Entrepreneurship contributes significantly to economic growth because of its ability to foster competition and innovation. Entrepreneurship is also increasing worldwide and, to the surprise of many, women constitute the fastest growing group of individuals involved in starting new businesses. In recent years, much has been learned about the reasons why women start businesses and about how women who lead businesses differ from the men who do.
How and why men and women differ with respect to entrepreneurship matters to companies because entrepreneurship is not limited to the creation of new businesses. Rather, it is alertness to the existence of opportunities. Thus, much entrepreneurship takes place within existing companies. Add to that, in companies of all sizes the number of women is increasing, and the number of those that are filling important roles is growing. As a result, companies that understand women entrepreneurs’ motivations and leadership styles will be better able to infuse their corporate cultures with an entrepreneurial spirit.
Here are the facts: women represent an increasing portion of all people involved in starting a business worldwide, but men are still twice as likely to be involved in entrepreneurial activity then women, and their businesses tend to grow faster and be more profitable than those of women.
Examination of entrepreneurial behavior across the globe yields a clear explanation of this gender gap in venture creation and ownership activity. The aspiring entrepreneur engages in new venture creation out of necessity – having no better job alternatives – or because she perceives an opportunity – despite having other alternatives. Although opportunity is the dominant motivation for most entrepreneurs across all countries and regardless of gender, women are over-represented among those who start businesses out of necessity.
Independent from initial motivation, businesses headed by women tend to be smaller and to grow more slowly than those headed by men. Unfortunately, smaller size and slower growth rates are often perceived as problems, and it is assumed that women would want to expand their businesses if they could. However, much of this cross-gender variation is simply due to sectoral differences or to lifestyle choices. Women tend to start businesses in sectors, such as services and retail, where the optimal size of a company tends to be smaller and profit margins are lower. Also, women often make business decisions that allow them to combine work and family commitments and, therefore, attach relatively lower importance to their company’s rate of growth.
Non-monetary motivations are particularly important for women and self-assessments of success for women entrepreneurs have shown self-realization to be often considered of greater importance than financial profitability and growth. Also, when looking at female self-employment, several studies have confirmed independence and personal freedom, security, and satisfaction to be often more important for women than financial performance.
Individuals’ strategic choices are shaped by experiences to which individuals are subjected. Women and men have fundamentally different socialization experiences that result in the development of unique capabilities. For example, women-owned businesses are usually founded with fewer initial resources and tend to be launched on a smaller scale. However, women are also more likely than men to develop coping strategies that emphasized cost efficiency and profitability.
With respect to growing the company, women tend to report more concerns about the risks associated with fast growth and generally prefer to adopt a slower and steady rate. This, in turn, has important implications for their managerial style. Men and women form different types of networks. Women form long-term relationships based on affective ties, and men form short-term relationships based on mutual interest and weak ties. Differences between the organizations and coalitions created by men and women create a corresponding difference between the optimal sizes of their organizations: The male hierarchical structure allows for organizations that effectively monitor and draw information from large numbers and permits the rapid dispersal of information from the top to the lower levels of the hierarchy. On the other hand, the stronger ties of female organizations reduce the need for monitoring and for systems of explicit incentives. Importantly, the existence of gender differences in management styles suggests that men and women may play different, albeit equally important, roles in developing an entrepreneurial attitude within an organization.
Women tend to perform better in smaller groups. They are also sensitive to fairness and willing to contribute more in an environment perceived as fair. They are, however, more likely to retaliate and with more intensity if a tort is perceived. Women tend to be very detail-oriented and very good at absorbing and organizing information from their surroundings. With respect to the long standing debate on whether or not women tend to be less risk tolerant than men, we now know that, although risk tolerance plays some role in gender differences, the main difference is in the way in which men and women perceive themselves and their working environment.
While women entrepreneurs may differ from men in their motivation for starting and growing a business and in their style as business leaders, in an entrepreneurial environment, women will perform as well as men. Entrepreneurs—whether women or men–are made rather than born. Given proper incentives and positive assessments, any woman (or man) will be able and willing to behave entrepreneurially. In fact, the specific perceptual factors that have been shown to motivate women to behave entrepreneurially are, at least in part, the long term outcomes of institutional settings in the broader economy and organizational routines within a company. That is, they emerge from context and circumstances and can be learned and developed. For example, recent experimental studies in behavioural economics have shown that attitudes toward entrepreneurship reflect subjective perceptions rather than objective conditions, and that women and men have different cognitive characteristics. Therefore, organizations need to do things that enable both women and men to perceive:
- the existence of opportunities
- self-confidence in their own entrepreneurial skills
- recognition that others (especially in upper-management) approach work in the same entrepreneurial manner.
These are all crucial characteristics for the emergence of entrepreneurial attitudes among female (and male) employees.
Significant differences exist between female and male businesses and such differences seem to hold, with varying degrees, across most countries. This consistency is useful in trying to understand the impact of female entrepreneurship on aggregate economic activity and, at the same time, how gender differences in entrepreneurial styles may be leveraged to provide employees with more rewarding work experiences and companies with stronger entrepreneurial profiles. More attention should be devoted to the needs and characteristics of aspiring and existing female entrepreneurs, and policy makers and business leaders would be wise to develop and enhance environments in which women’s entrepreneurship may flourish.