Entreperneurship Essay dot

8/14/2019 Entreperneurship Essay dot

1/9

Management School and Economics

Honours

Entrepreneurship and Small Firms

Assessment:

Given the large increase of self-employed women since the 1970s, are women

really disadvantaged when it comes to starting a business?

Written by Asta Young-Smith

Matriculation number: s0566397

Date: 12/03/08

Tutor: Professor Peter Rosa

Word count; 2492


2/9

Introduction

Taking that first step to becoming your own boss requires courage and confidence in your

own abilities, and for women it can be even more daunting as the business world still

dominated by men. However, the world of employment has changed dramatically since the

1970s and there is the large increase of self-employed women who are now achieving a

successful breakthrough into the business world. This essay is going to assess the issues that

women are faced with, when it comes to starting a business. It will be done by providing an

overview of the most common reasons of starting a business, then exploring the financing of

female owned business and the use of networks in the management of female owned firms,

and also discusses the overall performance of female owned firms and analyse whether or not

women are disadvantaged when it comes to starting their own business.

The most common reason for starting a business is independence or wanting to be ones own

boss. Other personal reasons are: to achieve job satisfaction; wanting a flexible lifestyle; the

personal challenge; a need for personal development; the need for approval; wanting

autonomy and use existing experience and knowledge (Birley and Westhead, 1994; Kuratko

el al., 1997). All of these reasons are personal and have very little or no financial motivations

attached to them. The most common financial reasons would be: the need for money and

financial security. Most probably, the need for money would actually be to make more money

than the person was currently making. However, Gray (1993, p. 149) states the desire to be

independent is apparently a far stronger drive than financial considerations.

In the past, men were more inclined to become owners of small business because of financialconsiderations and were more likely to be pulled into their business ventures. On the other

hand, women were more likely to become owners of small business because of lifestyle

issues and were more likely to be pushed into self-employment. Also for women an

additional factor was to be able to better balance work and family.1 Prior to the mid 1980s,

the contribution women made to the small firms sector either as business owners in their own

right, or more commonly as providers of labour to family owned firms. Research suggest that

women are propelled into home-based employment because of the additional time that can be

devoted to family and for adjusting their work efforts to meet their house holds needs for


3/9

productivity and income (Hundley, 2000)2. Some research indicates that a major motivator

for women to work from home, whether as a worker for a business owner, is the potential to

combine domestic responsibilities with an income earning status. However, very often

women do underestimate the financial and emotional costs that are involved of starting and

sustaining a business.

Almost all new businesses require investment to purchase the goods and services to create

infrastructure of a new business and to provide some sort of capital to cover enterprise cost

and personal drawings. Sometimes expenses may exceed income for long periods, generating

need for pattern of finance sequencing (Mason and Harrison, 2003). The survey which was

structured to represent the UK small business population, Fraser (2004)3 noted that mean

investment during business start-up is 71,000 and median investment is 15,000.4

These

figures reflect a wide variety of finance required for starting a business in the UK and that

significant investment is necessary. For a women entrepreneur who lacks experience in

executive management, has had limited financial responsibilities, and proposes a non-

proprietary product, the task of persuading a loan officer to lend start-up capital is not an easy

one. As a result, woman must often have her husband cosign a note, seek a co-owner, or use

personal assets or savings. Many women entrepreneurs feel strongly that they have been

discriminated against in this financial area.(S. Carter & D. Jones-Evans, 2006, p.181).Theconsequence of undercapitalization during formation of the business can lead to the

underperformance during the life of the business. However, it doesnt mean that all self-

employed women are going to fail, but that gendered characterization will hinder the full

realization of business potential.

Over the past 15 years there have been a number of studies carried out to investigate the

effect of gender on bank lending, but evidence of gender discrimination are inconclusive. A

number of studies showed, that gender-based differences in finance usage were due to

structural differences between male and female owned businesses. Haines el al. (1999)5 in his

study found differences between women and men entrepreneurs, like low sales level and

liabilities, lower levels of salary and drawings, to be a product of business size, age, and

sector. However, there is no direct evidence of gender discrimination and researchers were

left to suggest of various patterns of finance usage that may exist and could be explained by

the practises of individual lending officers or through the use of application procedures that

inadvertently disadvantage women business owners. (S. Carter & D. Jones-Evans, 2006,

p.185). Fay and William (1993)6 in their study found that when bank loan officers were


4/9

presented by identical loan application where some were from male and others were from

female applicants, gender-based differences were found when applicant was described as

high school educated, but not when university educated. This led to the conclusion, that some

loan officers do use differing evaluative criteria for women and men applicants, and such

evaluative criteria could act to female disadvantage. However, Coleman (2000)7 suggests that

women are less likely to use bank for start-up capital, as their business size on average is

lower than mens. He also concluded that bankers discriminate on the basis of firm size,

preferring to lend to larger and, one would assume, more established firms. This preference

may put women at a disadvantage given that they are half the size of men-owned firms on

average (S. Carter & D. Jones-Evans, 2006, p.185).

