Whose problems do investors see as worth solving? I experimentally study how investors evaluate a startup idea based on the socioeconomic background of the founder, the target customer, and the (in)congruence between the two. I am also interested in how the socioeconomic background of investors themselves affect these evaluations. I aim to contribute to the research on diversity and inequality in entrepreneurial funding in which socioeconomic backgrounds have been relatively understudied.
IGL Trials Database
IGL curates a database with randomised controlled trials in the field of innovation, entrepreneurship and growth. Browse our list of topics, see it as a map, or use the search function below.
We conducted two randomized controlled trials (RCTs) to evaluate the impact of government-guaranteed loans offered by the Chilean and Colombian governments. The public funds of these programs greatly expanded following the start of the Covid-19 pandemic and offered loans to Micro, Small and Medium Enterprises to mitigate the negative impact of the shock. Through a collaboration with private banks, we launched two experiments which offered loans to a sub-set of the 10,072 Chilean and 3,079 Colombian small businesses that took part in our experiments.
This study is focused on the relationship between borrowing constraints, access to cutting-edge technology and information about cutting-edge technology on the performance of U.S. online businesses. With the help of two large U.S. technology companies we will be able to randomize access to loans and free cloud computing credits (as well as information about the potential use of technology) to otherwise identical (generally small, but fast growing) firms, to see if they will have a causal impact on firm development.
This lab-in-the-field experiment will measure the gender bias in entrepreneurship and investment among youth and credit officers in Ethiopia. Chigign Tobiya “Ethiopia Emerges” is a television show in Ethiopia where entrepreneurs pitch their business ideas to a panel of business tycoons for a chance to get investment funding.
In many scientific contexts, peer review can be either single-blind or double-blind: in single-blind review, research work (e.g., manuscripts, proposals) is reviewed alongside information on the author(s), whereas in double-blind review, information on the author(s) is withheld. We will report results from a randomized experiment conducted in collaboration with a grantmaking body, in the context of the grantmaker reviewing proposals in one field of science.
Microcredit promised business growth for small firms lacking access to banking loans. Although microcredit has reached millions, recent randomized evaluations find limited average business impacts. Critics often blame contract rigidity, specifically the fixed and frequent installments, for the lack of productive risk-taking. But such rigidity may instill borrower discipline. This study partnered with a Colombian lender that offered first-time borrowers a flexible loan that permitted delaying up to three monthly repayments.
We study the demand for government participation in China’s venture capital and private equity market. We conduct a large-scale, non-deceptive field experiment in collaboration with the leading industry service provider, through which we survey both sides of the market: the capital investors and the private firms managing the invested capital by deploying it to high-growth entrepreneurs. Our respondents together account for nearly $1 trillion in assets under management.
Resource allocation decisions play a dominant role in shaping a firm’s technological trajectory and competitive advantage. Recent work indicates that innovative firms and scientific institutions tend to exhibit an anti-novelty bias when evaluating new projects and ideas. In this paper, we focus on shedding light into this observed pattern by examining how evaluator expertise in the problem’s focal domain shapes the relationship between novelty and feasibility in evaluations of quality for technical solutions.
By enabling smaller loans, broader geographic reach, and less human bias in decision-making, process automation may reduce racial disparities in access to financial services. We find evidence for all three channels in a setting where private lenders faced no credit risk but decided who to serve: the Paycheck Protection Program (PPP), which provided loans to small businesses during COVID-19. Black-owned firms disproportionately obtained their PPP loans from fintech lenders, especially in areas with high racial animus.
We seek to understand what is limiting women's access to finance, in particular for highly skilled start-up entrepreneurs. To investigate supply side constraints, we run a lab-in-the-field experiment in which loan officers in Uganda evaluate several business ideas based on real pitch decks from start-ups. We separate biases in idea evaluation from other constraints (such as gender specific differences in the ability to implement a project, or in external constraints that start-up entrepreneurs are facing).
This impact evaluation aims to measure the effect of a program that combines business training, mentoring, and a large cash transfer on high-potential small and medium businesses in Chile. 250 out of the top 500 firms participating in a business plan competition will be randomly selected to receive all three components of the program, while the remaining firms will receive none of them.
The gender financing gap persists. Women-led startups raise significantly less capital than startups led by only men. That number has hardly budged over the past decade — despite the fact that data continues to suggest that women-led startups outperform startups with all-men founding teams.For investors, focusing on only a fraction of all entrepreneurs means they leave significant opportunities for returns on the table. For startups, this gender financing gap means promising innovations do not receive the resources they need to scale.
Do capital grants improve microenterprise productivity? We use the lens of a production function to re-examine two previous randomised controlled trials that allocated capital to microenterprises. We find that productivity is higher for treated firms, and accounts for about 20-30 percent of the revenue effects of capital grants. Although long-run estimates are noisy, point estimates indicate that these productivity effects are sustained six years after the grants.
Innovative firms with good ideas may still struggle to fine-tune them to the stage where they can attract outside funding. We conduct a five-country randomized experiment that tests the impact of an investment readiness program. Firms then pitched their ideas to independent judges. The program resulted in a 0.3 standard deviation increase in the investment readiness score. Two years later, the average impacts on firm investment outcomes are positive, but small in magnitude, and not statistically significant.
