Entrepreneurship is the heartbeat of small business growth and innovation. Therefore, many initiatives attempt to improve entrepreneurs’ skill sets as a way of improving productivity in micro-, small- and medium-sized businesses, which would lead to faster growth.
The IDB’s strategy is focused on increasing the relatively low productivity of Latin America and the Caribbean, which has been well documented. One paramount question that arises from such a strategy is whether relevant soft skills could be boosted enough to transform micro-entrepreneurs into the type of innovative agents that would lead to a more productive society. The fact that billions of dollars are spent subsidizing business-training programs around the world indicates that policymakers and donors believe that such a transformation is possible.
Unfortunately, a recent study of entrepreneurs in Jamaica, published in World Development, shows that while soft skills can be boosted, such initiatives may not translate to improved sales and profits over the long term. The study was implemented by the Jamaica Business Development Corporation, Development Bank of Jamaica, Inter-American Development Bank, IDB Invest, and the IDB Lab and focused on soft-skills training within a Jamaican context.
A New Training Mindset
The study was in reaction to existing research indicating that traditional business-training programs have not generated transformative effects around the world. One possibility for this failure is that these programs are centered on recommending a set of generic business practices, while entrepreneurs face ever-evolving idiosyncratic challenges that require more tailored advice.
Accordingly, there is a belief that psychology-based training programs focus on changing the way entrepreneurs think about their business might have more of an impact than traditional training programs. Instead of recommending a set of generic business practices, these psychology-based training programs aim at changing a particular set of soft skills that are believed to be related to successful entrepreneurship. These skills include personal initiative, persistence, perseverance after setbacks, and grit.
The study in Jamaica was designed to test whether such an approach would work by training entrepreneurs in a set of soft skills. The study did show that such skills can be boosted over the long term and that these improved skills foster the adoption of desirable business practices. However, while sales and profits improved in the short term, the intensity of the adoption of desirable business practices was insufficient to translate into long-term gains.
Combined Training May Work
Given the absence of persistent effects of soft-skills training, it appears that more is needed. Complementing soft-skills training with more intense continued technical assistance and mentorship might be a relevant avenue for generating long-lasting improved business outcomes. Future research should test whether such a combination of training along with mentorship can produce the impact needed to improve productivity in different contexts.
If the combination does yield positive results, such efforts would enable productivity in Latin America and the Caribbean to increase throughout the region and contribute to improving the lives of citizens and enhancing entrepreneurs’ skills for the future.