Pathways to Profits: The Impact of Marketing versus Finance Skills on Business Performance

Wednesday, 7 December, 2016
Abstract: 
This paper by Anderson, Chandy and Zia (2016) examines the impact of improvements in marketing skills relative to finance skills among small business owners. It addresses three important questions: (1) What is the impact of marketing or financial skills on business performance? (2) How do improvements in marketing and finance skills respectively affect business outcomes? (3) Who benefits most from increases in marketing relative to finance skills? Through a randomized control study of 852 firms in South Africa, the analysis finds significant improvements in profitability from both types of business skills training. However, the pathways to achieve these gains differ substantially between the two groups. The marketing group achieves greater profits by adopting a growth focus on higher sales, greater investments in stock and materials, and hiring more employees. The finance group achieves similar profit gains but through an efficiency focus on lower costs. Both groups show significantly higher adoption of business practices related to their respective training program. Consistent with a growth focus, marketing/sales skills are significantly more beneficial to firm owners who ex ante have less exposure to different business contexts. In contrast and in line with an efficiency focus, entrepreneurs who have been running more established businesses prior to training benefit significantly more from finance/accounting skills.