Learning Managerial Skills: Evidence from Kenyan Microenterprises∗

We use a randomized controlled trial to evaluate whether interaction with successful firms increases managerial skill and profit among Kenyan microenterprises. Owners are assigned to receive classroom business training, meet with a randomly assigned successful firm (“mentorship”), or neither. Over the course of a year, mentee weekly profit is on average 20 percent higher than the control while no such change occurs among the class treatment. However, the effect fades over time as matches dissolve. The gains are driven by the fact that mentees are 40 percent more likely to switch suppliers in the aftermath of the treatment, increase inventory spending by 20 percent, and have 50 percent lower inventory costs relative to both the class and the control. We exploit our mentor selection procedure with a regression discontinuity design to show that there are no changes in scale or business practices among mentors. This implies that the observable gains from the interaction accrue only to the mentee, consistent with models in which learning occurs only in one direction. ∗We thank the Ford Family Program and the Hellen Kellogg Institute for International Studies for financial support, especially Bob Dowd and Dennis Haraszko for their help coordinating the project, and Lawrence Itela, Jackie Olouch-Aridi, and Maurice Sikenyi for their excellent work managing the project in Dandora. Thanks also to conference and seminar participants at Arizona State, Notre Dame, York University, and the Midwest Development Conference (Michigan) for comments and insights, especially Joe Kaboski and Chris Woodruff. Contact Info: 434 Flanner Hall, Notre Dame, IN 46556. Brooks: [email protected]; Donovan: [email protected]; Johnson: [email protected]