Limited Impact of Business Development Programs on Entrepreneurs¡¯ Pro?tability in the Presence of Ambiguity Aversion

Dmitry Shapiro ()

Working Paper Series from Institute of Economic Research, Seoul National University

Abstract: This paper develops a theoretical framework to explain a limited e?ect of business development programs (BDPs) on entrepreneurs¡¯ profit. We argue BDPs limited effect is due to mismatch between a BDPs¡¯ narrow focus on business-promoting strategies and a wider context in which microentrepreneurs operate. Entrepreneurs are ambiguity-averse and have multiple sources of income, e.g. business and wage incomes, that are correlated with each other. We show that for a sufficiently ambiguity-averse entrepreneur with multiple income sources e?cient training can result in pro?t decline. We, further, show that both the ambiguity aversion and the multiplicity of income sources are crucial for our results. Only when the wider context (multiple income sources, ambiguity-aversion) is considered, the business-training impact is limited and can result in post-training profit decline. The limited impact is caused by the diversifying role that the business income plays in households¡¯ finances.

Keywords: Business development programs; ambiguity aversion; microentrepreneurship (search for similar items in EconPapers)
JEL-codes: D1 O12 O16 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-ent and nep-upt
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ier.snu.ac.kr/activity/working-papers?md=download&seqidx=2

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:snu:ioerwp:no102

Access Statistics for this paper

More papers in Working Paper Series from Institute of Economic Research, Seoul National University Contact information at EDIRC.
Bibliographic data for series maintained by Hojung Lee ().