This paper discusses implementing a lab-in-the-field experiment with 334 Turkish loan officers to test for the presence, and learn about the mechanisms, of gender discrimination in small business lending.
A field experiment in Sri Lanka provided wage subsidies to randomly chosen microenterprises to test whether hiring additional labor benefits such firms, and whether a short-term subsidy can have a lasting impact on firm employment. Using 12 rounds of surveys to track dynamics four years after treatment, we find that firms increased employment during the subsidy period. Treated firms were more likely to survive, but there was no lasting impact on employment, and no effect on profitability or sales either during or after the subsidy period.
We explore how variation in entrepreneurs' displayed passion affects informal investor interest in start-up ventures by examining neural responses to entrepreneurs' pitches using functional Magnetic Resonance Imaging (fMRI). We find that founders displaying high passion increase investor neural engagement by 39% and investor interest in the venture by 26% over those displaying low passion. A one standard deviation increase in neural engagement is associated with an 8% percent increase in investors' interest in investing in a start-up company relative to the mean.
User entrepreneurs are responsible for the most important innovations in many industries, but little research has explored the performance of firms founded by user entrepreneurs. While user entrepreneurs have a deep knowledge of customer needs that facilitates the identification of innovative solutions, they tend to lack the relevant business knowledge (e.g., market, production, operational and organizational) to successfully exploit opportunities and grow their ventures.
While prior research shows a significant gender gap in traditional equity financing, with mostly male investors who prefer male founders, emerging evidence indicates that gender gaps in funding may not translate to rewards-based crowdfunding, where female entrepreneurs may have an advantage, particularly with female investors. We seek to examine founder gender preferences in the context of equity crowdfunding, which represents a direct counterpart to traditional equity financing and which is a “higher-stakes” context than rewards-based crowdfunding.
In this paper, meager jointly estimates the average effect and the heterogeneity in effects across seven studies using Bayesian hierarchical models.
We study gender and race in high-impact entrepreneurship within a tightly controlled random field experiment. We sent out 80,000 pitch emails introducing promising but fictitious start-ups to 28,000 venture capitalists and business angels. Each email was sent by a fictitious entrepreneur with a randomly selected gender (male or female) and race (Asian or White). Female entrepreneurs received an 8% higher rate of interested replies than male entrepreneurs pitching identical projects. Asian entrepreneurs received a 6% higher rate than White entrepreneurs.
Many innovative start-ups and small and medium-size enterprises have good ideas, but do not have these ideas fine-tuned to the stage where they can attract outside funding. Investment readiness programs attempt to help firms to become ready to attract and accept outside equity funding through a combination of training, mentoring, master classes, and networking.
Can improved access to credit jump-start microenterprise growth? We examine subjects in urban Hyderabad, India, six years after microfinance–an intervention commonly believed to lower the cost of credit and spark business creation–was randomly introduced to a subset of neighborhoods. We find large benefits both in business scale and performance from giving “gung-ho entrepreneurs” (GEs)–those who started a business before microfinance entered–more access to microfinance. Notably, these effects persist two years after microfinance was withdrawn from Hyderabad.
It is well-established that the effectiveness of pay-for-performance (PfP) schemes depends on employee- and organization-specific factors. However, less is known about the role of external forces. Investigating the role of market competition on the effectiveness of PfP, we theorize that there are two counteracting effects – business stealing and competitor response – that jointly generate an inverted U-shape relationship between PfP effectiveness and competition.
Almost all firms in developing countries have fewer than ten workers, with a modal size of one. Are there potential high-growth entrepreneurs, and can public policy help identify them and facilitate their growth? A large-scale national business plan competition in Nigeria provides evidence on these questions. Random assignment of US$34 million in grants provided each winner with approximately US$50,000.
In the context of rug-making in Egypt, the opportunity to export provides evidence that learning-by-exporting occurs, and can lead to production quality and cost improvements.
Accredited investors finance more than 75,000 U.S. startups annually. We explain how training aspiring entrepreneurs to pitch their new business ideas to these investors affects their odds of continued funding discussions. We model accredited investors’ decision to continue investigation as a real option whose value is a function of their experience and the information contained in the entrepreneurs’ pitches. We derive four hypotheses from the model, which we test through a field experiment that randomly assigns pitch training at four elevator pitch competitions.
Using a randomized control trial, we evaluated the effect of a financial literacy program on the level of debt and on formal access to credit in Chile. We use a sample of beneficiaries of a publicly run micro-entrepreneurship program. We evaluated the program using administrative data with information on the debt level, interest rates, and new loans provided by the formal sector. The program tends to decreased debt level in the short run while increasing the probability of having formal debt.
This study presents results from a randomized evaluation of two labor market interventions targeted to young women aged 18 to 19 years in three of Nairobi's poorest neighborhoods. One treatment offered participants a bundled intervention designed to simultaneously relieve credit and human capital constraints; a second treatment provided women with an unrestricted cash grant, but no training or other support.
I use a field experiment in rural Kenya to study how temporary incentives to save impact long run economic outcomes. Study participants randomly selected to receive large temporary interest rates on an individual bank account had significantly more income and assets 2.5 years after the interest rates expired. These changes are much larger than the short-run impacts on experimental bank account use and almost entirely driven by growth in entrepreneurship.