Knowledge Diffusion Among Small Firms: Linking Theory and Data in Kenya

This project takes aggregate models in which economic development is linked to knowledge diffusion, and proves theoretically that critical diffusion parameters can be identified with a properly designed RCT.

This project considers aggregate models in which economic development is linked to knowledge diffusion, and proves theoretically that critical diffusion parameters can be identified with a properly designed RCT. Building on an existing project in Dandora (Kenya), the researchers plan to scale up and collect additional information on an already successful microenterprise "mentorship" treatment, where enterpreneurs are paired with a more profitable business owner for a series of one-on-one meetings to discuss business.

The existing work showed that the "mentorship" initiative can generate significant benefits for business owners. This project will allow them to expand the sample, including new and larger firms, and to focus on identifying important margins of heterogeneity. Moreover, the data collected will allow the researchers to test whether the mechanisms of the theoretical model they built are operational in the data, and to identify critical diffusion parameters in this class of models.

While it is often hard to identify the policy relevance of theoretical contributions to the academic literature, this project provides several useful insights. Firstly, the "mentorship" initiative appears promising and cost-effective, and looking at the margins of heterogeneity could improve the targeting of this intervention. Secondly, uncovering the relevance of spillover effects in knowledge diffusion may be helpful in trying to provide optimal policy recommendations.