Low productivity is a major constraint to growth in developing countries. Furthermore, recent micro-level evidence finds that small business owners and farmers do not fully understand how to optimize their production processes suggesting that knowledge may be a barrier to productivity growth. Small firms may also face challenges in reaching the scale required to access markets. Market segmentation is a potentially important, and understudied aspect of firm growth in developing countries. Thus, the Ugandan Investment Authority in collaboration with Makerere University has developed a cluster-level intervention to help SMEs grow. The intervention aims to: (i) provides technical training that is designed to increase productivity, and (ii) leverages bringing firms together as a cluster to to facilitate market segmentation. This study, by conducting a randomized evaluation of the cluster intervention, seeks to answer whether jointly providing technical knowledge and assistance in reaching economies of scale can cost-effectively increase productivity growth of small and medium enterprises. Results forthcoming.
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