Sex differences and risk-taking propensity of entrepreneurs.

ABSTRACT: RAPPORTS ENTRE LE SEXE DES ENTREPRENEURS ET LEURS TENDANCES A PRENDRE DES RISQUES

Il a ete souvent suggere que les entrepreneurs etaient enclins a prendre plus de risques que les gerants, et que les hommes prenaient plus de risques que les femmes. Le but de cette etudetait d'examinerces

Elle s'inspire des recherches conduites par Brockhaus pour determiner la difference d'attitude entre les entrepreneurs et les gerants dans le domaine des prises de risques. Elle en corrobore les resultats: il n'y a aucune difference significative entre la tendance a prendre des risques parmi les entrepreneurs et les gerants. Il en est de meme en ce qui concerne la difference entre hommes et femmes.

The entrepreneur's and manager's roles have always involved risk taking. Entrepreneurs, however, are widely believed to be willing to take more risks than managers. In addition, women have been stereotyped as conservative and risk-averse-males are viewed as taking more risks than females.

The purpose of this article is to present the results of a study conducted to determine whether male entrepreneurs and female entrepreneurs in the United States differ in risk-taking propensity. A secondary purpose of the study was to replicate the research conducted by Brockhaus comparing the risk-taking propensity of entrepreneurs and managers..sup.1

BACKGROUND Previous researchers have either openly stated or implied that both entrepreneurs and managers are risk-taker..sup.2 According to Burch, "The antithesis of the entrepreneur is a person who never loses because he or she never puts himself or herself at risk.".sup.3

Research conducted prior to the 1960s investigating differences between males and females in various situations typically found females to be more conservative than males..sup.4 Wallach and Kogan concluded that women are more conservative when they make decisions under conditions of uncertainty; however, they are more extreme in their judgments when conditions are certain..sup.5 This result is generally explained by reference to the constraining influences females are exposed to in the socialization process. Males are reinforced for exploratory (i.e., risk-taking) behavior; females are encouraged to be more conservative.

The women's movement which took shape in the 1960s and 1970s has had a major influence on societal value systems. Its primary emphasis has been on achieving legal equality and increasing employment opportunities for women, including preparing women for managerial roles, in part by developing awareness of risk-taking..sup.6

During the 1980s, the literature addressed female entrepreneurship and actual risk-taking, which demonstrated women's advancement into entrepreneurial and risk-taking roles.sup.7 Statistics show that during this period, women started more small businesses than men, and women-owned businesses were the fastest growing segment of small business in North America.sup.8 From 1972 to 1982, the number of self-employed women increased by 59 percent; five times the rate of increase among men..sup.9 It appears, therefore, that sex differences with respect to risk taking may no longer exist.

DEFINITIONS

Many characteristics and attributes have been attributed to "the entrepreneurial personality.".sup.10 Some writers have suggested defining entrepreneurs in terms of role rather than attributes.sup.11 The debate as to what actually constitutes an entrepreneur has not been resolved. For the purposes of this article, the entrepreneur is defined as a major owner of a small business or the major owner and manager of a small business. A manager is defined as a person who manages, but does not own a small business.

As for the definition of risk-taking, Baty has said a question to ask when considering an entrepreneurial venture is "are the potential rewards commensurate with the risks?".sup.12 A survey conducted by Venture indicates that four out of ten entrepreneurs like "taking some chances." However, they take risks after carefully analyzing the situation in question..sup.13 Others have discussed the motives for risk-taking, which usually relate to achievement.sup.14Hisrich, for example, cites the need for achievement as one of the primary motives for women to take the risk of starting a business.sup.15

For the purposes of this study, the Brockhaus definition of risk-taking propensity will be used. That is: The propensity for risk taking is defined as the perceived probability of receiving the rewards associated with success of a proposed situation, which is required by an individual before he will subject himself to the consequences associated with failure, the alternative situation providing less reward as well as less severe consequences than the proposed situation.sup.16

SAMPLE AND METHOD

The present study was conducted in the Midwest using two groups of subjects. The first group was composed of males and females who either owned a small business or owned and managed a small business (the entrepreneurs). The second group was composed of males and females who did not own a small business, but managed one. This group will be referred to as the managers.

