Despite being the only region in the world where there are more female entrepreneurs than men, the vast majority of female-owned businesses in Sub-Saharan Africa are microenterprises and women’s businesses earn 34% lower profits than male-owned ones. Identifying the constraints faced by female entrepreneurs is vital for fostering economic growth. Recent studies have shown that interfirm relationships and access to professional networks can be important determinants of business success (Ashraf et al., 2019; Kanter, 1994; Cai and Szeidl, 2017). However, past interventions that aimed at expanding business networks mainly considered male entrepreneurs (Cai and Szeidl, 2017). At the same time, the literature on female entrepreneurs in the developing settings has primarily focused on informal microenterprises. Therefore, there is limited evidence on the importance of interfirm relationships for female entrepreneurs of potential high-growth firms.
In this project, we conduct an RCT in Ghana on a sample of 1,771 growth-oriented female entrepreneurs to investigate the effect of online networking groups combined with legal support on business collaborations and firm performance. We randomly assigned the female entrepreneurs into two treatment arms and a control group:
- Treatment 1: Networking 40% (N=704)
- Treatment 2: Networking and Legal Support 35% (N=608)
- Control 25% (N=436)
In the first treatment arm, women are assigned into online networking groups of 8 entrepreneurs on the WhatsApp platform in two rounds. Each week, each member is assigned to meet virtually with another group member. We also provide a directory of all entrepreneurs in the treatment group with their contact information. The aim of this treatment is to expand the business networks of participants and increase their opportunities for business collaborations. In the second treatment arm, entrepreneurs also receive legal support in addition to the online networking groups. The legal support entails weekly video lessons by a local corporate lawyer that discusses risks of collaborations and ways of mitigating these risks through the use of written agreements and effective communication. Entrepreneurs can also consult the lawyer individually during the four-month intervention period. This treatment aims to reduce contracting frictions in addition to networking frictions, potentially increasing collaborations between entrepreneurs who meet on the platform.
The intervention was implemented between February and June of 2021. The first post-intervention follow-up survey was conducted between August and October 2021 and the second follow-up survey was conducted between April to July 2022, one year after the intervention.
From the analysis of the one-year follow-up survey, we find that access to online networking opportunities (i) does not increase total business collaborations, but (ii) shifts business collaborations from friends and family members to business network members in the intervention, and (iii) leads to greater innovation, better business practices and higher profits by 21%. The increase in profits is concentrated in the upper tail of the distribution. We find the largest effects for those in groups with more-educated, higher-quality, and more diverse entrepreneurs. While legal support leads to a decline in overall collaborations due to a greater reduction in collaborations within pre-existing networks (e.g., friends and family), it does not have additional impacts on business outcomes, suggesting that legal contracting barriers are unlikely to be the key barrier to growth for these firms. Our findings reveal that a low-cost, light-touch online intervention that increases networking opportunities can effectively improve outcomes of female-owned firms.
However, the current dataset does not allow us to disentangle the main drivers of our results which is crucial for understanding the policy implications of this intervention and its scale-up potential (even in different settings). For this reason, in March 2023, we conducted 17 in-person qualitative interviews to collect preliminary evidence on mechanisms. The qualitative interviews reveal that the WhatsApp networking groups allowed women in our sample to find new business partners, market their products, learn better business practices, and gain new ideas.
In this project we conduct a 3-year post-intervention quantitative survey on our entire sample of female entrepreneurs. The goal of this long-run data collection is to test potential mechanisms highlighted by the qualitative interviews and to understand the persistence of our results beyond the first year post-intervention. Testing these mechanisms in the long run is important because outcomes such as formation of collaborations and women’s empowerment may require multiple years to realize.