It’s often assumed that being an entrepreneur is a question of predisposition or personality, that having innate traits and instincts such as passion, perseverance and risk-taking, are a prerequisite for entrepreneurial success. These traits may matter but asking ‘Who is an entrepreneur ?’ is the wrong question, says researcher Gartner. He argues that behavioural approaches, which focus on what entrepreneurs do and not who they are, prove to be much more fruitful in understanding how one becomes an entrepreneur. And we couldn’t agree more. Beyond personality traits, there are a series of behaviours that make people more or less likely to be successful entrepreneurs.
Importantly, the environment can significantly shape which behaviours potential entrepreneurs engage in. Everything from social norms to business regulations, or the type of training support on offer will influence the decisions that entrepreneurs take. Recognising and addressing these behavioural implications is important for sustainable development actors such as the United Nations Development Programme (UNDP) who are looking to transform lives and livelihoods.
Why behavioural science can enhance entrepreneurship policy and programming
In the last two decades, discoveries in the field of psychology have helped us to understand what behavioural barriers get in the way of entrepreneurship and what interventions can encourage it.
Let’s take an example. One common barrier preventing people from successfully implementing their intentions is the planning fallacy. Planning fallacy is a cognitive bias detailing our systematic tendency to underestimate the time, effort or risk required to perform an action. For example, underestimating the cost of production of a product or the time required to complete a task. By identifying this as a key barrier, development practitioners can design targeted interventions to overcome it, for instance by offering programmes that strengthen young people’s action planning skills or get them to commit to an action plan. Indeed, action planning is positively related to business performance because it helps entrepreneurs to initiate activities, to direct their focus and to keep track of their progress.
To better inform public policies and entrepreneurship programmes, we distilled the academic literature and summarised these and other barriers and levers in a rapid evidence review which was published last year.
Exploring behavioural approaches in the Arab States
In 2021, the Behavioural Insights Team (BIT) and UNDP’s Regional Innovation Team in the Arab States partnered on a project to explore what works (or not) to support successful entrepreneurship and how to create more evidence-based entrepreneurship policies and programmes. The project involved working with inclusive growth, gender, and youth programming staff in 10 UNDP Country Offices in the Arab States to apply behavioural insights to existing entrepreneurship projects through pilot behavioural interventions.
The 10 country teams worked on various topics: from encouraging rural women entrepreneurs to take up mobile money or microfinance, to getting more persons with disabilities into entrepreneurship training programmes, to enhancing confidence in bookkeeping and minimising barriers to business registration.
One of the participating Country Offices, UNDP Tunisia, focused on the behavioural aspects of financial inclusion of rural women entrepreneurs, under the backing of an existing economic empowerment project. Through in-depth interviews with a representative sampling of these women, colleagues found that they see financial institutions as “black boxes”: banking products and offers are perceived as unsuitable, difficult to understand and confusing. Many also had previously bad experiences with microloans that led them to fear and mistrust banks. Once the UNDP team better understood the barriers facing these women, they were able to bring the entrepreneurs and bank staff together to co-create behaviourally informed products and offers that would better meet the women’s needs.
“Working with BIT has brought a new dimension to the complex challenges we tackle through our work. The tools and methodology are problem-oriented rather than solution-oriented which sharpens our analysis and allows us to explore blind spots we could otherwise miss. We are uncovering new insights for our project about women’s financial inclusion, such as the importance of personalized financial products and more direct and informal touchpoints with banks. ” Mehdi Fathallah, UNDP Tunisia
Learn more about the methodology in our toolkit
For those looking to examine behavioural components of entrepreneurship policy and programming, we’ve collated our experiences and methods from the project in a step-by-step toolkit that will take you through the process of breaking down your objectives into specific behaviours in order to better understand the associated challenges and barriers faced by target groups, and designing, prototyping and piloting behavioural interventions.
Illustration of the Behavioural Insights Toolkit co-created by BIT and UNDP
It is an interactive tool that you can use as an individual or as a team, and you don’t need to have any previous knowledge of behavioural science to use it.
The toolkit is accompanied by a set of entrepreneurship-specific “barrier” and “solution” cards, where we’ve summarised the most relevant barriers and enablers to entrepreneurship identified through our research. These do not preclude systemic and structural interventions, but are rather designed to complement those types of interventions. Remember: the solution is not always in the hands of the entrepreneurs, and behavioural enablers can be designed and implemented by a series of actors (from banks, universities through to incubators and governments).
You can also catch up on our launch event at UN Behavioural Science Week 2022 to hear directly from the toolkit authors and staff from the country offices.
We look forward to hearing about your applications of the toolkit, and your feedback!