Gender gap in entrepreneurship

BusinessManagement

  • Author Muhammad Fahad Ali
  • Published December 30, 2020
  • Word count 3,226

Introduction:

The significance of entrepreneurship has been raised in the global economy by the reorganization of labor market with respect to the qualifications of employees, category of work and changes in economy. There are differences in male and female entrepreneurs with respect to their business and personal profile. They tend to choose different fields or sectors to start a business, there are differences in their goals, they want to make different products and build their business in a different manner. (Grain Startien, 2018)

However, it is noticed that the gender gap in entrepreneurship is still there despite the importance of female entrepreneurs in the economy and the rapid increase of women in professional and managerial work (Manding, 2018)According to foreign scientists women have to face a lot of hurdles while building their own business and these hurdles are greater for the women as compared to men. These hurdles include opposition from family, friends and relatives, discrimination, obtaining proper coaching or training, overcoming culture related conditioning and acquiring capital.

The keen interest was noticeable in the gender gap in entrepreneurship from the last century when women started to practice entrepreneurship more actively. There are several studies i.e., macro, micro analysis that was performed in different countries. Through the different study’s authors not only tried to find out the gender gaps in entrepreneurship but also want to obtain the reasons for gender gap and determine and study the factors, which affect both men and women’s behavior while business development. We do not have enough clear definitions for the reasons of this gender gap despite it was discussed widely, as some authors. Considered feminism as the point of their discussion to explain the gender gap, Others (R. O. Kutanis, S. Bayraktaroglu, 2003) explain the gap by demographic changes and some (I. Verheul, A. Van Stel, R. Thurik (2006); G. Negru-Strauti,M. Izvercian, M. Tion (2008)) discuss this gap with reference to different other factors. However, there is one question that scientists do not have a clear answer to is that do the same factors have close effect on the gender gap? Authors like M. Minniti (2003) explain the man and women both are affected by the same factors while business development, but the statistical data shows that women take a lesser part in starting a business as compared to men, which makes us assume the existence of gender gap. Unfortunately, scientific literature lacks the complete details of the reasons and nature related to the differences.

Purpose of the Article:

To determine the gender gap in his, her, their, etc. entrepreneurship. A series of tasks was set to achieve the purpose of this article

  1. Identification of the reasons, which describe the origin of the gender gap in starting a business.

  2. Classification or organization of factors, which affect the gender gap in entrepreneurship.

  3. To find out the factors, which increase, decrease, or produce no effect (neutral) in generating a gender gap in entrepreneurship.

  4. Execute a comparative analysis of gender gap in entrepreneurship on the basis of expert opinion.

Scientific methods: evaluation of scientific literature, statistic data, secondary data, professional conclusion.

Gender differences from the viewpoint of business

If we look into the early literature related to entrepreneurship and business ownership, then it was clearly established that it is a man’s domain. The work or activities related to entrepreneurship were found to be on masculine side in the old literature or descriptions. According to Hebert and Link (1982) an entrepreneur is a key man. As stated by Schumpeter (1934), the entrepreneur is as the captain of industry, Liebenstein (1968) narrated an entrepreneur as a hero who senses and identifies the gaps and connects markets. Entrepreneurs were described as men in economic, social and psychological literature. Since the involvement of women in entrepreneurship was seen recently in 20^(th) century and with this increased participation scientists started taking keen interest in the question “what caused women’s participation in business?

Due to recent changes in demographical variables, women’s noticeable participation and success is seen and these demographical variables are, new lifestyle, surge in the duration of work time, changes in nutritional habits, increase in residential movability, increase in the population of women who never married, increase in rates of divorce, delay in childbearing, emotional and psychological contentment (Kutanis, Bayraktaroglu, 2003). According to some other literature (Bid and Brush, 2002) the second wave of feminism, which was appeared in thein the 1960s, was responsible to notice the increase in number of female employment and women’s participation in different sectors like politics etc. The gender gaps in entrepreneurship were found because of social feminist and liberal feminist theories in action, which states or explains the inequality of women in society. Many authors in their gender gap analysis research have concluded that still in 21^(st) century the entrepreneurship is a male dominant pursuit. And the reason for that was found that there are very few women who start their entrepreneurship journey as compared to men and the business started by them does no show as much growth as the ones started my men (Cliff, 1998). It was also found that women exit from their entrepreneurship journey very quickly.

