Not All “Best” Practices Are Created Equal: Access to Expert Knowledge and Practice Adoption in Microenterprises

Strategy & Business Policy

Speaker: Natalie Carlson

Professor - Wharton Upenn

Conference  Jouy-en-Josas T015

Much of the world's economic activity is still produced by small operations such as microenterprises or smallholder farms, who frequently operate below the productivity frontier. Research suggests that a failure to implement best practices often dogs these small operations, but an understanding of which frictions prevent optimal practice adoption is still lacking. In this study we examine how physical access to expert knowledge affects practice diffusion and productivity, drawing on a proprietary dataset of 1480 smallholder coconut farmers in the Philippines. Leveraging variation in the proximity of farms to agricultural extension offices, we show that productivity (i.e., crop yields) increases steadily with increased physical access to experts. Similarly, awareness of eight best practices for coconut farming (known as GAP 1-8) increases along with expert access. Examining the chain from practice awareness to implementation to productivity, however, reveals a more complex picture: access to expert knowledge is associated with increased adoption of some practices and decreased adoption of others. We investigate this finding, discovering three distinct patterns of practice adoption, two positively associated with expert access and one negatively associated. We find that the benefits of each bundle of practices are contingent on the presence of other sources of income (e.g., how much time investment the proprietor is putting into the farm), the ability to afford advanced inputs such as chemical pesticides, and the material support of external institutions such as cooperatives or fair trade. We suggest that proprietors of micro-operations face a fairly complex optimization problem in determining which “best” practices to adopt, and that experts may serve an important role in helping proprietors identify the most advantageous suite of practices.