In recent years, the rate of new business formation
by women has significantly outpaced the rate of new business formation by men
across all ethnic groups in the USA. Similar trends are found across the
developing world. However, women still own and manage significantly fewer
businesses than men. The explanation for this phenomenon, the behaviour of
female entrepreneurs in terms of traits, motivations, and success rates, and
their gender-related distinctiveness are complex and multifaceted. Despite a
growing literature we still need more research on female
entrepreneurship—particularly in developing countries where we are seeing a
growing number of initiatives aimed at promoting entrepreneurship and
empowering women in the process. The latter tendency reflects a generally
growing interest in female entrepreneurship in developing countries, which, in
turn, is due to greater interest in the role played by entrepreneurship in the
economic development process. Women have been assigned a special role not only
because they stand to benefit from entrepreneurship being the poorer and more
discriminated against gender, but also because they are seen as a critical
driver of entrepreneurship in light of their unique role in the household and
the rise in female-headed households across the developing world.
Within this context, UNU-WIDER's project
on Promoting Entrepreneurial Capacity turned its focus towards a
fresh look at female entrepreneurs in developing countries. The resulting
research was recently published as a special section of the European
Journal of Development Research (EJDR) (see further reading). This
article provides a short overview of some of the key findings and recommendations
contained in the special section of the journal
Some stylized facts from three
decades of research on female entrepreneurship in advanced economies
What are the stylized facts we have learned from
the last 30 years of research on female self-employment and new business
creation? We now know that significantly fewer women than men own and manage
businesses worldwide. This could be because women fail more often than men or
because fewer women than men start businesses to begin with, or both. However,
some evidence exists that, after correcting for factors such as size of the
business and sectoral distribution, women's failure rates are not that
significantly different from those of men. Thus, at least a portion of the
difference between genders must be due to the fact that fewer women than men
start businesses. Evidence to date suggests that a variety of reasons
contribute to explaining observed differences in entrepreneurial behaviour
across genders, and that such differences have significant implications at the
macroeconomic level. Perhaps women and men have different socioeconomic
characteristics and, if we were to correct for factors such as education,
wealth, family and work status, those differences would disappear. Indeed,
quite a bit of empirical evidence shows that such differences exist. Also,
women tend to possess fewer years of experience then men and tend to
concentrate in different sectors. In addition, the propensity of women to start
a business may differ from that of men for cultural reasons such as discrimination.
The businesses owned and managed by men and women
are also different. We now know that women's businesses tend to be smaller and
to grow less than those owned by men. Also, women's businesses tend to be less
profitable than those of men and to generate lower sales turnover than men,
even in same industry comparisons. Minniti (2009, see further reading) provides
a comprehensive and up-to-date review of the literature on women entrepreneurs
and their businesses.
Female
entrepreneurs in developing countries
What do we know about female entrepreneurship in
developing countries? Do 'stylized facts', as briefly noted above, also apply
to developing contexts? The general question is whether the characteristics and
role of female entrepreneurship vary across countries at different stages of
development. Recent evidence shows that prevalence rates of female
entrepreneurship tend to be relatively higher in developing then in developed
countries. This has traditionally been explained by the fact that in developing
economies women face higher barriers to entry in the formal labour market and
have to resort to entrepreneurship as a way out of unemployment and, often, out
of poverty. Research on female entrepreneurship in Latin America and the
Caribbean, for example, found very high rates of female entrepreneurship in the
poorest countries of the region—up to 35 per cent in Peru—and notes that only
13 per cent of women entrepreneurs in the region indicated that they expected
their firm to grow over the following five years. In many cases opportunities
and incentives are unfavourable for women to begin businesses, even when they
have the abilities and knowledge.
This issue was again taken up by asking, as
documented in greater detail in the special section of EJDR, what variables are
systematically associated with female entrepreneurship, and whether they vary
when countries at various levels of economic development are considered. It is
found that variables associated with entrepreneurial decisions tend to be the same
for men and women and across countries, regardless of level of development, and
that gender differences in entrepreneurial behaviour tend to be remarkably
stable across countries. However, the intensity with which each of these
variables influences individuals does vary significantly across gender and
across countries depending on their level of development. As a result, on
average, participation rates for men tend to be 50 per cent higher than those
of women creating a 'gender gap' in entrepreneurship.
