Differences and Similarities between Male and Female owned Businesses

Differences and similarities between male and female owned businesses - featured image

Gender differences and similarities in entrepreneurship in Western countries

Significantly fewer women are involved in entrepreneurship than men in Western countries [Allen et al., (2008)]. Although male and female entrepreneurs exhibit similar levels of education, female entrepreneurs may lack appropriate type of education and prior experience [Brush, (1992); Boden and Nucci, (2000); Kalleberg and Leicht, (1991); Verheul, (2005)] for starting and running a successful business compared to their male counterparts. This post is on the differences and similarities between male and female owned businesses.

Female entrepreneurs are more similar and different from male entrepreneurs in terms of personality traits except in terms of risk-taking propensity [Brush; (1992)]. Women choose self-employment and entrepreneurship for family-related and other non-economic reasons more often than men [Cromie, (1987); Boden, (1999); DeMartino and Barbato, (2003)], while men tend to place more importance on economic motives [Cromie, (1987); DeMartino and Barbato, (2003); Wilson et al., (2004)].

Women tend to use relational practices and exhibit participative management style, while men tend to be autocratic managers [Chaganti, (1986); Neider, (1987); Rosener, (1990)]. Some studies find that female entrepreneurs are also less likely to exhibit growth intentions [Rosa et al., (1996); Orser et al., (1998)].

See also: Definition and Importance of Small Scale Businesses

The majority of female-owned businesses are concentrated in service and trade industries [Neider, (1987); OECD, (1998); Loscocco et al., (1991), Orser et al., (2006)] and are registered as sole proprietorships [Brush, (1992), Baker et al., (1997), Greene et al. (2003), Carter et al., (2001)], which may be associated with their lower risk preferences and lower growth aspirations in comparison with male entrepreneurs [Turk and Shelton, (2004)].

Analysis on Female-owned Firms and Businesses

Female-owned firms are smaller than those owned by men [Orser et al. (2006)] even after controlling for firm age, industry [Rosa et al., (1996)], education, experience, and motivation [Fisher et al., (1993)]. Female entrepreneurs start their businesses with relatively less resources such as human, social, and financial capital, than male entrepreneurs [Carter et al., (2001); Boden and Nucci, (2000); Cooper et al., (1994); Verheul, (2005), Alsos et al., (2006)].

Although female business ownership rates have risen in recent decades, the prevalence of business ownership among women is only 50-60 percent of that for men.  The low rate of business ownership among women permeates around the world.

Aggregate data from the OECD indicate that female self-employment rates are substantially lower than male rates in almost every reported country with an average ratio of 0.543 (OECD 2002).

In the United States, the female business ownership rate is 6.6 percent, which is only 60 percent of the male rate (Fairlie 2006).

See also: Impact of Gender on Human Performance

Less well documented and researched, however, it is whether female-owned firms underperform male-owned firms.  Furthermore, we know relatively little about why female-owned businesses might underperform male-owned businesses.  Only a handful of previous studies use business-level data to study the outcomes of female-owned firms.  In general, previous studies on differences in firm performance by gender have revealed that women-owned firms were more likely to close, and had lower levels of sales, profits, and employment (Rosa, Carter and Hamilton 1996; Robb 2002; Robb and Wolken 2002, Kalleberg and Leicht 1991).

More on Female-owned Businesses

These studies find that financial capital, education, and work experience are important factors.  The lack of research on the outcomes of female firms is primarily due to the limited availability of data with large enough samples of female-owned businesses and detailed information on business outcomes.

Female business owners are less likely to have very low levels of education than male business owners, but they are also less likely to have graduate degrees.

business owners are also less likely to have prior work experience in a family business and prior work experience in a business providing similar goods and services.  Because of these differences in prior work experience, female business owners may have had fewer opportunities to acquire the specific and general business human capital that is important for running successful businesses.

Female businesses are also found to have relatively low levels of startup capital.  Estimates from the CBO (characteristics of business owners) indicate that 13.3 percent of female-owned businesses started with more than $25,000 in capital, compared with 17.7 percent of male-owned firms.

