Friends or Competitors: Peer Effects within Business Accelerator Programs

This project builds on a PEDL pilot grant awarded as part of the 2020 PEDL Young Scholars Matchmaking Workshop.

Jobs and opportunities for young people is a policy priority in almost every country in Sub-Saharan Africa. A key challenge is to increase the productivity of small and medium-scale firms (SMEs) in the informal sector. One way to increase firm performance is through training owners of small firms in management practices. However, there is a low take-up of management training by small firms. Another way is by providing support programs to high-growth-potential entrepreneurs through business accelerators and business plan competitions to improve business outcomes and increase employment. Non-monetary services, such as peer interactions during accelerator programs, may have a meaningful impact on firm performance. Interaction between peers is often cited as beneficial to high-growth-potential entrepreneurs, but there is little evidence of its effectiveness in Africa, especially in business accelerators. This research examines the impact of business accelerators programs on early-stage firms in Nigeria. The research design will be a randomised control experiment that will investigate two questions: (1) whether there are "peer effects" of financial and sales management on the growth and performance of startups? (2) What is the impact of peer effects on women entrepreneurs compared to male entrepreneurs?

For the project, the researchers will partner with Impact Hub Lagos by carrying out an RCT on firms participating in a relief support program. These firms will be either established but stressed ventures at the startup stage participating in the incubation program, or ventures with high-growth potential participating in the acceleration program. Selected treatment firms will be randomised into mixed groups, which will be assigned to different chats within the collaboration platform in order to encourage peer interaction and feedback. Over two months, the researchers will use an incentive scheme to encourage the firms to ask and answer questions from each other regarding financial and sales management.

Many governments in Africa recognise the fact that providing support programs to high-growth-potential entrepreneurs, through business accelerators and business plan competitions, can improve business outcomes and increase employment. However, there is little evidence of the effectiveness of business accelerators in the region. This project will thus address multiple policy-relevant questions around job creation, supporting small and microenterprises through alternative business training models, identifying and supporting high-growth-potential entrepreneurs.


Rupali Kaul

Stanford University

Arinze Nwokolo

Lagos Business School

Yulu Tang

Harvard University