Won’t you be my neighbor? Geography, peer learning, and entrepreneur performance in Togo

Abstract

Entrepreneurs, especially in developing economies, rely on peers for advice and managerial knowledge. While a growing body of work shows that introducing entrepreneurs to new peers outside their immediate neighborhood and social circles improves performance, these results are seemingly at odds with work on geographic spillovers which suggests that entrepreneurs are especially likely to learn and benefit from their neighbors. We explore these diverging predictions using data from a training program in Togo, during which entrepreneurs were randomly assigned to meet and talk to peers from across the city of Lomé. We find that meeting neighbors increases entrepreneurs’ performance more than does meeting more distant peers. Profits increase by 10% when entrepreneurs get to know three neighbors who are on average 1 km closer. In additional analyses we find evidence that, in this context, entrepreneurs tend to be locally “under networked:” they are likelier to stay in touch with neighbors than with more distant peers and neighbors possess novel managerial knowledge. These results suggest that entrepreneurs in our context, and potentially in other developing economies, are often under networked, making neighbors particularly impactful for their performance.