Enterprise and Small Business Principles

The performance of female-owned businesses

The performance of small businesses, that is their ability to contribute to employment and wealth creation through business start-up, survival and growth, is an important policy and academic debate. Comparatively little rigorous and in-depth research, how­ever, has been undertaken on the issue of gender and business performance. Although many studies have made some mention of it, most shy away from direct examination of quantitative performance measures, preferring instead to engage in discursive debate concerning gender differences in qualitative assessments of success. These studies sug­gest that women perform less well on quantitative measures such as jobs created, sales turnover and profitability. This, it is argued, is usually because women do not enter business for financial gain but to pursue intrinsic goals (e. g. independence, and the flexibility to run business and domestic lives) and assess their success in relation to their achievement in attaining these goals rather than on the more usual economic or financial measures.

An example of this approach was seen in a study which linked the self-reported motivations of women leaving organisations in order to start businesses and their sub­sequent success in achieving their goals (Buttner and Moore, 1997). Four related issues were investigated in the study: first, the motivational influences which affect former managerial or professional women’s entrepreneurial decisions; second, the role family concerns play in these former corporate women’s entrepreneurial motivation; third, how these female entrepreneurs measure success in their ventures; and finally, whether the women’s entrepreneurial motivation is related to the ways they measure success in their own businesses. Using a sample of 129 American female entrepreneurs who were all formerly managers in large organisations, the data was collected by focus groups, interviews and structured questionnaires. In common with several previous studies of female entrepreneurship both in Europe and in the US, the sample were both better - educated and less likely to be married than the total population. Similarly, the pro­file of the businesses owned by respondents revealed a strong bias towards services (81%).

Reasons for exiting organisations were measured using 32 items on a rated scale. Of the five main reasons for leaving their former employment, the desire for ‘challenge’ (to gain more respect; to be in charge; to regain excitement; to get recognition) and ‘self-determination’ (to make it on my own; self-esteem) were the most influential. ‘Family concerns’ (to balance family and work; to control my time) and ‘blocks to career advancement’ (discrimination; career barriers; didn’t fit into corporate culture) were the next most influential reasons for exiting organisations. Of least importance was the influence of ‘organisational dynamics’ (little motivation to produce; no urgency to finish; lack of shared information; low quality standards). Success was measured using six items on a rated scale. Of these items, ‘self-fulfilment’ was found to be the most important measure of success. This was followed, in order of importance, by ‘achievement of their goals’, ‘profits’, ‘growth’, ‘balancing family and work’ and fin­ally, making a ‘social contribution’. Using correlation analysis, certain relationships emerged between reasons for leaving previous employment and how success was mea­sured in their own enterprises. Women who had left employment for the ‘challenge’, for example, were found to measure entrepreneurial success in terms of ‘self-fulfilment’ and ‘profitability’, those who had left because of ‘organisational dynamics’ sought success in balancing work and family, while those who had left because of ‘family concerns’ measured success in balancing family and work and in making a ‘social contribution’.

One methodological issue which emerged from this investigation was concerned with the attempt to isolate and rank measures of business success, particularly in studies which attempt to demonstrate differences between female and male respondents. Within the literature that deals with gender and performance, there is an implicit assumption that men measure business success using quantitative, ‘external’ criteria (i. e. profits, growth, etc.), while women use qualitative, ‘internal’ criteria (i. e. self-fulfilment, goal attainment, etc.) In this, there is a concern that researchers may be projecting par­ticular value systems onto subjects and that the expectation of differences becomes a self-fulfilling prophecy. Assumptions such as these, which inadvertently result in trivial - ising women’s entrepreneurial efforts, have generally been derived from studies using single-sex samples that lack the ability to pose identical questions to both genders.

The few studies that have used more sophisticated methodologies in pursuing issues of gender and performance have presented less clear-cut results. In a longitudinal study of 298 UK businesses, of which 67 were female-owned, Johnson and Storey (1993) found that women proprietors in their study had created more stable enterprises than had their male sample, although on average the sales turnover for women was lower than for males. Kalleberg and Leicht (1991) also found only slight and inconclusive differences in key performance measures in their sample of 400 businesses from three industrial sectors in Indiana. Fischer’s (1992) study found that women’s businesses tended to perform less well on measures such as sales, employment and growth, but concluded that determinants of gender differences in business performance were far more complex than had been recognised in earlier studies.

