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Does Entrepreneurship Education Make People Better Entrepreneurs?

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A recent Global Entrepreneurship Monitor (GEM) report on entrepreneurship training asks a central question for anyone interested in starting a business: “Does entrepreneurship education make a difference?”

You might think that this question has been resolved. After all, the Ewing Marion Kauffman Foundation reports that more than 2,000 U.S. colleges and universities teach entrepreneurship. How could all those professors teach something that might not matter?

As surprising as it may sound, we don’t know the effect that entrepreneurship training has on start-up company success. Relatively little research has looked directly at the benefits provided by entrepreneurship education; and the results to date are far from conclusive.

Most of the studies on entrepreneurship training look at whether people who have received this education perform better as entrepreneurs than those who have not . Studies by researchers at the University of Arizona, New York University and other institutions have found that people who have received entrepreneurship education perform better at running their own businesses.

However, these studies don’t necessarily show that entrepreneurship education causes better start-up company performance. The same people who are good at running their own businesses might also be the most interested in studying entrepreneurship. As a result, receiving entrepreneurship training and start-up company performance are correlated, but the education doesn’t cause the performance.

The gold standard in research is a controlled experiment. If some people are randomly assigned entrepreneurial education and others are not, then we can see if the training causes the performance.

Researchers have conducted a few randomized experiments to look at the effect of entrepreneurial training. One study by Dean Karlan of Yale University and Martin Valdivia of Grupo de Análisis para el Desarrollo randomly assigned entrepreneurship classes to female micro-entrepreneurs in Peru participating in a micro-credit program.

The researchers found mixed results for the effects of training. The entrepreneurs who received training showed higher sales, but did not have higher profit margins or more employees. The trained entrepreneurs also scored higher on “keeping records of their withdrawals from their business, an index of business knowledge questions, the proportion that report using profits for business growth, and implementation of innovations in the business.” But they were scored no differently on “changes in tax formality, paid fixed salary to self, number of sales locations, level of diversification, allowing sales on credit, keeping records of payments to workers, started new business, proportion of clients who faced problems with business and proportion of clients who planned innovations in their businesses.”

Lars Oppedal Berge Kjetil Bjorvatn and Bertil Tungodden of the Norwegian School of Economics and Business Administration randomly assigned recipients of microcredit in Tanzania to entrepreneurship training. They also found mixed results. They observed no significant effect of training on sales or the number of employees, but found that training increased the entrepreneurs’ record keeping, tendency to use bonuses to incentivize employees, and willingness to change their product mix.

Xavier Gine and Ghazala Mansuri randomly assigned Pakistani microentrepreneurs to receive six hours of training, the chance to participate in a loan lottery, neither, or both. Gine and Mansuri found that, for men, receiving business training reduced business failure, but had no significant effect on sales, business assets, or number of employees. For women, receiving business training had no significant effect on any of the performance measures.

The three studies described above don’t show consistent evidence that entrepreneurship training improves the performance of micro-entrepreneurs. Moreover, experiments with random treatment of the type of entrepreneurship training provided by universities in industrialized countries have not been conducted.

In short, getting some entrepreneurship training might increase your performance as a business owner. Then again it might not.

[“source-smallbiztrends”]