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Title Limited Impact of Business Development Programs on Entrepreneurs Profitability in the Presence of Ambiguity Aversion
Author Dmitry Shapiro (Seoul National University)
Volume 36 Number 2
Pages 377-413 
Keywords Business Development Programs, Ambiguity Aversion, Microentrepreneurship
Abstract This paper develops a theoretical framework to explain the limited effect of business development programs (BDPs) on entrepreneurs profits. We argue that a mismatch between a BDPs narrow focus on business-promoting strategies and the wider context in which micro entrepreneurs operate can limit the impact of business training. In our framework,entrepreneurs are ambiguity-averse and have multiple sources of income (e.g., business and wage incomes.) We show that for a sufficiently ambiguity-averse entrepreneur with multiple income sources, efficient training can result in a decline in expected profit. Notably, when the wider context (multiple income sources, ambiguity-aversion) is considered, the business training impact is limited and can result in a post-training expected profit decline. This limited impact is caused by the diversifying role that the business income plays in household finances.
File KER-20200701-36-2-04.pdf
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