Examining Venture-related Myths Concerning Women Entrepreneurs

It is generally acknowledged that women are increasingly choosing business ownership as a career path. Notwithstanding this trend, there are many derogatory "myths" relating to women entrepreneurs. The U.S. Diana Project (Brush, Carter, Gatewood, Greene & Hart, 2001) examined eight myths related to women entrepreneurs. These myths included: women do not want to own high growth businesses; they do not have the right education or experience to lead high growth businesses; they lack suitable networks; they are not financially savvy; they do not submit business plans; they are not in industries that Venture Capitalists (VCs) find attractive; and, they are not a force in the VC industry. These myths were compiled by Brush, et al. (2001) as part of a large-scale academic and practical project that identified and sought to address the shortage of women seeking and receiving venture capital for their businesses. They state that the myths are "statements that are illusionary and generally lack substance . . . [nevertheless] stereotypes [that] have the potential to inhibit a woman's chance of gaining access to equity capital and create a negative context for entrepreneurial growth." (p. 5).

This study explores the derogatory myths identified in the U.S. Diana Project to investigate their salience. This is an exploratory study that investigates these myths by comparing female and male nascent entrepreneurs. Nascent entrepreneurs are defined as those individuals who are actively engaged in activities related to starting their own businesses; however, the businesses have not yet reached operating status (indicated by a positive monthly cash flow that covers expenses and the owner-manager salaries for more than three months) (Reynolds, 2000). (It is acknowledged that some businesses, e.g. in the new economy, are operating and do not meet this definition). Reynolds (2000, p. 157) states that by studying nascent entrepreneurs we "get to the heart" of the question. Bias of retrospective accounts is avoided and the myths can be viewed at an earlier and perhaps critical stage. Furthermore, many women may take steps to try to start a business, but never achieve an operating business. Studying people in the "start-up" pool facilitates a fundamentally more in-depth analysis of the issues relating to comparisons between men and women in business.

Given the limited research on nascent entrepreneurs and on women entrepreneurs, this work is of importance to address the argument that a theory is flawed if it is based on insufficient research (Chaganti & Parasuraman, 1996). A study of the venture-related derogatory myths is particularly important because the presence of stereotypical derogatory statements could lead to women being discouraged from attempting business ownership as a career path. It could also inhibit an attempt to grow a business due to perception associated with those myths. The presence of stereotypical derogatory myths does not just impact on the disadvantaged, the potential and existing female entrepreneurs. There could also be an impact on those associated with women in business, for example, potential or existing employees, bankers, clients, suppliers and business associates.

Background

The derogatory myths (Brush et al., 2001) concern at least three theoretical constructs, namely, Human Capital Theory (Becker, 1993; Coleman, 1988; Gimeno et al., 1997) which deals with age, education and experience; Social Capital Theory (Adler & Kwon, 2002; Portes, 1989; Woolcock, 1998) which examines networks and relationships of trust; and Financial Capital Theory (Portes, 1989) which can be enhanced by human and social capital. There have been studies of nascent entrepreneurs, (e.g. Reynolds & White, 1997; Delmar & Davidsson, 2000; Davidsson & Honig, 2003; Gartner, Shaver & Gatewood, 2000), but they mostly concern factors that affect the incidence of nascent entrepreneurs and consider gender differences within that context. Reviews of literature have found that women entrepreneurs are rarely a topic of entrepreneurship research (Baker, Aldrich, & Liou, 1997). Brush and Edelman (2000) propose that this may be because more similarities than differences have been found in past studies, hence the redundancy of further study. Thus, the background literature relating to the human, social and financial capital of women entrepreneurs, and especially nascent women entrepreneurs, is extremely limited.

Human, Social and Financial Capital

Previous research regarding human capital factors has found that women and men achieve a similar educational level (Birley, Moss & Sanders, 1987). There is a lower incidence of women in some university programs, such as engineering (Brush et al., 2001; Menzies & Paradi, 2003). Matthews & Moser (1995) report that female university graduates have less interest in owning a small business than male graduates. Regarding working and managerial experience Srinivasan, Woo and Cooper (1994), reported that women had less organizational and managerial experience. Regarding social capital, some previous studies found that women network differently from men. For example, women tended to have smaller networks (Aldrich, 1989) although the process of creating a network was found to be similar for women and men. Aldrich, Reece and Dubini (1989) found that men were seldom included in the personal networks of women.

