Success in Entrepreneurship: Doing the Math
Outside of agriculture, the family owned business is the most common form of enterprise in low-income countries. There is tremendous heterogeneity in how such firms perform. For instance, in the retail sector, some firms hold large inventories and earn significant profits, while others hold minimal stocks and provide little more than subsistence income for their owners. However, it is an open question why there is such heterogeneity in the success of small firms. This paper examines the association between entrepreneurial success and firm and owner characteristics, in the context of the small retail sector in Western Kenya. Earlier work finds very high rates of return to inventories. Inventories are positively associated with math skills. Since inventories and profits are positively correlated, math skills predict profits as well. Math skills are also robustly correlated with profits conditional on inventories.
We thank Louis Kasekende, David Laibson, Issac Mbiti, David Weil and participants at various seminars and conferences for helpful comments. Abdulla Al-Sabah, Kenzo Asahi, Pia Basurto, Dan Bjorkegren, Conner Brannen, Elliott Collins, Sefira Fialkoff, Katie Hubner, Eva Kaplan, Anthony Keats, Jamie McCasland, and Russell Weinstein provided excellent research assistance. We gratefully acknowledge funding from the SEVEN Foundation, the Kauffman Foundation and the NBER Africa program, Harvard University, and the National Science Foundation. We thank IPA-Kenya for administrative support.