How effective are business training programs for entrepreneurs of necessity-driven startups? An RCT of Fondoempleo's Entrepreneurship Program

Abstract

This paper evaluates FONDOEMPLEO’s Line 3—an intensive entrepreneurship program for necessity-driven entrepreneurs in Peru—using a randomized pairwise-matched controlled trial with 1,278 participants across four regions (2017 cohort). The intervention combined 60–111 hours of classroom training with 6–8 months of individualized technical assistance. Outcomes on operation, formalization, practices, and performance were measured ~12 and ~24 months after completion. The program produced sizable and persistent improvements in managerial practices (e.g., bookkeeping and record-keeping) but no gains in employment, sales, or earnings at either follow-up. Impacts on business operation were heterogeneous: the program increased the probability that applicants with business ideas launched operational firms, while effects for existing businesses were modest and faded over time. Formalization effects were limited, with only small increases in simplified tax regime registration and no consistent changes in permits or full tax registration. These findings suggest that training can shift managerial behaviors and facilitate business creation but is unlikely to transform subsistence enterprises into growth firms.