What Lasts After the Money Is Gone

The YouWiN! results establish that assignment to the integrated competition program changed firm outcomes; this chapter asks why those changes lasted after the fourth tranche. The key question is whether conditional payments, confidence, mentoring, or networks can explain the larger firms—or whether the grant relaxed a capital constraint and left treated businesses with a more productive base. The long-term evidence then shows how much of that advantage survived a severe recession and what the measurements still cannot establish.

From grant to capital, labor, and productive activity

A payment schedule can create a short-term incentive. If a later tranche arrives only after a firm reaches a sales or employment milestone, the owner may hire or produce enough to qualify. That mechanism would predict a temporary increase in activity that weakens once the final payment has arrived. The YouWiN! evidence does not fit that explanation by itself. Most winning firms had more employees than required for the tranche conditions, and the employment advantage persisted after the payment schedule ended.

The stronger mechanism begins with capital. Treated firms accumulated more inventories, made more large capital purchases, and held substantially more capital stock than control firms. These changes are exactly what a credit-constraint model predicts: the grant allowed firms to buy inputs that were productive but difficult to finance through ordinary markets. Capital could be equipment, inventory, or other business assets; the important feature is that it remained available for production after the original payment had been spent.

Labor is the next link. Capital and labor can complement each other: a machine needs someone to operate it, inventory needs workers to sell or process it, and a new location needs people to serve customers. More capital can therefore raise employment rather than replace it. The experiment found that assigned winners had substantially more workers, with the effect larger by the third follow-up than at the beginning. That timing is difficult to reconcile with a grant that merely encouraged a short burst of hiring. It is more consistent with firms expanding their operating capacity as they acquired and used new inputs.

Innovation is part of the same chain. A firm that lacks capital may be unable to test a product, change a process, improve quality, or open a new route to customers even when the owner knows what should be tried. The study finds more innovative activity among winners. This does not mean that the program turned every recipient into a research laboratory or that every change was globally novel. It means that the additional resources were associated with more attempts to change how the business operated or what it offered, which is plausible when credit constraints prevent ordinary experimentation.

Sales and profits provide the downstream test. Winners had positive effects on sales and profitability measures, with aggregate effects in the later early follow-up of roughly 0.2 to 0.3 standard deviations. Because these outcomes are highly dispersed, the study uses transformations and indices rather than treating one unusually successful firm as representative. The result is not that every recipient became profitable or that the grant generated a uniform return.