Does a Theory-of-Value Add Value? Evidence from a Randomized Control Trial with Tanzanian Entrepreneurs

Entrepreneurs making decisions under uncertainty are encouraged to evaluatetheir initial ideas through hypothesis testing, but entrepreneurial approaches vary in theiremphasis on ex-ante theory development prior to collecting evidence. In this paper, we exam-ine whether and how entrepreneurs benefit from adopting an evidence-based approach or atheory-and-evidence-based approach to decision making. We conducted a field experimentwith Tanzanian agribusiness entrepreneurs by randomly assigning entrepreneurs to two dif-ferent training conditions. We find that entrepreneurs in the theory-and-evidence–based con-dition have higher economic performance during the observation period following theintervention. We conjecture this result stems from differences in the types of changes enacted:entrepreneurs in the theory-and-evidence–based training make more coordinated changesthat encompass both core and operational elements of their business models.