See also: Gender Differences in Human Capital

Female businesses are located in different industries than male businesses.  Female businesses are more likely to be in retail trade, personal services and professional services, and less likely to be in construction.

As reported above, evidence from the United States and several other countries suggests that women are less likely than men to report having a desire for self-employment, although the difference is not large (Kourilsky and Walstad 1998 and Blanchflower, Oswald and Stutzer 2001).

In the end, unobservable factors, such as different preferences, discrimination, and risk aversion, may be responsible for low levels of female entrepreneurship and lower returns (Bird and Brush 2002 and Carter et. al 2003).

Differences and similarities between male and female owned Businesses

From a policy perspective, however, these are difficult to address.  Policies that increase human capital and access to financial capital, such as entrepreneurial training and loan assistance programs, are easier to implement and expand.

  • Female and male entrepreneurs are very similar in personality traits such as locus of control and willingness to take risks, which are considered as some of the distinctive psychological traits of entrepreneurs. Although female and male business owners in private firms seem to differ in terms of risk taking [Davidkov, (2006)], these differences disappear when comparing female and male entrepreneurs.
  • Both female and male entrepreneurs are equally likely to cite financial motives as very important for start-up. This finding is not surprising in transition countries characterized with unfavourable economic conditions, where the need to generate income is very significant for both men and women.
  • Entrepreneurs regardless of their gender have experienced lack of initial start-up resources such as capital and personnel. It seems equally difficult to obtain the necessary start-up capital and personnel for both women and men in a country with a poor economic situation.

More on the differences and similarities between male and female owned businesses

  • The probability of receiving support from family and friend is similar for both female and male entrepreneurs. Gender differences can be observed in a number of individual, business, and environmental characteristics of entrepreneurs and their ventures.
  • Female entrepreneurs are younger than male entrepreneurs.
  • Male entrepreneurs are more likely to exhibit autocratic management style, while female entrepreneurs tend to show participative or consultative management style.
  • In comparison with men, women are less likely to report growth intentions. Female entrepreneur are most likely to possess management training and skills than their male counterparts even when controlling for age and education.
  • Women are more likely to choose sole proprietorship as a legal form and to run smaller businesses than men. Formal institutions – such as higher capital requirements and more unfavourable tax and social security regulations associated with other legal forms – may be obstacles for female entrepreneurs.
  • Female-owned businesses are more likely to operate in trade sector, while male-owned businesses in manufacturing sector.

Differences and similarities between male and female owned businesses: Comparison of Study

However, the findings of these studies were in most cases contradictory. For example, Kalleberg and Leicht found that woman’s firms were not more likely to fail, nor less successful than those headed by men (Kalleberg & Leicht, 1991).

No doubt that the results of these authors contradicted several other studies that concluded that male-owned businesses generally outperform female- owned businesses (Loscocco, 1991 , Fisher et al., 1993 and Shim and Eastlick, 1998 ).

Two main indicators were used to measure the business performance: the firm’s gross revenue and the owner’s income. Concerning the firm’s gross revenue, many researches and studies were conducted in order to find the gender impact on the small firm’s gross revenue.

See also: Gender as a factor that may influence the Performance of Small Scale Businesses

One group of studies has found that female-owned businesses are less profitable than male-owned businesses (Loscocco, 1991 , Fasci and Valdez, 1998 and Loscocco and Robinson, 1989). However, another group of studies has found few differences according to the gross revenue in comparison of female- and male-owned businesses (Watson, 2002 and Chaganti and Parasuraman, 1996 ).

On the other side, many others studies were interested in the earnings differences between men and women, most of which these studies showed a persistent gender difference in income between self-employed male and female.

In other terms, these studies found that female owners, on average, earn less than male owners. Most surprising thing is that the difference in income between self-employed men and women is even greater than employed men and women. These findings showed that female-owned businesses had lower earnings compared to male-owned businesses.

Differences and similarities between male and female owned business: Human Capital and firm’s business characteristics

The differences were attributed in earnings between female and male owners to credit market or consumer discrimination. According to several researches and studies, this difference in business performance can be explained by factors related to the owner’s human capital and the firm’s business characteristics.

