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Limited Impact of Business Development Programs on Profitability in the Presence of Ambiguity Aversion

Publication | April 2020
Limited Impact of Business Development Programs on Profitability in the Presence of Ambiguity Aversion

This paper presents an analysis of business development programs (BDPs) based on a theoretical framework aimed at understanding the mixed effect of business training on entrepreneurs.

There has been an emerging empirical literature on the use of BDPs to improve business knowledge, management practices, and overall profitability of microentrepreneurs in developing countries. However, the effect of such programs is mixed. In the author’s framework, entrepreneurs are ambiguity-averse and have multiple sources of income (e.g., business and wage incomes). The paper shows that a mismatch between a BDP’s narrow focus on business-promoting strategies and the wider context in which microentrepreneurs operate can limit the impact of business training.

Contents 

  • Introduction
  • Basic Setup
  • Business Training
    • Effect of Business Training on Profit: A Special Case
    • Business Training: A General Case
  • Concluding Remarks
  • Appendix