Main Reasons in literature:

According to different authors there could be various reasons for gender gap in entrepreneurship, which were mentioned in many sources of literature.

Small possibility of arrangement of capital:

One of the strong reasons, which contribute in women participating less in the entrepreneurship is because of difficulties of arrangement of finance for starting a business. The availability of capital or resources for women does not match with the number of women-owned firms who are looking for the resources to grow their enterprise. This fact stops women to attain adequate finances to expand their enterprise to reach their full potential (Brush et al., 2006). The capital for a business can be attained by 4 sources in many western countries.

a. Personnel saving

b. Soft loans or support by government

c. Debt financing

d. Equity funding from venture capital institutions or informal investors. (Borch et al., 2002; Foss, Ljunggren, 2006; Jarvis, 2000; Pečiūrien÷, 2006).

Women’s earn much lesser as compared to their male counterpart because of salary differences and this causes lower savings. Evidence shows that women have to face various difficulties to acquire personal savings as compared to men (Carter and Kolvereid, 1997) because of the lower paid jobs or working part-time or they belong to lesser income households. This issue will inherently affect their entrepreneurship journey (Marlow and Patton, 2005b). Because of these difficulties, their possibility to get a loan is reduced and this issue causes difficulty in starting their entrepreneurship journey (Manning, Swaffiels, 2008). Women face more difficulties in convincing investors to attain the capital. The struggle faced by women in acquiring equity capital could be elucidated by 3 factors.

  1. Structural barriers for women while trying to raise equity capital

  2. women do not want to use this kind of capital

  3. Lack of potential and understanding in women to attain equity capital.

It was also found in the studies that bank loan officers considered women less ambitious, enterprising or entrepreneurial as compared to their male counterpart and the successful women entrepreneur’s traits are more related with masculine behaviors than with feminine (Buttner and Rosen, 1988; Buttner and Moore, 1997; Hertz, 1986; Hisrich and Brush, 1986).

Attributes of the term Entrepreneurship:

The attributes of a successful entrepreneur are mostly associated as masculine as agile or active, conclusive, competing and self-confident rather than feminine entrepreneurial attributes i.e., understanding, caring, emotional and being warm. This issue shows that women will not achieve success in entrepreneurship unless they demonstrate masculine traits.

Difference in Value systems of both genders:

Some researchers describe that there is a difference in the value systems of both men and women which produce a significant effect on the inadequate participation of women in entrepreneurship. For example, income is not the reason that excites most women to start business (Kuratko, Hornsby, 1997; McClelland, Swail, Bell, Ibbotson, 2005) or financial gain is not the main reason or the driving factor for women to establish success as compared to men. Personal satisfaction and other goals not related to income are much more important as compared to financial success. Women are much more interested in attaining Self-actualization, skill development, professional growth, social contribution, acknowledgement, work, and family life balance etc. Gender Gap explained by Feminist theories: In different research sources (Watson, 2002) there are some descriptions, which elucidate the gender gap by 2 theories:

  1. Social feminist theory 2)

  2. Liberated feminist theory

According to social feminist theory proposed that women and men are fundamentally different by nature and explains that women are as much appropriate for entrepreneurship as men; they only pick different paths or use different strategies for developing their entrepreneurship, which may not be as fruitful as their male counterpart.

Liberal feminist theory suggests that medium and small ventures started by women will demonstrate inadequate performance because of the discrimination women face, for example from banks, from money lenders and for some other reasons that deprive women of useful funds or resources.

In different researches, a disposition was noticed that some writers (Driga, Lafuente, Vaillant, 2005; Malaya, 2006; Mirchandani, 1999 and others) analyze or study the gender gaps related to entrepreneurial triumph with individual factors (individual traits) and not classifies them to any factor group. These factors might produce a positive, negative or neutral effect on the gender gap. Other researchers (Verheul, Van Stel, Thurik, 2006) make classification of these factors influencing gender gap in entrepreneurship. On the basis of such classification, different factor groups have been arranged.

