In regions where formal employment opportunities are scarce, entrepreneurship is often promoted as a key way to improve livelihoods. Many development organizations have adopted market-based strategies to combat poverty, offering education and training programs to help microentrepreneurs innovate in their businesses. However, evidence shows that these programs often struggle to bring about lasting changes in how entrepreneurs operate.
New research from the University of Michigan highlights that the way these training programs are framed plays a critical role in their success. Typically, such programs encourage microentrepreneurs to emulate successful business figures—a method known as within-logic contrasting—by teaching them new skills.
A better approach
However, the research suggests a more effective approach: helping entrepreneurs translate skills they already use at home, like experimenting with recipes or making small repairs, into their business practices. This method, called cross-logic analogizing, proves to be more successful.
The researchers tested this idea through a field experiment in rural Sri Lanka with 683 entrepreneurs. Participants were divided into two groups and trained in innovation practices, such as developing new products or adjusting pricing strategies. While both groups received the same training content, the examples and framing differed. The group that received cross-logic analogizing training, which linked new business concepts to familiar domestic innovations, was more likely to adopt new practices than the group exposed to within-logic contrasting, which used examples of successful Sri Lankan entrepreneurs.
An example of within-logic contrasting from the study might highlight a successful entrepreneur, like Otara, who diversified her business by introducing new products and creating her own brand, moving beyond her original focus on factory surplus export clothing. In contrast, cross-logic analogizing might involve a relatable story, such as a family innovating with natural mosquito repellents during a dengue outbreak, showing how simple modifications can meet customer needs better.
Reduces fear
“This approach reduces the fear of trying new things by showing that experimentation is already a part of their daily lives,” the researchers explain.
The study also found that cross-logic analogizing made new business practices seem more appealing and enjoyable, while within-logic contrasting actually made them less attractive. Interviews with participants revealed two key reasons for this. First, instead of feeling inspired by the success stories of prominent entrepreneurs, participants often felt intimidated by them. Second, they tended to focus on the grand achievements of these role models, forgetting that they started in similar circumstances.
The findings have implications beyond the context of impoverished Sri Lankan microentrepreneurs. In North American business schools, for instance, icons like Bill Gates and Jeff Bezos are frequently presented as models to follow. However, these comparisons can be discouraging for aspiring entrepreneurs who may feel overwhelmed by the distance between their current situation and these success stories. More relatable examples can offer familiar anchors and encourage incremental progress.
“This is especially important for underrepresented groups, such as women and racial or ethnic minorities, who face additional biases and often lack relatable role models,” the researchers add.
The research has already been put into practice. The NGO partner on the study, Développement International Desjardins, trained more than 7,000 microentrepreneurs in Sri Lanka using the insights from the experiment and has adapted their training programs in other regions around the world.
