Thread by @orgRem

New working paper!

“The Value of communication” w/ Stefan Dimitriadis @rotmanschool

Using a RCT in Togo we find that “communication practices” cause entrepreneurs to share more information, form more/better relationships, and increase profitability. Why?

Thread follows 👇

1/ First of all, this paper comes out of Stefan’s amazing dissertation work @HarvardHBS.

Stefan interviewed ~50 entreprenerus in Togo.

The interviews revaled that entrepeneurs has trouble communicating with one another.

For example, one entrepreneur commented:

2/ “entrepreneurs here [in Togo] are not able to reach out to people.” and another noted “I find that the way we are educated here is that entrepreneurs have good ideas but they cannot implement them because they cannot approach other people to discuss them.”

3/ This qualitative work led us to conjecture that perhaps a lack of “communication practices” might explain why entrepeneurs felt they couldn’t connect with and learn from one another.

4/ Similar to @johnvanreenen @raffasadun @dmckenzie001 @RDMetcalfe studies on how variation in management practices can explain firm productivity, we thought variation in communication practices might help us understand when businesses and entrepreneurs benefit from their peers.

5/ Building on @annosax foundational work, at macro level, perhaps the success of places like Silicon Valley might be the result of cultures that emphasize the value and important of communication.

Okay, but lets go back to our paper!

6/ How could we show that something as fuzzy as “communication practices” might matter?

We decided we would need an RCT.

7/ Specifically, we partnered with a business training program and randomized the entrepreneurs into a communication practices training treatment and a control.

The training (see the table) mirror what we teach at @HarvardHBS and advice provided in @HarvardBiz.

8/ So what do “communication practices” change?

First, it leads entrepreneurs to see peers as more helpful and leads them to share 2X the amount of information. Treatment is the distribution in red.

Don’t need test stats to know those distributions are different!

9/ As a result, the entrepreneurs keep in touch with 50% more peer connections from the biz training program after the program ends.

10/ And these connections appear to be more useful too

Communication practices cause entrepreneurs to build relationships with peers who have more knowledge of management practices they don’t know. So if I don’t know about marketing I connect with peers with marketing expertise.

11/ As a side effect of forming connections on the basis of knowledge complementarities we find the ties become more ethnically diverse.

Better communication reduces the impact of homophily.

12/ All of these outcomes—more information, more peer connections, more useful advisors—should improve firm performance. Do they?

Yes!

Profits 6-months after the intervention increase substantially, nearly fifty percent.

12/ We think these findings point to how “communication practices” might matter as much as structural frictions—like spatial co-location or organizational co-membership—in shaping the value of peer advice and learning between and within firms.

13/ Paper also opens up some cool questions for future work:

How important is treating the group vs. an invidious? We trainined everyone on a day so everyone knew everyone else had the training. Are there benefits if you just train one entrepreneur?

14/ Can we use survey/admin data to measure variation in communication practices across ecosystems and countries?

Would the same effects hold with scientists or high-tech knowledge work?

15/ Much more in the paper.

The paper is aimed at strategy scholars and sociologists, but we think economists and psychologists will be interested too! Also anyone interested in peer effects please check it out.

Sorry in advance for not citing so much awesome related work.

16/ Thanks for reading!

17/ And, I can’t believe I forgot them, links to the paper here:

papers.ssrn.com/sol3/papers.cf…

osf.io/preprints/soca…