The Management Development Center at Fort Hays State University conducts workshops, seminars, and conferences for persons in business and industry. Related to these activities, the Center maintains a comprehensive mailing list. A stratified sample totaling 250 names and addresses of known entrepreneurs and managers of small businesses was taken from the mailing list.

The Choice Dilemma Questionnaire (CDQ) used in the survey included a cover letter explaining the purpose of the study and a section for gathering demographic data. Demographic data were collected on sex, age, income, county residence, and position (own business, own and manage business, manage but do not own business, and "other"). Fifty usable questionnaires were returned-a response rate of 25 percent. Sample-size determination followed techniques offered by Krejcie and Morgan..sup.17

The CDQ was developed by Wallach and Kogan for obtaining probability preferences in 12 everyday life situations. The questionnaire requires the respondent to give advice with respect to the level of risk one should take in pursuing a desired goal. The respondent must choose between a risky and a safe course of action and indicate the probability of success needed for selecting the risky alternative. The task of the CDQ is to produce a deterrence of failure index.sup.18 A typical item is shown in figure.sup.1

The CDQ is scored in such a way that the maximum score is 120 and the minimum is 12. The higher the score, the more conservative the response. Kogan and Wallach, using the Spearman-Brown formula, determined an odd-even reliability coefficient for the CDQ, with reliabilities of .53 for men and .62 for women. They concluded that the internal consistency of the instrument is adequate.sup.19

PROPOSITIONS AND RESULTS

The propositions tested in this study are:

Proposition I: Female entrepreneurs have the same risk-taking proponsity as male entrepreneurs.

Proposition II: Entrepreneurs have the same risk-taking propensity as managers.

In order to test the propositions, data from the CDQ were used. The mean CDQ score for both male and female entrepreneurs was 68.5. The mean CDQ score of the manager group was 76.0 for males and 71.1 for females.

The overall mean CDQ was 69.7, with a standard deviation of 14.8. This compares with the data reported by Kogan and Wallach of an overall mean of 70.3 and a standard deviation of 12.1..sup.20 The chi-square goodness of fit test indicated no significant differences between the CDQ scores in this study and the scores obtained in the Kogan and Wallach study in which normality was assumed.

The data were analyzed using SAS (Statistical Analysis System) Analysis of Covariance with the CDQ score as the dependent variable. Age and annual income were used as covariates, but they were not significant. The summary of the analysis of covariance is displayed in table 1.

The propositions of equal adjusted means for the CDQ scores by position and sex were tested. The results indicate no significant differences (see table 2). Therefore, Proposition I and Proposition II were accepted as a result of the analysis. No significant differences were found in the risk-taking propensity of entrepreneurs vs. managers, or males vs. females. These findings contradict widely held beliefs about entrepreneurial behavior and characteristics.

CONCLUSION

The findings of the present study, like those of a study conducted by Brockhaus, suggest that, contrary to popular opinion, entrepreneurs and managers do not differ in risk-taking propensity.

In addition, no differences were found in the risk-taking propensity of male vs. female entrepreneurs-a finding which departs from findings published in the literature prior to the 1970s. Previous studies indicated a difference between males and females in judgment situations, suggesting that females are less likely to take risks. It appears that the women's movement has had an impact on the behavior of women in the business environment. The closing of the gap between men and women with regard to risk-taking propensity may be one such influence. Other economic, social, and cultural factors may also have influenced the role of women in business, but these factors were beyond the scope of this study.

It should be noted that the relatively small sample size and geographically limited sample may constrain the generalizability of these results. Nevertheless, the present study utilized a cross-section of both new and established entrepreneurs and confirmed results reported earlier by Brockhaus.

The additional finding-that no significant differences exist in risk-raking propensity between male and female entrepreneurs-suggests that further research may call into question other sex-role stereotypes associated with entrepreneurial and managerial behavior.

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