For example, Loscocco thought that for small businesses, human capital can be considered as an important factor that influences the success of the business which may be translated in higher earnings. Kalleberg defined human capital by the personal attributed and he said that the differences in the personal attributes of men and women are the reason why male-owned businesses outperform female-owned businesses.

Furthermore, prior researches agreed that the income and gross revenue gap between female- and male-owned firms can be explained by the differences in the business characteristics. Thus business characteristics are likely to account for any male–female differences in business revenues and owner’s earnings. Loscocco showed that for small firms, a strong link exists between business characteristics and personal success. Abdullah Kh. Alowaihan found a significant difference between women-owned businesses and men-owned businesses with respect to the business characteristics (Alowaihan, 2004).

Female entrepreneurs might be outdoing men when it comes to running successful businesses in the same year. About 40 percent of women surveyed started running their business within the last five years, and nearly 70 percent of them expect their revenue to increase in the same year, according to Bank of America’s spring 2014 Small Business Owner Report. While nearly one-third of the women surveyed said they think they have less access to capital and new business opportunities than male small business owners do, 18 percent of women said they think they have more access to clients than men do.

Still on the differences and similarities between male and female owned businesses

Moreover, the survey found that women plan to hire more than men do: 56 percent of women plan to hire more employees in the same year, as opposed to 50 percent of men, and 68 percent of women expect their business to continue growing over the next five years.

The survey also found some interesting differences between female entrepreneurs and their male counterparts. When asked about their key character traits, 58 percent of women considered multitasking to be strength, versus only 40 percent of men.

Women were also 10 percent more likely to list creativity and 5 percent more likely to list empathy as key character traits for employees. On the other hand, 30 percent of men listed confidence as their strongest attribute, as opposed to only 24 percent of women. While 72 percent of small business owners admitted they’ve made significant personal sacrifices in order to run their business, the results showed that the sacrifices female entrepreneurs make are significantly different from those of their male counterparts.

According to the findings, women are more likely to sacrifice time for themselves and their social lives for their businesses, whereas men are more likely to sacrifice time with their spouse and time with their children. Women are also more likely to hire their children, while 27 percent of men said that it would be better if their children did not work for their business.

Despite these differences, both men and women cited “not spending enough time with my loved ones” as their top regret. They were also in agreement about their greatest accomplishments: having enough money to support their families, being their own boss and doing what they love.

From my findings, it is observed that in the Yoruba culture more women are more productive, ranging from roadside hawking to shop and kiosk.

Standing at the Student Union Building (SUB) of the Obafemi Awolowo University Ile-Ife, the researcher found out that the number of hawkers, shop owners and kiosk are mostly owned by women selling varieties of things which is not so profitable but it is meeting the need of the society and making a minute profit.

Differences and similarities between male and female owned businesses – The final paragraphs

Every enterprise is centered on meeting the need of the society. Why many Sme had failed is because their focus is majorly on maximizing profit and mismanagement of funds. It is also observed that more women patronize the financial institution for business funds than men do and women can be seen as a risk taken as regards this.

It is also observed that more women are involved in Sme while, more men are actively involved in Lse. It has also been observed that amongst the youth in the Nigerians culture, more of the easterners’ youth have higher participation in Sme. They trade in less regarded businesses with the hope that it will grow into a full-fleshed enterprise in the nearest future. They sell their goods at a lower price with the intent of retaining customers and having good customer relationship.

The Northern part of Nigeria has a one-way gender response towards Sme. It is observed that the male young adult have a high degree of participation towards Sme but the female have a shallow response majorly due to their culture and religious dictates.

It is observed that gender attitude of people towards Smes varies across board. In that, the strength of a particular gender along a particular line of business, can be the weakness of the other gender along the same line of business and vice versa. Some major line of business is also attributed to a particular gender based on the nature of the activities of the business.

 

Contributor: Temiloluwa Olaposi

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Inioluwa Olaposi

Inioluwa Olaposi is the founder of PRINCIOLOGY.COM. He is a Christian, lover of music and prolific author, with a soul that cares.

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