Despite the emphasis of evidence pointing towards gender discrimination, there is an

increasing recognition of women entrepreneurs, who represent a new market for banks, and it

would be unwise for banks to exclude this rising market. Bank of Scotland Business Banking

has a programme dedicated to encouraging and supporting women in business. As part of

this initiative, the bank is committed to tackling the issues women face, such as concerns over

the risks attached to borrowing money and using personal sources of finance or credit cards

to start a business, which are repeatedly highlighted by external research as specific to

women in business8

The use of networks in the management of small firms is another area where research has

been carried out by a number of researchers around the world, who wanted to explore the

relationship between networks and how they are useful for small businesses. Research

suggest that the role of networks is quite important in the survival and success of individual

business, and in the way networks are created and used has an influence on various aspects of

the management process; for example, enabling improved access to finance and the

development of strong relationships with financial officers. Some researchers suggested that

gender differences may exist both in the types of networks in which owners are embedded

and their use of these networks for business purpose.9 For example, in USA Aldrich et al.

(1989)10 suggest that women networks differ significantly from men ones regarding activity

levels, density and with whom they network. However, similar research that was carried out

in UK found very few gender differences in these respects. Another study that was done by

Moult (2000)11, suggest that women and men are more likely to network with people of their

own gender whereas Aldrich et al. (1989) argue that while the networks of women are not as

widespread as those of men, the networks tend to be mostly of men.


5/9

These different findings suggest that women do face particular challenges, when establishing

and accessing networks, even if considering that women are more likely to have stronger

interpersonal and communication skills, which should help them with networking. Wilkinson,

(2001)12 believes, that deep-rooted and institutionalised social structure, that preventing

women from networking. As Brush (1997, p. 22)13 concluded, women are less welcome in

social networks and are left out of those loops, meaning they do not have access to as much

information. So a social structure and the way that women socialise influence the human and

social capital endowments with which they start their businesses. However, there is not

enough empirical evidence about the networks that women business owners are associated

with and what kind of use they get from these networks which leaves researchers with

restricted explanation which may account for gender differences in business owner networks.

Maybe the explanation for this would be that historically, small business research has defined

womens experiences in relation to those of men. Consequently, what is known about

business owner networks has been shaped by the perceptions and experiences of male

business owners.14Further research is needed to fully understand if women are

disadvantaged or not when it comes to networking.

The performance of small businesses, which is their ability to contribute to employment and

wealth creation through business start-up, survival and growth, is an important policy andacademic debate (S. Carter & D. Jones-Evans, 2006, p.186).However, very little in-depth

research has been carried out on the issue of gender and business performance. The few

studies that have been performed in finding out the issues of gender and performance, found

that women create more stable businesses than the male ones, although the sale turnover for

women would be lower than for males. Study done by Fischer (1993) found that womens

enterprises would perform less well on measures like sale, employment and growth. On the

other hand, Rosa et al.s (1996) from his study outlined four different measures for analysing

performance of businesses by gender:

1) Primary performance measures (number of employees, growth in employees, sales

turnover, value of capital assets)

2) Proxy performance measures (geographical range of markets, VAT registration)

3) Subjective measures (including the ability of the business to meet business and

domestic needs)


6/9

4) Entrepreneurial performance measures (the desire for growth, the ownership of

multiple businesses).15

The results of primary performance showed that womens owned firms employed fewer

core staff, and grown as little as 20 employees after 12 months in business, also turnover

was valued at lower level than male owned businesses. The analysis of proxy

performance measures showed that women owned businesses were more likely to serve

local markets, although gender differences in export sales were non-significant.

Subjective measures of performance, women were less optimistic than men about

expectation of future business success, and were less likely to believe that their business

created enough income to meet domestic needs. The entrepreneurial performance measure

showed clear sex differences. Men were more likely to own other businesses and had

strong growth ambitions.

This study did find some sex differences, however, women have only recently emerged as

entrepreneurial group, therefore a more sophisticated interpretation study is maybe

needed than simply attributing differences to gender alone. On the whole studies suggest

that determinants of performance are similar by gender.

