By Annie Duflo & Dean Karlan Summer 2012

Should we assume that small enterprises in developing countries are lacking in business skills—and that guidance and training will improve these businesses? Economic theory says that firms do as much as possible to maximize profits—including paying for advice from management consultants. In developing countries, interventions ranging from quick lectures during microcredit meetings to extended engagements with international consulting firms aim to improve management practices. These interventions presume that the existing management must be missing something. And whenever there is a ton of activity, questionable data, and competing theories, researchers often try to fill the knowledge gap. We want to know: What is all this interventionist effort for? Can mere advice really help these enterprises run better, earn more money, and create more jobs—and, if so, why?

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