For financial capital, a study of 300 male-owned and 300 female-owned businesses in the U.K. (Carter & Rosa, 1998) found a significant difference regarding the amount of start-up capital, with women reporting lower start-up capital than men, which could have a long-term effect on business growth and success. However, they found that sources of funding were similar for men and women at start-up but subsequently women were significantly less likely to use lines of credit, bank loans or supplier credit. Coleman (2002) found that women were disadvantaged due to their small business size, limited growth potential and profitability that reduced the likelihood of obtaining debt capital. Other studies have found no differences between women and men for access or use of lines of credit or regular loans from banks (Fabowale, Orser & Riding, 1995; Haynes & Haynes, 1999).

Business Size Motivations and Business Characteristics

Differentiating entrepreneurs from small business owners is usually done according to the desire, or achievement of high as opposed to level, slow or moderate business growth (Birch, 1987; Gundry & Welsch, 2001). Kolvereid (1992), studying Norwegian entrepreneurs posited that many factors influenced whether a business became high growth or not. These included the motivations of the nascent entrepreneur, their education and experience, the industry and characteristics of the business, the environment and location, as well as the firm rate of growth to date and the entrepreneur's desire to grow the business. However, Kolvereid's study found no differences between women and men with regards to aspirations for growth. Shane, Kolvereid and Westhead (1991), in an international survey of entrepreneurs from Britain, New Zealand and Norway, found that men and women did not differ with respect to "independence" measures (e.g. flexibility) for starting a business. However, they did find differences for reasons related to "recognition" (e.g. prestige), with men scoring higher, (which may be related to desire for high growth businesses). Sonfield, Lussier, Corman and McKinney (2001) found that female and male business owners did not differ in their venture innovation/risk situation. Women and men were just as likely to be distributed on the high to low risk innovator continuum and the low to high-risk continuum. Furthermore, Kolvereid, Shane and Westhead (1993), with a one-time examination of nascent entrepreneurs, found that for environmental influences, nationality had more impact than gender.

The scale of the business at start-up is considered to be closely related to growth potential. Carter, Williams and Reynolds, 1997), studying 203 new firms in the retail industry, found that women-owned businesses were more likely to fail than those started by men. Women started on a smaller scale and made less use of previous business experience. Home-based businesses, for example, are mostly owned by women (Carter, Van Auken & Harms, 1992). Cliff (1998) interviewing male and female business owners states that women had a "maximum business size threshold" and were more worried about the risks involved in growing their business. Hisrich, Brush, Good and DeSouza (1997) found that male and female business owners had similar sales revenues. However, some studies report womenowned businesses performed at a lower level (Cuba, DeCenzo & Anish, 1983). Robb (2002) found that women's businesses were less likely to survive than men's. Then again, Watson (2002), controlling for industry and business age, and Chell and Baines (1998), found no difference between the performances of women versus male owned businesses.

The Incidence of Women Entrepreneurs in Canada by Industry Sector and Business Size

Women are under represented as lead entrepreneurs in Canada. Although the numbers are increasing over time, as of the year 2000 in Canada, women were majority owners in only 15% of small and medium sized enterprises (SMEs), whereas 66.2% of firms were majority male-owned. Women, however, did have some ownership in 45% of SMEs (Statistics Canada, 2000). Only 13% of the SMEs in manufacturing in Canada were majority female-owned firms, while 69% were majority male-owned (the remaining 18% is shared male and female ownership). Only 12% of knowledge based SMEs (industries with a high reliance on technology in some form) are majority female-owned (majority male-owned 68%). In the wholesale/retail, and professional services sectors, majority women-owned SMEs represented 23% and 22% respectively. Majority female-owned businesses had fewer employees, were less often incorporated, had slower growth and were less inclined to exporting than SMEs owned by male owners (Industry Canada, 2002).

This study does not purport to offer a comprehensive literature review in this area. Rather, it provides a sample of this literature in order to indicate the limited and sometimes contradictory (which may be due to different research methodologies, geographic locations, cultural and environmental issues) previous literature and an overview of the macro perspective in Canada. Based on these sources there seems to be some foundation to the stereotypical derogatory myths (Brush et al., 2001).

The myths explored and the hypotheses formulated in this study are as follows:

H 1: Women do not have the right educational backgrounds to build large ventures.

H 2: Women do not have the right types of experience to build large ventures.

H 3: Women are not in networks and lack the social contacts to build credible ventures.

H 4: Women do not have the financial savvy or resources to start high growth businesses.

H 5: Women-owned ventures are in industries unattractive to venture capitalists.

