Virtual social networks and entrepreneurship in low-income countries: A randomized controlled experiment in Ghana

This project aims to test whether poor social networks are a key factor limiting the rise of entrepreneurial behaviour in rural areas of low-income countries.

Bocconi University
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Development is largely about innovation and innovation is largely about entrepreneurship. What then are the ingredients of a good entrepreneur? Of course, psychological traits are important, as well as the “usual suspects” of good institutions, cooperative social norms, etc. However, without good ideas there is little individuals can do to free themselves from the status quo. So where do good ideas come from? This is a complex phenomenon, but social interaction is key. This is why cities (with their rich social networks) are typically found at the basis of sustained processes of social innovation. Do low-income rural areas in the developing world, without such networks, lack this capacity for innovation? And can virtual social networks provided with IT technologies ameliorate this factor?

The researchers have developed a smartphone application that delivers high versatility and richness in communication, approximating a dynamic community of entrepreneurs. A randomly chosen subset of the population will be given smartphones (treated group), with the application installed and free internet access for the duration of the experiment, while the complementary subset acting as a control group. The researchers will identify entrepreneurial business projects as those selected by a microcredit programme that will run in parallel alongside the virtual network platform. By comparing entrepreneurial behaviour in the treated and in the control group, this project will provide empirical evidence as to whether social networks are a crucial “missing factor” hampering the rise of entrepreneurial behaviour in rural areas of low-income countries, and whether virtual social networks can replicate this factor.

The promotion of entrepreneurship in the informal sector is one of the main areas of policy concern for policymakers in LICs, and represents a big share of the economy. At a relatively low cost, IT tools such as those developed for the experiment could be used in a very scalable manner to enhance the networking possibilities of large numbers of people and provide large welfare payoffs.