Date of Graduation


Document Type


Degree Name

Doctor of Philosophy in Business Administration (PhD)

Degree Level





Alan Ellstrand

Committee Member

Jon Johnson

Second Committee Member

Andrew Horowitz


Economic Development, Entrepreneurship, Innovation, Microfinance, Microlending


Advocates of microlending suggest it is a sustainable intervention that reaches the poor directly and offers them the means to invest and improve their incomes (Khavul, 2010; Morduch, 1999; Yunus, 2007); yet, impact studies of these interventions have suggested they often have little or even a detrimental impact on borrowers (Van Rooyen, Stewart & De Wet, 2012). This dissertation examines the efforts to promote entrepreneurship and alleviate poverty in developing countries through microlending. I begin by reviewing the microlending literature, and in particular, impact studies of the effect microlending is having in developing countries. Next, I review theory and empirical evidence that suggests innovation is an important mediating mechanism through which capital access may contribute to poverty alleviation. Subsequently, I put forth a person-situation interactional model to explain, at least in part, how two commonly implemented parts of microlending - incremental loans and joint liability - may negatively impact innovation adoption and reduce the relationship between capital access and poverty alleviation.

To empirically test this model, structured interviews were conducted with 340 borrowers of both individual and group-based microloans in Ethiopia across three different microlending organizations and 11 locations. The findings are consistent with a sorting effect in that innovative individuals appear more likely to take individual loans than group loans. Additionally, the results are also consistent with a social pressure effect where innovative individuals taking group loans are less likely to behave innovatively than their peers taking individual loans.