Conclusion

This essay shown, that the biggest hurdle for women in starting a business is; raising the

start-up capital, relationship with lenders and networking. But further research is needed

to demonstrate if women are disadvantaged in starting a business or not, although many

studies that had been undertaken previously by various researches showed that women are

being disadvantaged mostly in finance sector. However, Bank of Scotland is dedicated to

encouraging and supporting women in business, which is contradicts the findings of the

researches. The Prime Minister Gordon Brown is behind the concept of encouraging more

women into business ownership too. In his message to the Enterprising Women

conference in 2007, Gordon Brown said: From ethical product to innovative solutions

women are increasingly generating more and more of the ideas that are creating new

wealth and changing the face of the economy. And this is something we should celebrate

and encourage. But while we have come a long way we still have a long way to go. The

Government is committed to helping women succeed in business, and I am optimistic that


7/9

together we can continue the process of transforming our country and increase the rates of

female entrepreneurship16

References


8/9

1 Elizabeth A. Walker, Beverley J. Webster, 2007,Gender, age and self-employment: some things

change, some stay the same, Women in Management Review; Volume: 22, Issue: 2; Research

Paper.

2 Hundley, G. (2000), Male/female earnings differences in self-employment: the effects of

marriage, children and the household division of labour, Industrial and Labour Relations Review,

Vol.54, No. 1, pp. 95-114.

3 Fraser, S. (2004), Finance for Small and Medium-Sized Enterprises: A Report of the 2004 UK

Survey of SME Finance, Warwick University, Coventry.

4 Rouse, J., Jayawarna, D. (2006), The financing of disadvantaged entrepreneurs: Are enterprise

programmes overcoming the finance gap? International Journal of Entrepreneurial Behaviour &

Research. Volume 12; Issue 6; pp. 380-400.

5 Haines, G.H., Orser, B. J. and Riding, A. L. (1999), Myths and Realities: An Empirical Study of

Banks and Gender of Small Business Clients, Canadian Journal of Administrative Sciences, 16(4):

291-307

6 Fay, M. and Williams, L. (1993), Gender Bias and the Availability of Business Loans, Journal of

Business Venturing, Vol.8; Issue 4, pp. 363-76

7 Coleman, S. (2000), Access to Capital and Terms of Credit: A Comparison of Men and Women

Owned Small Business,Journal of Small Business Management, 38(3); pp. 49

8http://www.bankofscotlandbusiness.co.uk/womeninbusiness/pdfs/survey.pdf cited 3/3/2008

9 Neergaard, H., Shaw, E., Carter, S. (2005), The Impact of Gender, Social Capital and Networks on

Business Ownership: a research agenda, International Journal of Entrepreneurial Behaviour &

Research, Vol.11, Issue 5, pp. 338

10 Aldrich, H., Reese, P.R., Dubini, P. (1989), Women on Verge of a Breakthrough: networking

among entrepreneurs in the United States and Italy, Entrepreneurship and RegionalDevelopment, Vol.1, No.4, pp. 339-356.

11 Moult, S. (2000), Is Gender the key issue? A study of female entrepreneurs in Grampian,

Proceedings, Small Business and Enterprise Development Conference, European Research Press,

Amsterdam.

12 Wilkinson, H. (2001), Dot Bombshell: Women E-quality and the New Economy, The Industrial

Society, London

13 Brush, C. (1997), Womens Entrepreneurship, Proceedings of the OECD Conference on Women

Entrepreneurs in Small and Medium Enterprises, OECD, Paris.

14 Neergaard, H., Shaw, E., Carter, S. (2005), The Impact of Gender, Social Capital and Networks

on Business Ownership: a research agenda, International Journal of Entrepreneurial Behaviour &

Research, Vol.11, Issue 5, pp. 339

15 Rosa, P., Carter, S., Hamilton, D. (1996), Gender as a determinant of small business

performance: insight from a British study, Small business Economics, Vol.8, pp.463-478
http://www.bankofscotlandbusiness.co.uk/womeninbusiness/pdfs/survey.pdfhttp://www.bankofscotlandbusiness.co.uk/womeninbusiness/pdfs/survey.pdfhttp://www.bankofscotlandbusiness.co.uk/womeninbusiness/pdfs/survey.pdf


9/9

16http://www.ytko.com/images/pages/110/ew_report_executive_summary.pdf cited 20/2/08

Bibliography

Carter, S., and Jones-Evans, D., (2006), Enterprise and Small Business, Principles, Practices and

Policy, 2nd edition, FT Prentice Hall, Pearson Education.

Gray, C., (1993), Stages of Growth and Entrepreneurial career Motivation in Chitended, F., Robertson,

M., Watkins, D., (Eds), Small Firms: Recession and Recovery, Paul Chapman Publishing, London, pp.

149-59

Kuratko, D. F., Hornsby, J. S., Naffziger, D. W., (1997), An Examination of Owners Goals in

Sustaining Entrepreneurship,Journal of Small Business Manangement, Vol.35, No.1, pp. 24-33
http://www.ytko.com/images/pages/110/ew_report_executive_summary.pdf%20cited%2020/2/08http://www.ytko.com/images/pages/110/ew_report_executive_summary.pdf%20cited%2020/2/08

Documents

Entreperneurship Essay dot