Low productivity is a major constraint to growth in low and middle-income countries. Furthermore, recent micro-level evidence finds that small and medium-sized enterprise (SME) 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 low and middle-income countries.
The Ugandan Investment Authority, in collaboration with Makerere University, has developed a cluster-level intervention to help SMEs grow. The intervention aims to: (i) provide technical training that is designed to increase productivity, and (ii) leverage bringing firms together as a cluster to facilitate market segmentation. This randomized evaluation seeks to answer whether jointly providing technical knowledge and assistance in reaching economies of scale can cost-effectively increase productivity growth of SMEs. Results forthcoming.
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