapter 2 elicits local microenterprises’ business practices through qualitative interviews and a quantitative survey to disseminate best practices via professionally designed handbooks. It further documents the positive impact of two additional treatments to facilitate adoption among peers: a documentary of successful peers to foster social learning and personalised short-term implementation assistance through local laymen to encourage individual learning. Chapter 3 makes use of the panel structure of the control-group data. It shows that, in the absence of treatment, entrepreneurial aspirations predict forward-looking firm behaviour and performance, but that failures to aspire beyond the status quo and failures to imagine or plan for the entrepreneur’s ideal business are common. Chapter 4 uses the experimental data to directly test predictions from aspirations theory. It shows that exposure to aspirational role models can have differential effects on effort and performance depending on their distance to initial levels of aspirations and the inherent risk of seeing one’s aspirations frustrated.