  1. Demographical factors

  2. Psychological factors

  3. Cultural factors

  4. Institutional factors and government intervention

  5. Technological development

  6. Organizational factors

  7. Economical factors

If we look into the demographic factor, women pull themselves out from entrepreneurship and jobs, after getting married and having children and this produce a negative impact on women's entrepreneurship and increase the gender gap. It is also difficult for women to continue their entrepreneurship journey or employment after motherhood this issue producing a negative impact on their professional life, but the male employment has the opposite (positive) effect after parenthood. Mostly, married men hire their wives in their corporations to keep an eye on the employees of the company to maximize their performance. This fact reduces the chances of women becoming an entrepreneur.

Immigration is another factor that increases the gender gap in entrepreneurship as after immigration women does not consider working for themselves as compared to men.

Gender gap in entrepreneurship is also impacted by experience, which is also a significant demographic factor. As maintained by Brush (1992), Fisher et al. (1993), Cliff (1997), men have more work experience either in regards of employment or entrepreneurship development as compared to women. Women also lack administration or management experience, experience with people management, financial and technical experience. On the other hand men tend to have all of these mentioned experiences enough which helps them in starting their own business.

If we look into the institutional factors and government intervention group then factors such as business licensing, social security and obtaining finance for business (previously discussed) strongly impact on gender gaps on entrepreneurship. Women take into more consideration the social security funds as compared to their present earnings and men tend to think more about their present income as compared to the future advantages.

It is much easier for men entrepreneurs to acquire business licenses as compared to females, who face more issues during the process of licensing. The lack of experience of females in business development and limited understanding of government legislation and compliance prohibit them to start their enterprises.

As far as the psychological factors like a personal value system and motivation are concerned, there are mixed descriptions in the research. Most of the authors describe that these factors increase the gender gap in entrepreneurship. They further explained that men are mostly motivated to their social status, success and their income while self-satisfaction, self-actualization, sense of achievement, strong interpersonal relationships and disappointment are the factors, which motivate the women.

However, there are few authors like McCain and Warren (1982), Wadell (1984), Mukhtar (1998) who declared that there is not much difference in both motivation and other psychological traits of both genders (males and females). There are some factors as well, which produce a positive impact or decrease the gender gap in entrepreneurship. Education and share of service sector are 2 of those factors. The higher level of education in any country is the amalgamation of women in the economy of country by self-employment. The more the level of education of women the more will be chances of women starting a business.

Women labor force participation has been maximized by the growth of service industries, which is one of the many factors in decreasing gender gap. A 3^(rd) group of neutral factors was also created to avoid any complexity. These are the factors that produce either a very small or no impact on the gender gap in entrepreneurship. For example according to author (Verheul et al., 2006) factors like service sector and industrial sector were designated to decrease the gender gap. While the other authors like (Mirchandani, 1999) explained that there is very little evaluation on the effect of gender on any company or industry.

The barriers faced by the owners of Industries either male or female are same, and it confirms that these difficulties are gender neutral.

Gender gap analysis in entrepreneurship:

In 2008, there were 99.4% small and mid-sized businesses in Lithuania as per the department of statistics of government. Four presumptions were constructed to either verify or refute the gender gaps in an entrepreneurship described in the theoretical section of this article to perform the analysis in the development of entrepreneurship in Lithuania.

Presumption 1: Ventures started by men are much huger with longer survival time as compared to the ones started by women entrepreneurs.

Presumption 2: It is much more difficult for women to attain the earliest capital to start their business because of low earnings as compared to their male counterparts who either already have the capital or are less likely to face any such difficulties as women.

Presumption 3: The reason for women to start a business is not the financial gain rather it’s about personal growth, self-fulfillment, to become self-sufficient, etc. while mostly men get their inspiration to start a business from gaining financial benefits.

