Prof Mark Hart shared some interesting research on the role gender plays in entrepreneurship. The research is based on the results of the annual GEM survey.
The data shows that women startups are less successful and more prone to failure. A little more digging raises three possible reasons:
- Smaller amounts of start-up capital deployed (Verheul & Thurik, 2001; Watson, 2002; Coleman & Robb, 2009)
- Less successful because of lower start-up capital, less prior work experience in a similar business and in a family business (Fairlie & Robb, 2009)
- Women rely more heavily on personal rather than external sources of financing (Coleman & Robb, 2009)
The first point is quite likely related to women being more risk aware (excellent point made by Mark - the term risk averse already implies judgement that risk is desirable). But surely success has a lot to do with the competitive & macro environment. In an environment dominated by macho, risk-taking, “big guns” & “big bang” businesses, it must be pretty hard to compete when you have a more reasonable/conservative sales forecasts and, consequently, lower starting capital.
The big guns approach got us where we are now. A global crisis. One fuelled by excessive risk-taking and the yet unsolved agency problem. How do we foster the more risk aware businesses in their infancy? How do we build-in controls for long term sustainability early on? Umair Haque is exploring some of these points in his latest book (yet to read). How do we build-in & measure the real cost? (i.e. would McDonalds be so profitable if it had to pay for the obesity problems and environmental damage it generates?)
Interestingly, the theme of Mark’s lecture was business growth. It seems that the term is quite a similar case to the “risk averse”. The term Business growth already caries this macho charge, this imperative for expansion or even(tually) aspiration for future business empire. But growth is what causes the agency problem too. Female entrepreneurs are quite aware of this. In the post-industrial world, economies of scale are often not a requirement for sustainability. With 3D printing becoming more & more feasible, even the manufacturing sector might eventually come back to its artisan shop roots.
Should then business growth be viewed as positive-only?
I’ve already touched on some of this in my previous post on gender balance. Curiously, all business initiatives described in Prahalad’s Bottom of Pyramid relied on women. Is the business environment in development countries different in this respect?
Again, nature could probably give us a clue. Male to female ratio globally is 1.01. On the other hand, the male to female ratio in corporate boards is 9:1.
What are your views?
- Is equality in businesses desirable & feasible?
- Should we aim to foster more risk-aware businesses?
- Should growth be perceived as mostly desirable?
—-
The views expressed in this post contain only my personal opinions which are not in any way related to those of Aston University or its employees (apart from the referenced research).
