Women’s entrepreneurship
Patricia G. Greene and Candida G. Brush
Women’s entrepreneurship is a growing phenomenon around the world. Despite the legal and social restrictions that limited their owner ship of property and active participation in the marketplace, women have a long history of contributions to the household economy, often through small businesses that were sometimes unrecorded in numbers and impact (Wertheimer, 1977). Post World War II, legislative enactments (e.g., Equal Credit Opportunity Act of 1974, etc.) and societal changes in the US catalyzed a dramatic increase in women’s venture creation. Today, women entrepreneurs are a potent eco nomic force as employers, customers, suppliers, and competitors in the world marketplace.
Definition and Statistics
The US government defines a woman owned business as one that is at least 51 percent owned by a woman, who is also involved in the day to day operation of the business. Approximately 5.4 million or 28 percent of all US businesses meet this definition. In addition, women jointly own (50/50) an additional 3.6 million (18 percent) of businesses with men. By contrast, men own 11.4 million businesses (54 percent) (US Census Bureau, 2001). This reflects a rapid increase from the reported 1.5 million women owned businesses in 1976. During this period, revenues and number of employees in women owned businesses also grew significantly. Employment by women owned businesses rose 28 percent between 1992 and 1997, compared to an 8 percent increase for all firms – more than three times the rate for all US firms of similar size (NFWBO, 2001). Earlier statistics show that women owned businesses employ more than 18.5 million people (NFWBO, 1998). The US Economic Census of 1997 is also useful in reporting the most common types of businesses owned by women: services (55 percent), retail trade (17 percent), and FIRE, a category including combined fire, insurance, and real estate business ownership activities (9 percent).
Gender Differences
The literature offers two primary explanations for differences between men and women entrepreneurs. First, historically, the research base focused almost entirely on men. One study shows that less than 10 percent of all studies included or focused on women entrepreneurs (Baker, Aldrich, and Liou, 1997; Gatewood et al., 2002). While women may indeed share many characteristics and behaviors with their male counterparts, we cannot assume they are the same if we have not studied them either separately or together with men. This also means that what we know about entrepreneurship is based almost entirely on populations of men, and therefore the descriptions and prescriptions for success are male biased (Bird and Brush, 2002). Second, aside from obvious biological differences, we know that women are subject to different start up circumstances by virtue of the regulatory, family, societal, and economic circumstances with which they must deal in starting new ventures. More specifically, work experience (role, type, and level) and educational background, family roles and expectations, and social relationships directly affect the starting point of business creation in terms of what is or is not possible.
Research shows differences between men and women in demographic characteristics, experience, and education, while similarities are found in motives and reasons for becoming an entrepreneur (see Brush, 1992; Gatewood et al., 2002). In studies about businesses, women owned businesses are often smaller in size and revenues, in part due to their prevalence in ser vice and retailing sectors (Brush, 1997).
Resource Differences
Entrepreneurs start with different bundles of capabilities and resources; specifically, human capital (education and experience), social capital (networks and contacts), and financial capital. These beginning resources are used to build a fledgling firm. Women entrepreneurs have relatively high stocks of human capital, generally described as either being college educated or having more education than her wage and salary counterpart. However, men and women are similar in level of education, but women are more likely to have a liberal arts background, while men more often have education in business or engineering (Brush, 1992; Carter, Williams, and Reynolds, 1997). The recent rise of women in business school programs (BS and MBA), law, and medicine is creating more similarities between men and women with regard to education. While both young men and women rate entrepreneurial knowledge as important, young women more often report being more aware of gaps in their entrepreneurial knowledge (Kour ilsky and Walstad, 1998).
Another aspect of human capital is work experience. Occupational segregation and under representation of women at upper management levels continue to persist. Women hold approximately 16 percent of the corporate officer positions in large US companies (Catalyst, 2002). Without managerial experience, women have women’s entrepreneurship 249 less opportunity to enhance their endowments for business ownership. The extremely small number of women at the board and CEO levels may decrease the leadership decision making experience that women need to start or acquire companies. In addition, occupational segregation may qualify women for service and retailing entrepreneurial endeavors but prevent them from gaining experience in non traditional areas.
Also influencing women’s human capital are the expectations about their family roles, which may restrict women in terms of time and acceptance as business owners. While the perspective that women’s primary responsibility is at home has changed somewhat over past years, the view still has wide acceptance. This not only restricts women’s time and acceptance as a business owner, but also leads to lowered expectations about financing needs, growth goals, and the ‘‘seriousness of the business’’ in the eyes of others (Brush, 1997; Gatewood et al., 2002).
Social capital is a second resource, and it can be considered in two ways. The individual net works of the founder or founding team serve as conduits for various types of capital to launch the business. Business founder(s) networks are the basis for the development of subsequent organizational networks crucial to venture start up. While there are few significant gender differences in networking behavior (Aldrich et al., 1989; Katz and Williams, 1997), there are differences by sex in the composition of networks, with women’s networks being smaller and more predominantly female, which may influence survival and performance.
Financial capital is the third crucial start up resource. Entrepreneurial funds come from many sources, including personal savings, family, friends, banks, government programs, venture capital funds, and business angels. Often, the source of capital can be a prime determinant of the type of business selected. Women with greater sources of personal capital, possibly through a working spouse, have more opportunities for choice in regards to the initial resource base. This stands in contrast to women with very low levels of household income or personal savings, who have fewer resource options.
Research about access to debt capital shows that women and men have similar access to financial capital from banks; however, the terms of loans, payback time, and interest rates are less favorable for women (Riding and Swift 1990; Buttner and Rosen; 1988). With regard to growth capital, women receive an extremely small percentage of the billions invested. While less than 3 percent of all new businesses receive venture capital at any time in their existence, women receive less than 5 percent of the total (Greene et al., 2001). Because equity funded ventures grow more rapidly, become larger, and create more wealth for owners and investors, this remains a challenge for women.
The performance of businesses started by women entrepreneurs has increased dramatic ally. In 1997, women owned firms averaged $1.8 million in sales. By 2000, the average had grown to $2.4 million, but despite this growth, women owned firms still lagged behind the national average of $12.3 million (Center for Women’s Business Research, 2001). By 2000, nearly 60 percent of women owned firms had less than $500,000 in revenues, compared to 44 percent of all firms with revenues at that level. At the mid range sales level, the percentage of women owned firms was similar to that of all other firms. In 2000, women, on average, employed almost 6 employees per firm compared to a little over 9 employees for all firms.
Implications
Research on women entrepreneurs focuses on the factors affecting the supply of women business owners, their entrepreneurial activities, and the societal and economic impact through wealth creation and increased innovation. Much of the research suffers from a lack of control for con founding factors such as class, race, and ethnicity. The domain of entrepreneurship has historically been a male preserve, but this is changing rapidly and opening many doors for future research.
Bibliography
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