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Can Consultants Improve Small Firms?

(Photo: David Cameron)

A few months ago I ran a contest here at Freakonomics (results here) to predict the outcome of a randomized trial on charitable giving.

Although we are long way from realization (and it may be a pipe dream), the idea is simple: imagine a market on results from research studies. This could help not just hold people accountable for their ex-ante stated views, but also serve as a guiding tool for investors, practitioners, policymakers and donors, to help make decisions and allocate resources using the collective wisdom of markets. Of course this requires liquidity, and a certain faith in markets. Anyhow, until that dream comes true, we are doing this the simple way: running contests!

Here is the question: many NGOs and some “social enterprises” try to improve enterprises, from micro to small to medium, by providing training or consulting services. There is a wide spectrum of what this actually means. We ran two randomized trials with two such programs: one for micro firms (tailors in Ghana) with a major international accounting and consulting firm, and one for small and medium firms (many sectors, in Mexico) with a collection of local consultants.

Which one worked better? For more on this, and the central differences in the programs, and a chance to win a contest, please check out Annie Duflo and my article in the Stanford Social Innovation Review. Results will be published in the summer print issue.