Closing the Business-Ownership Gender Gap
The entrepreneurship gender gap stubbornly persists.
While 10 percent of American men ran their own businesses in 2012, only 7 percent of American women did, the Global Entrepreneurship Monitor (GEM) – a representative survey of American adults coordinated by Babson College – reveals.
Some argue that policymakers should double down on existing solutions to address the gender gap. Boost contracting set-asides and specialized finance programs for women would get rid of the problem, they say. But they are wrong.
Despite a wide range of programs to address differences in rates of business ownership among men and women, the gender gap has persisted. The female fraction of business owners remained stuck at 36 percent between 2007 and 2012, analysis released recently by the Office of Advocacy of the Small Business Administration showed. And Bureau of Labor Statistics (BLS) data reveal that women accounted for the same fraction of self-employed – 39 percent – in 2011 that they did in 1995.
Moreover, enhancing existing programs will do little because gender discrimination isn’t the cause of the gap. Researchers have found little scientifically-credible evidence of bias among lenders, or other structural barriers to business formation by women.
The core problem is lesser interest in business ownership among women than men. In 2012, male college freshmen, for example, were more than twice as likely as female ones to report “business owner” as their intended occupation, the Cooperative Institutional Research Program at UCLA indicates. That gap in entrepreneurial intentions portents continued differences in rates of business ownership among men and women.
Women are less likely to study business in college. While 27 percent of men major in business, only 19 percent of women do, analysis by the American Association of University Women reveals. And among prospective business majors, male students are nearly four times as likely as female ones to say they intend to focus on entrepreneurship. Because studying business and entrepreneurship in college increases the odds of later business ownership, this difference in majors contributes to the entrepreneurship gender gap.
The differences in educational choices lead fewer women to develop entrepreneurial skills. Therefore, it isn’t surprising that a recent GEM study reveals that 65 percent of men believe they have ability to start a business, while only 47 percent of women do.
The gap in perceived entrepreneurial skills naturally leads to a smaller fraction of women intending to start businesses. The 2012 GEM study reported that 15 percent of American men who do not run their own companies intend to start one in the next three years as compared with only 10 percent of non-business-running women.
Government set-asides, special financing programs, and efforts to build the skills and social networks of existing, adult women entrepreneurs won’t close the gender gap because it’s not the women starting businesses that policy makers need to reach. Eliminating the gap requires implementing educational programs that change occupational stereotypes and attitudes towards business ownership among elementary, junior high and high school girls so that more of them express interest in starting businesses when they grow up.
The good news is that those attitudes finally might be changing. The recently released Gallup HOPE Report shows that a statistically indistinguishable fraction of boys and girls report planning to start their own business. If this pattern holds, we should see the entrepreneurial gender gap begin to shrink in the coming decades.
Scott Shane is the A. Malachi Mixon III professor of entrepreneurial studies at Case Western Reserve University. His books include Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live by (Yale University Press, 2008) and Finding Fertile Ground: Identifying Extraordinary Opportunities for New Businesses (Pearson Prentice Hall, 2005).