Aspire
Abstract
We gave US$1,000 cash prizes to winners of a business plan competition in Africa. The competition, entitled 鈥楢spire鈥�, was intended to attract young individuals aspiring to become entrepreneurs. Participants were ranked by committees of judges composed of established entrepreneurs. Each committee selected one winner among twelve candidates; that winner was awarded a prize of US$1,000 to spend at his or her discretion. Our experiment is novel in two respects. First, we choose our recipients by competition, rather than randomization; we therefore estimate the effect of seed grants on high-potential recipients. Second, no previous research has provided sums of this magnitude to aspiring entrepreneurs. Six months after the competition, we compare winners with the two runners-up in each committee: winners are about 33 percentage points more likely to be self-employed. We estimate an average effect on monthly profits of about US$150: an annual profit of 80% on initial investment. Our findings imply that access to start-up capital constitutes a sizeable barrier to entry into entrepreneurship for the kind of young motivated individual most likely to succeed in business.
Citation
Fafchamps, M.; Quinn, S. Aspire. CSAE Economics Department, University of Oxford, Oxford, UK (2015) 34 pp. [CSAE Working Paper WPS/2014-34]
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