H 6: Women do not submit business plans to equity providers.

H 7: Women do not want to own high growth businesses.

The methodology of the study will be explained in the next section, followed by a presentation of the results of the analysis in relation to the myths outlined earlier. The study concludes with a discussion of the findings and the implications for theory, practice and policy.

Methodology

This research is part of the Entrepreneurship Research Consortium (ERC), which comprises 111 researchers from 32 different organizations worldwide, and was set-up to study nascent entrepreneurs (Menzies, Gasse, Diochon & Garand, 2002; Reynolds, 2000). The ERC longitudinal methodology includes a short screening interview, then longer telephone interviews at the end of the first, second and third year and also two mail surveys. For the Canadian ERC work a group of academics from across Canada agreed to collaborate on ERC instrument refinement, data collection and analysis of results. A national polling firm was utilized to perform a random sampling of the Canadian population to identify the subjects for the study. The unit of inquiry was the "household", and the study was limited to adults, 18 years of age and older. The key questions asked when screening potential respondents were: Are you, alone or with others, now trying to start a business? Will you be an owner, in part or in whole of this business? During the last 12 months, have you done anything to help start this new business? From the initial 49,763 randomly selected telephone numbers, there were 29,855 usable numbers. Using a Computer Assisted Telephone Interviewing System (CATIS) screening interviews were completed with individuals in 21,116 households, with a 71% response rate (12.2% non-response rate and 16.8% refusal rate). From these interviews, it was ascertained that nascent entrepreneurs were present in 1.8% of households (margin of error less than .2%) as of 2000. This stratified proportional sample is representative of all Canadian households from all provinces.

The second stage of the study involved a telephone interview with the nascent entrepreneurs identified in the first stage. There were 593 people who qualified for the phone interview. However, due to unavoidable delays for the interviewing, some of the nascent entrepreneurs were no longer engaged in the start-up effort, some refused to participate and others could no longer be contacted at the previous phone number. Therefore, the first long interview was completed with only 150 nascent entrepreneurs. Due to non-response on some questions (missing data), 144 respondents were included in this study. The interview questions were grouped into 26 areas of inquiry, and as related in a previous study by Diochon, Gasse, Menzies and Garand (2001) categorized them into contextual factors, organizing issues, activities undertaken, and nascent individual influences. The second and third interviews examined the progress of the start-up and do not provide any additional information relevant to the myths. The sample includes 52 women and 92 men and although the number of females does not equal the number of male respondents, the results are nevertheless valuable for an exploratory study of the derogatory myths about women entrepreneurs. A total of 34 variables from the 2000 interview were used for the analysis. To test for statistically significant differences between women and men, chi square and t-tests were utilized as appropriate.

Findings

The geographic dispersion of the respondent nascent entrepreneurs across Canada corresponds generally to the percentages in the general population, except that there are a smaller number of nascent entrepreneurs from the West. The average age of respondents was 41 (40 for women and 42 men), with 14% of our sample in their 20s, 35% in their 30s, 26% in their 40s, and 25% over 50. About a third had been born outside of Canada. About three-quarters of respondents were married or living with a partner (Table 1). About a third were working full-time and a smaller number part-time while trying to start a business. There was a wide variation in the number of hours (less than 15 to more than 45) each week devoted to the start-up. About a fifth were seeking a full-time or part-time job. A few of the respondents (8%) were full-time students trying to start a business.

H 1: Women do not have the right educational backgrounds to build large ventures

Women and men had similar educational achievements with over half having completed college or university degrees and about 10% holding graduate degrees (Table 1). The college major was found to be significantly different between men and women. Women had less applied science and computer education and more health and natural sciences majors [[chi]^sup 2^(4, N = 124) = 12.50, p < .05]. Regarding specific education to start a business, significantly more men than women had taken business start-up courses [[chi]^sup 2^(1, N = 144) = 3.885, p < .05].

H 2: Women do not have the right types of experience to build large ventures

No significant differences were found between women or men for the total number of years of full and part-time working experience (Table 2), the years of experience in the industry of their current start-up (Table 2), or the years of management experience (Table 2). Similarly, no significant difference was found between men and women according to the number of previous start-ups with which they had been involved. About three quarters of the women (71%) and nearly half of the men (46%) had not been involved in a previous business start-up (Table 2). Comparing those whose parents had owned a business, no significant difference was found, with 52% of both groups' parents never having owned a business (Table 1).

