Field experiments in performance inequality among small businesses : evidence from India and Uganda

This dissertation is composed of three essays with the following abstracts. ``When does advice impact startup performance?'', co-authored with Aaron Chatterji, Sharique Hasan and Rembrand Koning and published in the Strategic Management Journal \citep{chatterji2019}: Why do some entrepreneurs thrive while others fail? We explore whether the advice entrepreneurs receive about managing their employees influences their startup's performance. We conducted a randomized field experiment in India with 100 high‐growth technology firms whose founders received in‐person advice from other entrepreneurs who varied in their managerial style. We find that entrepreneurs who received advice from peers with a formal approach to managing people—instituting regular meetings, setting goals consistently, and providing frequent feedback to employees—grew 28\% larger and were 10 percentage points less likely to fail than those who got advice from peers with an informal approach to managing people, 2 years after our intervention. Entrepreneurs with MBAs or accelerator experience did not respond to this intervention, suggesting that formal training can limit the spread of peer advice. ``Do buyers discriminate against female-owned businesses? Two field experiments'': Gender inequality manifests itself at every step of the entrepreneurial process. By the time a woman is running her business, multiple factors have already constrained her profitability. How much of the gender gap can be explained by buyer's behavior in the marketplace as against supply-side differences? Buyers might behave differently based on 1) a seller's gender or 2) differential business characteristics by gender. To address this problem of confounding, we ran two field experiments that hold constant business characteristics and vary the owner's gender, thus separating supply from demand factors. Before our randomized experiments, we collected data in India showing that men earn 50\% more than women, men's inventory is 40\% larger than women's and buyers are more likely to buy from male sellers. We set up our own market stalls in three different markets, keeping hours worked, location, size and setup constant, and provided the same type, quantity, and quality of goods to 272 owners--regardless of gender. To further test for demand-side discrimination, we also set up two shops in a large vegetable market and recruited confederate sellers to sell packaged goods using a standardized script. Our results show that providing men and women with the same business closes the gender gap in profitability, ruling out buyer's discrimination. Women can earn as much as men, if given equal opportunity to do so. This finding challenges existing conclusions about the causes of the gender gap in business ownership and performance. ``The baby profit gap: An overlooked gendered constraint for small business performance'': Studies have shown that female-owned businesses are less profitable than male-owned businesses. In this paper, we shed light on an overlooked constraint for female-owned businesses in developing countries: the need to bring a baby to work. In Uganda, the context of this study, working women are very likely to be self-employed (84\%) and women are very likely to have children (close to 100\% by age 30). We estimate how much of the observed gender profit gap can be explained by this constraint. We collect original, multi-visit field data from a sample of micro-entrepreneurs in select areas of Uganda, paired with data from real customers and confederate buyers (i.e., mystery shoppers). We document that vendors are also taking care of small children at 17 percent of all outlets. These childcare duties are highly gendered: 38\% of female owners bring small children to work, compared to 0\% of men. Childcare duties are correlated with a ``baby profit gap'': outlets with children earn 48\% lower profits. We find that prices, quality, and other variables correlated with profits are not robustly correlated with the presence of a baby. However, we find suggestive evidence that women with children in the store are more likely to run out of stock than both men and women without children in the store. We estimate that if all women earned profits equal to women without children at work, the median gender gap would fall by 50\%. Our findings suggest that childcare duties may have a significant impact on gender earnings disparities, which may lead to lower economic mobility and increased economic distortion

Keywords: Business.
Advisor: Sorensen Jesper B.
Ferguson John-Paul
Ranganathan Aruna