Enterprise and Small Business Principles

The growth of female entrepreneurship

Over the past 30 years there have been increases in the number of women entering self­employment and business ownership, although the rate of increase has varied widely from country to country. In the US, it is estimated that there are currently 10.6 million firms that are at least 50% owned by a woman, accounting for 48% of all privately held firms. Women-owned firms in the US employ in the region of 19.1 million workers and generate $2.5 trillion (defined as a million millions) in sales (National Women’s Business Council, 2004). Collectively, women-owned businesses in the US are estimated to spend $492bn per year on salaries and employee benefits, and in addition spend $38bn on IT, $25bn on telecommunications, $23bn on human resource services and $17bn on shipping (National Women’s Business Council, 2004). The number of women-owned businesses in the US has expanded much more rapidly than in almost any other coun­try. Between 1997 and 2004, the estimated growth in the number of women-owned firms (17%) was nearly twice that of all firms (9%) and the number of women-owned firms with employees grew by 28%, three times the growth rate of all firms with employees (National Women’s Business Council, 2004).

A key issue in international comparative assessments of the numbers and trends relating to women’s business ownership lies in the definitional differences of what con­stitutes a woman-owned business. In the US the term ‘women-owned businesses’ includes businesses solely owned by a woman or women, businesses that are majority (>51%) owned by a woman or women and businesses that are owned equally (50/50) by women and men. A more precise definition of women-owned businesses would include only those that are majority (>51%) woman owned. However, even this more careful definition still demonstrates the outstanding success of female entrepreneurship in the US. Businesses that are majority owned (>51%) by women comprise 63% of women - owned businesses, a total of 6.7 million firms that collectively employ 9.8 million people and generate $1.2 trillion in sales (National Women’s Business Council, 2004). International comparisons may be more accurately assessed through the use of self­employment data. In 2002, the total number of self-employed in the US was 8,490,000 (6.4% of total employment). Of this, male self-employment accounted for 5,124,000 (7.3% total male employment) and female self-employment accounted for 3,366,000 (5.4% total female employment). While male self-employment still accounts for a larger proportion of the self-employed total (60.3%), the female share of self-employment, which currently accounts for 39.6% of the total, has expanded every year for the past 30 years. In 1976, women constituted 26.8% of total self-employment in the US, a figure that has increased gradually year by year to its present level of nearly 40%.

By comparison, within the UK, researchers have operated a more cautious definition of women-owned businesses, focusing their attention on businesses that are wholly owned by women. Survey data suggests that about 15% of UK businesses are women - owned, 50% are male-owned and 35% are co-owned by males and females (Small

Business Service, 2004). Women currently account for 26.7% of the self-employed total, a figure that has shown modest fluctuations but little change since 1984 when the female share of self-employment increased from 18% to 24% of the total (Labour Force Survey, 2005). Although remarkable increases in female self-employment have been seen within the US over the past ten years, the UK situation is marked by more modest attainment. In 1992, there were 899,000 self-employed women (7% of economically active women) accounting for 26% of the total self-employed population. In 2004, fol­lowing growth in total UK self-employment, there were 963,000 self-employed women in the UK, but they accounted for the same proportion of economically active women (7%) and a similar share of the self-employed population (27%).

Across the EU (15), in comparison with men, there are fewer self-employed women in all age groups and across all business sectors. The EU (15) average level of self­employment in industry and services, as a percentage of total employment, is 15.5% for men and 8% for women. Self-employment in the UK is slightly below the average for the EU (15) (14% male, 6% female) and much lower than in the highest countries of Greece (31% male, 16% female), Italy (26% male, 15% female) and Portugal (20% male and 13% female). The EU (15) countries with the lowest levels of self-employment as a percentage of total employment are Luxemburg (8% male, 5% female), Denmark (10% male, 4% female) and Austria (10% male, 5% female). More female (30%) than male (23%) self-employment is within the retail and distribution sectors, while more male (30%) than female (13%) self-employment is within the industry and construc­tion sectors. Across the EU (15) as a whole, with the exception of Greece, a much larger proportion of female self-employment is within distribution, community and personal services, and hotels and restaurants sectors. While the male and female self-employed population has similar levels of education, self-employed females are more likely to operate smaller enterprises/units (Franco and Winquist, 2002).

A recent study of female entrepreneurial activity rates undertaken as part of the Global Entrepreneurship Monitor (Acs et al., 2005) shows that there is, as yet, no country in the world where there are more women than men participating in business ownership (Minitti et al., 2005). The GEM research project also found that, despite the remarkable growth in the number of women entrepreneurs, the US lies only eighth out of 34 nations. The countries with the highest levels of female entrepreneurial activ­ity rates are Peru, Uganda, Ecuador and Jordan. All of these countries also demonstrate correspondingly high levels of male entrepreneurial activity. While some researchers have drawn distinctions between the types of entrepreneurial activity apparent in devel­oped and developing countries, tending to conceptualise the former as opportunity - driven and the latter as a function of necessity (Acs et al., 2005), it is clear that many developing countries may offer rich insights into the experiences of women-owned businesses.

Global comparisons are not only constrained by definitional differences, but are complicated by the differing social and economic environments in which enterprises operate, the prevailing culture and the legal status of women (Marcucci et al., 2001; Richardson et al., 2004). Delmar and Holmquist (2004) point out that women’s entre­preneurship depends on both the situation of women and the role of entrepreneur­ship in the society. The motivation and objectives for starting a business, education, individual levels of entrepreneurship as well as time management of home and com­munity responsibilities all have an impact on levels of entrepreneurial participation and the types of enterprises established. A study undertaken by Richardson et al. (2004) of women-owned enterprises in Africa and Asia, for example, reported the situation in Bangladesh, a country in a lengthy recession, dependent on foreign assistance and where unexpectedly severe monsoon floods added a long-term risk to growth forecasts. Female economic participation was 73% of the male rate, while the share of earned income of women was 23.1% in contrast with the male share of 76.9% (UNDP,

1998) . As a consequence of economic necessity, purdah (female seclusion) was becom­ing less rigid, allowing women to work outside the home. As Richardson et al. (2004) point out, the economic background and culture of Bangladesh is markedly different from western countries where most studies of female entrepreneurship have been con­ducted. Despite this, broad comparisons can be drawn. In all of the countries studied, the share of earned income of women was lower than that of men and the highest pro­portion of women-owned enterprises operate within traditionally feminised sectors such as retail and low-order services (Marcucci, 2001).