Empirical Assessment of ODA Grant Funding for Start-ups in Conflict-Affected Regions: Evidence from Palestine

Purpose: This study empirically evaluates the impact of entrepreneurship-focused ODA projects on the growth and sustainability of local start-ups operating in conflict-affected settings. Specifically, it analyzes the short- and long-term outcomes of KOICA’s grant-funding program for Palestinian start-ups. Originality: Although entrepreneurship-oriented ODA initiatives and public-private partnership programs have expanded, quantitative empirical research on direct grant support for start-ups in fragile and conflict-affected regions remains scarce. This study presents the first longitudinal, quantitative evaluation of KOICA’s Palestinian start-up grant project, providing important academic and policy insights for the design and assessment of similar programs. Methodology: Using the Theory of Change (ToC) framework, this study reconstructs the project’s intervention logic and conducts a near-census, idiographic case analysis of 34 grant-recipient start-ups. Revenue, employment, and survival data were collected longitudinally over a three-year period before and after the grants were awarded, enabling a systematic assessment of outcomes and limitations. Result: Grant funding led to a short-term increase in revenue and employment; however, long-term sustainability was limited. A stark polarization emerged: while 59% of recipient firms closed within three years, the surviving firms (41%) saw their average revenue grow by 82% over the three years, suggesting the grant acted as a catalyst. In contrast, closed firms experienced a 45% revenue decrease over the same period. Firms that eventually closed typically showed a temporary spike in employment immediately after receiving grants, followed by steep revenue declines. Conclusions and Implication: Entrepreneurship-focused ODA projects are effective in delivering short-term outcomes but face clear limitations in achieving long-term sustainability. In fragile contexts like Palestine, unconditional grants primarily provide temporary liquidity, leading to high post-project closure rates. Therefore, future project designs should move beyond simple grants and incorporate performance-based repayable grants, which link financial support to a repayment obligation based on performance, to enhance accountability and foster more durable growth.