H 3: Women are not in networks and lack the social contacts to build credible ventures

No significant differences were found between men and women for the variables utilized to investigate the network (seeking and using start-up assistance and family support) (Table 3). Forty percent of women and 42% of men received no help to start their business; even more did not approach help services (e.g. government or private providers) (women 77%; men 67%); and about a third or more were not even supported by family members (women 31%; men 43%).

H 4: Women do not have the financial savvy or resources to start high growth businesses

Ten variables were used to investigate Hypothesis 4. Of these, only one was found to be significantly different (Table 3). No significant difference was found according to which nascent entrepreneurs had prepared projected financial statements, asked financial institutions for funds, invested their own funds, the amount of the initial investment, net worth of the household or household incomes. As some start-ups depend on the pooled resources of partners, partners were viewed as a potential source of funding and experience. The nascent entrepreneurs (women 40%; men 53%) had business partners assisting in the start-up (about a quarter were wife and husband teams). However, a significant difference between women and men was found according to their relationship with their business partner(s). Women were significantly less likely to have non-family members as business partners [[chi]^sup 2^(2, N = 142) = 6.30, p < .05].

H 5: Women-owned ventures are in industries unattractive to venture capitalists

No significant difference was uncovered between women and men according to the industry in which they were establishing their businesses (Table 4). A majority was going to operate in the service sector, about a fifth in retail, and a small number in manufacturing (Table 4). However, significantly more men than women (36% men, 19% women) had businesses they classified as hi-tech [[chi]^sup 2^(1, N = 136) = 4.576, p < .05]. Also, significantly more men than women (31% men, 11% women) reported they held copyrights for materials relating to their business [[chi]^sup 2^(1, N = 126) = 6.687, p < .05]. However, there was no significant difference between men and women regarding research and development spending being a major priority, or for holding trademarks or patents (women 5%, men 17%).

H 6: Women do not submit business plans to equity providers

To examine this Hypothesis for nascent entrepreneurs, respondents were asked if they had prepared a business plan for the start-up. Women and men were equally likely to have prepared a plan or to have a business plan in progress (women 56%, men 66%) (Table 4).

H 7: Women do not want to own high growth businesses

No significant differences were detected between women and men according to the desired future size of their business or reasons for starting a business (Table 4). There were also no significant difference between men and women regarding their image of owning a business, their estimation of the likelihood of still being operating in 5 years, the number that were home-based or the percentage who thought the business would be their primary source of income.

Conclusion and Discussion

Seven derogatory myths about women entrepreneurs were examined within the context of nascent entrepreneurs (Table 5). Based on a random sample of Canadian nascent entrepreneurs, 36% of whom were female and 64% male, the findings of this study suggest that women are in many circumstances remarkably similar to male nascent entrepreneurs. For the sample used, the length of working experience, industry specific and management experience were found to be no different for men or women. (The specific type of working experience was not explored). Networking aspects were similar for male and female nascent entrepreneurs. Also, women were just as likely, and in many instances, just as unlikely as men to have prepared a formal business plan. In addition, there seemed to be no difference between women and men according to their preference for their start-up to become a high growth venture.

In some instances, however, significant differences were uncovered among men and women. For Hypothesis 1, regarding the educational background of our sample, it was found that female entrepreneurs majored less in engineering or computer areas and more in health related fields. It was also found that women were less likely to have taken courses specifically related to starting a business. In testing Hypothesis 4, regarding financial savvy and resources, no significant differences were found for the most part, however, men were significantly more likely to have a business partner who was not a family member. Previous studies have found that larger businesses started out with a team, which provided additional resources to potentially grow a larger business (Carter, Williams & Reynolds, 1997). However, of note is the work of Litz and Folker (2002) who found that husband and wife teams reported superior profitability than those that were managed by only male owners. For Hypothesis 5, regarding the type of industries attractive to venture capitalists, it was found that men were significantly more likely than women to be starting a venture that was hi-tech, which fits with our previous finding about educational background. Moreover, male nascent entrepreneurs were significantly different from women with regard to their business having some form of intellectual property. This might indicate that the venture had some form of competitive advantage, thus making the venture potentially more fundable, profitable and sustainable. To summarize, five of the myths were largely refuted, but two Hypotheses would appear to have some substance, as shown in Table 5.

Theoretical Implications and Future Research

Given the limited prior research that compares female and male entrepreneurs, this study makes a substantial contribution to the literature on human capital theory, social capital theory and financial capital theory. Furthermore, the study concerns nascent entrepreneurs, and as such provides information about an under-researched category of entrepreneurs. Studying nascent entrepreneurs, as stated earlier, allows for action based interviewing and a minimization of errors due to hindsight reflections and bias that may intrude due to reporting on business aspirations that have been tempered by later events.

