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

Entrepreneurs making decisions under uncertainty are encouraged to evaluate their initial ideas through hypothesis testing, but entrepreneurial approaches vary in their emphasis on ex-ante theory development prior to collecting evidence. In this paper, we examine whether and how entrepreneurs benefit from adopting an evidence-based approach or a theory-and-evidence-based approach to decision-making. We conducted a field experiment with Tanzanian agribusiness entrepreneurs by randomly assigning entrepreneurs to two different training conditions. We find that entrepreneurs in the theory-and-evidence-based condition have higher revenue and profits during the observation period following the intervention. Such higher performance metrics stem from differences in the types of changes enacted: entrepreneurs in the theory-and-evidence-based training make more coordinated changes that encompass both core and operational elements of their business models.