Presumption 4: Existence of this gap in business components: Women are much more interested to start their enterprises in service and trade fields while men are interested to start their ventures in technology (innovation), construction or industrial related sections.

Analysis Process:

Empirical methodology was used to confirm those presumptions mentioned above. Various experts were used to evaluate and verify these presumptions. A survey with questions was created which was going to represent the gender gap in entrepreneurship in a written form. And to answer the survey questions a group of 20 experts was created, men and women are equally divided in this group (10 men and 10 women) and these experts possess medium to small sized ventures.

Verification of presumptions:

Presumption 1

Presumption 1 was found to be confirmed after the survey data was summed up, as per the expert’s point of view mostly women start business with less employees (up to 9 employees) while men entrepreneurs start a large enterprises with more workers (10 to 49 employees). According to the survey which was done in Australia, most women have small businesses with not more than 5 employees. According to that survey, the survival time of a business for both men and women is different. Women tend to have businesses with less survival time as compared to men. Businesses started by women can survive up to 5.5 years while the businesses of men entrepreneurs have the double survival time that is up to 11 years as compared to women.

Presumption 2

The average pay of women was lesser by 218 Lt as compared to men in 2000- 2006 (Statistics department of govt. of Lithuania). And this issue was also verified during the analysis. As it was revealed by the experts that women use lesser personal savings (40% of women and 50% of men) in starting their own business as compared to men or the combination of finance from personal savings and bank lone both( 40% women and 30% men). There are other sources of finances as well besides the bank loans and personal savings i.e., acquiring capital from friends, parents and relatives, EU structural fund’s support. Women tend to use the help of family, parents and relatives while men have more likelihood to use either the EU structural funds or bank loans as per the experts. After gathering all the answers, a declaration can be made that it is more difficult for a woman to acquire the capital for starting a business while it’s much easier for men to attain the capital for this purpose. And in this way the second presumption was found to be verified or confirmed.

Presumption 3

11 reasons that tend to affect the business development were specified to the experts in the group to verify the third presumption. The experts could select many answers and rank them according to priority: 1 – very important, 2 – important and so on. As per expert’s declaration, financial gains are important but not the prime concern or priority for women entrepreneurs while 80% of Men start a venture specifically for financial benefits. According to the expert’s opinion in survey the main reasons for women to start a business are found to be, their wish to start a business, getting away from unfavorable employment conditions, using their talent and professional expertise. This issue confirms the third presumption, and the existence of gender stereotypes.

Presumption 4

To verify the 4^(th) presumptions the experts had to relegate the domains in which the women and men have developed their businesses. Experts were supposed to pick many alternatives. After the data was outlined, it was found by the experts that a large percentage of men (70%) set up business in trade and 40% of them run real estate and other types of businesses. It was also emerged that the percentage of women (from 20% to 30%) was almost identical in the following business segments: real estate, services, rent, trade and other types of businesses. So, it was concluded that 4^(th) presumption was not confirmed as per the judgment of experts as women and men tend to develop numerous businesses in Lithuania and not any clear difference was indicated.

Conclusion:

  1. After evaluating the research descriptions, it was concluded that the main reasons for the gender gap in entrepreneurship are the differences in value systems, different factor groups and variation in demographic factors. It was further explained by the ffeministtheories that women are positioned less in the society as compared to men. There are more factors, which increase the gender gap in entrepreneurship as compared to neutral or the ones that decrease the gender gap.

  2. A classification of different factor groups, which affect the gender gaps in entrepreneurship was formed by various researchers. There were 7 factor groups.

  3. There were different group factors, which maximizes the gender gap in entrepreneurship are found to be Demographical factors (marriage, taking care of children, work experience, immigration), Economical factors (difference in the pay of men and women, availability of work), Institutional and political factors (Business licensing, social security and accessibility of finance or resources) and at last psychological factors (value system and motivation).

  4. As per the survey answers by the expert’s groups, it was concluded that 3 out of 4 presumptions were confirmed about current gender gap in entrepreneurship. It was concluded that the gender gap in the entrepreneurship still exists.

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