The findings support earlier studies in relation to some aspects of human capital, that is, that women and men are surprisingly equal in terms of education, but that female students are under represented in some disciplines (e.g. engineering). Women were not found to have fewer years of management experience, which has been a finding of earlier research. For social capital, the results pointed to similarities between women and men rather than the differences as found in some studies. However, the process, composition and size of networks were not fully investigated due to the limitations of the ERC methodology. Previous literature relating to financial capital has produced contradictory results. In some studies researchers found that women used similar funding sources to men, but in other instances it was found that women placed less reliance on debt funding and more on equity. Women were also found in a previous study to start a business with less capital. The findings support previous research that uncovered no differences between men and women in relation to level of start-up funding, sources of funding and wealth. The findings in this study regarding business size motivations and risk propensity support previous research that found no difference between men and women.

No support was found for many of the derogatory myths about women entrepreneurs, some of which are supported by findings in the literature and also by the macro level information about women majority owned businesses (e.g. fewer employees, less often incorporated, had slower growth, less inclined to exporting than male majority owned businesses). In terms of theory, follow-up is needed on this exploratory study with a larger sample of female and male nascent entrepreneurs. For example, although there were no significantly different results in our study between the women and men, there are some variables that require further investigation, for example, women may generally try to start businesses with fewer years of working experience; they may attempt to start a venture with a smaller financial investment; they may have a lower household net worth; they may be less likely to complete a formal written business plan; and lastly, women may be more likely than men to start a home-based business.

Furthermore, the early stages of operating a business need to be investigated to determine if it is during that phase that issues like home-work conflict (Martins, Eddleston & Veiga, 2002) impede the apparently almost level playing field that exists for women and men starting businesses. Further research should also look at established female and male entrepreneurs to test for the veracity of the myths. Bird and Brush (2002) have explored the concept of gender as a socialized perspective as opposed to the traditional biological sex differences. This should be explored in future research. Further research is also necessary to investigate the composition of start-up teams and the effect this has on venture success and growth, given that women nascent entrepreneurs tend to have fewer non-family members and fewer male members on their ownership team, than do male nascent entrepreneurs.

Implications for Practice and Policy

Women are under-represented as majority-owners of businesses, in all categories according to business size and growth pattern. The substance and tone of the derogatory myths would seem to be germane to the argument as to why women are not found in larger numbers in other male dominated careers, for example, in politics. Lack of experience, not in the network, lack the savvy and do not really want to do it anyway, all sound like excuses that could be leveled against women in other contexts as well as in business. Dispelling the apparent truisms in relation to women entrepreneurs, as has largely been done in this study, may also assist in discrediting myths relating to other fields of endeavor for women. From a practical perspective, women may be encouraged to think about venturing due to our findings that dismiss many of the derogatory myths. Women already engaged in start-ups or running businesses, as well as their clients and those who provide services for women entrepreneurs can learn from what we have discovered.

Policy makers are concerned with whether obstacles exist for women entrepreneurs, and if so, how these obstacles can be addressed by special incentives or programs. Is the fact that fewer women major in engineering and computer science evidence of an obstacle for women that policy can address, a pre-disposition based on inherent differences between women and men, or due to socialization processes from birth? An optimistic view is that the preponderance of women in the health sciences field will lead to more women with PhDs, potentially starting ventures in the bio-tech industry, which have the likelihood of being based on a product or service that is protected by patents. This was the conclusion of Brush et al. (2001) in their study in the U.S.

There is a trend toward more women taking engineering degrees (Menzies & Paradi, 2003). It might be advisable to accelerate this trend and offer scholarships and other incentives to encourage women to study engineering and computer science. However, school administrators have an important role to play (Walker & Joyner, 1999) in a long term but higher potential strategy for increasing the number of women in certain disciplines. Math, science and computer clubs and competitions (local, regional and national) targeted at females and subsidized by different levels of government or private foundations could have important payoffs. It was also found in this study that fewer women than men took business start-up courses. Providers of start-up courses need to examine whether course scheduling, location and content is female friendly. The derogatory myths may act as a disincentive for women to pursue ambitious goals in relation to their business, and it is the responsibility of educators and academics to dispel the derogatory myths and to design business education programs that encourage women as well as men to pursue their venturing goals.