Rosa et al.’s (1996) study was one of the few large-scale studies specifically designed to investigate the impact of gender on small business management. In analysing the comparative performance of businesses by gender, the study outlined four different measures:

■ primary performance measures (number of employees, growth in employees, sales

turnover, value of capital assets);

■ proxy performance measures (geographical range of markets, VAT registration);

■ subjective measures (including the ability of the business to meet business and

domestic needs); and

■ entrepreneurial performance measures (the desire for growth, the ownership of mul­tiple businesses).

The analysis of primary performance measures suggested that women’s businesses employed fewer core staff, were less likely to have grown substantially in employment (more than 20 employees) after 12 months in business, had a lower sales turnover, and were valued at a lower level than male-owned businesses. The analysis of proxy performance measures also indicated that women-owned businesses were more likely to serve only local markets, although gender differences in export sales were non­significant. Male-owned businesses were also more likely to be registered for VAT. The subjective measures of performance, however, were less clearly divided by gender. In considering how well their businesses had performed in the previous two years, men and women gave comparable responses. Women did, however, appear to be less optimistic than men in their expectation of future business success. Women were also less likely to believe that their business created sufficient income to meet domestic needs. This result appears to stem directly from the fact that women’s businesses tended to be substantially smaller than male-owned businesses in the sample. Male respond­ents whose businesses had a similar-sized turnover were equally dissatisfied with their ability to meet domestic financial needs. The final measure, entrepreneurial performance, also demonstrated marked sex differences. Men were significantly more likely to own other businesses (19.6% compared with 8.6%) and also to have strong growth ambitions in so far as they wanted to expand their businesses ‘as far as they could (43% versus 34%)’ (Rosa et al., 1996: 469).

Although these results appear to demonstrate marked gender differences in business performance, they should be treated with caution. Not only are conclusions potentially premature given the scarcity of previous research, there are a number of complicating factors (such as industrial sector, business age and presence of co-owners) which, depending on how they are treated methodologically, appear to produce widely dif­fering results in business performance (Rosa et al., 1996). Moreover, Rosa et al. (1996) argue that, while the performance of women-owned businesses appears at first sight to be substantially lower than for their male counterparts, women have only recently emerged as an entrepreneurial group and their businesses are much younger and there­fore less established. On this basis, they concluded that: ‘If female business owners have started from a much lower tradition of achievement in business, then this trend is encouraging and may provide support for Birley’s (1989) view that the gender gap in the UK is narrowing’ (1996: 475).

Collectively, the results of the various studies which compare male and female performance differences offer mixed results. Overall, these studies suggest that the determinants of performance (i. e. the measures that are used by owners to assess their business performance) are similar by gender. Contrary to many of the earlier studies of gender and entrepreneurship, neither is there any evidence to suggest that men are more profit-orientated than women or less likely to value intrinsic goals. Although the Rosa et al. (1996) study found some marked sex differences in performance indicators, the complexity of the overall pattern of results suggests that a more complex interpre­tation is required than simply attributing differences to gender alone.

9.3 The neglect of female entrepreneurship

So far this chapter has concentrated on describing the research studies that have been undertaken in an attempt to understand the true dynamics of women’s entrepreneur­ship. It has, however, been noted that, in comparison with the volume of academic research which has been undertaken on the small-firm sector, the female entrepreneur has been seriously ‘neglected’ by both the mass media and the academic community (Baker et al., 1997: 221). For some, the lack of attention paid to women’s experience of entrepreneurship is evidence of a wider problem of gender effects being omitted from mainstream research studies into social phenomena. Carter (1993: 151), for example, notes that ‘historically women have been left off the small business research agenda or made invisible by research practices or in other ways written out of the ana­lysis of self-employment’. Hamilton (1990) cites an example of how this is done, using Rees and Shah’s (1986) analysis of self-employment in the UK. As Hamilton (1990: 6-7) points out, their study ‘excludes a number of categories of people and then a whole gender “in order to obtain sharper results”. Among those excluded are “those who are not heads of household” (mainly women); “those who worked for less than 30 hours a week” (mainly women); “females” (on the basis that “self-employment is predominantly a male preserve”).’ The neglect of female entrepreneurship is, there­fore, part of a much wider problem which has resulted in the social sciences being structured in a manner which favours the male experience. Concepts of entrepreneur­ship are traditionally assumed to be gender neutral, but as Berg (1997: 261) points out: ‘rely in fact on notions of humanity and rationality that are masculinist’. Dualities such as the rational-irrational distinction may appear to have no apparent gender bias, but in reality are ‘thoroughly imbued with gender connotations, one side being socially char­acterised as masculine, the other as feminine, and the former being socially valorised’ (Massey, 1996: 113).

