Learning to Grow from Peers: Experimental Evidence from Small Retailers in Indonesia

Abstract

Business practices and performance vary widely among local peers. This paper identifies key determinants of such heterogeneity among a sample of small urban retail shops in Indonesia, and experimentally tests whether learning about the best practices of local peers is valuable for business growth. Through extensive baseline quantitative and qualitative fieldwork, the study develops a handbook that associates specific business practices with performance and provides detailed implementation guidance informed by exemplary local shop owners. Instead of offering formal training or in-depth counseling, this handbook is simply distributed to a randomly selected sample of shop owners and complemented with three experiential learning modules: one group is invited to watch a documentary video on experiences of highly successful peers, another is offered light in-shop assistance on the implementation of the handbook, and a third group is offered both. Eighteen months after the intervention, the study finds no effect of offering the handbook alone, but significant impact on practice adoption when the handbook is coupled with experiential learning. On business performance, the study finds sizable and significant improvements as well, up to an increase of 35 percent in profits and an increase of 16.7 percent in revenues. The types of practices adopted map these performance improvements to efficiency gains rather than other channels. The analysis suggests that these interventions are simple, scalable, and highly cost-effective. This is an output of the World Bank’s Strategic Research Program