Shocking Business Aspirations: Experimental Evidence from Small-scale Entrepreneurs in a Developing Economy

Patricio Dalton, Julius Rüschenpöhler, Bilal Zia

Research output: Working paperOther research output

Abstract

Lack of growth aspirations can be an important psychological constraint to small-scale entrepreneurship in developing economies. We use a field experiment among urban retail entrepreneurs in Indonesia to provide an exogenous shock to their aspirations window. A randomly selected set of entrepreneurs are provided a handbook of key business practices implemented by successful local peers, complemented with two psychological and implementation nudges: a movie with business role models from the local area who demonstrate their path to success; and personalized business assistance to help entrepreneurs with individual implementation challenges. We show that business growth aspirations respond strongly to these interventions, measured up to eighteen months afterwards. In line with the theoretical literature, we find that the distance between the initial aspirations of the entrepreneurs and the business frontier is the key driver for the direction of the effects. Entrepreneurs with high business aspirations at baseline respond positively to the treatments and increase business aspirations, sales, and profits; while those with low initial aspirations respond negatively and decrease their business aspirations and performance. We find similar heterogeneity in complementary aspirations for children’s education and satisfaction with household finances. These results confirm that initial levels of aspirations are crucial in determining how entrepreneurs respond to exogenous aspirational shocks.
LanguageEnglish
Place of PublicationTilburg
PublisherTilburg University
Number of pages51
Publication statusPublished - 30 Jun 2018

Publication series

NameDFID Working Paper

Fingerprint

Aspiration
Entrepreneurs
Developing economies
Exogenous shocks
Psychological
Retail
Business practices
Field experiment
Movies
Education
Household finance
Peers
Business growth
Profit
Entrepreneurship
Role model
Indonesia

Cite this

Dalton, P., Rüschenpöhler, J., & Zia, B. (2018). Shocking Business Aspirations: Experimental Evidence from Small-scale Entrepreneurs in a Developing Economy. (DFID Working Paper). Tilburg: Tilburg University.
Dalton, Patricio ; Rüschenpöhler, Julius ; Zia, Bilal. / Shocking Business Aspirations : Experimental Evidence from Small-scale Entrepreneurs in a Developing Economy. Tilburg : Tilburg University, 2018. (DFID Working Paper).
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Dalton, P, Rüschenpöhler, J & Zia, B 2018 'Shocking Business Aspirations: Experimental Evidence from Small-scale Entrepreneurs in a Developing Economy' DFID Working Paper, Tilburg University, Tilburg.

Shocking Business Aspirations : Experimental Evidence from Small-scale Entrepreneurs in a Developing Economy. / Dalton, Patricio; Rüschenpöhler, Julius; Zia, Bilal.

Tilburg : Tilburg University, 2018. (DFID Working Paper).

Research output: Working paperOther research output

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N2 - Lack of growth aspirations can be an important psychological constraint to small-scale entrepreneurship in developing economies. We use a field experiment among urban retail entrepreneurs in Indonesia to provide an exogenous shock to their aspirations window. A randomly selected set of entrepreneurs are provided a handbook of key business practices implemented by successful local peers, complemented with two psychological and implementation nudges: a movie with business role models from the local area who demonstrate their path to success; and personalized business assistance to help entrepreneurs with individual implementation challenges. We show that business growth aspirations respond strongly to these interventions, measured up to eighteen months afterwards. In line with the theoretical literature, we find that the distance between the initial aspirations of the entrepreneurs and the business frontier is the key driver for the direction of the effects. Entrepreneurs with high business aspirations at baseline respond positively to the treatments and increase business aspirations, sales, and profits; while those with low initial aspirations respond negatively and decrease their business aspirations and performance. We find similar heterogeneity in complementary aspirations for children’s education and satisfaction with household finances. These results confirm that initial levels of aspirations are crucial in determining how entrepreneurs respond to exogenous aspirational shocks.

AB - Lack of growth aspirations can be an important psychological constraint to small-scale entrepreneurship in developing economies. We use a field experiment among urban retail entrepreneurs in Indonesia to provide an exogenous shock to their aspirations window. A randomly selected set of entrepreneurs are provided a handbook of key business practices implemented by successful local peers, complemented with two psychological and implementation nudges: a movie with business role models from the local area who demonstrate their path to success; and personalized business assistance to help entrepreneurs with individual implementation challenges. We show that business growth aspirations respond strongly to these interventions, measured up to eighteen months afterwards. In line with the theoretical literature, we find that the distance between the initial aspirations of the entrepreneurs and the business frontier is the key driver for the direction of the effects. Entrepreneurs with high business aspirations at baseline respond positively to the treatments and increase business aspirations, sales, and profits; while those with low initial aspirations respond negatively and decrease their business aspirations and performance. We find similar heterogeneity in complementary aspirations for children’s education and satisfaction with household finances. These results confirm that initial levels of aspirations are crucial in determining how entrepreneurs respond to exogenous aspirational shocks.

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Dalton P, Rüschenpöhler J, Zia B. Shocking Business Aspirations: Experimental Evidence from Small-scale Entrepreneurs in a Developing Economy. Tilburg: Tilburg University. 2018 Jun 30. (DFID Working Paper).