Mckenzie, DavidAssaf, NabilaCusolito, Ana Paula2015-11-052015-11-052015-10https://hdl.handle.net/10986/22884Matching grants are one of the most common types of private sector development programs used in developing countries. But government subsidies to private firms can be controversial. A key question is that of additionality: do these programs get firms to undertake innovative activities that they would not otherwise do, or merely subsidize activities that would take place anyway? Randomized controlled trials can provide the counterfactual needed to answer this question, but efforts to experiment with matching grant programs have often failed. This paper uses a randomized controlled trial of a matching grant program for firms in the Republic of Yemen to demonstrate the feasibility of conducting experiments with well-designed programs, and to measure the additionality impact. In the first year, the matching grant is found to have led to more product innovation, firms upgrading their accounting systems, marketing more, making more capital investments, and being more likely to report their sales grew.en-USCC BY 3.0 IGONEW MARKETEMPLOYMENTINTANGIBLE ASSETEQUIPMENTENTERPRISE DEVELOPMENTACCOUNTINGMATERIALSPRIVATE ENTERPRISESMEDIUM ENTERPRISESGROUPSDATA COLLECTIONINFORMATIONPROGRAMSSERVICESMEDIUM ENTERPRISECONSULTANTSIMPACTSNEW PRODUCTSLOANPROJECTSFIRM SIZECOMPUTER TRAININGCITIESPLANNINGPILOT PROJECTQUALITYREPORTINGCOMPUTEROPEN ACCESSACCOUNTING SERVICESTRAININGIMPACT EVALUATIONPRODUCTIVITYCRITERIABUSINESS SERVICESPROCUREMENT PROCESSMARKETINGMARKETSFIRMLIMITED ACCESSCONSULTANTLEARNINGPRIVATE SECTOR DEVELOPMENTRESEARCHENTERPRISESCAPITAL INVESTMENTSACCOUNTRADIOCONSULTING SERVICESGRANTSCAPABILITIESVENDORSACCESS TO THE INTERNETTELEVISION CHANNELSMALL ENTERPRISERESOURCESMANUFACTURINGPROJECT MANAGEMENTTECHNOLOGYENTERPRISE SUPPORTGRANTFIRMSPROCUREMENTBUSINESS DEVELOPMENT SERVICESBUSINESS PLANSMALL ENTERPRISESRESULTSPARTICIPATIONBUSINESS DEVELOPMENTELECTRICITYRETAIL SALESRETAIL SALESENTERPRISECOSTPRIVATE SECTORMARKETTRANSPARENT WAYCOMPANYTECHNOLOGY DIFFUSIONNEW MARKETSPOLICYACCOUNTING SYSTEMSMEDIARESULTINNOVATION POLICYEXPANSIONBUSINESS ORGANIZATIONSSECURITYBUSINESSBUSINESSESINVESTMENTHUMAN RESOURCESPERFORMANCEBUSINESS ENVIRONMENTTELECOMPRODUCT INNOVATIONCOMPANY INFORMATIONINNOVATIONFUNDINGSMALL FIRMSENTREPRENEURSHIPCAPITAL INVESTMENTPROFITSIMPLEMENTATIONTARGETPRICESUSESBUSINESS TRAININGWorking PaperWorld Bank10.1596/1813-9450-7462