Larger gender gaps in start-up activity are found
in middle-income countries, whereas they tend to be narrower in lower-income
countries probably because many women start businesses out of necessity.
Surprisingly, women in poorer countries tend to be more self-confident about
their abilities (skills and knowledge) to become entrepreneurs and less afraid
of failure compared to women in middle- and high-income
countries—notwithstanding subjective and possibly biased perceptions about
self-confidence, fear of failure, and existence of opportunities or significant
and systematically associated determinants of the gender gap across all
countries.
Women in developing countries, like their
counterparts in more developed ones, rely more than men on extended families
which, in many rural settings are often their only or major social network.
This is often constraining since women's marriage status, and the assets and
incomes brought to their marriages, emerge as important determinants of their
entrepreneurial decisions. Married women with young children are more likely to
enter entrepreneurship than waged labour, and are more likely to be
entrepreneurs than non-married women—although they are also more likely to quit
a business voluntarily.
As far as female entrepreneurs' firm performance is
concerned, the evidence from developing and developed countries is somewhat
similar. Women tend to have lower growth expectations and their firms tend to
grow slower in both sales and employment than those of men even if one controls
for sectors. Some evidence suggests that women's primary concern in many
developing countries is not with growth but rather with survival. This may be a
reason for the finding that habitual female entrepreneurs in developing
countries tend to be portfolio rather than serial entrepreneurs, as they
attempt to diversify income sources and survival chances.
Further
research
We conclude our overview by noting a few avenues
where further research is warranted. Six stand out. First, we need more theory,
as theoretical developments have not kept pace with the large amount of
empirical studies.
Second, a significant and yet unresolved issue
concerns what variables should enter the utility function of individuals when
studying their allocation of time between household production, waged labour
and self-employment—particularly in developing economies and when alternative
views of the familial unit are considered. And when applied to serial
entrepreneurship, the theoretical and empirical literature has very little to
say on women in developing countries.
Third, questions related to cultural factors and
migrations among the self-employed provide another very fertile area of inquiry
for both theory and empirical work—with the possibility of making not only a
significant contribution to science but also to policy and management
practices. As migration becomes an important coping mechanism in the face of
development shocks, further research would be very desirable especially at the
under-researched intersection between gender, ethnicity, and migrant status.
Fourth, discrimination has been suggested as a
possible explanation for the gender gap in entrepreneurship and this is likely
to be more significant in poorer countries, although the evidence is mixed. Discrimination
against women is often the result of gender beliefs inherent in a culture or
society. This may have the effect of not only reducing women's likelihood of
becoming entrepreneurs and their earnings as entrepreneurs, but may also reduce
the non-pecuniary benefits women receive from entrepreneurship.
Fifth, very little is known about how the level of
aggregate activity influences women's decisions about entrepreneurship and even
less is known about how the latter contribute to growth. Although a significant
amount of anecdotal evidence and some very good case studies exist on this
topic, the lack of a systematic approach and data has prevented, so far, the
formulation of a comprehensive and robust theory of female entrepreneurship and
growth. Of course, no 'women only' theory is necessary. However, a solid
understanding of how the distinctive characteristics of female entrepreneurship
are accounted by existing models of growth would be very desirable for both
science and policy.
Finally, the study of institutions and how they
promote or discourage female entrepreneurship is particularly needed for its
policy implications, especially in developing countries where issues of
institutional development has in recent years been emphasized. Within this context,
a post-institutional approach based on insights from economics and organization
theory seems promising as well as economic approaches that integrate tools and
methods from anthropology and ethnography.
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This article was written by Maria Minniti and Wim Naudé. Maria Minniti is Professor and Bobby B. Lyle Chair in Entrepreneurship in the Cox School of Business,Southern Methodist
University, Dallas, USA. She is participating in the UNU-WIDER research
project on 'Promoting Entrepreneurial Capacity'. Wim Naudé is Senior Research Fellow at UNU-WIDER, Helsinki, Finland. He is director of the project 'Promoting Entrepreneurial Capacity'.
| Maria Minniti |
| Wim Naudé |
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