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
8/14/2019 Entreperneurship Essay dot
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
8/14/2019 Entreperneurship Essay dot
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
8/14/2019 Entreperneurship Essay dot
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.
8/14/2019 Entreperneurship Essay dot
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)
8/14/2019 Entreperneurship Essay dot
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
8/14/2019 Entreperneurship Essay dot
7/9
together we can continue the process of transforming our country and increase the rates of
female entrepreneurship16
References
8/14/2019 Entreperneurship Essay dot
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.pdf8/14/2019 Entreperneurship Essay dot
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