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[The 9th AIEA-NBER Conference] Working Paper - Yizhou Jin

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DATE 2021.11.17 15:59

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LIFTING GROWTH BARRIERS FOR NEW FIRMS EVIDENCE FROM AN ENTREPRENEURSHIP TRAINING EXPERIMENT WITH TWO MILLION ONLINE BUSINESSES
 
Yizhou Jin
Zhengyun Sun
 
AIEA Working Paper A210804  Issue date August 2021
 
 
The expansion of e-commerce presents new opportunities for SMEs to enter broader mar-
kets at lower costs, but the new entrants face barriers to growth after entry. To help new en-
trant overcome potential barriers, we implement a large-scale business training program as a
randomized controlled experiment. The training focuses on practical skills specific to online
business operations and reached over two million new sellers on a large e-commerce platform.
Treated newsellers with access to the training earn higher revenues and attract more consumers
to their sites. These sellers become more engaged in marketing and improve their customer
service. Leveraging detailed consumer-seller matched search and browsing data, we find that
consumers have higher purchase probability when they encounter new sellers regardless of
treatment status. When making purchases, consumers choose treated new sellers over incum-
bents. Moreover, doing so does not lower consumers’ satisfaction with their purchases. We
use a structural model to characterize consumer demand and recover sellers’ underlying qual-
ity. Both treated and control new sellers have a higher quality compared to incumbents. The
training increases new sellers’ likelihood of being encountered by consumers, which improves
the matching outcomes between consumers and sellers. The counterfactual exercise shows that
the training leads to higher consumer surplus and sellers’ total revenues. As the operator of
the online marketplace, the platform could benefit from increased profits in both the short and
the long run because of the training.
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