Know-how and Know-who: Effects of a Randomized Training on Network Changes Among Small Urban Entrepreneurs

Micro-enterprise owners in developing country industrial clusters interact through networks of horizontal business collaboration, information-sharing, and friendship links, despite the potential for close competition inherent in this setting. This paper explores how such business links change, and specifically whether they can be endogenous to a public policy intervention that provides training to some network members but not others. Using a randomized training for micro-entrepreneurs in Kampala, Uganda, together with novel panel network data, I find a positive effect on linking likelihoods, driven by untreated entrepreneurs to whom links with treated entrepreneurs become more desirable. As predicted by a bilateral network formation framework, it is the relatively lower-status treated who attract new connections with relatively higher-status untreated. Furthermore, links within clusters of treated enterprises are strengthened, which is not due to a strategic replacement of untreated with treated partners out of a competition motive but seems to be an effect of jointly attending the training. Together, my findings show that public policy interventions can cause networks to re-wire, with important implications both for research and policy.