Although many of the early studies which examined the demographic character­istics and motivations of female entrepreneurs were subsequently criticised for their small scale and their lack of rigour, their importance cannot be underestimated in iden­tifying and clearly delineating a, hitherto, ‘invisible’ group (Baker et al., 1997: 221). Although exploratory, these studies challenged for the first time the view that entre­preneurship is a gender-neutral activity. Their success can be judged in two main ways: first, by considering whether subsequent research has developed in a manner which addresses the methodological criticisms of the late 1980s; and second, by considering whether they have influenced the design and output of non-gender specific studies.

As this chapter has demonstrated, research investigating female entrepreneurship has expanded and matured considerably over the past 20 years. This has been demon­strated by the refocusing of attention away from early studies of women’s business ownership which considered female experiences entirely in relation to male norms, and towards an increasing awareness of gender differences within entrepreneurship which are socially constructed and negotiated. As this chapter has attempted to present the research output in approximate chronological manner, developments in the methodo­logical basis of many studies have been demonstrated. Where early studies were criticised for their use of small-scale samples and qualitative approaches, more recent research has moved towards large-scale, quantitative methods. Developments have not only occurred in the growing trend towards empiricism, however. Engagement with socio­logical approaches, in particular, has enabled a more insightful, qualitative analysis of the entrepreneurial principles and processes used by both men and women. On this basis, therefore, the field has matured to develop a cumulative knowledge.

Whether research investigating the effects of gender in entrepreneurship has been successful in influencing the remainder of the small business research field is less cer­tain. Although there appears to have been an increase in the number of studies that have included gender as a variable for analysis, there remains a pervasive assumption that female experience should be considered only in direct relation to male norms. Elsewhere, studies still assume a gender-neutral or androcentric position. As Shakeshaft and Nowell (1984: 187-8) point out in discussing the pervasive assumption of andro- centrism in the social sciences, this results in the: ‘elevation of the masculine to the level of the universal and the ideal, it is the honouring of men and the male principle above women and the female. This perception creates a belief in male superiority and a value system in which female values, experiences and behaviours are viewed as inferior’.

9.4 Chapter summary

The past two decades have seen a growth in the number of women entering self­employment and business ownership. During the same period, the growing interest in the role and importance of small businesses within the overall economy has led to an increase in the volume of research studies that focus on the small firms sector. Although the experiences of female entrepreneurs have been only a minority interest, research investigating the influence of gender on small business ownership has developed con­siderably over the past 15 years. While early research into female entrepreneurship focused on describing women’s characteristics, motivations and experiences, the field has progressed beyond these exploratory and rudimentary studies. More recent research has not only developed a degree of methodological sophistication, it has also focused on increasingly specialised issues, such as the role of gender effects on the financing and the performance of firms.

This chapter has attempted to provide an overview of the growing literature on female entrepreneurship, highlighting some of the key debates within the field. It has also attempted to highlight more recent concerns that the female experiences of entre­preneurship and the effects of gender in small business management are seriously neglected areas of study. Studies that have started to investigate key issues, such as the management and performance of female-owned firms, have revealed the extent of female disadvantage in business financing and the related and relative under-performance of women-owned firms. Although definitive results have yet to be attained, many recent studies unequivocally point to the same conclusion that as a relatively new group of entrepreneurs, operating significantly younger businesses, women-owned firms may not yet have attained the same level of achievement as those owned by men, but as a group they are catching up fast.