Female entrepreneurs have it tougher than men

May 02 2008 by Nic Paton Print This Article

It's bad enough that women still suffer from a gender gap when climbing the corporate ladder, but female entrepreneurs around the world also experience a gender gap when it comes to owning and starting up their own businesses.

A study of 41 countries by the Center for Women's Leadership at Babson College in the U.S has found that women are hugely active in creating and running businesses around the world, contributing to economies representing more than 70 per cent of the world's population and 93 per cent of global GDP.

Yet a gender gap persisted in new venture creation and business ownership, it argued, with the gender difference most obvious in high-income countries and much clearer in Europe and Asia than Latin America and the Caribbean.

Regardless of gender, intriguingly entrepreneurial activity was higher in low and middle-income countries and significantly higher in Latin America and the Caribbean.

These latter two regions also showed the highest rates of female early-stage entrepreneurial activity, with female entrepreneurs were now a key contributor to economic growth.

Yet at all income levels a gender gap existed for both early-stage entrepreneurship and established business ownership.

This gap was greatest in high-income countries, where men were almost twice as likely to be early-stage or established business owners.

Only in Japan and Peru in 2007 were women more active in starting a business than men, and the gap narrowed in Latin America and the Caribbean.

Early-stage entrepreneurs in high-income countries were more likely to become established entrepreneurs than those in both low/middle-income groups, the survey reported.

In high-income countries, there was no gender difference in the survival rate of women's businesses versus those of men. In stark contrast, women entrepreneurs in low/middle income countries were less likely than their male counterparts to keep their businesses thriving beyond 42 months.

Women's levels of optimism and self-confidence in starting a business were highly influenced by the culture and social norms of their native countries, it also found.

Women entrepreneurs generally had less fear of failure than women who were not involved in entrepreneurial activity, yet they expressed a greater fear of business failure than men when it came to starting businesses.

"Women's entrepreneurship varies widely across the globe," said Babson professor Elaine I Allen, principal researcher of the study.

"It's a surprise that developing countries in Eastern Europe have low rates of women's entrepreneurship, closely resembling their highly developed European neighbours, while the countries of Latin America and the Caribbean have rates of women's entrepreneurship two and three times higher," she added.

Women were more likely to run service and consumer-oriented businesses than men, the survey also found.

In low and middle-income countries, women generally became early-stage entrepreneurs between the ages of 25-34 and established between the ages of 35-44.

These age spans were broader in high-income countries; with early-stage women more likely to be aged 25-44 and established between 35-54 years old.

The likelihood of being involved in entrepreneurial activity was three to four times higher for women who were employed in a waged job (whether full or part time) compared with women who were not working, were retired or are students.

This suggested that working provided access to resources, social capital and ideas that could be an aide in establishing an entrepreneurial venture, the report suggested.

On average, women entrepreneurs in high-income countries were better educated than those in low/middle income countries.

But surprisingly, in all country groups, the level of educational attainment was not consistently higher for women who were established business owners.

In fact, the level of education was the same or higher for early-stage entrepreneurs compared with established business owners, which could indicate a generally higher level of education for women in all countries.

In every nation studied women tended to be less optimistic and self-confident than men about starting a business.

But once involved in entrepreneurial activity, their confidence built and they were more likely to know other entrepreneurs and exploit viable opportunities just like their male counterparts.

Fear of failure was also higher for women in all country groups compared with their male counterparts.

Women in European and Asian low/middle income countries had the highest fear of failure rates (40 per cent) compared with women in Latin America and the Caribbean (34 per cent), and women in high-income countries (27 per cent).

This rise in fear of failure could be linked to the necessity-driven perception of fewer job options, the report argued.